H.F. _____ Section 1. Section 275.12, Code 2015, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 4A. a. The area education agency board 3 in reviewing a petition as provided in sections 275.15 and 4 275.16 that is not subject to the division of assets and 5 liabilities provisions in sections 275.29 through 275.31 shall 6 review the proposal for dividing outstanding bonds issued 7 under sections 423E.5 and 423F.4, required to be included 8 under section 275.28, and may change or amend the proposal 9 in any manner, including to specify a different division for 10 the reorganized districts or a different method of payment or 11 retirement of the bonds as may be required by law, justice, 12 equity, and the interest of the people. The review conducted 13 by the area education agency, including any resulting change 14 to the proposal for dividing bonds, shall ensure that each 15 reorganized district’s estimated revenues under section 423F.2 16 are sufficient for the payment of principal and interest on 17 the outstanding bonds required to be paid in the budget year 18 following the reorganization. 19 b. For bonds issued under sections 423E.5 and 423F.4, the 20 approval of the reorganization at election creates a lien on 21 the revenues from the secure an advanced vision for education 22 fund received by the reorganized district designated in the 23 proposal approved by the area education agency, subject to the 24 same priority as provided by the affected school district that 25 issued the bonds. 26 c. The area education agency may retain the services of 27 legal counsel to advise the area education agency regarding the 28 division of the outstanding bonded indebtedness under sections 29 423E.5 and 423F.4 and the adequacy of revenues for the payment 30 or retirement of such bonds by the reorganized districts. 31 d. In the action, the area education agency board shall 32 follow the same procedure as is required by sections 275.15 and 33 275.16 for other action on the petition by the area education 34 agency board. 35 -1- LSB 2559YC (2) 86 md/sc 1/ 9

H.F. _____ Sec. 2. Section 275.28, Code 2015, is amended to read as 1 follows: 2 275.28 Plan of division of assets and liabilities. 3 In addition to setting up the territory to comprise the 4 reorganized districts, a reorganization petition shall provide 5 for the division of any outstanding bonds issued under sections 6 423E.5 and 423F.4 by the school districts affected among one 7 or more reorganized school districts and may provide for a 8 division of assets and other liabilities of the old school 9 districts between affected among the reorganized districts or 10 contiguous school districts receiving territory of the school 11 districts affected . If no provision is made in the petition 12 for division of assets and liabilities other than outstanding 13 bonds issued under sections 423E.5 and 423F.4 , or if territory 14 is excluded from the reorganized district by the petition or by 15 the area education agency board of directors, the division of 16 all assets and liabilities shall be made under the provisions 17 of sections 275.29 to 275.31 . 18 Sec. 3. Section 275.29, Code 2015, is amended to read as 19 follows: 20 275.29 Division of assets and liabilities after 21 reorganization. 22 1. Between July 1 and July 20, the board of directors of 23 the newly formed school district shall meet with the boards 24 of the school districts affected by the organization of the 25 new school corporation, including the boards of districts 26 receiving territory of the school districts affected, for 27 the purpose of reaching joint agreement on an equitable 28 division of the assets of the several school corporations or 29 parts of school corporations and an equitable distribution 30 of the liabilities of the affected corporations or parts 31 of corporations. In addition, if outstanding bonds are in 32 existence in any district, the initial board of directors of 33 the newly formed school district shall meet with the boards of 34 all school districts affected prior to April 15 prior to the 35 -2- LSB 2559YC (2) 86 md/sc 2/ 9

H.F. _____ school year the reorganization is effective to determine the 1 distribution of the bonded indebtedness between the districts 2 so that the newly formed district may certify its budget 3 under the procedures specified in chapter 24 . The boards 4 shall consider the mandatory levy required in section 76.2 5 and shall assure the satisfaction of outstanding obligations 6 of each affected school corporation. If a school district 7 affected by the reorganization has outstanding bonds issued 8 under sections 423E.5 and 423F.4, the joint agreement shall 9 divide the outstanding bonds among the reorganized districts 10 and the districts receiving territory of the school districts 11 affected in a manner calculated to ensure that the estimated 12 revenue under section 423F.2 for each district to which such 13 bonds are assigned is sufficient for the payment of principal 14 and interest on the outstanding bonds required to be paid in 15 the budget year following reorganization. 16 2. For bonds issued under sections 423E.5 and 423F.4, the 17 approval of the joint agreement creates a lien on the revenues 18 from the secure an advanced vision for education fund received 19 by the reorganized district or district receiving territory 20 from the school district affected to which the divided bonds 21 were assigned, subject to the same priority as provided by the 22 affected school district that issued the bonds. 23 3. If the petition includes plans for the distribution of 24 the all bonded indebtedness and such distribution satisfies 25 the adequacy of funding requirement under subsection 1 for 26 outstanding bonds issued under sections 423E.5 and 423F.4 , the 27 exclusion of territory from the reorganized district does not 28 require action pursuant to this section and the approval of the 29 reorganization at election creates a lien on the revenues from 30 the secure an advanced vision for education fund received by 31 the district to which the bonds were distributed, subject to 32 the same priority as provided by the affected school district 33 that issued the bonds . 34 Sec. 4. Section 275.30, Code 2015, is amended to read as 35 -3- LSB 2559YC (2) 86 md/sc 3/ 9

H.F. _____ follows: 1 275.30 Arbitration. 2 1. If the boards cannot agree on such division and 3 distribution, the matters on which they differ shall be decided 4 by disinterested arbitrators, one selected by the initial board 5 of directors of the newly formed district, one by each of the 6 boards of directors of the school districts affected, and one 7 selected jointly by the boards of directors of contiguous 8 districts receiving territory of the school district affected. 9 If the number of arbitrators selected is even, a disinterested 10 arbitrator shall be added by the area education agency 11 administrator. 12 2. The decision of the arbitrators shall be made in writing 13 and filed with the secretary of the new corporation, and 14 a party to the proceedings may appeal the decision to the 15 district court by serving notice on the secretary of the new 16 corporation within twenty days after the decision is filed. 17 The appeal shall be tried in equity and a decree entered 18 determining the entire matter, including the levy, collection, 19 and distribution of any necessary taxes. 20 3. a. If a school district affected by the reorganization 21 has outstanding bonds issued under sections 423E.5 and 423F.4, 22 the arbitrators’ decision and any decision of the court on 23 appeal shall divide the outstanding bonds among the reorganized 24 districts and the districts receiving territory of the school 25 districts affected in a manner calculated to ensure that the 26 estimated revenue under section 423F.2 for each district to 27 which such bonds are assigned is sufficient for the payment of 28 principal and interest on the outstanding bonds required to be 29 paid in the budget year following reorganization. 30 b. The issuance of the arbitrators’ decision or court 31 decision on appeal creates a lien on the revenues from the 32 secure an advanced vision for education fund received by the 33 district to which the bonds were distributed, subject to the 34 same priority as provided by the affected school district that 35 -4- LSB 2559YC (2) 86 md/sc 4/ 9

H.F. _____ issued the bonds. 1 Sec. 5. Section 275.52, unnumbered paragraph 2, Code 2015, 2 is amended to read as follows: 3 The commission shall request statements from contiguous 4 school districts outlining each district’s willingness 5 to accept attachments of the affected school district to 6 the contiguous districts and what conditions, if any, the 7 contiguous school district recommends. If the dissolving 8 school district has outstanding bonds issued under sections 9 423E.5 and 423F.4, each contiguous school district’s statement 10 shall include information on the estimated financial impact on 11 the contiguous district if it were to assume liability for the 12 payment of principal and interest on all or a portion of such 13 outstanding bonds. The commission shall meet with boards of 14 contiguous school districts and with residents of the affected 15 school district to the extent possible in drawing up the 16 dissolution proposal. The commission may seek assistance from 17 the area education agency and the department of education. 18 Sec. 6. Section 275.53, subsection 1, Code 2015, is amended 19 to read as follows: 20 1. The commission shall send a copy of its dissolution 21 proposal or shall inform the board that it cannot agree upon 22 a dissolution proposal not later than one year following the 23 date of the organizational meeting of the commission. If the 24 dissolving school district has outstanding bonds issued under 25 sections 423E.5 and 423F.4, the proposal shall designate one 26 or more contiguous school districts to assume liability for 27 the payment of principal and interest on all or a portion of 28 such bonds. The dissolving school district may retain the 29 services of legal counsel to advise the commission regarding 30 the division of such bonds and adequacy of revenues for 31 the outstanding bonded indebtedness under sections 423E.5 32 and 423F.4. The commission shall also send a copy of the 33 dissolution proposal to the boards of directors of all school 34 districts to which area of the affected school district will 35 -5- LSB 2559YC (2) 86 md/sc 5/ 9

H.F. _____ be attached. If the board of a district to which area of 1 the affected school district will be attached objects to 2 the attachment, within ten days following receipt of the 3 dissolution proposal the board shall send its objections in 4 writing to the commission. The commission may consider the 5 objections and may modify the dissolution proposal. If the 6 dissolution proposal is modified, the commission shall notify 7 the boards of directors of all school districts to which area 8 of the affected school district will be attached. 9 Sec. 7. Section 275.54, subsection 4, Code 2015, is amended 10 to read as follows: 11 4. a. If the board of a district to which area of 12 the affected school district will be attached objects to 13 the division of assets and liabilities contained in the 14 dissolution proposal, the matter shall be decided by a panel 15 of disinterested arbitrators. The panel shall consist of one 16 arbitrator selected by each affected district objecting to the 17 provisions of the dissolution proposal, one selected by each 18 affected district in favor of the provisions of the dissolution 19 proposal, and one selected by each dissolving district. If 20 the number of arbitrators selected is even, a disinterested 21 arbitrator shall be selected by the administrator of the area 22 education agency to which the dissolving district or districts 23 belong. The decision of the arbitrators shall be made in 24 writing and filed with the secretary of the new corporation. 25 A party to the proceedings may appeal the decision to the 26 district court by serving notice on the secretary of the new 27 school corporation within twenty days after the decision is 28 filed. The appeal shall be tried in equity and a decree 29 entered determining the entire matter, including the levy, 30 collection, and distribution of any necessary taxes. 31 b. If the dissolving district has outstanding bonds issued 32 under sections 423E.5 and 423F.4, the arbitrators’ decision 33 and any decision of the court on appeal shall divide the 34 outstanding bonds among the districts to which the territory of 35 -6- LSB 2559YC (2) 86 md/sc 6/ 9

H.F. _____ the dissolving district are attached in a manner calculated to 1 ensure that the estimated revenue under section 423F.2 for each 2 district to which such bonds are assigned is sufficient for 3 the payment of principal and interest on the outstanding bonds 4 required to be paid in the budget year following dissolution. 5 Sec. 8. Section 275.55, Code 2015, is amended by adding the 6 following new subsection: 7 NEW SUBSECTION . 5. For bonds issued under sections 423E.5 8 and 423F.4, the approval of the dissolution at election creates 9 a lien on the revenues from the secure an advanced vision for 10 education fund received by the district to which such bonds 11 are assigned in the proposal, subject to the same priority as 12 provided by the affected school district that issued the bonds. 13 Sec. 9. APPLICABILITY. This Act applies to reorganization 14 petitions and dissolution proposals filed under chapter 275 on 15 or after July 1, 2015. 16 EXPLANATION 17 The inclusion of this explanation does not constitute agreement with 18 the explanation’s substance by the members of the general assembly. 19 This bill relates to the division of assets and liabilities 20 of school districts involved in a reorganization or 21 dissolution. 22 Current Code section 275.28 provides that in addition to 23 setting up the territory to comprise the reorganized districts, 24 a reorganization petition may provide for a division of 25 assets and liabilities of the old districts between the newly 26 reorganized districts. The bill requires a reorganization 27 petition to provide for the division of any outstanding 28 bonds issued under Code sections 423E.5 and 423F.4 (secure 29 an advanced vision for education fund bonds for school 30 infrastructure) by the school districts affected among one or 31 more reorganized school districts. 32 The bill provides that the review of certain school district 33 reorganization petitions by the area education agency board 34 shall include a review of the proposal for dividing outstanding 35 -7- LSB 2559YC (2) 86 md/sc 7/ 9

H.F. _____ bonds issued under Code sections 423E.5 and 423F.4, to ensure 1 that each reorganized district’s estimated revenues under Code 2 section 423F.2 are sufficient for the payment of principal 3 and interest on the outstanding bonds required to be paid in 4 the budget year following the reorganization. The bill also 5 authorizes the area education agency board to change or amend 6 the proposal in any manner, including to specify a different 7 division for the reorganized districts or a different method 8 of payment or retirement of the bonds as may be required by 9 law, justice, equity, and the interest of the people. The area 10 education agency may retain the services of legal counsel to 11 advise the area education agency regarding the division of the 12 outstanding bonded indebtedness under Code sections 423E.5 13 and 423F.4 and the adequacy of revenues for the payment or 14 retirement of such bonds by the reorganized districts. 15 The bill specifies that for bonds issued under Code sections 16 423E.5 and 423F.4, the approval of the reorganization at 17 election creates a lien on the revenues from the secure an 18 advanced vision for education fund received by the reorganized 19 district designated in the proposal approved by the area 20 education agency, subject to the same priority as provided by 21 the affected school district that issued the bonds. 22 The bill also establishes similar requirements for the 23 division of outstanding bonds issued under Code sections 423E.5 24 and 423F.4, the determination of sufficient revenues for the 25 payment of such bonds, and the creation of liens for the 26 payment of such bonds when the board of directors of a newly 27 formed school district adopts a joint agreement on the division 28 of assets and liabilities, when failure to adopt a joint 29 agreement on the division of assets and liabilities results 30 in an arbitration decision, and when the arbitration decision 31 regarding the division of assets and liabilities is appealed 32 to the district court. 33 Under the bill, as part of preparing a dissolution proposal 34 initiated by a school district dissolution commission, if the 35 -8- LSB 2559YC (2) 86 md/sc 8/ 9

H.F. _____ dissolving school district has outstanding bonds issued under 1 Code sections 423E.5 and 423F.4, the statement requested by the 2 commission from each contiguous school district must include 3 information on the estimated financial impact on the contiguous 4 district if it were to assume liability for the payment of 5 principal and interest on all or a portion of such outstanding 6 bonds. 7 The bill also requires a school district dissolution 8 commission’s proposal to designate one or more contiguous 9 school districts to assume liability for the payment of 10 principal and interest on all or a portion of outstanding 11 bonds issued by the dissolving district under Code sections 12 423E.5 and 423F.4. The bill authorizes the dissolving school 13 district to retain the services of legal counsel to advise the 14 commission regarding the division of such bonds and adequacy of 15 revenues for the outstanding bonded indebtedness. 16 The bill also establishes similar requirements for the 17 division of outstanding bonds issued under Code sections 423E.5 18 and 423F.4 and the determination of sufficient revenues for the 19 payment of such bonds when the dissolution proposal is subject 20 to arbitration and appeal to the district court. For bonds 21 issued under Code sections 423E.5 and 423F.4, the approval of 22 the dissolution at election creates a lien on the revenues 23 from the secure an advanced vision for education fund received 24 by the district to which such bonds are assigned in the 25 dissolution proposal, subject to the same priority as provided 26 by the affected school district that issued the bonds. 27 The bill applies to school district reorganization petitions 28 and dissolution proposals filed under Code chapter 275 on or 29 after July 1, 2015. 30 -9- LSB 2559YC (2) 86 md/sc 9/ 9