Legislative Changes

Any Controlled Project Can Now be Voted on by Referendum

Circuit Breaker Relief for New Debt

In general, "controlled projects" are capital projects which: (i) a school corporation or a building corporation will either issue bonds or enter into a lease and which the school corporation will levy property taxes to pay the debt service on the bonds or the lease rentals due under a lease; and (ii) which have costs that are at least equal to the lesser of $2 million or one percent of the school corporation's gross assessed value (but never less than $1 million). For most school corporations, a controlled project will cost at least $2 million.

Currently, if the school corporation wants to levy property taxes for a controlled project, it must determine whether the project is large enough to trigger the referendum process or whether the petition remonstrance process will apply.

Other than the cost of the controlled project, one of the biggest differences between the petition/remonstrance process and the referendum process is whether the property taxes levied to pay the debt service or lease rentals are "outside the circuit breaker caps." Property taxes levied for a project that has been approved as a referendum do not count against a school corporation's overall property tax cap.

The problem for many school corporations has been that often the renovation and construction projects being considered cost less than the amount necessary to trigger a referendum.

In response to this, legislation was enacted that allows a school corporation to adopt a resolution to voluntarily put any controlled project on the ballot for a referendum vote.  This means that even though an elementary school project's total cost is less than $10 million, a school corporation can place it on a ballot and, if approved by the voters, the debt will be outside the property tax caps. 

Multiple Questions on the Ballot

Similarly, this legislation will make it much easier to place multiple questions on the ballot.  For example, a school corporation could choose to have one question on the ballot regarding the construction of an auditorium or auxiliary gym and a completely separate question regarding the general renovation of the classroom portion of the high school. In this manner, the school corporation would provide voters with options and perhaps protect the basic project from taxpayers who are opposed to what they believe are "frills."

DLGF Approval of a Public Question on a Ballot

The General Assembly has given the Department of Local Government Finance (DLGF) a greater role in the preparation of the question concerning the controlled project that is submitted to the voters at a referendum. Once the county election board has approved the question concerning a controlled project that will be submitted to the voters, the election board is now required to submit the question to the DLGF, which will review the question to evaluate whether the description of the project is "accurate" and "not biased" against either a vote in favor or against the project.

Additional Notices for Controlled Projects

Under current law, the school corporation must publish several notices as part of the process for financing a controlled project. The notices include: (i) a notice of a hearing on a determination to finance a controlled project; (ii) a notice that a determination has been made; and (iii) a notice that the controlled project will be the subject of either a petition/remonstrance process or a referendum. Beginning July 1, 2010, copies of those notices must also be sent by first class mail to the circuit court clerk.

If you have further questions on these legislative changes or on the procedures for financing projects, please call Jane Herndon, Todd Ponder, Kristin McClellan or Erik Long.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.