DAR File No. 28065

Education, Administration

R277-451

The State School Building Program

NOTICE OF PROPOSED RULE

DAR File No.: 28065
Filed: 07/01/2005, 03:33
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is amended to provide for changes to the law during the 2005 Legislative Session in H.B. 124. (DAR NOTE: H.B. 124 is found at UT L 2005 Ch 171, and was effective 07/01/2005.)

Summary of the rule or change:

The amended rule includes adding and removing definitions, adding language on a district's yield per Average Daily Membership (ADM), and removing the requirement that a school district be a recipient of the Capital Outlay Foundation Program in order to qualify for Enrollment Growth Program funds.

State statutory or constitutional authorization for this rule:

Sections 53A-21-103 and 53A-21-103.5

Anticipated cost or savings to:

the state budget:

There are no anticipated cost or savings to the state budget. The rule amendments change the manner in which Enrollment Growth Program funds are distributed to school districts.

local governments:

Preliminary estimates indicate that under the provisions outlined in the new legislation and this rule, 17 school districts would qualify for Enrollment Growth Program funds instead of 13 under current statutory provisions. The 2005 Legislature appropriated $5,000,000 to fund this change.

other persons:

There are no anticipated cost or savings to other persons. Enrollment Growth Program funds are distributed to school districts.

Compliance costs for affected persons:

There are no compliance costs for affected persons. Enrollment Growth Program funds are distributed to school districts.

Comments by the department head on the fiscal impact the rule may have on businesses:

I have reviewed this rule and I see no fiscal impact on businesses. Patti Harrington, State Superintendent of Public Instruction

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Carol Lear at the above address, by phone at 801-538-7835, by FAX at 801-538-7768, or by Internet E-mail at carol.lear@schools.utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/15/2005

This rule may become effective on:

08/16/2005

Authorized by:

Carol Lear, Coordinator School Law and Legislation

RULE TEXT

R277. Education, Administration.

R277-451. The State School Building Program.

R277-451-1. Definitions.

[A. "Accounts receivable" means any amount due the Board from a school district for which payment has not been received by the Board.

B]A. "ADM" means Average Daily Membership of students.

[C. "Assessed valuation" means the assessed value of real property certified by the State Tax Commission to the Board each year.

D]B. "Board" means the Utah State Board of Education.

[E]C. "Capital Outlay Foundation Program" means a program that provides a minimum dollar generation guarantee, per ADM, for every school district willing to levy a tax of .002400 per dollar of taxable value on real property, as provided in R277-451-3.

D. "Capital Outlay Loan Program" means a program that provides short-term assistance to school districts, for a period not to exceed five years, for school building construction and renovation, as provided in R277-451-6.

[F]E. "Derived assessed valuation" means current collections of tax levy (no prior year penalties or redemptions) divided by the same year tax rates.

[G]F. "Enrollment Growth Program" means a program that provides additional support to those school districts which are experiencing the most pressing needs for school facilities due to rapid growth, as provided in R277-451-4.

[H. "Fiscal year (FY)" means the twelve month period from July 1 through June 30 during which state funds are distributed.

I]G. "Foundation level" means the guaranteed pro-rated amount per ADM to the extent of funds available distributed to school districts by the Board.

[J]H. "Loan" means a transaction which takes money from a Board account and places it in a school district account with the full legal intention by a school district that it be repaid to the account from which it was taken.

[K]I. "Superintendent" means the State Superintendent of Public Instruction.

[L]J. "USOE" means the Utah State Office of Education.

K. "Yield per ADM" means the product of the derived assessed valuation multiplied by .0024, divided by the average daily membership.

R277-451-2. Authority and Purpose.

A. This rule is authorized by Utah Constitution, Article X, Section 3 which vests general control and supervision of public education in the Board, Section 53A-21-103 which requires that the Board to adopt rules regarding qualifications for participation in the foundation program and distribution of funds for the program, Section 53A-21-103.5 which requires the Board to adopt rules regarding qualifications for participation in the Enrollment Growth Program and for distribution of funds for the program, and Section 53A-1-401(3) which permits the Board to adopt rules in accordance with its responsibilities.

B. The purpose of this rule is to specify the eligibility requirements and the procedures for distributing funds appropriated for the [c]Capital [o]Outlay [f]Foundation [p]Program and [e]Enrollment [g]Growth [p]Program as well as for providing short-term loans to school districts for capital outlay projects in school building construction and renovation.

R277-451-3. Capital Outlay Foundation Program.

A. A school district may receive state school building funds under the [c]Capital [o]Outlay [f]Foundation [p]Program established in Section 53A-21-102(1) if the amount raised by levying a tax rate of .002400 does not generate revenues above the foundation level established per ADM when the legislative appropriation is entered into the formula.

B. To qualify to receive 100 percent of the [c]Capital [o]Outlay [f]Foundation funds available to a school district, a school district shall levy a property tax rate of at least 0.002400 designated specifically for capital outlay and debt service:

(1) school districts levying less than the full 0.002400 tax rate for capital outlay and debt service shall receive proportional funding under the capital foundation program based upon the percentage of the 0.002400 tax rate levied by the school district;

(2) the amount of capital foundation funds to which a school district would otherwise be entitled under the Capital Outlay Foundation [p]Program may not be reduced as a consequence of changes in the certified tax rate under Section 59-2-924 due to changes in property valuation for a period of two tax years from the effective date of any such change in the certified tax rate.

C. The USOE shall support the foundation program to assist the qualifying school district in reaching the foundation level.

R277-451-4. Enrollment Growth Program.

A. A school district may receive [e]Enrollment [g]Growth [p]Program funds under Section 53A-21-103.5 for the following purposes:

(1) to fund general obligation bond principal and interest costs;

(2) to fund construction;

(3) to fund facilities renovation; and

(4) to fund other capital project needs as approved.

B. In order to qualify for monies under the Enrollment Growth Program, a school district [shall be a recipient of monies distributed under the Capital Outlay Foundation Program and ]shall have had an average net increase in student enrollment over the previous three years from the year in which money is requested under the Enrollment Growth Program and yield per ADM is less than two times the prior year's average yield per ADM for Utah school districts.

[C. If a school district was or is not a recipient of Capital Outlay Foundation Program monies in FY 2003-04 or FY 2004-05, the school district may qualify for monies under the Enrollment Growth Program if the school district received Capital Outlay Foundation Program monies in FY 2002-03.

D]C. School districts receive Enrollment Growth Program monies in the same proportion that the school district's three-year average net increased enrollment bears to the total three-year net increased enrollment of all the school districts which qualify to receive funds under the Enrollment Growth Program.

R277-451-5. When Funds are Distributed.

Capital Outlay Foundation and Enrollment Growth Program funds shall be distributed through the monthly electronic bank transfer to school districts as early as possible after the data elements are received from school districts and entered into the formulae, typically before the February bank transfer.

R277-451-6. Capital Outlay Loan Program.

A. A school district may receive [c]Capital [o]Outlay [l]Loan [p]Program funds under Section 53A-21-102 which establishes a [c]Capital [o]Outlay [l]Loan [p]Program to provide short-term assistance to school districts, for a period not to exceed five years, for school building construction and renovation.

B. To be a priority qualifier for the [c]Capital [o]Outlay [l]Loan [p]Program, a school district shall satisfy all of the following criteria:

(1) demonstrate an ability and commitment as demonstrated by a local board vote to set the levy at the rate needed to repay the loan within the time period prescribed by the loan agreement; and

(2) levy a tax rate for capital outlay and debt service above the state average; and

(3) demonstrate a school district need that is better met through the loan fund than through more traditional means for providing school building construction or renovation or both.

C. If a school district does not meet the criteria for a priority qualifier and the needs of the priority qualifiers are met, the loan application of school districts not meeting this criteria may be considered, if the school district commits to levying at or above the state average for the next tax year. In the case of a natural disaster or other compelling emergency, this requirement may be waived by the Superintendent.

D. A school district applying for a short term loan under this rule shall make a formal application which includes:

(1) the emergency condition or the condition that exists that would be better met through the loan fund rather than through more traditional means for providing school building construction or renovation or both;

(2) the amount of loan sought;

(3) the proposed repayment schedule, not to exceed five years;

(4) the history of the last five years of loans or special supplementary funds received by the school district from the USOE;

(5) minutes of the local board meeting recording the affirmative vote to levy the needed tax; and

(6) a signed agreement that if the school district should default on a loan payment, the Superintendent may deduct the loan payment and added interest from the calculated per school district state distribution after 90 days.

E. The loan request and repayment conditions shall be approved by the Superintendent after receiving recommendations from a loan approval committee, including representatives from state and local education entities.

F. If the loan approval committee recommends approval of the loan application, the committee's recommendations shall include:

(1) the recommendation amount of the loan;

(2) the repayment schedule; and

(3) the interest rate to be charged. It is the intent of the Board that the interest rate be based upon the Delphis Hanover Corp. triple A interest rate less 1/2 percent, as quoted 30 days before the loan date and dependent upon the term of the loan.

KEY: educational facilities, education finance

[November 2, 2004]2005

Notice of Continuation September 7, 2004

Art X Sec 3

53A-21-103

53A-21-103.5

53A-1-401(3)

59-2-924

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Carol Lear at the above address, by phone at 801-538-7835, by FAX at 801-538-7768, or by Internet E-mail at carol.lear@schools.utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.