FINAL BILL REPORT

HB 2310

                                   C 47 L 90

BYRepresentatives H. Sommers, Schoon and Rasmussen; by request of State Treasurer

Modifying the state's ability to lease and lease back land.

House Committe on Capital Facilities & Financing

Senate Committee on Governmental Operations

SYNOPSIS AS ENACTED

BACKGROUND:

In 1989, the Legislature authorized the state to enter into lease/purchase agreements for equipment and real estate.  Agreements for installment payments on real estate require prior approval by the Legislature.

During the implementation of the new statute, several technical problems surfaced.  Two require legislative action.  First, public property being acquired by lease/purchase or installment contacts is subject to the state property tax even though the same property, if acquired by outright purchase, would be exempt from the property tax.  Second, the state cannot lease to a third party that resides on state owned land, a building, or other property acquired under a lease/purchase agreement. For example, if the state has a building constructed on state land under a lease/purchase agreement, the state may not lease the building to a third party until the financing contract is satisfied.  The lease/purchase program currently finances building contracts with certificates of participation, in which private investors provide initial capital to finance the building.

The state treasurer's office recommends that the state shall be authorized to lease buildings being purchased pursuant to a financing contract to a third party.  This would assure investors who provide initial capital to finance the building that they would be able to lease the buildings to others if the state defaults on the financing contract.

SUMMARY:

The Department of General Administration may enter into leases of public lands when buildings or other property on the land is to be acquired by the state by a financing contract.  All property owned by the state, including property being acquired under a financing contract, is exempt from property taxation.

VOTES ON FINAL PASSAGE:

      House 92   0

      Senate    47     0

EFFECTIVE:June 7, 1990