HF 599 (LSB 2559HV (1) 86)

HOUSE FILE 599

BY  COMMITTEE ON EDUCATION

(SUCCESSOR TO HSB 206)

A BILL FOR

An Act relating to the division of assets and liabilities of school districts involved in a reorganization or dissolution and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 275.12, Code 2015, is amended by adding the following new subsection:
   NEW SUBSECTION.  4A.  a.  The area education agency board in reviewing a petition as provided in sections 275.15 and 275.16 that is not subject to the division of assets and liabilities provisions in sections 275.29 through 275.31 shall review the proposal for dividing outstanding bonds issued under sections 423E.5 and 423F.4, required to be included under section 275.28, and may change or amend the proposal in any manner, including to specify a different division for the reorganized districts or a different method of payment or retirement of the bonds as may be required by law, justice, equity, and the interest of the people. The review conducted by the area education agency, including any resulting change to the proposal for dividing bonds, shall ensure that each reorganized district’s estimated revenues under section 423F.2 are sufficient for the payment of principal and interest on the outstanding bonds required to be paid in the budget year following the reorganization.
   b.  For bonds issued under sections 423E.5 and 423F.4, the approval of the reorganization at election creates a lien on the revenues from the secure an advanced vision for education fund received by the reorganized district designated in the proposal approved by the area education agency, subject to the same priority as provided by the affected school district that issued the bonds.
   c.  The area education agency may retain the services of legal counsel to advise the area education agency regarding the division of the outstanding bonded indebtedness under sections 423E.5 and 423F.4 and the adequacy of revenues for the payment or retirement of such bonds by the reorganized districts.
   d.  In the action, the area education agency board shall follow the same procedure as is required by sections 275.15 and 275.16 for other action on the petition by the area education agency board.
    Sec. 2.  Section 275.28, Code 2015, is amended to read as follows:
   275.28  Plan of division of assets and liabilities.

   In addition to setting up the territory to comprise the reorganized districts, a reorganization petition shall provide for the division of any outstanding bonds issued under sections 423E.5 and 423F.4 by the school districts affected among one or more reorganized school districts and may provide for a division of assets and other liabilities of the old school districts between affected among the reorganized districts or contiguous school districts receiving territory of the school districts affected. If no provision is made in the petition for division of assets and liabilities other than outstanding bonds issued under sections 423E.5 and 423F.4, or if territory is excluded from the reorganized district by the petition or by the area education agency board of directors, the division of all assets and liabilities shall be made under the provisions of sections 275.29 to 275.31.
    Sec. 3.  Section 275.29, Code 2015, is amended to read as follows:
   275.29  Division of assets and liabilities after reorganization.
   1.  Between July 1 and July 20, the board of directors of the newly formed school district shall meet with the boards of the school districts affected by the organization of the new school corporation, including the boards of districts receiving territory of the school districts affected, for the purpose of reaching joint agreement on an equitable division of the assets of the several school corporations or parts of school corporations and an equitable distribution of the liabilities of the affected corporations or parts of corporations. In addition, if outstanding bonds are in existence in any district, the initial board of directors of the newly formed school district shall meet with the boards of all school districts affected prior to April 15 prior to the school year the reorganization is effective to determine the distribution of the bonded indebtedness between the districts so that the newly formed district may certify its budget under the procedures specified in chapter 24. The boards shall consider the mandatory levy required in section 76.2 and shall assure the satisfaction of outstanding obligations of each affected school corporation.  If a school district affected by the reorganization has outstanding bonds issued under sections 423E.5 and 423F.4, the joint agreement shall divide the outstanding bonds among the reorganized districts and the districts receiving territory of the school districts affected in a manner calculated to ensure that the estimated revenue under section 423F.2 for each district to which such bonds are assigned is sufficient for the payment of principal and interest on the outstanding bonds required to be paid in the budget year following reorganization. 
   2.  For bonds issued under sections 423E.5 and 423F.4, the approval of the joint agreement creates a lien on the revenues from the secure an advanced vision for education fund received by the reorganized district or district receiving territory from the school district affected to which the divided bonds were assigned, subject to the same priority as provided by the affected school district that issued the bonds.
   3.  If the petition includes plans for the distribution of the all bonded indebtedness and such distribution satisfies the adequacy of funding requirement under subsection 1 for outstanding bonds issued under sections 423E.5 and 423F.4, the exclusion of territory from the reorganized district does not require action pursuant to this section and the approval of the reorganization at election creates a lien on the revenues from the secure an advanced vision for education fund received by the district to which the bonds were distributed, subject to the same priority as provided by the affected school district that issued the bonds.
    Sec. 4.  Section 275.30, Code 2015, is amended to read as follows:
   275.30  Arbitration.
   1.  If the boards cannot agree on such division and distribution, the matters on which they differ shall be decided by disinterested arbitrators, one selected by the initial board of directors of the newly formed district, one by each of the boards of directors of the school districts affected, and one selected jointly by the boards of directors of contiguous districts receiving territory of the school district affected. If the number of arbitrators selected is even, a disinterested arbitrator shall be added by the area education agency administrator.
   2.  The decision of the arbitrators shall be made in writing and filed with the secretary of the new corporation, and a party to the proceedings may appeal the decision to the district court by serving notice on the secretary of the new corporation within twenty days after the decision is filed. The appeal shall be tried in equity and a decree entered determining the entire matter, including the levy, collection, and distribution of any necessary taxes.
   3.  a.  If a school district affected by the reorganization has outstanding bonds issued under sections 423E.5 and 423F.4, the arbitrators’ decision and any decision of the court on appeal shall divide the outstanding bonds among the reorganized districts and the districts receiving territory of the school districts affected in a manner calculated to ensure that the estimated revenue under section 423F.2 for each district to which such bonds are assigned is sufficient for the payment of principal and interest on the outstanding bonds required to be paid in the budget year following reorganization.
   b.  The issuance of the arbitrators’ decision or court decision on appeal creates a lien on the revenues from the secure an advanced vision for education fund received by the district to which the bonds were distributed, subject to the same priority as provided by the affected school district that issued the bonds.
    Sec. 5.  Section 275.52, unnumbered paragraph 2, Code 2015, is amended to read as follows:

   The commission shall request statements from contiguous school districts outlining each district’s willingness to accept attachments of the affected school district to the contiguous districts and what conditions, if any, the contiguous school district recommends.  If the dissolving school district has outstanding bonds issued under sections 423E.5 and 423F.4, each contiguous school district’s statement shall include information on the estimated financial impact on the contiguous district if it were to assume liability for the payment of principal and interest on all or a portion of such outstanding bonds. The commission shall meet with boards of contiguous school districts and with residents of the affected school district to the extent possible in drawing up the dissolution proposal. The commission may seek assistance from the area education agency and the department of education.
    Sec. 6.  Section 275.53, subsection 1, Code 2015, is amended to read as follows:
   1.  The commission shall send a copy of its dissolution proposal or shall inform the board that it cannot agree upon a dissolution proposal not later than one year following the date of the organizational meeting of the commission.  If the dissolving school district has outstanding bonds issued under sections 423E.5 and 423F.4, the proposal shall designate one or more contiguous school districts to assume liability for the payment of principal and interest on all or a portion of such bonds. The dissolving school district may retain the services of legal counsel to advise the commission regarding the division of such bonds and adequacy of revenues for the outstanding bonded indebtedness under sections 423E.5 and 423F.4. The commission shall also send a copy of the dissolution proposal to the boards of directors of all school districts to which area of the affected school district will be attached. If the board of a district to which area of the affected school district will be attached objects to the attachment, within ten days following receipt of the dissolution proposal the board shall send its objections in writing to the commission. The commission may consider the objections and may modify the dissolution proposal. If the dissolution proposal is modified, the commission shall notify the boards of directors of all school districts to which area of the affected school district will be attached.
    Sec. 7.  Section 275.54, subsection 4, Code 2015, is amended to read as follows:
   4.  a.  If the board of a district to which area of the affected school district will be attached objects to the division of assets and liabilities contained in the dissolution proposal, the matter shall be decided by a panel of disinterested arbitrators. The panel shall consist of one arbitrator selected by each affected district objecting to the provisions of the dissolution proposal, one selected by each affected district in favor of the provisions of the dissolution proposal, and one selected by each dissolving district. If the number of arbitrators selected is even, a disinterested arbitrator shall be selected by the administrator of the area education agency to which the dissolving district or districts belong. The decision of the arbitrators shall be made in writing and filed with the secretary of the new corporation. A party to the proceedings may appeal the decision to the district court by serving notice on the secretary of the new school corporation within twenty days after the decision is filed. The appeal shall be tried in equity and a decree entered determining the entire matter, including the levy, collection, and distribution of any necessary taxes.
   b.  If the dissolving district has outstanding bonds issued under sections 423E.5 and 423F.4, the arbitrators’ decision and any decision of the court on appeal shall divide the outstanding bonds among the districts to which the territory of the dissolving district are attached in a manner calculated to ensure that the estimated revenue under section 423F.2 for each district to which such bonds are assigned is sufficient for the payment of principal and interest on the outstanding bonds required to be paid in the budget year following dissolution.
    Sec. 8.  Section 275.55, Code 2015, is amended by adding the following new subsection:
   NEW SUBSECTION.  5.  For bonds issued under sections 423E.5 and 423F.4, the approval of the dissolution at election creates a lien on the revenues from the secure an advanced vision for education fund received by the district to which such bonds are assigned in the proposal, subject to the same priority as provided by the affected school district that issued the bonds.
    Sec. 9.  APPLICABILITY.  This Act applies to reorganization petitions and dissolution proposals filed under chapter 275 on or after July 1, 2015.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to the division of assets and liabilities of school districts involved in a reorganization or dissolution.
   Current Code section 275.28 provides that in addition to setting up the territory to comprise the reorganized districts, a reorganization petition may provide for a division of assets and liabilities of the old districts between the newly reorganized districts. The bill requires a reorganization petition to provide for the division of any outstanding bonds issued under Code sections 423E.5 and 423F.4 (secure an advanced vision for education fund bonds for school infrastructure) by the school districts affected among one or more reorganized school districts.
   The bill provides that the review of certain school district reorganization petitions by the area education agency board shall include a review of the proposal for dividing outstanding bonds issued under Code sections 423E.5 and 423F.4, to ensure that each reorganized district’s estimated revenues under Code section 423F.2 are sufficient for the payment of principal and interest on the outstanding bonds required to be paid in the budget year following the reorganization. The bill also authorizes the area education agency board to change or amend the proposal in any manner, including to specify a different division for the reorganized districts or a different method of payment or retirement of the bonds as may be required by law, justice, equity, and the interest of the people. The area education agency may retain the services of legal counsel to advise the area education agency regarding the division of the outstanding bonded indebtedness under Code sections 423E.5 and 423F.4 and the adequacy of revenues for the payment or retirement of such bonds by the reorganized districts.
   The bill specifies that for bonds issued under Code sections 423E.5 and 423F.4, the approval of the reorganization at election creates a lien on the revenues from the secure an advanced vision for education fund received by the reorganized district designated in the proposal approved by the area education agency, subject to the same priority as provided by the affected school district that issued the bonds.
   The bill also establishes similar requirements for the division of outstanding bonds issued under Code sections 423E.5 and 423F.4, the determination of sufficient revenues for the payment of such bonds, and the creation of liens for the payment of such bonds when the board of directors of a newly formed school district adopts a joint agreement on the division of assets and liabilities, when failure to adopt a joint agreement on the division of assets and liabilities results in an arbitration decision, and when the arbitration decision regarding the division of assets and liabilities is appealed to the district court.
   Under the bill, as part of preparing a dissolution proposal initiated by a school district dissolution commission, if the dissolving school district has outstanding bonds issued under Code sections 423E.5 and 423F.4, the statement requested by the commission from each contiguous school district must include information on the estimated financial impact on the contiguous district if it were to assume liability for the payment of principal and interest on all or a portion of such outstanding bonds.
   The bill also requires a school district dissolution commission’s proposal to designate one or more contiguous school districts to assume liability for the payment of principal and interest on all or a portion of outstanding bonds issued by the dissolving district under Code sections 423E.5 and 423F.4. The bill authorizes the dissolving school district to retain the services of legal counsel to advise the commission regarding the division of such bonds and adequacy of revenues for the outstanding bonded indebtedness.
   The bill also establishes similar requirements for the division of outstanding bonds issued under Code sections 423E.5 and 423F.4 and the determination of sufficient revenues for the payment of such bonds when the dissolution proposal is subject to arbitration and appeal to the district court. For bonds issued under Code sections 423E.5 and 423F.4, the approval of the dissolution at election creates a lien on the revenues from the secure an advanced vision for education fund received by the district to which such bonds are assigned in the dissolution proposal, subject to the same priority as provided by the affected school district that issued the bonds.
   The bill applies to school district reorganization petitions and dissolution proposals filed under Code chapter 275 on or after July 1, 2015.