SENATE BILL REPORT
SB 5181
As of January 27, 2021
Title: An act relating to providing school districts serving low-income communities with flexibility in financing their facilities.
Brief Description: Providing school districts serving low-income communities with flexibility in financing their facilities.
Sponsors: Senators Honeyford and King.
Brief History:
Committee Activity: Early Learning & K-12 Education: 1/29/21.
Brief Summary of Bill
  • Allows school districts to create partnerships and limited liability companies, and enter into leases, loans, and other agreements with public and private entities, for the purpose of utilizing certain federal tax credit programs to finance school facilities.
SENATE COMMITTEE ON EARLY LEARNING & K-12 EDUCATION
Staff: Alexandra Fairfortune (786-7416)
Background:

School District Powers.  School districts are corporate bodies and possess the usual powers of a public corporation, including the ability to transact business necessary for maintaining schools, protecting the rights of the district, and entering into such obligations that are authorized by law.  The school board of directors has broad discretionary power to adopt written policies that provide for the development and implementation of programs, activities, services, or practices that will promote the education and daily physical activity of K-12 students and promote the management and operation of the school district.  The school board of directors may also contract with other entities, including public or private organizations, to implement the board's powers and duties.


School board directors are also authorized to rent, lease, or permit the occasional use of surplus real property owned or held by the district, so long as it is for a lawful purpose and the property can be recaptured should it be needed for school purposes.


School districts are limited to an indebtedness amount of 0.375 percent of the value of the taxable property within the district without seeking voter approval.  With the approval of at least 60 percent of district voters, the indebtedness limit may be increased up to 2.5 percent of the value of the taxable property within the district.


Federal Tax Credits.  The New Markets Tax Credit Program is a federal tax credit program that permits individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in community development entities (CDEs).  Using the capital from these equity investments, CDEs can make loans and investments to businesses operating in low-income communities on better rates and terms and more flexible features than the market.


The Rehabilitation Tax Credit Program is a federal tax credit program that provides a 20 percent tax credit claimed over five years for qualified rehabilitation expenditures to certified historic structures.
Summary of Bill:

School districts are authorized to create partnerships and limited liability companies, and enter into leases, loans, and other agreements with public or private entities, for the purpose of financing school facilities utilizing the federal New Markets Tax Credit Program, the federal Rehabilitation Tax Credit Program, or similar federal tax credit programs.


This authority is supplemental to existing school district authority, and any previous actions consistent with this authority are ratified and confirmed.  Existing statutes authorizing the rental, lease, or use of surplus property do not preclude school board directors from leasing, transferring, or encumbering real property to participate in such federal tax credit programs.


Current law limiting indebtedness is not applicable to any lease, sublease, lease-purchase, or similar agreement affecting real or personal property owned by a district and directly related to a district's participation in the federal New Markets Tax Credit Program, the federal Rehabilitation Tax Credit Program, or similar federal tax credit programs.  Any computation of indebtedness must exclude the amount of such agreements.
Appropriation: None.
Fiscal Note: Available.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.