Fifth Substitute S.B. 48

Representative Aaron Tilton 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 amends the Public Education Capital Outlay Act and the Property Tax Act to
11 modify school capital outlay funding.
12 Highlighted Provisions:
13 This bill:
14 . defines terms;
15 . requires certain divided school districts to impose a capital outlay levy at a specified
16 rate and allocates the revenue generated under the capital outlay levy to school
17 districts located within the qualifying divided school district;
18 . changes the allocation methodology for the Capital Outlay Foundation Program;
19 . appropriates funding to the State Board of Education for the Capital Outlay
20 Foundation Program and the Capital Outlay Enrollment Growth Program;
21 . requires each school district in a county of the first class to levy a capital outlay
22 property tax at a specified rate and allocates the revenue generated under the capital
23 outlay levy to school districts located in a county of the first class;
24 . amends truth in taxation notice and hearing requirements for school districts
25 imposing the mandatory portion of the capital outlay levy;

26 . amends the calculation of the certified tax rate with respect to the capital outlay
27 levy; and
28 . makes technical corrections.
29 Monies Appropriated in this Bill:
30 This bill appropriates:
31 . as an ongoing appropriation subject to future budget constraints, $27,288,900 from
32 the Uniform School Fund for fiscal year 2008-09 to the State Board of Education;
33 and
34 . $15,000,000 from the Uniform School Fund for fiscal year 2008-09 only to the
35 State Board of Education.
36 Other Special Clauses:
37 This bill takes effect on July 1, 2008.
38 This bill coordinates with H.B. 1, Minimum School Program Base Budget
39 Amendments, by providing superseding amendments.
40 Utah Code Sections Affected:
41 AMENDS:
42 11-13-302, as last amended by Laws of Utah 2007, Chapter 108
43 17-34-3, as last amended by Laws of Utah 2005, First Special Session, Chapter 9
44 17C-1-408, as renumbered and amended by Laws of Utah 2006, Chapter 359
45 53A-2-103, as last amended by Laws of Utah 2002, Chapter 301
46 53A-2-114, as last amended by Laws of Utah 1996, Chapter 326
47 53A-2-115, as last amended by Laws of Utah 1996, Chapter 326
48 53A-2-117, as last amended by Laws of Utah 2007, Chapters 215 and 297
49 53A-16-106, as last amended by Laws of Utah 1994, Chapter 12
50 53A-16-107, as last amended by Laws of Utah 1999, Chapter 332
51 53A-16-110, as last amended by Laws of Utah 2004, Chapter 371
52 53A-17a-133, as last amended by Laws of Utah 2006, Chapter 26
53 53A-19-102, as last amended by Laws of Utah 2007, Chapter 92
54 53A-19-105, as last amended by Laws of Utah 2003, Chapter 122
55 53A-21-102, as last amended by Laws of Utah 2003, Chapters 199 and 320
56 59-2-908, as last amended by Laws of Utah 1995, Chapter 278

57 59-2-913, as last amended by Laws of Utah 2007, Chapter 107
58 59-2-914, as last amended by Laws of Utah 1995, Chapter 278
59 59-2-918, as last amended by Laws of Utah 2006, Chapters 26 and 104
60 59-2-924, as last amended by Laws of Utah 2007, Chapters 107 and 329
61 59-2-1330, as last amended by Laws of Utah 2002, Chapters 196 and 240
62 ENACTS:
63 53A-2-118.3, Utah Code Annotated 1953
64 53A-16-107.1, Utah Code Annotated 1953
65 53A-21-101.5, Utah Code Annotated 1953
66 53A-21-201, Utah Code Annotated 1953
67 53A-21-202, Utah Code Annotated 1953
68 53A-21-301, Utah Code Annotated 1953
69 53A-21-302, Utah Code Annotated 1953
70 59-2-924.2, Utah Code Annotated 1953
71 59-2-924.3, Utah Code Annotated 1953
72 59-2-924.4, Utah Code Annotated 1953
73 RENUMBERS AND AMENDS:
74 53A-21-401, (Renumbered from 53A-21-104, as last amended by Laws of Utah 2007,
75 Chapter 344)
76 53A-21-501, (Renumbered from 53A-21-105, as last amended by Laws of Utah 2007,
77 Chapter 2)
78 REPEALS:
79 53A-21-103, as last amended by Laws of Utah 2003, Chapter 320
80 53A-21-103.5, as last amended by Laws of Utah 2005, Chapters 171 and 184
81
82 Be it enacted by the Legislature of the state of Utah:
83 Section 1. Section 11-13-302 is amended to read:
84 11-13-302. Payment of fee in lieu of ad valorem property tax by certain energy
85 suppliers -- Method of calculating -- Collection -- Extent of tax lien.
86 (1) (a) Each project entity created under this chapter that owns a project and that sells
87 any capacity, service, or other benefit from it to an energy supplier or suppliers whose tangible

88 property is not exempted by Utah Constitution Article XIII, Section 3, from the payment of ad
89 valorem property tax, shall pay an annual fee in lieu of ad valorem property tax as provided in
90 this section to each taxing jurisdiction within which the project or any part of it is located.
91 (b) For purposes of this section, "annual fee" means the annual fee described in
92 Subsection (1)(a) that is in lieu of ad valorem property tax.
93 (c) The requirement to pay an annual fee shall commence:
94 (i) with respect to each taxing jurisdiction that is a candidate receiving the benefit of
95 impact alleviation payments under contracts or determination orders provided for in Sections
96 11-13-305 and 11-13-306 , with the fiscal year of the candidate following the fiscal year of the
97 candidate in which the date of commercial operation of the last generating unit, other than any
98 generating unit providing additional project capacity, of the project occurs, or, in the case of
99 any facilities providing additional project capacity, with the fiscal year of the candidate
100 following the fiscal year of the candidate in which the date of commercial operation of the
101 generating unit providing the additional project capacity occurs; and
102 (ii) with respect to any taxing jurisdiction other than a taxing jurisdiction described in
103 Subsection (1)(c)(i), with the fiscal year of the taxing jurisdiction in which construction of the
104 project commences, or, in the case of facilities providing additional project capacity, with the
105 fiscal year of the taxing jurisdiction in which construction of those facilities commences.
106 (d) The requirement to pay an annual fee shall continue for the period of the useful life
107 of the project or facilities.
108 (2) (a) The annual fees due a school district shall be as provided in Subsection (2)(b)
109 because the ad valorem property tax imposed by a school district and authorized by the
110 Legislature under Section 53A-17a-135 represents both:
111 (i) a levy mandated by the state for the state minimum school program under Section
112 53A-17a-135 ; and
113 (ii) local levies for capital outlay, maintenance, transportation, and other purposes
114 under Sections 11-2-7 , 53A-16-107 , 53A-16-110 , 53A-17a-126 , 53A-17a-127 , 53A-17a-133 ,
115 53A-17a-134 , 53A-17a-143 , and 53A-17a-145 [, and 53A-21-103 ].
116 (b) The annual fees due a school district shall be as follows:
117 (i) the project entity shall pay to the school district an annual fee for the state minimum
118 school program at the rate imposed by the school district and authorized by the Legislature

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

150 (A) the project entity; and
151 (B) any county that:
152 (I) is due an annual fee from the project entity; and
153 (II) agrees to have the fee base of the project determined in accordance with the
154 agreement described in this Subsection (4).
155 (ii) The agreement described in Subsection (4)(b)(i):
156 (A) shall specify each year for which the fee base determined by the agreement shall be
157 used for purposes of an annual fee; and
158 (B) may not modify any provision of this chapter except the method by which the fee
159 base of a project is determined for purposes of an annual fee.
160 (iii) For purposes of an annual fee imposed by a taxing jurisdiction within a county
161 described in Subsection (4)(b)(i)(B), the fee base determined by the agreement described in
162 Subsection (4)(b)(i) shall be used for purposes of an annual fee imposed by that taxing
163 jurisdiction.
164 (iv) (A) If there is not agreement as to the fee base of a portion of a project for any
165 year, for purposes of an annual fee, the State Tax Commission shall determine the value of that
166 portion of the project for which there is not an agreement:
167 (I) for that year; and
168 (II) using the same measure of value as is used for taxable property in the state.
169 (B) The valuation required by Subsection (4)(b)(iv)(A) shall be made by the State Tax
170 Commission in accordance with rules made by the State Tax Commission.
171 (c) Payments of the annual fees shall be made from:
172 (i) the proceeds of bonds issued for the project; and
173 (ii) revenues derived by the project entity from the project.
174 (d) (i) The contracts of the project entity with the purchasers of the capacity, service, or
175 other benefits of the project whose tangible property is not exempted by Utah Constitution
176 Article XIII, Section 3, from the payment of ad valorem property tax shall require each
177 purchaser, whether or not located in the state, to pay, to the extent not otherwise provided for,
178 its share, determined in accordance with the terms of the contract, of these fees.
179 (ii) It is the responsibility of the project entity to enforce the obligations of the
180 purchasers.

181 (5) (a) The responsibility of the project entity to make payment of the annual fees is
182 limited to the extent that there is legally available to the project entity, from bond proceeds or
183 revenues, monies to make these payments, and the obligation to make payments of the annual
184 fees is not otherwise a general obligation or liability of the project entity.
185 (b) No tax lien may attach upon any property or money of the project entity by virtue of
186 any failure to pay all or any part of an annual fee.
187 (c) The project entity or any purchaser may contest the validity of an annual fee to the
188 same extent as if the payment was a payment of the ad valorem property tax itself.
189 (d) The payments of an annual fee shall be reduced to the extent that any contest is
190 successful.
191 (6) (a) The annual fee described in Subsection (1):
192 (i) shall be paid by a public agency that:
193 (A) is not a project entity; and
194 (B) owns an interest in a facility providing additional project capacity if the interest is
195 otherwise exempt from taxation pursuant to Utah Constitution, Article XIII, Section 3; and
196 (ii) for a public agency described in Subsection (6)(a)(i), shall be calculated in
197 accordance with Subsection (6)(b).
198 (b) The annual fee required under Subsection (6)(a) shall be an amount equal to the tax
199 rate or rates of the applicable taxing jurisdiction multiplied by the product of the following:
200 (i) the fee base or value of the facility providing additional project capacity located
201 within the jurisdiction;
202 (ii) the percentage of the ownership interest of the public agency in the facility; and
203 (iii) the portion, expressed as a percentage, of the public agency's ownership interest
204 that is attributable to the capacity, service, or other benefit from the facility that is sold by the
205 public agency to an energy supplier or suppliers whose tangible property is not exempted by
206 Utah Constitution, Article XIII, Section 3, from the payment of ad valorem property tax.
207 (c) A public agency paying the annual fee pursuant to Subsection (6)(a) shall have the
208 obligations, credits, rights, and protections set forth in Subsections (1) through (5) with respect
209 to its ownership interest as though it were a project entity.
210 Section 2. Section 17-34-3 is amended to read:
211 17-34-3. Taxes or service charges.

212 (1) (a) If a county furnishes the municipal-type services and functions described in
213 Section 17-34-1 to areas of the county outside the limits of incorporated cities or towns, the
214 entire cost of the services or functions so furnished shall be defrayed from funds that the county
215 has derived from:
216 (i) taxes that the county may lawfully levy or impose outside the limits of incorporated
217 towns or cities;
218 (ii) service charges or fees the county may impose upon the persons benefited in any
219 way by the services or functions; or
220 (iii) a combination of these sources.
221 (b) As the taxes or service charges or fees are levied and collected, they shall be placed
222 in a special revenue fund of the county and shall be disbursed only for the rendering of the
223 services or functions established in Section 17-34-1 within the unincorporated areas of the
224 county or as provided in Subsection 10-2-121 (2).
225 (2) For the purpose of levying taxes, service charges, or fees provided in this section,
226 the county legislative body may establish a district or districts in the unincorporated areas of
227 the county.
228 (3) Nothing contained in this chapter may be construed to authorize counties to impose
229 or levy taxes not otherwise allowed by law.
230 [(4) (a) A county required under Subsection 17-34-1 (4) to provide advanced life
231 support and paramedic services to the unincorporated area of the county and that previously
232 paid for those services through a countywide levy may increase its levy under Subsection
233 (1)(a)(i) to generate in the unincorporated area of the county the same amount of revenue as the
234 county loses from that area due to the required decrease in the countywide certified tax rate
235 under Subsection 59-2-924 (2)(k)(i).]
236 [(b) An increase in tax rate under Subsection (4)(a) is exempt from the notice and
237 hearing requirements of Sections 59-2-918 and 59-2-919 .]
238 [(5)] (4) Notwithstanding any other provision of this chapter, a county providing fire,
239 paramedic, and police protection services in a designated recreational area, as provided in
240 Subsection 17-34-1 (5), may fund those services from the county general fund with revenues
241 derived from both inside and outside the limits of cities and towns, and the funding of those
242 services is not limited to unincorporated area revenues.

243 Section 3. Section 17C-1-408 is amended to read:
244 17C-1-408. Base taxable value to be adjusted to reflect other changes.
245 (1) (a) (i) As used in this Subsection (1), "qualifying decrease" means:
246 (A) a decrease of more than 20% from the previous tax year's levy; or
247 (B) a cumulative decrease over a consecutive five-year period of more than 100% from
248 the levy in effect at the beginning of the five-year period.
249 (ii) The year in which a qualifying decrease under Subsection (1)(a)(i)(B) occurs is the
250 fifth year of the five-year period.
251 (b) If there is a qualifying decrease in the minimum basic school levy under Section
252 59-2-902 that would result in a reduction of the amount of tax increment to be paid to an
253 agency:
254 (i) the base taxable value of taxable property within the project area shall be reduced in
255 the year of the qualifying decrease to the extent necessary, even if below zero, to provide the
256 agency with approximately the same amount of tax increment that would have been paid to the
257 agency each year had the qualifying decrease not occurred; and
258 (ii) the amount of tax increment paid to the agency each year for the payment of bonds
259 and indebtedness may not be less than what would have been paid to the agency if there had
260 been no qualifying decrease.
261 (2) (a) The amount of the base taxable value to be used in determining tax increment
262 shall be:
263 (i) increased or decreased by the amount of an increase or decrease that results from:
264 (A) a statute enacted by the Legislature or by the people through an initiative;
265 (B) a judicial decision;
266 (C) an order from the State Tax Commission to a county to adjust or factor its
267 assessment rate under Subsection 59-2-704 (2);
268 (D) a change in exemption provided in Utah Constitution Article XIII, Section 2, or
269 Section 59-2-103 ; or
270 (E) an increase or decrease in the percentage of fair market value, as defined under
271 Section 59-2-102 ; and
272 (ii) reduced for any year to the extent necessary, even if below zero, to provide an
273 agency with approximately the same amount of money the agency would have received without

274 a reduction in the county's certified tax rate if:
275 (A) in that year there is a decrease in the county's certified tax rate under Subsection
276 [ 59-2-924 (2)(c) or (d)(i)] 59-2-924.2 (2) or (3)(a);
277 (B) the amount of the decrease is more than 20% of the county's certified tax rate of the
278 previous year; and
279 (C) the decrease would result in a reduction of the amount of tax increment to be paid
280 to the agency.
281 (b) Notwithstanding an increase or decrease under Subsection (2)(a), the amount of tax
282 increment paid to an agency each year for payment of bonds or other indebtedness may not be
283 less than would have been paid to the agency each year if there had been no increase or
284 decrease under Subsection (2)(a).
285 Section 4. Section 53A-2-103 is amended to read:
286 53A-2-103. Transfer of property to new school district -- Rights and obligations
287 of new school board -- Outstanding indebtedness -- Special tax.
288 (1) On July 1 following the approval of the creation of a new school district under
289 Section 53A-2-102 , the local school boards of the former districts shall convey and deliver all
290 school property to the local school board of the new district. Title vests in the new board. All
291 rights, claims, and causes of action to or for the property, for the use or the income from the
292 property, for conversion, disposition, or withholding of the property, or for any damage or
293 injury to the property vest at once in the new board.
294 (2) The new board may bring and maintain actions to recover, protect, and preserve the
295 property and rights of the district schools and to enforce contracts.
296 (3) The new board shall assume and be liable for all outstanding debts and obligations
297 of each of the former school districts.
298 (4) All of the bonded indebtedness, outstanding debts, and obligations of a former
299 district, which cannot be reasonably paid from the assets of the former district, shall be paid by
300 a special tax levied by the new board as needed. The tax shall be levied upon the property
301 within the former district which was liable for the indebtedness at the time of consolidation. If
302 bonds are approved in the new district under Section 53A-18-102 , the special tax shall be
303 discontinued and the bonded indebtedness paid as any other bonded indebtedness of the new
304 district.

305 (5) Bonded indebtedness of a former district which has been refunded shall be paid in
306 the same manner as that which the new district assumes under Section 53A-18-101 .
307 (6) State funds received by the new district under Section [ 53A-21-103 ] 53A-21-202
308 may be applied toward the payment of outstanding bonded indebtedness of a former district in
309 the same proportion as the bonded indebtedness of the territory within the former district bears
310 to the total bonded indebtedness of the districts combined.
311 Section 5. Section 53A-2-114 is amended to read:
312 53A-2-114. Additional levies -- School board options to abolish or continue after
313 consolidation.
314 (1) If a school district which has approved an additional levy under Section
315 53A-16-110 , 53A-17a-133 , 53A-17a-134 , or 53A-17a-145 [, or 53A-21-103 ] is consolidated
316 with a district which does not have such a levy, the board of education of the consolidated
317 district may choose to abolish the levy, or apply it in whole or in part to the entire consolidated
318 district.
319 (2) If the board chooses to apply any part of the levy to the entire district, the levy may
320 continue in force for no more than three years, unless approved by the electors of the
321 consolidated district in the manner set forth in Section 53A-16-110 .
322 Section 6. Section 53A-2-115 is amended to read:
323 53A-2-115. Additional levies in transferred territory -- Transferee board option
324 to abolish or continue.
325 If two or more districts undergo restructuring that results in a district receiving territory
326 that increases the population of the district by at least 25%, and if the transferred territory was,
327 at the time of transfer, subject to an additional levy under Section 53A-16-110 , 53A-17a-133 ,
328 53A-17a-134 , or 53A-17a-145 [, or 53A-21-103 ], the board of education of the transferee
329 district may abolish the levy or apply the levy in whole or in part to the entire restructured
330 district. Any such levy made applicable to the entire district may continue in force for no more
331 than five years, unless approved by the electors of the restructured district in the manner set
332 forth in Section 53A-16-110 .
333 Section 7. Section 53A-2-117 is amended to read:
334 53A-2-117. Definitions.
335 As used in Sections 53A-2-117 through 53A-2-121 :

336 (1) "Divided school district," "existing district," or "existing school district" means a
337 school district from which a new district is created.
338 (2) "New district" or "new school district" means a school district created under
339 Section 53A-2-118 or 53A-2-118.1 .
340 (3) "Remaining district" or "remaining school district" means an existing district after
341 the creation of a new district.
342 Section 8. Section 53A-2-118.3 is enacted to read:
343 53A-2-118.3. Imposition of the capital outlay levy in qualifying divided school
344 districts.
345 (1) For purposes of this section:
346 (a) "Qualifying divided school district" means a divided school district:
347 (i) located within a county of the second through sixth class; and
348 (ii) with a new school district created under Section 53A-2-118.1 that begins to provide
349 educational services after July 1, 2008.
350 (b) "Qualifying taxable year" means the calendar year in which a new school district
351 begins to provide educational services.
352 (2) Beginning with the qualifying taxable year, in order to qualify for receipt of the
353 state contribution toward the minimum school program described in Section 53A-17a-104 , a
354 school district within a qualifying divided school district shall impose a capital outlay levy
355 described in Section 53A-16-107 of at least .0006 per dollar of taxable value.
356 (3) The county treasurer of a county with a qualifying divided school district shall
357 distribute revenues generated by the .0006 portion of the capital outlay levy required in
358 Subsection (2) to the school districts located within the boundaries of the qualifying divided
359 school district as follows:
360 (a) 25% of the revenues shall be distributed in proportion to a school district's
361 percentage of the total enrollment growth in all of the school districts within the qualifying
362 divided school district that have an increase in enrollment, calculated on the basis of the
363 average annual enrollment growth over the prior three years in all of the school districts within
364 the qualifying divided school district that have an increase in enrollment over the prior three
365 years, as of the October 1 enrollment counts; and
366 (b) 75% of the revenues shall be distributed in proportion to a school district's

367