SB0313

SENATE BILL 313

53rd legislature - STATE OF NEW MEXICO - first session, 2017

INTRODUCED BY

John M. Sapien

AN ACT

RELATING TO PUBLIC EDUCATION; AMENDING THE PUBLIC SCHOOL CODE TO CLARIFY THE USE OF SCHOOL DISTRICT FACILITIES FOR CHARTER SCHOOLS AND ELIGIBILITY FOR PUBLIC SCHOOL CAPITAL OUTLAY COUNCIL GRANTS PAID FROM THE PUBLIC SCHOOL CAPITAL OUTLAY FUND FOR LEASE PAYMENTS; MAKING CLARIFYING CHANGES TO THE PUBLIC SCHOOL LEASE PURCHASE ACT REGARDING LEASE PURCHASE AGREEMENTS, INCLUDING ALLOWABLE INTEREST RATES AND PAYMENTS, AND CERTAIN AGREEMENT COMPONENTS REQUIRING PUBLIC EDUCATION DEPARTMENT APPROVAL.

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

SECTION 1. Section 22-8B-4 NMSA 1978 (being Laws 1999, Chapter 281, Section 4, as amended) is amended to read:

"22-8B-4. CHARTER SCHOOLS' RIGHTS AND RESPONSIBILITIES--OPERATION.--

A. A charter school shall be subject to all federal and state laws and constitutional provisions prohibiting discrimination on the basis of disability, physical or mental handicap, serious medical condition, race, creed, color, sex, gender identity, sexual orientation, spousal affiliation, national origin, religion, ancestry or need for special education services.

B. A charter school shall be governed by a governing body in the manner set forth in the charter contract; provided that a governing body shall have at least five members; and provided further that no member of a governing body for a charter school that is initially approved on or after July 1, 2005 or whose charter is renewed on or after July 1, 2005 shall serve on the governing body of another charter school. No member of a local school board shall be a member of a governing body for a charter school or employed in any capacity by a locally chartered charter school located within the local school board's school district during the term of office for which the member was elected or appointed.

C. A charter school shall be responsible for: (1) its own operation, including preparation of a budget, subject to audits pursuant to the Audit Act; and

(2) contracting for services and personnel matters.

D. A charter school may contract with a school district, a university or college, the state, another political subdivision of the state, the federal government or one of its agencies, a tribal government or any other third party for the use of a facility, its operation and maintenance and the provision of any service or activity that the charter school is required to perform in order to carry out the educational program described in its charter contract. Facilities used by a charter school shall meet the standards required pursuant to Section 22-8B-4.2 NMSA 1978.

E. A conversion school chartered before July 1, 2007 may choose to continue using the school district facilities and equipment it had been using prior to conversion, subject to the provisions of Subsection F of this section.

F. The school district in which a charter school is geographically located shall provide a charter school with available facilities for the school's operations unless the facilities are currently used for other educational purposes, and a charter school shall accept an offer of an available facility made by a school district; provided that, if a charter school can demonstrate that the facilities being offered do not meet the educational programming needs of the school, a charter school does not have to accept available facilities offered by a school district. An agreement for the use of school district facilities by a charter school may provide for reasonable lease payments; provided that the payments do not exceed the sum of the lease reimbursement rate provided in Subparagraph (b) of Paragraph (1) of Subsection I of Section 22-24-4 NMSA 1978 plus any reimbursement for actual direct costs incurred by the school district in providing the facilities; and provided further that any lease payments received by a school district may be retained by the school district and shall not be considered to be cash balances in any calculation pursuant to Section 22-8-41 NMSA 1978. The available facilities provided by a school district to a charter school shall meet all occupancy standards as specified by the public school capital outlay council. As used in this subsection, "other educational purposes" includes school-based health clinics, daycare centers [teacher training centers, school district administration functions and other ancillary services related to a school district's functions and operations] and pre-kindergarten programs.

G. A locally chartered charter school may pay the costs of operation and maintenance of its facilities or may contract with the school district to provide facility operation and maintenance services.

H. Locally chartered charter school facilities are eligible for state and local capital outlay funds and shall be included in the school district's five-year facilities plan.

I. A locally chartered charter school shall negotiate with a school district to provide transportation to students eligible for transportation under the provisions of the Public School Code. The school district, in conjunction with the charter school, may establish a limit for student transportation to and from the charter school site not to extend beyond the school district boundary.

J. A charter school shall be a nonsectarian, nonreligious and non-home-based public school.

K. Except as otherwise provided in the Public School Code, a charter school shall not charge tuition or have admission requirements.

L. With the approval of the chartering authority, a single charter school may maintain separate facilities at two or more locations within the same school district; but, for purposes of calculating program units pursuant to the Public School Finance Act, the separate facilities shall be treated together as one school.

M. A charter school shall be subject to the provisions of Section 22-2-8 NMSA 1978 and the Assessment and Accountability Act.

N. Within constitutional and statutory limits, a charter school may acquire and dispose of property; provided that, upon termination of the charter, all assets of the locally chartered charter school shall revert to the local school board and all assets of the state-chartered charter school shall revert to the state, except that, if all or any portion of a state-chartered charter school facility is financed with the proceeds of general obligation bonds issued by a local school board, the facility shall revert to the local school board.

O. The governing body of a charter school may accept or reject any charitable gift, grant, devise or bequest; provided that no such gift, grant, devise or bequest shall be accepted if subject to any condition contrary to law or to the terms of the charter. The particular gift, grant, devise or bequest shall be considered an asset of the charter school to which it is given.

P. The governing body may contract and sue and be sued. A local school board shall not be liable for any acts or omissions of the charter school.

Q. A charter school shall comply with all state and federal health and safety requirements applicable to public schools, including those health and safety codes relating to educational building occupancy.

R. A charter school is a public school that may contract with a school district or other party for provision of financial management, food services, transportation, facilities, education-related services or other services. The governing body shall not contract with a for-profit entity for the management of the charter school.

S. To enable state-chartered charter schools to submit required data to the department, an accountability data system shall be maintained by the department.

T. A charter school shall comply with all applicable state and federal laws and rules related to providing special education services. Charter school students with disabilities and their parents retain all rights under the federal Individuals with Disabilities Education Act and its implementing state and federal rules. Each charter school is responsible for identifying, evaluating and offering a free appropriate public education to all eligible children who are accepted for enrollment in that charter school. The state-chartered charter school, as a local educational agency, shall assume responsibility for determining students' needs for special education and related services. The division may promulgate rules to implement the requirements of this subsection."

SECTION 2. Section 22-8B-4.2 NMSA 1978 (being Laws 2005, Chapter 221, Section 3 and Laws 2005, Chapter 274, Section 2, as amended) is amended to read:

"22-8B-4.2. CHARTER SCHOOL FACILITIES--STANDARDS.--

A. The facilities of a charter school that is approved on or after July 1, 2005 and before July 1, 2015 shall meet educational occupancy standards required by applicable New Mexico construction codes.

B. The facilities of a charter school whose charter has been renewed at least once shall be evaluated, prioritized and eligible for grants pursuant to the Public School Capital Outlay Act in the same manner as all other public schools in the state; provided that for charter school facilities in leased facilities, grants may be used to provide additional lease payments for leasehold improvements made by the lessor.

C. On or after July 1, 2011, a new charter school shall not open and an existing charter school shall not relocate unless the facilities of the new or relocated charter school, as measured by the New Mexico condition index, [receive] have a condition rating equal to or better than the average condition for all New Mexico public schools for that year or the charter school [demonstrates] attains, within eighteen months of occupancy or relocation of the charter [the way in which the facilities will achieve], a rating equal to or better than the average New Mexico condition index.

D. On or after July 1, 2015, a chartering authority shall not authorize a new charter school [shall not open and] or renew an existing charter [shall not be renewed] unless the charter school:

(1) is housed in a building that is:

(a) owned by the charter school, the school district, the state, an institution of the state, another political subdivision of the state, the federal government or one of its agencies or a tribal government; or

(b) subject to a [lease-purchase arrangement] lease purchase agreement that has been entered into and approved pursuant to the Public School Lease Purchase Act; or

(2) if it is not housed in a building described in Paragraph (1) of this subsection, demonstrates that:

(a) the facility in which the charter school is housed meets the statewide adequacy standards developed pursuant to the Public School Capital Outlay Act and the owner of the facility is contractually obligated to maintain those standards at no additional cost to the charter school or the state; and

(b) as certified by the governing body of a charter school, either: 1) public buildings are not available or adequate for the educational program of the charter school; or 2) the owner of the facility is a nonprofit entity specifically organized for the purpose of providing the facility for the charter school.

E. Without the approval of the public school facilities authority pursuant to Section 22-20-1 NMSA 1978, a charter school shall not enter into a [lease-purchase] lease purchase agreement.

F. The public school capital outlay council:

(1) shall determine whether facilities of a charter school meet the educational occupancy standards pursuant to the requirements of Subsection A of this section

or the requirements of Subsections B, C and D of this section, as applicable; and

(2) upon a determination that specific requirements are not appropriate or reasonable for a charter school, may grant a variance from those requirements for that charter school."

SECTION 3. Section 22-24-4 NMSA 1978 (being Laws 1975, Chapter 235, Section 4, as amended) is amended to read:

"22-24-4. PUBLIC SCHOOL CAPITAL OUTLAY FUND CREATED-- USE.--

A. The "public school capital outlay fund" is created. Balances remaining in the fund at the end of each fiscal year shall not revert.

B. Except as provided in Subsections G and I through N of this section, money in the fund may be used only for capital expenditures deemed necessary by the council for an adequate educational program.

C. The council may authorize the purchase by the public school facilities authority of portable classrooms to be loaned to school districts to meet a temporary requirement. Payment for these purchases shall be made from the fund. Title to and custody of the portable classrooms shall rest in the public school facilities authority. The council shall authorize the lending of the portable classrooms to school districts upon request and upon finding that sufficient need exists. Application for use or return of state-owned portable classroom buildings shall be submitted by school districts to the council. Expenses of maintenance of the portable classrooms while in the custody of the public school facilities authority shall be paid from the fund; expenses of maintenance and insurance of the portable classrooms while in the custody of a school district shall be the responsibility of the school district. The council may authorize the permanent disposition of the portable classrooms by the public school facilities authority with prior approval of the state board of finance.

D. Applications for assistance from the fund shall be made by school districts to the council in accordance with requirements of the council. Except as provided in Subsection K of this section, the council shall require as a condition of application that a school district have a current five-year facilities plan, which shall include a current preventive maintenance plan to which the school adheres for each public school in the school district.

E. The council shall review all requests for assistance from the fund and shall allocate funds only for those capital outlay projects that meet the criteria of the Public School Capital Outlay Act.

F. Money in the fund shall be disbursed by warrant of the department of finance and administration on vouchers signed by the secretary of finance and administration following certification by the council that an application has been approved or an expenditure has been ordered by a court pursuant to Section 22-24-5.4 NMSA 1978. At the discretion of the council, money for a project shall be distributed as follows:

(1) up to ten percent of the portion of the project cost funded with distributions from the fund or five percent of the total project cost, whichever is greater, may be paid to the school district before work commences with the balance of the grant award made on a cost-reimbursement basis; or

(2) the council may authorize payments directly to the contractor.

G. Balances in the fund may be annually appropriated for the core administrative functions of the public school facilities authority pursuant to the Public School Capital Outlay Act, and, in addition, balances in the fund may be expended by the public school facilities authority, upon approval of the council, for project management expenses; provided that:

(1) the total annual expenditures from the fund for the core administrative functions pursuant to this subsection shall not exceed five percent of the average annual grant assistance authorized from the fund during the three previous fiscal years; and

(2) any unexpended or unencumbered balance remaining at the end of a fiscal year from the expenditures authorized in this subsection shall revert to the fund.

H. The fund may be expended by the council for building system repair, renovation or replacement initiatives with projects to be identified by the council pursuant to Section 22-24-4.6 NMSA 1978; provided that money allocated pursuant to this subsection shall be expended within three years of the allocation.

I. The fund may be expended annually by the council for grants to school districts for the purpose of making lease payments for classroom facilities, including facilities leased by charter schools. The grants shall be made upon application by the school districts and pursuant to rules adopted by the council; provided that an application on behalf of a charter school shall be made by the school district, but, if the school district fails to make an application on behalf of a charter school, the charter school may submit its own application. The following criteria shall apply to the grants:

(1) a charter school shall use a council-approved, standardized lease for all new leases, amendments and renewals entered into after July 1, 2017;

[(1)] (2) the amount of a grant to a school district shall not exceed:

(a) the actual annual lease payments owed for leasing classroom space for schools, including charter schools, in the school district; or

(b) seven hundred dollars ($700) multiplied by the number of MEM using the leased classroom facilities; provided that [in fiscal year 2009 and in each subsequent fiscal year, this amount shall be adjusted] the council may adjust the amount annually by the percentage change between the penultimate calendar year and the immediately preceding calendar year of the consumer price index for the United States, all items, as published by the United States department of labor;

[(2)] (3) a grant received for the lease payments of a charter school may be used by that charter school as a state match necessary to obtain federal grants pursuant to the federal [No Child Left Behind Act of 2001] Every Student Succeeds Act;

[(3)] (4) at the end of each fiscal year, any unexpended or unencumbered balance of the appropriation shall revert to the fund;

[(4)] (5) no grant shall be made for lease payments due pursuant to a financing agreement under which the facilities may be purchased for a price that is reduced according to the lease payments made unless:

(a) the agreement has been approved pursuant to the provisions of the Public School Lease Purchase Act; and

(b) the facilities are leased by a charter school;

[(5)] (6) if the lease payments are made pursuant to a financing agreement under which the facilities may be purchased for a price that is reduced according to the lease payments made, neither a grant nor any provision of the Public School Capital Outlay Act creates a legal obligation for the school district or charter school to continue the lease from year to year or to purchase the facilities nor does it create a legal obligation for the state to make subsequent grants pursuant to the provisions of this subsection; [and

(6)] (7) as used in this subsection:

(a) "MEM" means: 1) the average full-time-equivalent enrollment using leased classroom facilities on the [eightieth and one hundred twentieth days] second and third reporting dates of the prior school year; or 2) in the case of an approved charter school that has not commenced classroom instruction, the estimated full-time-equivalent enrollment that will use leased classroom facilities in the first year of instruction, as shown in the approved charter school application; provided that, after the [eightieth day] second reporting date of the school year, the MEM shall be adjusted to reflect the full-time-equivalent enrollment on that date; and

(b) "classroom facilities" or "classroom space" includes the space needed, as determined by the minimum required under the statewide adequacy standards, for the direct administration of school activities; and

(8) beginning July 1, 2018, a charter school that receives a D or F school grade pursuant to the A-B-C-D-F Schools Rating Act for the immediately preceding three consecutive school years shall not be eligible for grants pursuant to this section.

J. In addition to other authorized expenditures from the fund, up to one percent of the average grant assistance authorized from the fund during the three previous fiscal years may be expended in each fiscal year by the public school facilities authority to pay the state fire marshal, the construction industries division of the regulation and licensing department and local jurisdictions having authority from the state to permit and inspect projects for expenditures made to permit and inspect projects funded in whole or in part under the Public School Capital Outlay Act. The public school facilities authority may enter into contracts with the state fire marshal, the construction industries division or the appropriate local authorities to carry out the provisions of this subsection. Such a contract may provide for initial estimated payments from the fund prior to the expenditures if the contract also provides for additional payments from the fund if the actual expenditures exceed the initial payments and for repayments back to the fund if the initial payments exceed the actual expenditures. Money distributed from the fund to the state fire marshal or the construction industries division pursuant to this subsection shall be used to supplement, rather than supplant, appropriations to those entities.

K. Pursuant to guidelines established by the council, allocations from the fund may be made to assist school districts in developing and updating five-year facilities plans required by the Public School Capital Outlay Act; provided that:

(1) no allocation shall be made unless the council determines that the school district is willing and able to pay the portion of the total cost of developing or updating the plan that is not funded with the allocation from the fund. Except as provided in Paragraph (2) of this subsection, the portion of the total cost to be paid with the allocation from the fund shall be determined pursuant to the methodology in Paragraph (5) of Subsection B of Section 22-24-5 NMSA 1978; or

(2) the allocation from the fund may be used to pay the total cost of developing or updating the plan if:

(a) the school district has fewer than an average of six hundred full-time-equivalent students on the [eightieth and one hundred twentieth days] second and third reporting dates of the prior school year; or

(b) the school district meets all of the following requirements: 1) the school district has fewer than an average of one thousand full-time-equivalent students on the [eightieth and one hundred twentieth days] second and third reporting dates of the prior school year; 2) the school district has at least seventy percent of its students eligible for free or reduced-fee lunch; 3) the state share of the total cost, if calculated pursuant to the methodology in Paragraph (5) of Subsection B of Section 22-24-5 NMSA 1978, would be less than fifty percent; and 4) for all educational purposes, the school district has a residential property tax rate of at least seven dollars ($7.00) on each one thousand dollars ($1,000) of taxable value, as measured by the sum of all rates imposed by resolution of the local school board plus rates set to pay interest and principal on outstanding school district general obligation bonds.

L. Upon application by a school district, allocations from the fund may be made by the council for the purpose of demolishing abandoned school district facilities; provided that:

(1) the costs of continuing to insure an abandoned facility outweigh any potential benefit when and if a new facility is needed by the school district;

(2) there is no practical use for the abandoned facility without the expenditure of substantial renovation costs; and

(3) the council may enter into an agreement with the school district under which an amount equal to the savings to the district in lower insurance premiums are used to reimburse the fund fully or partially for the demolition costs allocated to the district.

M. Up to ten million dollars ($10,000,000) of the fund may be expended each year in fiscal years 2014 through 2019 for an education technology infrastructure deficiency corrections initiative pursuant to Section 22-24-4.5 NMSA 1978; provided that funding allocated pursuant to this section shall be expended within three years of its allocation.

N. For each fiscal year from 2018 through 2022, twenty-five million dollars ($25,000,000) of the public school capital outlay fund is reserved for appropriation by the legislature to the instructional material fund or to the transportation distribution of the public school fund. The secretary shall certify the need for the issuance of supplemental severance tax bonds to meet an appropriation from the public school capital outlay fund to the instructional material fund or to the transportation distribution of the public school fund. Any portion of an amount of the public school capital outlay fund that is reserved for appropriation by the legislature for a fiscal year, but that is not appropriated before the first day of that fiscal year, may be expended by the council as provided in this section."

SECTION 4. Section 22-26A-3 NMSA 1978 (being Laws 2007, Chapter 173, Section 3, as amended) is amended to read:

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

A. "financing agreement" or "lease purchase [arrangement] agreement" 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. "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 5. 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] AGREEMENT--APPROVAL OF DEPARTMENT.--

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

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

SECTION 6. A new section of the Public School Lease Purchase Act is enacted to read:

"[NEW MATERIAL] PROPOSED LEASE PURCHASE AGREEMENT AMENDMENT--APPROVAL REQUIREMENT.--A governing body shall not amend or otherwise change an executed lease purchase agreement without the approval of the department of the final amendment or change."

SECTION 7. 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] AGREEMENTS--TERMS.--Lease purchase [arrangements] agreements:

A. may have payments payable annually or more frequently as determined by the governing body;

B. may be subject to prepayment at the option of the 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 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 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] agreement, 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] agreement; provided that the net effective interest rate shall not exceed the maximum permitted by the Public Securities Act; and provided further that the net effective interest rate of a lease purchase agreement entered into prior to July 1, 2017 shall not exceed fifty percent of 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, 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] agreement 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] agreement 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] agreement from year to year or to purchase the building or other real property;

J. shall provide that the lease purchase [arrangement] agreement 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] agreement is assignable, without cost to the school district, or charter school and with all of the rights and benefits of its predecessor in interest being transferred to the assignee, to:

(1) a school district or charter school; or

(2) the state or one of its institutions, instrumentalities or other political subdivisions; and

L. shall provide that amendments to the lease purchase [arrangement] agreement, 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 8. Section 22-26A-5.1 NMSA 1978 (being Laws 2009, Chapter 132, Section 5) is amended to read:

"22-26A-5.1. TRANSFER OR ASSIGNMENT OF LEASE PURCHASE [ARRANGEMENT] AGREEMENT--DESIGNATION AS PUBLIC PROPERTY.--

A. A holder of a lease purchase [arrangement] agreement, including any public entity holding a lease purchase [arrangement] agreement, may secure financing by issuing certificates of participation or otherwise assigning or transferring all or a portion of the lease purchase [arrangement] agreement.

B. A building or other real property subject to a lease purchase [arrangement] agreement that has been entered into and approved pursuant to the Public School Lease Purchase Act shall be considered to be a public property."

SECTION 9. 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] AGREEMENTS--RESOLUTION.--

A. If a governing body proposes to acquire a building or other real property through a lease purchase [arrangement] agreement, 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] agreement, a governing body shall:

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

(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] agreement;

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

C. After receiving department approval of the lease purchase [arrangement] agreement, the governing body may adopt a final resolution approving the lease purchase of the building or other real property; provided that the lease purchase agreement is not modified after the governing body receives department approval.

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

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 of the charter school has notified the local school board that the charter school has been approved to enter into a lease purchase [arrangement] agreement and has identified revenue from the proposed tax as a necessary source of funds. The local school board:

(1) shall include the tax revenue needed by the charter school in the resolution if the school's charter has been renewed at least once; and

(2) may 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.

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] agreement.

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

SECTION 10. 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] AGREEMENTS.--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] agreement or to the payments due under a lease purchase [arrangement] agreement, including any combination of:

A. money from the school district's or charter school'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 or charter school 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 or charter school 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 11. Section 22-26A-8 NMSA 1978 (being Laws 2007, Chapter 173, Section 8, as amended) is amended to read:

"22-26A-8. AUTHORIZATION FOR LOCAL SCHOOL BOARD TO SUBMIT QUESTION OF LEASE PURCHASE TAX.--A local school board may adopt a resolution to submit to the qualified electors of the school district the question of whether a property tax at a rate not to exceed the rate specified in the resolution should be imposed upon the net taxable value of property allocated to the school district under the Property Tax Code for the purpose of making payments under lease purchase [arrangements] agreements. The resolution shall:

A. specify the maximum rate of the proposed tax, which shall not exceed ten dollars ($10.00) on each one thousand dollars ($1,000) of net taxable value of property allocated to the school district under the Property Tax Code; B. specify the date an election will be held to submit the question of imposition of the tax to the qualified electors of the district; and

C. limit the imposition of the proposed tax to no more than thirty property tax years."

SECTION 12. Section 22-26A-9 NMSA 1978 (being Laws 2007, Chapter 173, Section 9) is amended to read:

"22-26A-9. AUTHORIZING RESOLUTION--TIME LIMITATION.--The resolution authorized under Section [8 of the Public School Lease Purchase Act] 22-26A-8 NMSA 1978 shall be adopted no later than May 15 in the year in which the tax is proposed to be imposed."

SECTION 13. Section 22-26A-10 NMSA 1978 (being Laws 2007, Chapter 173, Section 10, as amended) is amended to read:

"22-26A-10. CONDUCT OF ELECTION--NOTICE--BALLOT.--

A. An election on the question of imposing a tax under Sections 22-26A-8 through 22-26A-12 NMSA 1978 may be held in conjunction with a regular school district election or may be conducted as or held in conjunction with a special school district election, but the election shall be held prior to July 1 of the property tax year in which the tax is proposed to be imposed. Conduct of the election shall be as prescribed in the School Election Law for regular and special school district elections.

B. The resolution required to be published as notice of the election under Section 1-22-4 or 1-22-5 NMSA 1978 shall include as the question to be submitted to the voters whether a property tax at a rate not to exceed the rate specified in the authorizing resolution should be imposed for the specified number of property tax years not exceeding thirty years upon the net taxable value of all property allocated to the school district for payments due under lease purchase [arrangements] agreements.

C. The ballot shall include the information specified in Subsection B of this section and shall present the voter the choice of voting "for the lease purchase tax" or "against the lease purchase tax"."

SECTION 14. Section 22-26A-12 NMSA 1978 (being Laws 2007, Chapter 173, Section 12, as amended) is amended to read:

"22-26A-12. IMPOSITION OF TAX--LIMITATIONS.--If as a result of an election held in accordance with Sections 22-26A-8 through 22-26A-11 NMSA 1978 a majority of the qualified electors voting on the question votes in favor of the imposition of the tax, the tax rate shall be certified, unless the local school board directs that the tax levy not be made for the year, by the department of finance and administration at the rate specified in the authorizing resolution or at a lower rate directed by the local school board and the tax shall be imposed at the rate certified in accordance with the provisions of the Property Tax Code. The revenue produced by the tax shall be expended only for payments due under lease purchase [arrangements] agreements, as specified in the authorizing resolution."

SECTION 15. Section 22-26A-13 NMSA 1978 (being Laws 2007, Chapter 173, Section 13, as amended) is amended to read:

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

A. After adoption of a resolution approving a lease purchase [arrangement] agreement, the 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 governing body preliminary to and in the authorization of and entering into the lease purchase [arrangement] agreement described in the notice is perpetually barred."

SECTION 16. Section 22-26A-14 NMSA 1978 (being Laws 2007, Chapter 173, Section 14, as amended) is amended to read:

"22-26A-14. REFUNDING OR REFINANCING LEASE PURCHASE [ARRANGEMENTS] AGREEMENTS.--School districts and charter schools may enter into lease purchase [arrangements] agreements for the purpose of refunding or refinancing any lease purchase [arrangements] agreements 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] agreements. Until the proceeds of the lease purchase [arrangements] agreements issued for the purpose of refunding or refinancing outstanding lease purchase [arrangements] agreements are applied to the prepayment or retirement of the outstanding lease purchase [arrangements] agreements, 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 governing body, also be applied to the payment of the outstanding lease purchase [arrangements] agreements 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 governing body to be used for payment of the refunding or refinancing lease purchase [arrangement] agreement. If the proceeds from a tax imposed pursuant to Sections 22-26A-8 through 22-26A-12 NMSA 1978 were used as a source of payments for the refunded lease purchase [arrangement] agreement, the proceeds may continue to be used for the refunding or refinancing lease purchase [arrangements] agreements without the requirement of an additional election on the issue."

SECTION 17. 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] agreement, certificates of participation or other partial interest in a lease purchase [arrangement] agreement 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] agreement or related sublease [arrangement] agreement or in any way impair the rights and remedies of the holders of lease purchase [arrangements] agreements, certificates of participation or other partial interests in lease purchase [arrangements] agreements 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] agreement or related sublease [arrangement] agreement."

SECTION 18. Section 22-26A-16 NMSA 1978 (being Laws 2007, Chapter 173, Section 16, as amended) is amended to read:

"22-26A-16. LEGAL INVESTMENTS FOR PUBLIC OFFICERS AND FIDUCIARIES.--Lease purchase [arrangements] agreements entered into under the authority of the Public School Lease Purchase Act, including certificates of participation and other partial interests in such lease purchase [arrangements] agreements, shall be legal investments in which all insurance companies, banks and savings and loan associations organized under the laws of the state, public officers and public bodies and all administrators, guardians, executors, trustees and other fiduciaries may properly and legally invest funds."

SECTION 19. 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] agreements entered into by governing bodies, in consideration of the acceptance of and payment for the lease purchase [arrangements] agreements entered into pursuant to the Public School Lease Purchase Act, that lease purchase [arrangements] agreements, certificates of participation and other partial interests in lease purchase [arrangements] agreements and the interest income from the lease purchase [arrangements] agreements, 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."

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