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Third 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:
             40          .    as an ongoing appropriation subject to future budget constraints, $56,000,000 from
             41      the Uniform School Fund for fiscal year 2008-09 to the State Board of Education.
             42      Other Special Clauses:
             43          This bill provides effective dates and provides for retrospective operation.
             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          17-34-3, as last amended by Laws of Utah 2005, First Special Session, Chapter 9
             50          17C-1-408, as renumbered and amended by Laws of Utah 2006, Chapter 359
             51          53A-2-103, as last amended by Laws of Utah 2002, Chapter 301
             52          53A-2-114, as last amended by Laws of Utah 1996, Chapter 326
             53          53A-2-115, as last amended by Laws of Utah 1996, Chapter 326
             54          53A-2-117, as last amended by Laws of Utah 2007, Chapters 215 and 297
             55          53A-16-106, as last amended by Laws of Utah 1994, Chapter 12
             56          53A-16-107, as last amended by Laws of Utah 1999, Chapter 332


             57          53A-16-110, as last amended by Laws of Utah 2004, Chapter 371
             58          53A-17a-133, as last amended by Laws of Utah 2006, Chapter 26
             59          53A-17a-135, as last amended by Laws of Utah 2007, Chapter 2
             60          53A-19-102, as last amended by Laws of Utah 2007, Chapter 92
             61          53A-19-105, as last amended by Laws of Utah 2003, Chapter 122
             62          53A-21-102, as last amended by Laws of Utah 2003, Chapters 199 and 320
             63          59-2-908, as last amended by Laws of Utah 1995, Chapter 278
             64          59-2-913, as last amended by Laws of Utah 2007, Chapter 107
             65          59-2-914, as last amended by Laws of Utah 1995, Chapter 278
             66          59-2-918, as last amended by Laws of Utah 2006, Chapters 26 and 104
             67          59-2-924, as last amended by Laws of Utah 2007, Chapters 107 and 329
             68          59-2-1330, as last amended by Laws of Utah 2002, Chapters 196 and 240
             69      ENACTS:
             70          53A-2-118.3, Utah Code Annotated 1953
             71          53A-16-107.1, Utah Code Annotated 1953
             72          53A-21-101.5, Utah Code Annotated 1953
             73          53A-21-201, Utah Code Annotated 1953
             74          53A-21-202, Utah Code Annotated 1953
             75          53A-21-301, Utah Code Annotated 1953
             76          53A-21-302, Utah Code Annotated 1953
             77          59-2-924.2, Utah Code Annotated 1953
             78          59-2-924.3, Utah Code Annotated 1953
             79          59-2-924.4, Utah Code Annotated 1953
             80          59-2-924.5, Utah Code Annotated 1953
             81      RENUMBERS AND AMENDS:
             82          53A-21-401, (Renumbered from 53A-21-104, as last amended by Laws of Utah 2007,
             83      Chapter 344)
             84          53A-21-501, (Renumbered from 53A-21-105, as last amended by Laws of Utah 2007,
             85      Chapter 2)
             86      REPEALS:
             87          53A-21-103, as last amended by Laws of Utah 2003, Chapter 320


             88          53A-21-103.5, as last amended by Laws of Utah 2005, Chapters 171 and 184
             89     
             90      Be it enacted by the Legislature of the state of Utah:
             91          Section 1. Section 11-13-302 is amended to read:
             92           11-13-302. Payment of fee in lieu of ad valorem property tax by certain energy
             93      suppliers -- Method of calculating -- Collection -- Extent of tax lien.
             94          (1) (a) Each project entity created under this chapter that owns a project and that sells
             95      any capacity, service, or other benefit from it to an energy supplier or suppliers whose tangible
             96      property is not exempted by Utah Constitution Article XIII, Section 3, from the payment of ad
             97      valorem property tax, shall pay an annual fee in lieu of ad valorem property tax as provided in
             98      this section to each taxing jurisdiction within which the project or any part of it is located.
             99          (b) For purposes of this section, "annual fee" means the annual fee described in
             100      Subsection (1)(a) that is in lieu of ad valorem property tax.
             101          (c) The requirement to pay an annual fee shall commence:
             102          (i) with respect to each taxing jurisdiction that is a candidate receiving the benefit of
             103      impact alleviation payments under contracts or determination orders provided for in Sections
             104      11-13-305 and 11-13-306 , with the fiscal year of the candidate following the fiscal year of the
             105      candidate in which the date of commercial operation of the last generating unit, other than any
             106      generating unit providing additional project capacity, of the project occurs, or, in the case of
             107      any facilities providing additional project capacity, with the fiscal year of the candidate
             108      following the fiscal year of the candidate in which the date of commercial operation of the
             109      generating unit providing the additional project capacity occurs; and
             110          (ii) with respect to any taxing jurisdiction other than a taxing jurisdiction described in
             111      Subsection (1)(c)(i), with the fiscal year of the taxing jurisdiction in which construction of the
             112      project commences, or, in the case of facilities providing additional project capacity, with the
             113      fiscal year of the taxing jurisdiction in which construction of those facilities commences.
             114          (d) The requirement to pay an annual fee shall continue for the period of the useful life
             115      of the project or facilities.
             116          (2) (a) The annual fees due a school district shall be as provided in Subsection (2)(b)
             117      because the ad valorem property tax imposed by a school district and authorized by the
             118      Legislature under Section 53A-17a-135 represents both:


             119          (i) a levy mandated by the state for the state minimum school program under Section
             120      53A-17a-135 ; and
             121          (ii) local levies for capital outlay, maintenance, transportation, and other purposes
             122      under Sections 11-2-7 , 53A-16-107 , 53A-16-110 , 53A-17a-126 , 53A-17a-127 , 53A-17a-133 ,
             123      53A-17a-134 , 53A-17a-143 , and 53A-17a-145 [, and 53A-21-103 ].
             124          (b) The annual fees due a school district shall be as follows:
             125          (i) the project entity shall pay to the school district an annual fee for the state minimum
             126      school program at the rate imposed by the school district and authorized by the Legislature
             127      under Subsection 53A-17a-135 (1); and
             128          (ii) for all other local property tax levies authorized to be imposed by a school district,
             129      the project entity shall pay to the school district either:
             130          (A) an annual fee; or
             131          (B) impact alleviation payments under contracts or determination orders provided for
             132      in Sections 11-13-305 and 11-13-306 .
             133          (3) (a) An annual fee due a taxing jurisdiction for a particular year shall be calculated
             134      by multiplying the tax rate or rates of the jurisdiction for that year by the product obtained by
             135      multiplying the fee base or value determined in accordance with Subsection (4) for that year of
             136      the portion of the project located within the jurisdiction by the percentage of the project which
             137      is used to produce the capacity, service, or other benefit sold to the energy supplier or suppliers.
             138          (b) As used in this section, "tax rate," when applied in respect to a school district,
             139      includes any assessment to be made by the school district under Subsection (2) or Section
             140      63-51-6 .
             141          (c) There is to be credited against the annual fee due a taxing jurisdiction for each year,
             142      an amount equal to the debt service, if any, payable in that year by the project entity on bonds,
             143      the proceeds of which were used to provide public facilities and services for impact alleviation
             144      in the taxing jurisdiction in accordance with Sections 11-13-305 and 11-13-306 .
             145          (d) The tax rate for the taxing jurisdiction for that year shall be computed so as to:
             146          (i) take into account the fee base or value of the percentage of the project located
             147      within the taxing jurisdiction determined in accordance with Subsection (4) used to produce the
             148      capacity, service, or other benefit sold to the supplier or suppliers; and
             149          (ii) reflect any credit to be given in that year.


             150          (4) (a) Except as otherwise provided in this section, the annual fees required by this
             151      section shall be paid, collected, and distributed to the taxing jurisdiction as if:
             152          (i) the annual fees were ad valorem property taxes; and
             153          (ii) the project were assessed at the same rate and upon the same measure of value as
             154      taxable property in the state.
             155          (b) (i) Notwithstanding Subsection (4)(a), for purposes of an annual fee required by
             156      this section, the fee base of a project may be determined in accordance with an agreement
             157      among:
             158          (A) the project entity; and
             159          (B) any county that:
             160          (I) is due an annual fee from the project entity; and
             161          (II) agrees to have the fee base of the project determined in accordance with the
             162      agreement described in this Subsection (4).
             163          (ii) The agreement described in Subsection (4)(b)(i):
             164          (A) shall specify each year for which the fee base determined by the agreement shall be
             165      used for purposes of an annual fee; and
             166          (B) may not modify any provision of this chapter except the method by which the fee
             167      base of a project is determined for purposes of an annual fee.
             168          (iii) For purposes of an annual fee imposed by a taxing jurisdiction within a county
             169      described in Subsection (4)(b)(i)(B), the fee base determined by the agreement described in
             170      Subsection (4)(b)(i) shall be used for purposes of an annual fee imposed by that taxing
             171      jurisdiction.
             172          (iv) (A) If there is not agreement as to the fee base of a portion of a project for any
             173      year, for purposes of an annual fee, the State Tax Commission shall determine the value of that
             174      portion of the project for which there is not an agreement:
             175          (I) for that year; and
             176          (II) using the same measure of value as is used for taxable property in the state.
             177          (B) The valuation required by Subsection (4)(b)(iv)(A) shall be made by the State Tax
             178      Commission in accordance with rules made by the State Tax Commission.
             179          (c) Payments of the annual fees shall be made from:
             180          (i) the proceeds of bonds issued for the project; and


             181          (ii) revenues derived by the project entity from the project.
             182          (d) (i) The contracts of the project entity with the purchasers of the capacity, service, or
             183      other benefits of the project whose tangible property is not exempted by Utah Constitution
             184      Article XIII, Section 3, from the payment of ad valorem property tax shall require each
             185      purchaser, whether or not located in the state, to pay, to the extent not otherwise provided for,
             186      its share, determined in accordance with the terms of the contract, of these fees.
             187          (ii) It is the responsibility of the project entity to enforce the obligations of the
             188      purchasers.
             189          (5) (a) The responsibility of the project entity to make payment of the annual fees is
             190      limited to the extent that there is legally available to the project entity, from bond proceeds or
             191      revenues, monies to make these payments, and the obligation to make payments of the annual
             192      fees is not otherwise a general obligation or liability of the project entity.
             193          (b) No tax lien may attach upon any property or money of the project entity by virtue of
             194      any failure to pay all or any part of an annual fee.
             195          (c) The project entity or any purchaser may contest the validity of an annual fee to the
             196      same extent as if the payment was a payment of the ad valorem property tax itself.
             197          (d) The payments of an annual fee shall be reduced to the extent that any contest is
             198      successful.
             199          (6) (a) The annual fee described in Subsection (1):
             200          (i) shall be paid by a public agency that:
             201          (A) is not a project entity; and
             202          (B) owns an interest in a facility providing additional project capacity if the interest is
             203      otherwise exempt from taxation pursuant to Utah Constitution, Article XIII, Section 3; and
             204          (ii) for a public agency described in Subsection (6)(a)(i), shall be calculated in
             205      accordance with Subsection (6)(b).
             206          (b) The annual fee required under Subsection (6)(a) shall be an amount equal to the tax
             207      rate or rates of the applicable taxing jurisdiction multiplied by the product of the following:
             208          (i) the fee base or value of the facility providing additional project capacity located
             209      within the jurisdiction;
             210          (ii) the percentage of the ownership interest of the public agency in the facility; and
             211          (iii) the portion, expressed as a percentage, of the public agency's ownership interest


             212      that is attributable to the capacity, service, or other benefit from the facility that is sold by the
             213      public agency to an energy supplier or suppliers whose tangible property is not exempted by
             214      Utah Constitution, Article XIII, Section 3, from the payment of ad valorem property tax.
             215          (c) A public agency paying the annual fee pursuant to Subsection (6)(a) shall have the
             216      obligations, credits, rights, and protections set forth in Subsections (1) through (5) with respect
             217      to its ownership interest as though it were a project entity.
             218          Section 2. Section 17-34-3 is amended to read:
             219           17-34-3. Taxes or service charges.
             220          (1) (a) If a county furnishes the municipal-type services and functions described in
             221      Section 17-34-1 to areas of the county outside the limits of incorporated cities or towns, the
             222      entire cost of the services or functions so furnished shall be defrayed from funds that the county
             223      has derived from:
             224          (i) taxes that the county may lawfully levy or impose outside the limits of incorporated
             225      towns or cities;
             226          (ii) service charges or fees the county may impose upon the persons benefited in any
             227      way by the services or functions; or
             228          (iii) a combination of these sources.
             229          (b) As the taxes or service charges or fees are levied and collected, they shall be placed
             230      in a special revenue fund of the county and shall be disbursed only for the rendering of the
             231      services or functions established in Section 17-34-1 within the unincorporated areas of the
             232      county or as provided in Subsection 10-2-121 (2).
             233          (2) For the purpose of levying taxes, service charges, or fees provided in this section,
             234      the county legislative body may establish a district or districts in the unincorporated areas of
             235      the county.
             236          (3) Nothing contained in this chapter may be construed to authorize counties to impose
             237      or levy taxes not otherwise allowed by law.
             238          [(4) (a) A county required under Subsection 17-34-1 (4) to provide advanced life
             239      support and paramedic services to the unincorporated area of the county and that previously
             240      paid for those services through a countywide levy may increase its levy under Subsection
             241      (1)(a)(i) to generate in the unincorporated area of the county the same amount of revenue as the
             242      county loses from that area due to the required decrease in the countywide certified tax rate


             243      under Subsection 59-2-924 (2)(k)(i).]
             244          [(b) An increase in tax rate under Subsection (4)(a) is exempt from the notice and
             245      hearing requirements of Sections 59-2-918 and 59-2-919 .]
             246          [(5)] (4) Notwithstanding any other provision of this chapter, a county providing fire,
             247      paramedic, and police protection services in a designated recreational area, as provided in
             248      Subsection 17-34-1 (5), may fund those services from the county general fund with revenues
             249      derived from both inside and outside the limits of cities and towns, and the funding of those
             250      services is not limited to unincorporated area revenues.
             251          Section 3. Section 17C-1-408 is amended to read:
             252           17C-1-408. Base taxable value to be adjusted to reflect other changes.
             253          (1) (a) (i) As used in this Subsection (1), "qualifying decrease" means:
             254          (A) a decrease of more than 20% from the previous tax year's levy; or
             255          (B) a cumulative decrease over a consecutive five-year period of more than 100% from
             256      the levy in effect at the beginning of the five-year period.
             257          (ii) The year in which a qualifying decrease under Subsection (1)(a)(i)(B) occurs is the
             258      fifth year of the five-year period.
             259          (b) If there is a qualifying decrease in the minimum basic school levy under Section
             260      59-2-902 that would result in a reduction of the amount of tax increment to be paid to an
             261      agency:
             262          (i) the base taxable value of taxable property within the project area shall be reduced in
             263      the year of the qualifying decrease to the extent necessary, even if below zero, to provide the
             264      agency with approximately the same amount of tax increment that would have been paid to the
             265      agency each year had the qualifying decrease not occurred; and
             266          (ii) the amount of tax increment paid to the agency each year for the payment of bonds
             267      and indebtedness may not be less than what would have been paid to the agency if there had
             268      been no qualifying decrease.
             269          (2) (a) The amount of the base taxable value to be used in determining tax increment
             270      shall be:
             271          (i) increased or decreased by the amount of an increase or decrease that results from:
             272          (A) a statute enacted by the Legislature or by the people through an initiative;
             273          (B) a judicial decision;


             274          (C) an order from the State Tax Commission to a county to adjust or factor its
             275      assessment rate under Subsection 59-2-704 (2);
             276          (D) a change in exemption provided in Utah Constitution Article XIII, Section 2, or
             277      Section 59-2-103 ; or
             278          (E) an increase or decrease in the percentage of fair market value, as defined under
             279      Section 59-2-102 ; and
             280          (ii) reduced for any year to the extent necessary, even if below zero, to provide an
             281      agency with approximately the same amount of money the agency would have received without
             282      a reduction in the county's certified tax rate if:
             283          (A) in that year there is a decrease in the county's certified tax rate under Subsection
             284      [ 59-2-924 (2)(c) or (d)(i)] 59-2-924.2 (2) or (3)(a);
             285          (B) the amount of the decrease is more than 20% of the county's certified tax rate of the
             286      previous year; and
             287          (C) the decrease would result in a reduction of the amount of tax increment to be paid
             288      to the agency.
             289          (b) Notwithstanding an increase or decrease under Subsection (2)(a), the amount of tax
             290      increment paid to an agency each year for payment of bonds or other indebtedness may not be
             291      less than would have been paid to the agency each year if there had been no increase or
             292      decrease under Subsection (2)(a).
             293          Section 4. Section 53A-2-103 is amended to read:
             294           53A-2-103. Transfer of property to new school district -- Rights and obligations
             295      of new school board -- Outstanding indebtedness -- Special tax.
             296          (1) On July 1 following the approval of the creation of a new school district under
             297      Section 53A-2-102 , the local school boards of the former districts shall convey and deliver all
             298      school property to the local school board of the new district. Title vests in the new board. All
             299      rights, claims, and causes of action to or for the property, for the use or the income from the
             300      property, for conversion, disposition, or withholding of the property, or for any damage or
             301      injury to the property vest at once in the new board.
             302          (2) The new board may bring and maintain actions to recover, protect, and preserve the
             303      property and rights of the district schools and to enforce contracts.
             304          (3) The new board shall assume and be liable for all outstanding debts and obligations


             305      of each of the former school districts.
             306          (4) All of the bonded indebtedness, outstanding debts, and obligations of a former
             307      district, which cannot be reasonably paid from the assets of the former district, shall be paid by
             308      a special tax levied by the new board as needed. The tax shall be levied upon the property
             309      within the former district which was liable for the indebtedness at the time of consolidation. If
             310      bonds are approved in the new district under Section 53A-18-102 , the special tax shall be
             311      discontinued and the bonded indebtedness paid as any other bonded indebtedness of the new
             312      district.
             313          (5) Bonded indebtedness of a former district which has been refunded shall be paid in
             314      the same manner as that which the new district assumes under Section 53A-18-101 .
             315          (6) State funds received by the new district under Section [ 53A-21-103 ] 53A-21-202
             316      may be applied toward the payment of outstanding bonded indebtedness of a former district in
             317      the same proportion as the bonded indebtedness of the territory within the former district bears
             318      to the total bonded indebtedness of the districts combined.
             319          Section 5. Section 53A-2-114 is amended to read:
             320           53A-2-114. Additional levies -- School board options to abolish or continue after
             321      consolidation.
             322          (1) If a school district which has approved an additional levy under Section
             323      53A-16-110 , 53A-17a-133 , 53A-17a-134 , or 53A-17a-145 [, or 53A-21-103 ] is consolidated
             324      with a district which does not have such a levy, the board of education of the consolidated
             325      district may choose to abolish the levy, or apply it in whole or in part to the entire consolidated
             326      district.
             327          (2) If the board chooses to apply any part of the levy to the entire district, the levy may
             328      continue in force for no more than three years, unless approved by the electors of the
             329      consolidated district in the manner set forth in Section 53A-16-110 .
             330          Section 6. Section 53A-2-115 is amended to read:
             331           53A-2-115. Additional levies in transferred territory -- Transferee board option
             332      to abolish or continue.
             333          If two or more districts undergo restructuring that results in a district receiving territory
             334      that increases the population of the district by at least 25%, and if the transferred territory was,
             335      at the time of transfer, subject to an additional levy under Section 53A-16-110 , 53A-17a-133 ,


             336      53A-17a-134 , or 53A-17a-145 [, or 53A-21-103 ], the board of education of the transferee
             337      district may abolish the levy or apply the levy in whole or in part to the entire restructured
             338      district. Any such levy made applicable to the entire district may continue in force for no more
             339      than five years, unless approved by the electors of the restructured district in the manner set
             340      forth in Section 53A-16-110 .
             341          Section 7. Section 53A-2-117 is amended to read:
             342           53A-2-117. Definitions.
             343          As used in Sections 53A-2-117 through 53A-2-121 :
             344          (1) "Divided school district," "existing district," or "existing school district" means a
             345      school district from which a new district is created.
             346          (2) "New district" or "new school district" means a school district created under
             347      Section 53A-2-118 or 53A-2-118.1 .
             348          (3) "Remaining district" or "remaining school district" means an existing district after
             349      the creation of a new district.
             350          Section 8. Section 53A-2-118.3 is enacted to read:
             351          53A-2-118.3. Imposition of the capital outlay levy in qualifying divided school
             352      districts.
             353          (1) For purposes of this section, "qualifying divided school district" means a divided
             354      school district:
             355          (a) located within a county of the second through sixth class; and
             356          (b) with a new school district created under Section 53A-2-118.1 that begins to provide
             357      educational services after July 1, 2008.
             358          (2) A school district within a qualifying divided school district shall impose a capital
             359      outlay levy described in Section 53A-16-107 of at least .0006 per dollar of taxable value.
             360          (3) The county treasurer of a county with a qualifying divided school district shall
             361      distribute revenues generated by the .0006 portion of the capital outlay levy required in
             362      Subsection (2) to the school districts located within the boundaries of the qualifying divided
             363      school district as follows:
             364          (a) 25% of the revenues shall be distributed in proportion to a school district's
             365      percentage of the total enrollment growth in all of the school districts within the qualifying
             366      divided school district that have an increase in enrollment, calculated on the basis of the


             367      average annual enrollment growth over the prior three years in all of the school districts within
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