INFORMATIONAL

  The Code of Virginia and Regulations of the Board of
  Education Governing Literary Loan Applications convey to
  local school divisions the ability to apply to the Board of
  Education for a loan from its Literary Fund to finance the
  construction, renovation and/or expansion of school
  buildings (the "Project").  In the event your application
  for a Literary Fund loan is approved and funded, the note
  that you will execute will be transferred to the Virginia
  Public School Authority (the "VPSA") and used to secure
  certain of its bonds.
  
  The Constitution of Virginia specifically authorizes the use
  of Literary Fund assets as collateral for bonds issued by
  the VPSA.  All permanent notes evidencing Literary Fund
  loans (the "Loan Notes") are transferred from the Literary
  Fund to the VPSA at which time the Loan Notes are deposited
  in the Reserve Fund, which is pledged to the payment of
  certain of the VPSA's bonds.  In order to maintain the tax
  exemption of the VPSA bonds, the Loan Notes must also be tax
  exempt obligations.  Therefore, it is necessary that your
  Loan Note qualify as a tax exempt obligation.
  
  If you use the money advanced to you from the Literary Fund
  to reimburse yourself for money advanced toward the Project,
  or to retire any interim borrowing that you may have
  incurred to finance the Project, you should be aware that
  there are certain requirements that must be met in order for
  your Loan Note to be tax exempt.  Accordingly, you will be
  required to provide the Department of Education and the VPSA
  with an opinion of nationally recognized bond counsel that
  the Loan Note will be a tax exempt obligation before any
  money from the Literary Fund will be advanced.  Since these
  requirements may require you to take certain action during
  the period of time after your application has been approved
  and before any moneys are advanced from the Literary Fund,
  the purpose of this memorandum is to summarize 





  SUPTS. MEMO. NO. 6
  May 31, 1996
  Page 2


  some of those requirements so that you may take the action
  necessary to preserve the tax exemption of your Loan Note.

  TEMPORARY USE OF OWN FUNDS

  If you use your own money to finance the Project and intend
  to use the money from a Literary Fund loan draw to reimburse
  yourself, you must adopt a resolution BEFORE YOU SPEND ANY
  OF YOUR OWN MONEY that indicates that the use of your own
  money is temporary and that you intend to borrow money to
  reimburse yourself (the "Reimbursement Resolution").  The
  Reimbursement Resolution should also describe the Project
  and indicate the maximum principal amount of obligations
  expected to be issued for the Project.  A copy of a model
  Reimbursement Resolution is attached as Exhibit A to this
  memorandum for your convenience.

  There is also a time limit in which you may use the proceeds
  of the Literary Fund loan to reimburse yourself.  Generally,
  you must reimburse yourself within 18 months of the later of
  (1) the date the expenditure is paid and (2) the date that
  the project is placed in service but no later than 3 years
  after the date the expenditure is paid (the "Time Limit"). 
  For example, assume that an issuer uses its own money to pay
  project costs in November 1990 and June 1992 and the project
  was placed in service in June 1992.  If the issuer proposes
  in December 1993 to reimburse itself with Loan Note
  proceeds, it may reimburse itself for the costs paid in June
  1992 because it is within 18 months of the date the
  expenditure was made and the date the project was placed in
  service, but it cannot reimburse itself for the November
  1990 costs because those costs were paid more than three
  years earlier.

  INTERIM BORROWINGS

  If you use your own money to finance the Project and borrow
  money (e.g., from a bank, through a general obligation
  borrowing, or through a conduit issuer such as an industrial
  development authority) to reimburse yourself (the "Interim
  Borrowing") and intend to use the money from a Literary Fund
  loan draw to retire the Interim Borrowing, you must still
  adopt a Reimbursement Resolution BEFORE YOU SPEND ANY OF
  YOUR OWN MONEY.  In addition, the Time Limit is measured
  from the date you use your own money and not from the date
  that borrowed funds are used.


  SUPTS. MEMO. NO. 6
  May 31, 1996
  Page 3


  If you use the proceeds of the Interim Borrowing to pay
  directly for the costs of the Project, you do not need to
  adopt a Reimbursement Resolution.

  Whether you use the proceeds of the Interim Borrowing to
  reimburse yourself or to pay directly for the costs of the
  Project, you may wish to structure your Interim Borrowing to
  permit you to prepay the Interim Borrowing at any time
  without penalty so that when Literary Fund money is
  available, you may use it immediately to retire the Interim
  Borrowing.  If you are unable to prepay your Interim
  Borrowing within 90 days of the date of the release of your
  Literary Fund loan, your Project will not be funded and your
  Project will be moved to the bottom of the First Priority
  Waiting List.

  The attached questionnaire will be sent to you once your
  Literary Loan has been released.  No funds will be advanced
  to you until the questionnaire has been completed and
  submitted to the Department.  There is no need for any
  division to complete the questionnaire at this time.  If you
  have any questions regarding any of this information, please
  call Kathryn S. Kitchen, Division Chief, Finance, at (804)
  225-2025.

  WCBJr/kk

  Attachment:   This memo and its attachment will be sent to
                the superintendent's office.