Second Substitute S.B. 48

Senator Dan R. Eastman proposes the following substitute bill:

1 EQUALIZATION OF SCHOOL CAPITAL
2 OUTLAY FUNDING
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Dan R. Eastman
6 House Sponsor: Aaron Tilton
7
8 LONG TITLE
9 General Description:
10 This bill makes changes to the Public Education Capital Outlay Act.
11 Highlighted Provisions:
12 This bill:
13 . defines terms;
14 . requires certain divided school districts to impose a capital outlay levy of at least
15 .0006 per dollar of taxable value;
16 . allocates the revenue generated under the capital outlay levy to school districts
17 located within the qualifying divided school district;
18 . establishes a combined capital property tax rate a school district must impose to
19 receive a full distribution from both the Capital Outlay Foundation Program and
20 Capital Outlay Enrollment Growth Program;
21 . provides for a pro-rated distribution if a school district imposes a combined capital
22 property tax rate less than the rate required for full funding;
23 . appropriates additional ongoing funding to the State Board of Education for the
24 Capital Outlay Foundation Program and Capital Outlay Enrollment Growth
25 Program;

26 . requires a reduction in the property tax certified tax rate for school districts
27 receiving state capital outlay funding increases;
28 . requires each school district in a county of the first class to levy a capital outlay
29 property tax at a specified rate in order to receive the state contribution toward the
30 minimum basic program;
31 . allocates the revenue generated under the capital outlay levy to school districts
32 located in a county of the first class;
33 . amends truth in taxation notice and hearing requirements for school districts
34 imposing the mandatory portion of the capital outlay levy;
35 . amends the calculation of the certified tax rate with respect to the capital outlay
36 levy; and
37 . makes technical corrections.
38 Monies Appropriated in this Bill:
39 This bill appropriates as an ongoing appropriation subject to future budget constraints,
40 $56,000,000 from the Uniform School Fund for fiscal year 2008-09 to the State Board
41 of Education.
42 Other Special Clauses:
43 This bill takes effect on July 1, 2008.
44 This bill coordinates with H.B. 1, Minimum School Program Base Budget
45 Amendments, by providing superseding amendments.
46 Utah Code Sections Affected:
47 AMENDS:
48 11-13-302, as last amended by Laws of Utah 2007, Chapter 108
49 53A-2-103, as last amended by Laws of Utah 2002, Chapter 301
50 53A-2-114, as last amended by Laws of Utah 1996, Chapter 326
51 53A-2-115, as last amended by Laws of Utah 1996, Chapter 326
52 53A-2-117, as last amended by Laws of Utah 2007, Chapters 215 and 297
53 53A-16-107, as last amended by Laws of Utah 1999, Chapter 332
54 53A-16-110, as last amended by Laws of Utah 2004, Chapter 371
55 53A-17a-135, as last amended by Laws of Utah 2007, Chapter 2
56 53A-21-102, as last amended by Laws of Utah 2003, Chapters 199 and 320

57 59-2-924, as last amended by Laws of Utah 2007, Chapters 107 and 329
58 ENACTS:
59 53A-2-118.3, Utah Code Annotated 1953
60 53A-16-107.1, Utah Code Annotated 1953
61 53A-21-101.5, Utah Code Annotated 1953
62 53A-21-201, Utah Code Annotated 1953
63 53A-21-202, Utah Code Annotated 1953
64 53A-21-301, Utah Code Annotated 1953
65 53A-21-302, Utah Code Annotated 1953
66 59-2-924.2, Utah Code Annotated 1953
67 59-2-924.3, Utah Code Annotated 1953
68 RENUMBERS AND AMENDS:
69 53A-21-401, (Renumbered from 53A-21-104, as last amended by Laws of Utah 2007,
70 Chapter 344)
71 53A-21-501, (Renumbered from 53A-21-105, as last amended by Laws of Utah 2007,
72 Chapter 2)
73 REPEALS:
74 53A-21-103, as last amended by Laws of Utah 2003, Chapter 320
75 53A-21-103.5, as last amended by Laws of Utah 2005, Chapters 171 and 184
76
77 Be it enacted by the Legislature of the state of Utah:
78 Section 1. Section 11-13-302 is amended to read:
79 11-13-302. Payment of fee in lieu of ad valorem property tax by certain energy
80 suppliers -- Method of calculating -- Collection -- Extent of tax lien.
81 (1) (a) Each project entity created under this chapter that owns a project and that sells
82 any capacity, service, or other benefit from it to an energy supplier or suppliers whose tangible
83 property is not exempted by Utah Constitution Article XIII, Section 3, from the payment of ad
84 valorem property tax, shall pay an annual fee in lieu of ad valorem property tax as provided in
85 this section to each taxing jurisdiction within which the project or any part of it is located.
86 (b) For purposes of this section, "annual fee" means the annual fee described in
87 Subsection (1)(a) that is in lieu of ad valorem property tax.

88 (c) The requirement to pay an annual fee shall commence:
89 (i) with respect to each taxing jurisdiction that is a candidate receiving the benefit of
90 impact alleviation payments under contracts or determination orders provided for in Sections
91 11-13-305 and 11-13-306 , with the fiscal year of the candidate following the fiscal year of the
92 candidate in which the date of commercial operation of the last generating unit, other than any
93 generating unit providing additional project capacity, of the project occurs, or, in the case of
94 any facilities providing additional project capacity, with the fiscal year of the candidate
95 following the fiscal year of the candidate in which the date of commercial operation of the
96 generating unit providing the additional project capacity occurs; and
97 (ii) with respect to any taxing jurisdiction other than a taxing jurisdiction described in
98 Subsection (1)(c)(i), with the fiscal year of the taxing jurisdiction in which construction of the
99 project commences, or, in the case of facilities providing additional project capacity, with the
100 fiscal year of the taxing jurisdiction in which construction of those facilities commences.
101 (d) The requirement to pay an annual fee shall continue for the period of the useful life
102 of the project or facilities.
103 (2) (a) The annual fees due a school district shall be as provided in Subsection (2)(b)
104 because the ad valorem property tax imposed by a school district and authorized by the
105 Legislature under Section 53A-17a-135 represents both:
106 (i) a levy mandated by the state for the state minimum school program under Section
107 53A-17a-135 ; and
108 (ii) local levies for capital outlay, maintenance, transportation, and other purposes
109 under Sections 11-2-7 , 53A-16-107 , 53A-16-110 , 53A-17a-126 , 53A-17a-127 , 53A-17a-133 ,
110 53A-17a-134 , 53A-17a-143 , and 53A-17a-145 [, and 53A-21-103 ].
111 (b) The annual fees due a school district shall be as follows:
112 (i) the project entity shall pay to the school district an annual fee for the state minimum
113 school program at the rate imposed by the school district and authorized by the Legislature
114 under Subsection 53A-17a-135 (1); and
115 (ii) for all other local property tax levies authorized to be imposed by a school district,
116 the project entity shall pay to the school district either:
117 (A) an annual fee; or
118 (B) impact alleviation payments under contracts or determination orders provided for

119 in Sections 11-13-305 and 11-13-306 .
120 (3) (a) An annual fee due a taxing jurisdiction for a particular year shall be calculated
121 by multiplying the tax rate or rates of the jurisdiction for that year by the product obtained by
122 multiplying the fee base or value determined in accordance with Subsection (4) for that year of
123 the portion of the project located within the jurisdiction by the percentage of the project which
124 is used to produce the capacity, service, or other benefit sold to the energy supplier or suppliers.
125 (b) As used in this section, "tax rate," when applied in respect to a school district,
126 includes any assessment to be made by the school district under Subsection (2) or Section
127 63-51-6 .
128 (c) There is to be credited against the annual fee due a taxing jurisdiction for each year,
129 an amount equal to the debt service, if any, payable in that year by the project entity on bonds,
130 the proceeds of which were used to provide public facilities and services for impact alleviation
131 in the taxing jurisdiction in accordance with Sections 11-13-305 and 11-13-306 .
132 (d) The tax rate for the taxing jurisdiction for that year shall be computed so as to:
133 (i) take into account the fee base or value of the percentage of the project located
134 within the taxing jurisdiction determined in accordance with Subsection (4) used to produce the
135 capacity, service, or other benefit sold to the supplier or suppliers; and
136 (ii) reflect any credit to be given in that year.
137 (4) (a) Except as otherwise provided in this section, the annual fees required by this
138 section shall be paid, collected, and distributed to the taxing jurisdiction as if:
139 (i) the annual fees were ad valorem property taxes; and
140 (ii) the project were assessed at the same rate and upon the same measure of value as
141 taxable property in the state.
142 (b) (i) Notwithstanding Subsection (4)(a), for purposes of an annual fee required by
143 this section, the fee base of a project may be determined in accordance with an agreement
144 among:
145 (A) the project entity; and
146 (B) any county that:
147 (I) is due an annual fee from the project entity; and
148 (II) agrees to have the fee base of the project determined in accordance with the
149 agreement described in this Subsection (4).

150 (ii) The agreement described in Subsection (4)(b)(i):
151 (A) shall specify each year for which the fee base determined by the agreement shall be
152 used for purposes of an annual fee; and
153 (B) may not modify any provision of this chapter except the method by which the fee
154 base of a project is determined for purposes of an annual fee.
155 (iii) For purposes of an annual fee imposed by a taxing jurisdiction within a county
156 described in Subsection (4)(b)(i)(B), the fee base determined by the agreement described in
157 Subsection (4)(b)(i) shall be used for purposes of an annual fee imposed by that taxing
158 jurisdiction.
159 (iv) (A) If there is not agreement as to the fee base of a portion of a project for any
160 year, for purposes of an annual fee, the State Tax Commission shall determine the value of that
161 portion of the project for which there is not an agreement:
162 (I) for that year; and
163 (II) using the same measure of value as is used for taxable property in the state.
164 (B) The valuation required by Subsection (4)(b)(iv)(A) shall be made by the State Tax
165 Commission in accordance with rules made by the State Tax Commission.
166 (c) Payments of the annual fees shall be made from:
167 (i) the proceeds of bonds issued for the project; and
168 (ii) revenues derived by the project entity from the project.
169 (d) (i) The contracts of the project entity with the purchasers of the capacity, service, or
170 other benefits of the project whose tangible property is not exempted by Utah Constitution
171 Article XIII, Section 3, from the payment of ad valorem property tax shall require each
172 purchaser, whether or not located in the state, to pay, to the extent not otherwise provided for,
173 its share, determined in accordance with the terms of the contract, of these fees.
174 (ii) It is the responsibility of the project entity to enforce the obligations of the
175 purchasers.
176 (5) (a) The responsibility of the project entity to make payment of the annual fees is
177 limited to the extent that there is legally available to the project entity, from bond proceeds or
178 revenues, monies to make these payments, and the obligation to make payments of the annual
179 fees is not otherwise a general obligation or liability of the project entity.
180 (b) No tax lien may attach upon any property or money of the project entity by virtue of

181 any failure to pay all or any part of an annual fee.
182 (c) The project entity or any purchaser may contest the validity of an annual fee to the
183 same extent as if the payment was a payment of the ad valorem property tax itself.
184 (d) The payments of an annual fee shall be reduced to the extent that any contest is
185 successful.
186 (6) (a) The annual fee described in Subsection (1):
187 (i) shall be paid by a public agency that:
188 (A) is not a project entity; and
189 (B) owns an interest in a facility providing additional project capacity if the interest is
190 otherwise exempt from taxation pursuant to Utah Constitution, Article XIII, Section 3; and
191 (ii) for a public agency described in Subsection (6)(a)(i), shall be calculated in
192 accordance with Subsection (6)(b).
193 (b) The annual fee required under Subsection (6)(a) shall be an amount equal to the tax
194 rate or rates of the applicable taxing jurisdiction multiplied by the product of the following:
195 (i) the fee base or value of the facility providing additional project capacity located
196 within the jurisdiction;
197 (ii) the percentage of the ownership interest of the public agency in the facility; and
198 (iii) the portion, expressed as a percentage, of the public agency's ownership interest
199 that is attributable to the capacity, service, or other benefit from the facility that is sold by the
200 public agency to an energy supplier or suppliers whose tangible property is not exempted by
201 Utah Constitution, Article XIII, Section 3, from the payment of ad valorem property tax.
202 (c) A public agency paying the annual fee pursuant to Subsection (6)(a) shall have the
203 obligations, credits, rights, and protections set forth in Subsections (1) through (5) with respect
204 to its ownership interest as though it were a project entity.
205 Section 2. Section 53A-2-103 is amended to read:
206 53A-2-103. Transfer of property to new school district -- Rights and obligations
207 of new school board -- Outstanding indebtedness -- Special tax.
208 (1) On July 1 following the approval of the creation of a new school district under
209 Section 53A-2-102 , the local school boards of the former districts shall convey and deliver all
210 school property to the local school board of the new district. Title vests in the new board. All
211 rights, claims, and causes of action to or for the property, for the use or the income from the

212 property, for conversion, disposition, or withholding of the property, or for any damage or
213 injury to the property vest at once in the new board.
214 (2) The new board may bring and maintain actions to recover, protect, and preserve the
215 property and rights of the district schools and to enforce contracts.
216 (3) The new board shall assume and be liable for all outstanding debts and obligations
217 of each of the former school districts.
218 (4) All of the bonded indebtedness, outstanding debts, and obligations of a former
219 district, which cannot be reasonably paid from the assets of the former district, shall be paid by
220 a special tax levied by the new board as needed. The tax shall be levied upon the property
221 within the former district which was liable for the indebtedness at the time of consolidation. If
222 bonds are approved in the new district under Section 53A-18-102 , the special tax shall be
223 discontinued and the bonded indebtedness paid as any other bonded indebtedness of the new
224 district.
225 (5) Bonded indebtedness of a former district which has been refunded shall be paid in
226 the same manner as that which the new district assumes under Section 53A-18-101 .
227 (6) State funds received by the new district under Section [ 53A-21-103 ] 53A-21-202
228 may be applied toward the payment of outstanding bonded indebtedness of a former district in
229 the same proportion as the bonded indebtedness of the territory within the former district bears
230 to the total bonded indebtedness of the districts combined.
231 Section 3. Section 53A-2-114 is amended to read:
232 53A-2-114. Additional levies -- School board options to abolish or continue after
233 consolidation.
234 (1) If a school district which has approved an additional levy under Section
235 53A-16-110 , 53A-17a-133 , 53A-17a-134 , or 53A-17a-145 [, or 53A-21-103 ] is consolidated
236 with a district which does not have such a levy, the board of education of the consolidated
237 district may choose to abolish the levy, or apply it in whole or in part to the entire consolidated
238 district.
239 (2) If the board chooses to apply any part of the levy to the entire district, the levy may
240 continue in force for no more than three years, unless approved by the electors of the
241 consolidated district in the manner set forth in Section 53A-16-110 .
242 Section 4. Section 53A-2-115 is amended to read:

243 53A-2-115. Additional levies in transferred territory -- Transferee board option
244 to abolish or continue.
245 If two or more districts undergo restructuring that results in a district receiving territory
246 that increases the population of the district by at least 25%, and if the transferred territory was,
247 at the time of transfer, subject to an additional levy under Section 53A-16-110 , 53A-17a-133 ,
248 53A-17a-134 , or 53A-17a-145 [, or 53A-21-103 ], the board of education of the transferee
249 district may abolish the levy or apply the levy in whole or in part to the entire restructured
250 district. Any such levy made applicable to the entire district may continue in force for no more
251 than five years, unless approved by the electors of the restructured district in the manner set
252 forth in Section 53A-16-110 .
253 Section 5. Section 53A-2-117 is amended to read:
254 53A-2-117. Definitions.
255 As used in Sections 53A-2-117 through 53A-2-121 :
256 (1) "Divided school district", "existing district" or "existing school district" means a
257 school district from which a new district is created.
258 (2) "New district" or "new school district" means a school district created under
259 Section 53A-2-118 or 53A-2-118.1 .
260 (3) "Remaining district" or "remaining school district" means an existing district after
261 the creation of a new district.
262 Section 6. Section 53A-2-118.3 is enacted to read:
263 53A-2-118.3. Imposition of the capital outlay levy in qualifying divided school
264 districts.
265 (1) For purposes of this section, "qualifying divided school district" means a divided
266 school district:
267 (a) located within a county of the second through sixth class; and
268 (b) with a new school district created under Section 53A-2-118.1 that begins to provide
269 educational services after July 1, 2008.
270 (2) A school district within a qualifying divided school district shall impose a capital
271 outlay levy described in Section 53A-16-107 of at least .0006 per dollar of taxable value.
272 (3) The county treasurer of a county with a qualifying divided school district shall
273 distribute revenues generated by the .0006 portion of the capital outlay levy required in

274 Subsection (2) to the school districts located within the boundaries of the qualifying divided
275 school district as follows:
276 (a) 25% of the revenues shall be distributed in proportion to a school district's
277 percentage of the total enrollment growth in all of the school districts within the qualifying
278 divided school district that have an increase in enrollment, calculated on the basis of the
279 average annual enrollment growth over the prior three years in all of the school districts within
280 the qualifying divided school district that have an increase in enrollment during the prior three
281 years, as of the October 1 enrollment counts; and
282 (b) 75% of the revenues shall be distributed in proportion to a school district's
283 percentage of the total prior year enrollment in all of the school districts within the qualifying
284 divided school district, as of the October 1 enrollment counts.
285 (4) On or before December 31 of each year, the State Board of Education shall provide
286 a county treasurer with audited enrollment information from the fall enrollment audit necessary
287 to distribute revenues as required by this section.
288 (5) On or before March 31 of each year, a county treasurer in a county with a
289 qualifying divided school district shall distribute the revenue generated within the qualifying
290 divided school district during the prior calendar year from the capital outlay levy described in
291 Section 53A-2-118.3 .
292 Section 7. Section 53A-16-107 is amended to read:
293 53A-16-107. Capital outlay levy -- Maintenance of school facilities -- Authority to
294 use proceeds of .0002 tax rate -- Restrictions and procedure.
295 (1) [(a) A] Subject to Subsection (3), a local school board may annually impose a
296 capital outlay levy [a tax not to exceed .0024 per dollar of taxable value for debt service and
297 capital outlay.] not to exceed .0024 per dollar of taxable value to be used for:
298 (a) capital outlay;
299 (b) debt service; and
300 (c) subject to Subsection (2), school facility maintenance.
301 [(b) Each] (2) (a) A local school board may utilize the proceeds of a maximum of
302 .0002 per dollar of taxable value of [its] the local school board's annual capital outlay levy for
303 the maintenance of school [plants] facilities in [its] the school district.
304 [(2)] (b) A local school board that uses the option provided under Subsection [(1)(b)

305 must do the following] (2)(a) shall:
306 [(a)] (i) maintain the same level of expenditure for maintenance in the current year as it
307 did in the preceding year, plus the annual average percentage increase applied to the
308 maintenance and operation budget for the current year; and
309 [(b)] (ii) identify the expenditure of capital outlay funds for maintenance by a district
310 project number to ensure that the funds [were] are expended in the manner intended.
311 [(3)] (c) The State Board of Education shall establish by rule the expenditure
312 classification for maintenance under this program using a standard classification system.
313 (3) In order to qualify for receipt of the state contribution toward the basic program
314 described in Section 53A-17a-135 , a local school board in a county of the first class shall
315 impose a capital outlay levy of at least .0006 per dollar of taxable value.
316 (4) (a) The county treasurer of a county of the first class shall distribute revenues
317 generated by the .0006 portion of the capital outlay levy required in Subsection (3) to school
318 districts within the county in accordance with Section 53A-16-107.1 .
319 (b) If a school district in a county of the first class imposes a capital outlay levy
320 pursuant to this section which exceeds .0006, the county treasurer of a county of the first class
321 shall distribute revenues generated by the portion of the capital outlay levy which exceeds
322 .0006 to the school district imposing the levy.
323 Section 8. Section 53A-16-107.1 is enacted to read:
324 53A-16-107.1. School capital outlay in counties of the first class -- Allocation.
325 (1) The county treasurer of a county of the first class shall distribute revenues
326 generated by the .0006 portion of the capital outlay levy described in Subsection
327 53A-16-107 (3) to school districts located within the county of the first class as follows:
328 (a) 25% of the revenues shall be distributed in proportion to a school district's
329 percentage of the total enrollment growth in all of the school districts within the county that
330 have an increase in enrollment, calculated on the basis of the average annual enrollment growth
331 over the prior three years in all of the school districts within the county that have an increase in
332 enrollment during the prior three years, as of the October 1 enrollment counts; and
333 (b) 75% of the revenues shall be distributed in proportion to a school district's
334 percentage of the total prior year enrollment in all of the school districts within the county, as
335 of the October 1 enrollment counts.

336 (2) If a new school district is created or school district boundaries are adjusted, the
337 enrollment for each affected school district shall be calculated on the basis of enrollment in
338 school district schools located within that school district's newly created or adjusted
339 boundaries, as of October 1 enrollment counts.
340 (3) On or before December 31 of each year, the State Board of Education shall provide
341 a county treasurer with audited enrollment information from the fall enrollment audit necessary
342 to distribute revenues as required by this section.
343 (4) On or before March 31 of each year, a county treasurer in a county of the first class
344 shall distribute the revenue generated within the county of the first class during the prior
345 calendar year from the capital outlay levy described in Section 53A-16-107 .
346 Section 9. Section 53A-16-110 is amended to read:
347 53A-16-110. Special tax to buy school building sites, build and furnish
348 schoolhouses, or improve school property.
349 (1) (a) A local school board may, by following the process for special elections
350 established in Sections 20A-1-203 and 20A-1-204 , call a special election to determine whether
351 a special property tax should be levied for one or more years to buy building sites, build and
352 furnish schoolhouses, or improve the school property under its control.
353 (b) The tax may not exceed .2% of the taxable value of all taxable property in the
354 district in any one year.
355 (2) The board shall give reasonable notice of the election and follow the same
356 procedure used in elections for the issuance of bonds.
357 (3) If a majority of those voting on the proposition vote in favor of the tax, it is levied
358 in addition to [those] a levy authorized under [Sections] Section 53A-17a-145 [and
359 53A-21-103 ] and computed on the valuation of the county assessment roll for that year.
360 (4) (a) Within 20 days after the election, the board shall certify the amount of the
361 approved tax to the governing body of the county in which the school district is located.
362 (b) The governing body shall acknowledge receipt of the certification and levy and
363 collect the special tax.
364 (c) It shall then distribute the collected taxes to the business administrator of the school
365