SB0130

SENATE BILL 130

52nd legislature - STATE OF NEW MEXICO - first session, 2015

INTRODUCED BY

Mimi Stewart

FOR THE LEGISLATIVE EDUCATION STUDY COMMITTEE

AN ACT

RELATING TO PUBLIC SCHOOLS; AMENDING THE PUBLIC SCHOOL LEASE PURCHASE ACT TO CLARIFY THE DEFINITION OF "GOVERNING BODY"; ESTABLISHING THE RELATIONSHIP BETWEEN A GOVERNING BODY AND A SCHOOL DISTRICT OR A CHARTER SCHOOL IN THE ACQUISITION OF PUBLIC SCHOOL FACILITIES PURSUANT TO LEASE PURCHASE ARRANGEMENTS; REPEALING A SECTION OF THE NMSA 1978.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 22-26A-3 NMSA 1978 (being Laws 2007, Chapter 173, Section 3) is amended to read:

"22-26A-3. DEFINITIONS.--As used in the Public School Lease Purchase Act:

A. "financing agreement" or "lease purchase arrangement" means an agreement for the leasing of a building or other real property with an option to purchase for a price that is reduced according to the payments made, which periodic lease payments composed of principal and interest components are to be paid to the holder of the agreement and pursuant to which the owner of the building or other real property may retain title to or a security interest in the building or other real property and may agree to release the security interest or transfer title to the building or other real property to the school district for nominal consideration after payment of the final periodic lease payment; and

[B. except as limited by Section 19 of the Public School Lease Purchase Act, "local school board" includes the governing body of a locally chartered or state-chartered charter school; and

C. except as limited by Section 19 of the Public School Lease Purchase Act, "school district" includes a locally chartered or state-chartered charter school]

B. "governing body" means:

(1) the governing structure of a charter school, as set forth in its approved charter; or

(2) a local school board as the governing structure of a school district."

SECTION 2. Section 22-26A-4 NMSA 1978 (being Laws 2007, Chapter 173, Section 4, as amended) is amended to read:

"22-26A-4. NOTICE OF PROPOSED LEASE PURCHASE ARRANGEMENT--APPROVAL OF DEPARTMENT.--

A. When a [local school board] governing body determines, pursuant to Subsection B of Section 22-26A-6 NMSA 1978, that a lease purchase arrangement is in the best interest of the school district or the charter school, the [board] governing body shall forward to the department a copy of the proposed lease purchase arrangement and the source of funds that the [local school board] governing body has identified to make payments due under the lease purchase arrangement.

B. A [local school board] governing body shall not enter into a lease purchase arrangement without the approval of the department."

SECTION 3. Section 22-26A-5 NMSA 1978 (being Laws 2007, Chapter 173, Section 5, as amended) is amended to read:

"22-26A-5. LEASE PURCHASE ARRANGEMENTS--TERMS.--Lease purchase arrangements:

A. may have payments payable annually or more frequently as determined by the [local school board] governing body;

B. may be subject to prepayment at the option of the [local school board] governing body at such time or times and upon such terms and conditions with or without the payment of such premium or premiums as determined by the [local school board] governing body;

C. may have a final payment date not exceeding thirty years after the date of execution;

D. may be acquired or executed at a public or negotiated sale;

E. may be entered into between the [local school board] governing body and the owner of the building or other real property who may be a trustee or other person that issues or sells certificates of participation or other interests in the payments to be made under the lease purchase arrangement, the proceeds of which may be used to acquire the building or other real property;

F. shall specify the principal and interest component of each payment made under the lease purchase arrangement; provided that the net effective interest rate shall not exceed the maximum permitted by the Public Securities Act;

G. shall provide that, if the school district or charter school makes capital improvements to the building or other real property, there shall be no change in the lease payments or final payment without a written amendment approved by the department;

H. shall provide that, if state, [or] school district or charter school funds, above those required for lease payments, are used to construct or acquire improvements, the cost of the improvements shall constitute a lien on the real estate in favor of the school district or charter school and then, if the lease purchase arrangement is terminated prior to the final payment and the release of the security interest or the transfer of title at the option of the school district or charter school:

(1) the school district or charter school may foreclose on the real estate lien; or

(2) the current market value of the building or other real property at the time of termination, as determined by an independent appraisal certified by the taxation and revenue department, in excess of the outstanding principal due under the lease purchase arrangement shall be paid to the school district or charter school;

I. shall provide that there is no legal obligation for the school district or charter school to continue the lease purchase arrangement from year to year or to purchase the building or other real property;

J. shall provide that the lease purchase arrangement shall be terminated if sufficient money is not available to meet any current lease payment;

K. shall provide that, with the prior approval of the lessor, which shall not be unreasonably withheld, the lease purchase arrangement is assignable, without cost to the school district, [if the lessee is a charter school] and with all of the rights and benefits of its predecessor in interest being transferred to the assignee, to:

(1) a [locally chartered or state-chartered] charter school, if the lessee is a charter school; or [to]

(2) the state or one of its institutions, instrumentalities or other political subdivisions [The assignee shall acquire all rights and benefits of its predecessor in interest under the terms and conditions of the lease purchase arrangement]; and

L. shall provide that amendments to the lease purchase arrangement, except amendments that would improve the building or other real property without additional financial obligations to the school district or charter school, shall be approved by the department."

SECTION 4. Section 22-26A-6 NMSA 1978 (being Laws 2007, Chapter 173, Section 6, as amended) is amended to read:

"22-26A-6. AUTHORIZING LEASE PURCHASE ARRANGEMENTS--RESOLUTION.--

A. If a [local school board] governing body proposes to acquire a building or other real property through a lease purchase arrangement, it shall comply with the requirements of this section and the provisions of the Open Meetings Act.

B. At a regular meeting or at a special meeting called for the purpose of considering the acquisition of a building or other real property through a lease purchase arrangement, a [local school board] governing body shall:

(1) make a determination of the necessity for acquiring the building or other real property through a lease purchase arrangement;

(2) determine the estimated cost of the buildings or other real property needed;

(3) review a summary of the terms of the proposed lease purchase arrangement;

(4) identify the source of funds for the lease purchase payments;

(5) if obtaining all or part of the funds needed requires or anticipates the imposition of a property tax, determine the estimated rate of the tax and what, if any, the percentage increase in property taxes will be for real property owners in the school district; and

(6) if the [board] governing body determines that the lease purchase arrangement is in the best interest of the school district or charter school, forward a copy of the arrangement to the department pursuant to Section 22-26A-4 NMSA 1978.

C. After receiving department approval of the lease purchase arrangement, the [local school board] governing body may adopt a final resolution approving the lease purchase of the building or other real property.

D. If [the] a local school board finds that obtaining all or part of the funds needed for [the] a lease purchase arrangement requires the imposition of a property tax, the board may [also] adopt a resolution to be presented to the voters pursuant to Section 22-26A-8 NMSA 1978. [provided that]

E. If the governing body of a charter school finds that obtaining all or part of the necessary funds requires the imposition of a property tax, the local school board of the school district in which the charter school is located may adopt a resolution to be presented to the voters, pursuant to Section 22-26A-8 NMSA 1978; provided that the governing body has notified the local school board that the charter school has been approved to enter into a lease purchase arrangement and has identified revenue from the proposed tax as a necessary source of funds. The local school board:

(1) [if a charter school that is located within the school district has notified the local school board that the charter school has been approved to enter into a lease purchase arrangement and has identified revenue from the proposed tax as a source of needed funds, the local school board:

(a)] shall include the tax revenue needed by the charter school in the resolution if the [charter school is a locally chartered or state-chartered charter school whose] school's charter has been renewed at least once; and

[(b)] (2) may [in its discretion] include the tax revenue needed by the charter school in the resolution if the charter school is a locally chartered charter school prior to its first renewal term. [and

(2) if the tax revenue for a charter school is included in the resolution]

F. If a local school board adopts a resolution that includes tax revenue for a charter school, and, if the tax is approved in an election pursuant to Sections 22-26A-8 through 22-26A-12 NMSA 1978, the local school board shall distribute an amount of the tax revenue, as established in its resolution, to the charter school to be used in the lease purchase arrangement.

[E.] G. The local school board shall not adopt a resolution for or approve a lease purchase arrangement for a term that exceeds thirty years."

SECTION 5. Section 22-26A-7 NMSA 1978 (being Laws 2007, Chapter 173, Section 7, as amended) is amended to read:

"22-26A-7. PAYMENTS UNDER LEASE PURCHASE ARRANGEMENTS.--A school district or charter school may apply any legally available funds to acquire or improve buildings or other real property subject to a lease purchase arrangement or to the payments due under a lease purchase arrangement, including any combination of:

A. money from the school district's general fund;

B. investment income actually received from investments;

C. proceeds from taxes imposed pursuant to the Public School Capital Improvements Act or the Public School Buildings Act;

D. loans, grants or lease payments received from the public school capital outlay council pursuant to the Public School Capital Outlay Act;

E. state distributions to the school district pursuant to the Public School Capital Improvements Act;

F. fees or assessments received by the school district;

G. proceeds from the sale of real property and rental income received from the rental or leasing of school district property;

H. grants from the federal government as assistance to those areas affected by federal activity authorized in accordance with Title 20 of the United States Code, commonly known as "PL 874 funds" or "impact aid";

I. revenues from the tax authorized pursuant to Sections 22-26A-8 through 22-26A-12 NMSA 1978, if proposed by the local school board and approved by the voters; and

J. legislative appropriations."

SECTION 6. Section 22-26A-13 NMSA 1978 (being Laws 2007, Chapter 173, Section 13) is amended to read:

"22-26A-13. PUBLICATION OF NOTICE--VALIDATION.--

A. After adoption of a resolution approving a lease purchase arrangement, the [local school board] governing body shall publish notice of the adoption of the resolution once in a newspaper of general circulation in the school district in which the governing body's school is located.

B. After the passage of thirty days from the publication required by Subsection A of this section, any action attacking the validity of the proceedings taken by the [local school board] governing body preliminary to and in the authorization of and entering into the lease purchase arrangement described in the notice is perpetually barred."

SECTION 7. Section 22-26A-14 NMSA 1978 (being Laws 2007, Chapter 173, Section 14) is amended to read:

"22-26A-14. REFUNDING OR REFINANCING LEASE PURCHASE ARRANGEMENTS.--School districts and charter schools may enter into lease purchase arrangements for the purpose of refunding or refinancing any lease purchase arrangements then outstanding, including the payment of any prepayment premiums thereon and any interest accrued or to accrue to the date of prepayment maturity of the outstanding lease purchase arrangements. Until the proceeds of the lease purchase arrangements issued for the purpose of refunding or refinancing outstanding lease purchase arrangements are applied to the prepayment or retirement of the outstanding lease purchase arrangements, the proceeds may be placed in escrow and invested and reinvested. The interest, income and profits, if any, earned or realized on any such investment may, in the discretion of the [local school board] governing body, also be applied to the payment of the outstanding lease purchase arrangements to be refunded or refinanced by prepayment or retirement, as the case may be. After the terms of the escrow have been fully satisfied and carried out, any balance of such proceeds and interest, if any, earned or realized on the investments thereof may be returned to the [local school board] governing body to be used for payment of the refunding or refinancing lease purchase arrangement. If the proceeds from a tax imposed pursuant to Sections [8 through 12 of the Public School Lease Purchase Act] 22-26A-8 through 22-26A-12 NMSA 1978 were used as a source of payments for the refunded lease purchase arrangement, the proceeds may continue to be used for the refunding or refinancing lease purchase arrangements without the requirement of an additional election on the issue."

SECTION 8. Section 22-26A-15 NMSA 1978 (being Laws 2007, Chapter 173, Section 15, as amended) is amended to read:

"22-26A-15. AGREEMENT OF THE STATE.--The state does hereby pledge to and agree with the holders of any lease purchase arrangement, certificates of participation or other partial interest in a lease purchase arrangement entered into under the Public School Lease Purchase Act that the state will not limit or alter the rights vested in school districts or charter schools to fulfill the terms of any lease purchase arrangement or related sublease arrangement or in any way impair the rights and remedies of the holders of lease purchase arrangements, certificates of participation or other partial interests in lease purchase arrangements until the payments due thereon, and all costs and expenses in connection with any action or proceedings by or on behalf of those holders, are fully met and discharged. School districts and charter schools are authorized to include this pledge and agreement of the state in any lease purchase arrangement or related sublease arrangement."

SECTION 9. Section 22-26A-17 NMSA 1978 (being Laws 2007, Chapter 173, Section 17, as amended) is amended to read:

"22-26A-17. TAX EXEMPTION.--The state covenants with the original holder and all subsequent holders and transferees of lease purchase arrangements entered into by [the local school boards] governing bodies, in consideration of the acceptance of and payment for the lease purchase arrangements entered into pursuant to the Public School Lease Purchase Act, that lease purchase arrangements, certificates of participation and other partial interests in lease purchase arrangements and the interest income from the lease purchase arrangements, certificates of participation and other partial interests shall at all times be free from taxation by the state, except for estate or gift taxes and taxes on transfers."

SECTION 10. Section 22-26A-18 NMSA 1978 (being Laws 2007, Chapter 173, Section 18) is amended to read:

"22-26A-18. CUMULATIVE AND COMPLETE AUTHORITY.--The Public School Lease Purchase Act shall be deemed to provide an additional and alternative method for acquiring buildings and other real property authorized thereby and shall be regarded as supplemental and additional to powers conferred by other laws and shall not be regarded as a derogation of any powers now existing. The Public School Lease Purchase Act shall be deemed to provide complete authority for acquiring buildings and other real property and entering into lease purchase arrangements contemplated thereby, and no other approval of any state agency or officer, except as provided therein, shall be required with respect to any lease purchase arrangements, and the [local school board] governing body acting thereunder need not comply with the requirements of any other law applicable to the issuance of debt by school districts."

SECTION 11. REPEAL.--Section 22-26A-19 NMSA 1978 (being Laws 2007, Chapter 173, Section 19, as amended) is repealed.

SECTION 12. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2015.

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