HF 3076

as introduced - 89th Legislature (2015 - 2016) Posted on 03/16/2016 01:26pm

A bill for an act
relating to education finance; providing for charter school facilities; authorizing
appropriation bonds; establishing charter school facilities authority; amending
Minnesota Statutes 2015 Supplement, sections 124E.13, subdivision 3, by
adding subdivisions; 124E.22; proposing coding for new law in Minnesota
Statutes, chapters 16A; 124E; repealing Minnesota Statutes 2015 Supplement,
section 124E.26.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [16A.966] CHARTER FACILITIES APPROPRIATION BONDS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) The definitions in this subdivision and in chapter
124E apply to this section.
new text end

new text begin (b) "Appropriation bond" means a bond, note, or other similar instrument of the state
payable during a biennium from one or more of the following sources:
new text end

new text begin (1) money appropriated by law from the general fund in any biennium for debt
service due:
new text end

new text begin (i) as the portion of facilities aid under section 124E.22 calculated to pay the
obligations described in subdivision 2, paragraph (b); or
new text end

new text begin (ii) as the portion of long-term maintenance revenue under section 123B.595
calculated to pay the obligations described in subdivision 2, paragraph (b);
new text end

new text begin (2) proceeds of the sale of obligations described in subdivision 2, paragraph (b);
new text end

new text begin (3) payments received for that purpose under agreements and ancillary arrangements
described in subdivision 2, paragraph (d); and
new text end

new text begin (4) investment earnings on amounts in clauses (1) to (3).
new text end

new text begin (c) "Debt service" means the amount payable in any biennium of principal, premium,
if any, and interest on appropriation bonds.
new text end

new text begin Subd. 2. new text end

new text begin Authorization to issue appropriation bonds. new text end

new text begin (a) Subject to the
limitations of this subdivision, the commissioner may sell and issue appropriation bonds
of the state under this section for public purposes as provided by law, including, in
particular, the financing of all or a portion of the acquisition, construction, improving, and
equipping of charter school facilities authorized by the Charter School Facilities Authority
under section 124E.30. Proceeds of the appropriation bonds must be credited to a special
appropriation charter facilities bond proceeds fund in the state treasury. Net income from
investment of the proceeds, as estimated by the commissioner, must be credited to the
special appropriation charter facilities bond proceeds fund.
new text end

new text begin (b) The commissioner of management and budget shall sell and issue bonds of the
state in an amount up to $....... plus the amount necessary to pay the costs of issuing the
bonds in the manner, upon the terms, and with the effect prescribed in this section. As the
total outstanding amount of appropriation bonds under this section is reduced by payments
required under section 124E.22, the commissioner may sell and issue additional bonds of
the state in an amount up to the difference between $....... and the total outstanding amount
of appropriation bonds under this section.
new text end

new text begin (c) Appropriation bonds may be issued from time to time in one or more series on
the terms and conditions the commissioner determines to be in the best interests of the
state, but the term on any series of appropriation bonds may not exceed 30 years. The
appropriation bonds of each issue and series thereof shall be dated and bear interest,
and may be includable in or excludable from the gross income of the owners for federal
income tax purposes.
new text end

new text begin (d) At the time of, or in anticipation of, issuing the appropriation bonds, and at any
time thereafter, so long as the appropriation bonds are outstanding, the commissioner may
enter into agreements and ancillary arrangements relating to the appropriation bonds,
including but not limited to trust indentures, grant agreements, lease or use agreements,
operating agreements, management agreements, liquidity facilities, remarketing or
dealer agreements, letter of credit agreements, insurance policies, guaranty agreements,
reimbursement agreements, indexing agreements, or interest exchange agreements. Any
payments made or received according to the agreement or ancillary arrangement shall be
made from or deposited as provided in the agreement or ancillary arrangement. The
determination of the commissioner included in an interest exchange agreement that the
agreement relates to an appropriation bond shall be conclusive.
new text end

new text begin (e) The commissioner may enter into written agreements or contracts relating to the
continuing disclosure of information necessary to comply with, or facilitate the issuance
of, appropriation bonds in accordance with federal securities laws, rules, and regulations,
including Securities and Exchange Commission rules and regulations in Code of Federal
Regulations, title 17, section 240.15c 2-12. An agreement may be in the form of covenants
with purchasers and holders of appropriation bonds set forth in the order or resolution
authorizing the issuance of the appropriation bonds, or a separate document authorized
by the order or resolution.
new text end

new text begin (f) The appropriation bonds are not subject to chapter 16C.
new text end

new text begin Subd. 3. new text end

new text begin Form; procedure. new text end

new text begin (a) Appropriation bonds may be issued in the form
of bonds, notes, or other similar instruments, and in the manner provided in section
16A.672. In the event that any provision of section 16A.672 conflicts with this section,
this section shall control.
new text end

new text begin (b) Every appropriation bond shall include a conspicuous statement of the limitation
established in subdivision 6.
new text end

new text begin (c) Appropriation bonds may be sold at either public or private sale upon such terms
as the commissioner shall determine are not inconsistent with this section and may be sold
at any price or percentage of par value. Any bid received may be rejected.
new text end

new text begin (d) Appropriation bonds must bear interest at a fixed or variable rate.
new text end

new text begin (e) Notwithstanding any other law, appropriation bonds issued under this section
shall be fully negotiable.
new text end

new text begin Subd. 4. new text end

new text begin Refunding bonds. new text end

new text begin The commissioner from time to time may issue
appropriation bonds for the purpose of refunding any appropriation bonds then outstanding,
including the payment of any redemption premiums on the bonds, any interest accrued or
to accrue to the redemption date, and costs related to the issuance and sale of the refunding
bonds. The proceeds of any refunding bonds may, in the discretion of the commissioner, be
applied to the purchase or payment at maturity of the appropriation bonds to be refunded,
to the redemption of the outstanding appropriation bonds on any redemption date, or to
pay interest on the refunding bonds and may, pending application, be placed in escrow to
be applied to the purchase, payment, retirement, or redemption. Any escrowed proceeds,
pending such use, may be invested and reinvested in obligations that are authorized
investments under section 11A.24. The income earned or realized on the investment may
also be applied to the payment of the appropriation bonds to be refunded or interest or
premiums on the refunded appropriation bonds, or to pay interest on the refunding bonds.
After the terms of the escrow have been fully satisfied, any balance of the proceeds and
any investment income may be returned to the general fund or, if applicable, the special
appropriation charter facilities bond proceeds fund for use in any lawful manner. All
refunding bonds issued under this subdivision must be prepared, executed, delivered, and
secured by appropriations in the same manner as the appropriation bonds to be refunded.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation bonds as legal investments. new text end

new text begin Any of the following entities
may legally invest any sinking funds, money, or other funds belonging to them or under
their control in any appropriation bonds issued under this section:
new text end

new text begin (1) the state, the investment board, public officers, municipal corporations, political
subdivisions, and public bodies;
new text end

new text begin (2) banks and bankers, savings and loan associations, credit unions, trust companies,
savings banks and institutions, investment companies, insurance companies, insurance
associations, and other persons carrying on a banking or insurance business; and
new text end

new text begin (3) personal representatives, guardians, trustees, and other fiduciaries.
new text end

new text begin Subd. 6. new text end

new text begin No full faith and credit; state not required to make appropriations. new text end

new text begin The
appropriation bonds are not public debt of the state, and the full faith, credit, and taxing
powers of the state are not pledged to the payment of the appropriation bonds or to any
payment that the state agrees to make under this section. Appropriation bonds shall not be
obligations paid directly, in whole or in part, from a tax of statewide application on any
class of property, income, transaction, or privilege. Appropriation bonds shall be payable
in each fiscal year only from amounts that the legislature may appropriate for debt service
for any fiscal year as a portion of charter school facilities aid under section 124E.22 and
long-term maintenance revenue under section 123B.595, provided that nothing in this
section shall be construed to require the state to appropriate funds sufficient to make debt
service payments with respect to the appropriation bonds in any fiscal year. Appropriation
bonds shall be canceled and shall no longer be outstanding on the earlier of (1) the first day
of a fiscal year for which the legislature shall not have appropriated amounts sufficient for
debt service based on both the prior and current February forecast under section 16A.103,
or (2) the date of final payment of the principal of and interest on the appropriation bonds.
new text end

new text begin Subd. 7. new text end

new text begin Appropriation of proceeds. new text end

new text begin The proceeds of appropriation bonds and
interest credited to the special appropriation charter facilities bond proceeds fund are
appropriated to the commissioner for payment of capital expenses including capitalized
interest, debt service on outstanding indebtedness of the state, and for the operating and
capital reserves of the authority, each as permitted by state and federal law, and nonsalary
expenses incurred in conjunction with the sale of the appropriation bonds, and such
proceeds may be granted, loaned, or otherwise provided to the authority for the public
purpose provided by subdivision 2, paragraph (a).
new text end

new text begin Subd. 8. new text end

new text begin Appropriation for debt service and other purposes. new text end

new text begin The amount
needed to pay principal and interest on appropriation bonds issued under this section
is appropriated as a portion of charter school facilities aid under section 124E.22 and
long-term maintenance revenue under section 123B.595 each fiscal year from the general
fund to the commissioner of education for transfer to the commissioner of management and
budget, subject to repeal, unallotment under section 16A.152, or cancellation, otherwise
pursuant to subdivision 6, for deposit into the bond payments account established for such
purpose in the special appropriation charter facilities bond proceeds fund.
new text end

new text begin Subd. 9. new text end

new text begin Waiver of immunity. new text end

new text begin The waiver of immunity by the state provided for
by section 3.751, subdivision 1, shall be applicable to the appropriation bonds and any
ancillary contracts to which the commissioner is a party.
new text end

Sec. 2.

Minnesota Statutes 2015 Supplement, section 124E.13, subdivision 3, is
amended to read:

Subd. 3.

Affiliated nonprofit building corporation.

(a) A charter school may
organize an affiliated nonprofit building corporation (1) to purchase, expand, or renovate
an existing facility to serve as a school or (2) to construct a new school facility if the
charter school:

(i) has been in operation for at least six consecutive years;

(ii) as of June 30 has a net positive unreserved general fund balance in the preceding
three fiscal years;

(iii) has long-range strategic and financial plans that include enrollment projections
for at least five years;

(iv) completes a feasibility study of facility options that outlines the benefits and
costs of the options; and

(v) has a plan for purchase, renovation, or new construction which describes project
parameters and budget.

(b) An affiliated nonprofit building corporation under this subdivision must:

(1) be incorporated under section 317A;

(2) comply with applicable Internal Revenue Service regulations, including
regulations for "supporting organizations" as defined by the Internal Revenue Service;

(3) post on the school Web site the name, mailing address, bylaws, minutes of board
meetings, and the names of the current board of directors of the affiliated nonprofit
building corporation;

(4) submit to the commissioner a copy of its annual audit by December 31 of each
year; and

(5) comply with government data practices law under chapter 13.

(c) An affiliated nonprofit building corporation must not serve as the leasing agent
for property or facilities it does not own. A charter school that leases a facility from an
affiliated nonprofit building corporation that does not own the leased facility is ineligible
to receive charter school lease aid. The state is immune from liability resulting from a
contract between a charter school and an affiliated nonprofit building corporation.

deleted text begin (d) Once an affiliated nonprofit building corporation is incorporated under this
subdivision, the authorizer of the school must oversee the efforts of the school's board
of directors to ensure the affiliated nonprofit building corporation complies with all legal
requirements governing the affiliated nonprofit building corporation. A school's board
of directors that fails to ensure the affiliated nonprofit building corporation's compliance
violates its responsibilities and an authorizer must factor the failure into the authorizer's
evaluation of the school.
deleted text end

new text begin (d) An affiliated nonprofit building corporation created before May 31, 2018, may
continue to exist until any charter school facility bonds issued before May 31, 2018,
are renegotiated, refunded, or redeemed. Upon any of those bonds being renegotiated,
refunded, or redeemed, the facility must be transferred to the direct ownership of the
school nonprofit corporation. A school renegotiating or refunding a facility owned by an
affiliated building company may seek financing through the Charter School Facilities
Authority or from other sources other than the authority.
new text end

new text begin (e) The authorizer of the school must oversee the efforts of the school's board of
directors to ensure the affiliated nonprofit building corporation complies with all legal
requirements governing the affiliated nonprofit building corporation. A school's board
of directors that fails to ensure the affiliated nonprofit building corporation's compliance
violates its responsibilities. The authorizer must factor this violation into the authorizer's
evaluation of the school.
new text end

new text begin (f) Affiliated nonprofit building corporations formed by charter schools after May
31, 2018, are ineligible to receive public funds.
new text end

Sec. 3.

Minnesota Statutes 2015 Supplement, section 124E.13, is amended by adding a
subdivision to read:

new text begin Subd. 5. new text end

new text begin Direct ownership of facilities. new text end

new text begin (a) A charter school must be qualified
under section 124E.30, subdivision 5, as determined by the Charter School Facilities
Authority, to directly purchase, purchase and renovate, or construct a facility, regardless of
the source of the funding used for the purchase or construction.
new text end

new text begin (b) A charter school that directly owns a facility without outstanding bonds issued
through the Charter School Facilities Authority may finance facility projects that do not
meet the threshold specified in section 123B.71, subdivision 8, from sources other than the
authority, as long as they do not have other bonds through the authority.
new text end

new text begin (c) In the event of a closure of a charter school, a facility owned directly by a charter,
after satisfaction of creditors, is an asset of the state.
new text end

Sec. 4.

Minnesota Statutes 2015 Supplement, section 124E.13, is amended by adding a
subdivision to read:

new text begin Subd. 6. new text end

new text begin Charter school authority and responsibilities. new text end

new text begin (a) The board of a
qualified charter school, by a two-thirds majority, may vote to acquire school facilities
financed with the proceeds of bonds issued by the Charter School Facilities Authority in
the manner and subject to the limitations set forth in section 16A.966 in anticipation of
the receipt of facilities aid under section 124E.22 and long-term facilities maintenance
revenue under section 123B.595.
new text end

new text begin (b) A qualified charter school must provide the authority with a mortgage on the
facility that may be assigned to a trustee for the benefit of the bondholders.
new text end

new text begin (c) A charter school board must notify the Charter School Facilities Authority and
the commissioner if the board intends to sell a property being financed by the bonds issued
by the Charter School Facilities Authority. Sales subject to this provision must be made at
no less than the appraised market value.
new text end

Sec. 5.

Minnesota Statutes 2015 Supplement, section 124E.22, is amended to read:

124E.22 deleted text begin BUILDING LEASE deleted text end new text begin FACILITIES new text end AID.

new text begin Subdivision 1. new text end

new text begin Facilities aid. new text end

new text begin (a) A charter school's facilities aid equals the greater
of the aids calculated under paragraph (b) or (c).
new text end

deleted text begin (a) When a charter school finds it economically advantageous to rent or lease a
building or land for any instructional purposes and it determines that the total operating
capital revenue under section 126C.10, subdivision 13, is insufficient for this purpose, it
may apply to the commissioner for building lease aid for this purpose. deleted text end new text begin (b) A charter school
is eligible for lease aid to either rent or lease a building for any instructional purpose. The
amount of annual building lease aid for a charter school shall not exceed the lesser of 90
percent of the approved cost or the product of the pupil units served for the current school
year times $1,314. new text end The commissioner must review and either approve or deny a lease aid
application using the following criteria:

(1) the reasonableness of the price based on current market values;

(2) the extent to which the lease conforms to applicable state laws and rules; and

(3) the appropriateness of the proposed lease in the context of the space needs and
financial circumstances of the charter school. The commissioner must approve aid only
for a facility lease that has (i) a sum certain annual cost and (ii) a closure clause to relieve
the charter school of its lease obligations at the time the charter contract is terminated or
not renewed; the closure clause must not be constructed or construed to relieve the charter
school of its lease obligations in effect before the charter contract is terminated or not
renewed. new text begin Triple net leases entered into after June 20, 2017, are not eligible for lease aid.
new text end

new text begin (c) A qualified charter school that is required to make loan payments to be applied
to principal or interest payments on an outstanding debt obligation issued by the Charter
School Facilities Authority or a charter school that takes ownership of a building from
an affiliated building company is eligible for loan aid in an amount equal to the amount
needed to meet the principal and interest payment on the obligations minus the charter
school's long-term maintenance revenue under section 123B.595. A charter school that
is financed through bonds issued by the Charter School Facilities Authority need only
apply for loan aid in the first year the bonds are issued, or in any first year after the
school refinances bonds or takes on additional bonds for a facility project. Eligibility
shall be ongoing until the bonds debt is retired and the school is eligible for facilities
asset preservation aid under subdivision 2.
new text end

new text begin (d) Notwithstanding paragraph (a), an online charter school's facilities aid equals the
greater of the aids calculated under paragraph (b) or (c) plus costs for electronic hardware
provided for student use for online learning for students who are off campus more than
40 percent of the academic year.
new text end

new text begin (e) new text end A charter school must not use the building lease aid it receives for custodial,
maintenance service, utility, or other operating costs.

deleted text begin (b) The amount of annual building lease aid for a charter school shall not exceed the
lesser of (1) 90 percent of the approved cost or (2) the product of the pupil units served
for the current school year times $1,314.
deleted text end

new text begin Subd. 2. new text end

new text begin Facilities preservation aid. new text end

new text begin A charter school is eligible for facilities
preservation aid if the school has satisfied all of its debt obligations from the Charter
School Facilities Authority and owns its facility directly. A charter school's facilities
preservation aid equals 0.4 times the average annual facilities aid under subdivision 1,
paragraph (c), received by the charter school during the fiscal years the charter school was
repaying debt obligations to the Charter School Facilities Authority.
new text end

new text begin Subd. 3. new text end

new text begin Long-term facilities maintenance aid restrictions. new text end

new text begin (a) Notwithstanding
section 123B.88, subdivision 10, a charter school receiving loan aid under subdivision 1,
paragraph (c), must reserve long-term facilities maintenance aid under section 123B.88
for repayment of debt obligations issued by the Charter School Facilities Authority.
new text end

new text begin (b) Notwithstanding section 123B.88, subdivision 10, a charter school that has
satisfied all of its debt obligations and owns the facility directly must reserve long-term
facilities maintenance aid under section 123B.88 for deferred capital and maintenance
expenditures associated with the facility owned by the charter school.
new text end

Sec. 6.

new text begin [124E.30] CHARTER SCHOOL FACILITIES AUTHORITY.
new text end

new text begin Subdivision 1. new text end

new text begin Creation; membership; administration. new text end

new text begin (a) A state agency known
as the Charter School Facilities Authority is created. The Charter School Facilities
Authority shall consist of seven members:
new text end

new text begin (1) five of which are appointed under paragraph (b) by the governor with the advice
and consent of the senate;
new text end

new text begin (2) the commissioner of management and budget or the commissioner's designee; and
new text end

new text begin (3) an expert in education finance from the Department of Education designated by
the commissioner of education.
new text end

new text begin (b) All members to be appointed by the governor shall be residents of the state. At
least two members shall reside outside of the metropolitan area as defined in section
473.121, subdivision 2. At least one of the members shall have skill, knowledge, and
experience in the field of state bonding or finance; at least one of the members shall
have skill, knowledge, and experience in the building construction field; and at least one
member shall be a representative of the Minnesota Association of Charter Schools. With
the exception of the representative of the Minnesota Association of Charter Schools, each
appointed member of the authority shall be independent and not affiliated with a charter
school, a charter school management organization, or any entity working or contracting
with a charter school.
new text end

new text begin Subd. 2. new text end

new text begin Term; compensation; removal. new text end

new text begin The membership terms, compensation,
removal of members, and filling of vacancies for board members other than the
commissioner of management and budget and the commissioner of education shall be
provided in section 15.0575. The commissioner of management and budget, or the
commissioner's designee, shall convene the first meeting of the authority no later than
September 15, 2017. The authority shall elect a chair at its first meeting and shall
determine a rotation for the chair.
new text end

new text begin Subd. 3. new text end

new text begin Purpose. new text end

new text begin The authority shall provide an efficient and cost-effective method
of financing charter school facilities in this state through the sale and issuance of state
revenue bonds, in anticipation of the collection of facilities aid, for a qualified charter
school, to finance, in whole or in part, the cost of acquisition, acquisition and renovation,
or construction of a charter school building.
new text end

new text begin Subd. 4. new text end

new text begin Duties; applications; fees. new text end

new text begin The authority shall review applications from
charter schools to be determined to be qualified schools for the purchase and renovation
of an existing facility or to develop and construct a new facility. The authority shall
review applications for issuance of bonds under section 16A.966 for specific projects. The
authority may charge a charter school an application or administrative fee. The authority
shall adopt policies and procedures necessary to fulfill its responsibilities. The application
deadlines and any fees shall be determined by the authority. The authority may hire or
contract for services.
new text end

new text begin Subd. 5. new text end

new text begin Eligibility for qualified status. new text end

new text begin (a) The authority shall determine which
charter schools are in a financial and operational position to purchase, purchase and
renovate an existing facility, or construct a new facility.
new text end

new text begin (b) The authority shall approve a charter school to purchase, purchase and renovate,
or construct a school facility and finance that school facility through the issuance of
bonds. The authority shall only approve the sale of bonds on behalf of charter schools that
are issued through the authority.
new text end

new text begin (c) A charter school approved by the authority is a "qualified" school. A charter
school is prohibited from using the term qualified as defined in this subdivision in
educational promotional materials or advertising. A charter school may use the term
qualified for the purposes of issuing bonds through the authority.
new text end

new text begin Subd. 6. new text end

new text begin Criteria for qualified status. new text end

new text begin A charter school that has been enrolling
students for five or more years may seek qualified status from the authority to purchase,
purchase and renovate an existing building, or construct a new facility. The charter school
must submit to the authority the following information:
new text end

new text begin (1) documentation of the charter school's contract history and current status with the
school's authorizer and a letter indicating support from the authorizer for the proposed
facility project;
new text end

new text begin (2) documentation of the school's academic and nonacademic student performance
record in relation to the goals agreed upon in its charter contracts over the preceding
five years;
new text end

new text begin (3) financial statements for the preceding five fiscal years, a current year budget, and
fund balance of the school at the time of the application;
new text end

new text begin (4) a third-party review of the school's operating finances;
new text end

new text begin (5) long-range strategic plan and five-year financial projections for the school;
new text end

new text begin (6) an analysis prepared by an independent third party of school finances and the
five-year financial projections;
new text end

new text begin (7) a statement of the need for the purchase or purchase and renovation of the
proposed facility, including the physical space needs of the school, other facility options
examined, zoning and e-rating eligibility, and an appraisal of the proposed facility;
new text end

new text begin (8) documentation of a positive review and comment from the commissioner of
education for projects that are subject under section 123B.71; and
new text end

new text begin (9) a statement adopted by the charter school board of directors acknowledging that
any sale of the facility before the bonds are fully paid must be reviewed by the authority to
assure the property is sold for no less than the appraised value. In the event that the school
closes, the building and any assets revert to the state after satisfaction of creditors.
new text end

new text begin Subd. 7. new text end

new text begin Determination. new text end

new text begin The authority may request additional information of the
charter school to make their determination. The authority must use the criteria submitted as
required by subdivision 6 and any additional information the authority receives to determine
whether to qualify a school and allow a charter school to purchase, purchase and renovate,
or construct a new facility and use debt financing to pay for the costs of the school facility.
new text end

new text begin The authority must notify the charter schools of their determination within 45
business days after the application deadline. The decision of the authority is final. A
charter school may reapply for future consideration.
new text end

Sec. 7. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2015 Supplement, section 124E.26, new text end new text begin is repealed.
new text end