CHAPTER 2. PUBLIC HOLDING COMPANIES
IC 20-47-2
Chapter 2. Public Holding Companies
IC 20-47-2-1
Application
Sec. 1. This chapter does not apply to a:
(1) school corporation;
(2) joint school corporation; or
(3) consolidated school corporation;
the schools of which do not have a total enrollment of at least twohundred fifty (250) pupils.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-2
"Capital actually invested"
Sec. 2. As used in this chapter, "capital actually invested" includesthe following amounts expended by a lessor corporation:
(1) Organization and incorporation expenses.
(2) Financing costs.
(3) Carrying charges.
(4) Legal fees.
(5) Architects' fees.
(6) Contractors' fees.
(7) Reasonable costs and expenses incidental thereto.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-3
"Lessor corporation"
Sec. 3. As used in this chapter, "lessor corporation" means acorporation described in section 6 of this chapter.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-4
"School building"
Sec. 4. As used in this chapter, "school building" means a buildingused as a part of or in connection with the operation of a school andincludes the:
(1) site for the building;
(2) equipment for the building; and
(3) appurtenances to the building, such as heating facilities,water supply, sewage disposal, landscaping, walks, drives, andplaygrounds.
However, the term does not include a building that is designed forand to be used exclusively for interschool athletic contests.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-5
Powers; lease of school building
Sec. 5. (a) Subject to subsection (b), a school corporation maylease a school building or buildings for the use of: (1) the school corporation; or
(2) a joint or consolidated school district of which the schoolcorporation is a part or to which it contributes;
for a term not to exceed thirty (30) years.
(b) A school corporation may not enter into a lease under thissection unless:
(1) a petition for the lease signed by at least fifty (50) patronsof the school corporation has been filed with the governingbody of the school corporation; and
(2) the governing body, after investigation, determines that aneed exists for the school building and that the schoolcorporation cannot provide the necessary funds to pay the costor its proportionate share of the cost of the school building orbuildings required to meet the present needs.
(c) If two (2) or more school corporations propose to jointly enterinto a lease under this section, joint meetings of the governing bodiesof the school corporations may be held, but action taken at a jointmeeting is not binding on any of those school corporations unlessapproved by a majority of the governing body of those schoolcorporations. A lease executed by two (2) or more schoolcorporations as joint lessees must:
(1) set out the amount of the total lease rental to be paid by eachlessee, which may be as agreed upon; and
(2) provide that:
(A) there is no right of occupancy by any lessee unless thetotal rental is paid as stipulated in the lease; and
(B) all rights of joint lessees under the lease are inproportion to the amount of lease rental paid by each lessee.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-6
Qualifications of lessor corporation; permissible interest; returnof capital; recovery of expenses
Sec. 6. (a) A school corporation or corporations may enter into alease under this chapter only with a corporation organized underIndiana law solely for the purpose of acquiring a site, erecting asuitable school building or buildings on that site, leasing the buildingor buildings to the school corporation or corporations, collecting therentals under the lease, and applying the proceeds of the lease in themanner provided in this chapter.
(b) A lessor corporation described in subsection (a):
(1) must, except as provided in subdivision (2), act entirelywithout profit to the lessor corporation or its officers, directors,and stockholders;
(2) is entitled to the return of capital actually invested, plusinterest or dividends on outstanding securities or loans, not toexceed five percent (5%) per annum and the cost of maintainingthe lessor corporation's corporate existence and keeping itsproperty free of encumbrance; and
(3) upon receipt of any amount of lease rentals exceeding the
amount described in subdivision (2), apply the excess funds tothe redemption and cancellation of the lessor corporation'soutstanding securities or loans as soon as may be done.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-7
Required terms of lease agreement
Sec. 7. (a) A lease entered into under this chapter must include thefollowing provisions:
(1) An option for the school corporation or corporations torenew the lease for a further term on similar conditions.
(2) An option for the school corporation or corporations topurchase the property covered by the lease after six (6) yearsfrom the execution of the lease and before the expiration of theterm of the lease, on the date or dates in each year as may befixed in the lease. The purchase price:
(A) must be equal to the amount required to enable the lessorcorporation owning the property to liquidate by paying allindebtedness, with accrued and unpaid interest, redeemingand retiring any stock at par, and paying the expenses andcharges of liquidation; and
(B) may not exceed the capital actually invested in theproperty by the lessor corporation represented byoutstanding securities or existing indebtedness, plus the costof transferring the property and liquidating the lessorcorporation.
(b) A lease entered into under this chapter may not provide or beconstrued to provide that a school corporation is under any obligationto purchase a leased school building or buildings, or under anyobligation in respect to any creditors, shareholders, or other securityholders of the lessor corporation.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-8
Lessor corporation; submission of preliminary plans
Sec. 8. (a) A lessor corporation proposing to build a schoolbuilding or buildings must submit preliminary plans, specifications,and estimates for the building or buildings to the lessee or lesseesbefore the execution of the lease. Final plans and specifications mustbe submitted to the state department of health, state fire marshal, andother agencies designated by law to pass on plans and specificationsfor school buildings. The final plans and specifications described inthis subsection must be approved by the approving agencies inwriting and by the lessee or lessees before the construction of theschool building or school buildings.
(b) IC 4-21.5 does not apply to the formulation, issuance, oradministrative review of an approval by an agency under subsection(a). However, IC 4-21.5 does apply to the judicial review and civilenforcement of an approval by an agency under subsection (a).
As added by P.L.2-2006, SEC.170.
IC 20-47-2-9
Permissible provisions of lease; payment of taxes; insurance
Sec. 9. A lease entered into under this chapter may provide that aspart of the lease rental for the school building or buildings the lesseeor lessees shall:
(1) pay all taxes and assessments levied against or on accountof the leased property;
(2) maintain insurance on the leased property for the benefit ofthe lessor corporation; and
(3) assume all responsibilities for repair and alterations of theleased property during the term of the lease.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-10
Lease preceding acquisition of land
Sec. 10. A school corporation or corporations may, in anticipationof the acquisition of a site and the construction and erection of aschool building or buildings, enter into a lease with a lessorcorporation before the actual acquisition of the site and theconstruction and erection of the building or buildings. However, alease entered into under this section may not provide for the paymentof any lease rental by the lessee or lessees until the building orbuildings are ready for occupancy, at which time the stipulated leaserental may begin. The contractor must furnish to the lessorcorporation a bond satisfactory to the lessor corporation conditionedupon the final completion of the building or buildings within theperiod specified in the contract.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-11
Required public hearing; notice of lease terms
Sec. 11. (a) After the lessor corporation and the schoolcorporation or corporations have agreed upon the terms andconditions of a lease proposed to be entered into under this chapter,and before the final execution of the lease, a notice shall be given bypublication to all persons interested of a hearing or joint hearing tobe held before the governing body or governing bodies of the schoolcorporation or corporations authorized to approve the lease. Thehearing must be not earlier than:
(1) ten (10) days after publication of the notice, if newconstruction is proposed; or
(2) thirty (30) days after publication of the notice, ifimprovement or expansion is proposed.
(b) The notice required by subsection (a) must:
(1) be published one (1) time in:
(A) a newspaper of general circulation printed in the Englishlanguage in the school corporation;
(B) a newspaper described in clause (A) in each schoolcorporation if the proposed lease is a joint lease; or
(C) if no such paper is published in the school corporation,
in any newspaper of general circulation published in thecounty;
(2) name the date, time, and place of the hearing; and
(3) set forth a brief summary of the principal terms of the leaseagreed upon, including the:
(A) location of the property to be leased;
(B) name of the proposed lessor corporation;
(C) character of the property to be leased;
(D) rental to be paid; and
(E) number of years the lease is to be in effect.
The cost of publishing the notice shall be borne by the lessorcorporation.
(c) The proposed lease, drawings, plans, specifications, andestimates for the school building or buildings must be available forinspection by the public during the ten (10) day or thirty (30) dayperiod described in subsection (a) and at the hearing under section 12of this chapter.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-12
Conduct of public hearing; lease authorization procedures
Sec. 12. (a) At the hearing, all interested persons have a right tobe heard upon the necessity for the execution of the proposed leaseand whether the rental to be paid to the lessor corporation under theproposed lease is a fair and reasonable rental for the proposedbuilding. The hearing may be adjourned to a later date or dates.
(b) Within thirty (30) days following the termination of thehearing, the governing body or bodies of the school corporation orcorporations may by a majority vote of all members of the governingbody or bodies:
(1) authorize the execution of the proposed lease as originallyagreed upon; or
(2) make modifications to the proposed lease that are agreedupon with the lessor corporation.
However, the lease rentals as set out in the published notice may notbe increased in any modifications approved under subdivision (2).
As added by P.L.2-2006, SEC.170.
IC 20-47-2-13
Notice of signing of lease; appeal
Sec. 13. (a) If the execution of the lease as originally agreed uponor as modified by agreement is authorized by the governing body orbodies of the school corporation or corporations, the governing bodyshall give notice of the signing of the lease by publication one (1)time in:
(1) a newspaper of general circulation printed in the Englishlanguage in the school corporation;
(2) a newspaper described in subdivision (1) in each schoolcorporation if the proposed lease is a joint lease; or
(3) if no such newspaper is published in the school corporation,
in any newspaper of general circulation published in the county.
(b) This subsection does not apply to a lease for which a schoolcorporation after June 30, 2008, makes a preliminary determinationas described in IC 6-1.1-20-3.1 or IC 6-1.1-20-3.5 or a decision asdescribed in IC 6-1.1-20-5, or, in the case of a lease not subject toIC 6-1.1-20-3.1, IC 6-1.1-20-3.5, or IC 6-1.1-20-5, adopts aresolution or ordinance authorizing the lease after June 30, 2008.Within thirty (30) days after the publication of notice undersubsection (a), fifty (50) or more taxpayers in the school corporationor corporations who:
(1) will be affected by the proposed lease; and
(2) are of the opinion that:
(A) necessity does not exist for the execution of the lease; or
(B) the proposed rental provided for in the lease is not a fairand reasonable rental;
may file a petition in the office of the county auditor of the county inwhich the school corporation or corporations are located. Thepetition must set forth the taxpayers' objections to the lease and factsshowing that the execution of the lease is unnecessary or unwise orthat the lease rental is not fair and reasonable, as the case may be.
(c) Upon the filing of a petition under subsection (b), the countyauditor shall immediately certify a copy of the petition, together withany other data that is necessary to present the questions involved, tothe department of local government finance. Upon receipt of thecertified petition and data, if any, the department of local governmentfinance shall fix a time, date, and place for the hearing of the matter,which may not be less than five (5) nor more than thirty (30) daysthereafter. The department of local government finance shall:
(1) conduct the hearing in the school corporation orcorporations, or in the county where the school corporation orcorporations are located; and
(2) give notice of the hearing to the members of the governingbody or bodies of the school corporation or corporations and tothe first fifty (50) taxpayers who signed the petition undersubsection (b) by a letter signed by the commissioner or deputycommissioner of the department of local government financeand enclosed with full prepaid postage addressed to thetaxpayer petitioners at their usual place of residence, at leastfive (5) days before the hearing.
The decision of the department of local government finance on theappeal, upon the necessity for the execution of the lease and as towhether the rental is fair and reasonable, is final.
As added by P.L.2-2006, SEC.170. Amended by P.L.146-2008,SEC.515.
IC 20-47-2-14
Limitation on time to file appeal
Sec. 14. An action to contest the validity of the lease or to enjointhe performance of any of the terms and conditions of the lease maynot be instituted at any time later than: (1) thirty (30) days after publication of notice of the executionof the lease by the governing body or bodies of the schoolcorporation or corporations; or
(2) if an appeal is allowed under section 13 of this chapter andhas been taken to the department of local government finance,thirty (30) days after the decision of the department of localgovernment finance.
As added by P.L.2-2006, SEC.170. Amended by P.L.146-2008,SEC.516.
IC 20-47-2-15
Acquisition of land for building site; sale to lessor corporation
Sec. 15. The lessor corporation shall acquire, own, and hold in feesimple the land on which a school building or buildings are to beerected under this chapter. A school corporation that proposes tolease such a school building, either alone or jointly with anotherschool corporation, and owns the land on which it desires that thebuilding or buildings be erected may sell and transfer that land to thelessor corporation in fee simple, subject to the following conditions:
(1) Before the sale may take place, the governing body of theschool corporation must file a petition with the circuit court ofthe county in which the school corporation is located,requesting the appointment of:
(A) one (1) disinterested freeholder of the school corporationas an appraiser; and
(B) two (2) disinterested appraisers licensed underIC 25-34.1;
who are residents of Indiana to determine the fair market valueof the land. One (1) of the appraisers described in clause (B)must reside not more than fifty (50) miles from the land.
(2) Upon their appointment, the three (3) appraisers shallproceed to fix the fair market value of the land and shall reportthe amount fixed to the circuit court within two (2) weeks aftertheir appointment.
(3) The school corporation may sell the land to the lessorcorporation for an amount not less than the amount fixed as thefair market value by the three (3) appraisers, which shall bepaid in cash upon delivery of the deed by the school corporationto the lessor corporation. However, if the land was acquired bythe school corporation within three (3) years immediatelypreceding the date of the filing of the petition with the circuitcourt, the land may not be sold for an amount less than theamount paid by the school corporation for the land.
As added by P.L.2-2006, SEC.170. Amended by P.L.113-2006,SEC.15.
IC 20-47-2-16
Lessor corporation; sale of bonds and securities; mortgage bonds
Sec. 16. (a) A corporation qualifying as a lessor corporation underthis chapter may, in furtherance of its corporate purposes, issue and
sell stock, bonds, and other securities. Mortgage bonds issued by alessor corporation that are a first lien on the leased property are legaland proper investments for state banks and trust companies,insurance companies, and fiduciaries. Bonds issued under thissection may be callable upon notice in the manner provided in themortgage indenture, at premiums up to five percent (5%) withaccrued and unpaid interest.
(b) Stocks, bonds, and other securities issued by a lessorcorporation shall be sold in the manner provided in IC 5-1-11.However, the notice of sale shall be published in the manner requiredfor bonds of the county in which the school building is located.
(c) Shares of common stock issued by a lessor corporation are notrequired to be sold at a public sale. The price of the shares shall bedetermined by the lessor corporation, but the price of the shares maynot exceed the lesser of:
(1) the necessary expense of incorporation, preparation ofpreliminary plans and specifications, and other preliminaryexpense necessary to the preparation of the proposed lease andpublication of notice of the lease; or
(2) a sum equal to five percent (5%) of the proposed cost of thebuilding or buildings.
(d) None of the costs of construction of the building, the purchaseof the equipment for the building, or the incidental expenses inconnection with the construction or purchase may be paid fromstocks, bonds, or securities of the lessor corporation unless thosestocks, bonds, or securities are sold at public sale as provided in thissection.
(e) The approval of the securities commissioner is not required inconnection with the issuance and sale of any stocks, bonds, or othersecurities of the lessor corporation.
(f) A part of the proceeds from stocks, bonds, or other securitiessold at public sale may be used to reimburse the incorporators or anyother person or persons who may have advanced funds for essentialpreliminary expenses as provided for in this section, with interest onthe amount reimbursed not to exceed five percent (5%).
As added by P.L.2-2006, SEC.170.
IC 20-47-2-17
Refunding of outstanding bonds; appeal
Sec. 17. (a) As used in this section, "bonds" includes bonds,debentures, or other evidences of indebtedness.
(b) A lessor corporation having outstanding bonds that by theirterms are redeemable before their maturities may issue bonds in themanner provided by section 16 of this chapter to refund theoutstanding bonds. The refunding bonds may be issued in an amountnot exceeding the sum of:
(1) the principal amount of the outstanding bonds;
(2) any premium required to be paid upon redemption of theoutstanding bonds; and
(3) the estimated expenses to be incurred in connection with the
issuance of the refunding bonds.
(c) The sum of the net interest cost to the lessor corporation of therefunding bonds plus the premium required to be paid in connectionwith the redemption of the outstanding bonds and the estimatedexpenses to be incurred in connection with the issuance of therefunding bonds may not exceed the total interest that would havebeen payable by the lessor corporation on the bonds being refundedfrom the date of redemption to the maturity of the bonds beingrefunded. Net interest cost on the refunding bonds is the amountdetermined by computing the total interest on all the refunding bondsto their maturities and deducting from that amount the premium bid,if any.
(d) Refunding bonds issued under this section:
(1) are legal and proper investments;
(2) are exempt from taxation; and
(3) may be sold without registration with or approval of thesecurities division of the office of the secretary of state orsecurities commissioner;
in the same manner, under the same conditions, and subject to thesame limitations as any other bonds issued by lessor corporationsunder section 16 of this chapter. However, no proceedings or actionsby the lessee nor approval by any board, commission, or agency arerequired in connection with the refunding, and the refundingauthorized in this section does not affect the obligation of the lesseeto pay the lease rental under the lease of the building or buildings.
(e) An action to contest the validity of refunding bonds issuedunder this section may not be brought after the fifteenth dayfollowing the receipt of bids for the bonds.
(f) In connection with the issuance of refunding bonds, the lesseeschool corporation or school corporations may enter into anamendment to the lease with the lessor corporation providing for anextension of the time set forth in the lease before the option of thelessee or lessees to purchase may be exercised to a time agreed uponbetween the lessee school corporation or school corporations and thelessor corporation.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-18
Issuance of bonds; use of proceeds to refund outstanding bondsand make improvements; appeal
Sec. 18. (a) As used in this section, "bonds" means bonds,debentures, or other evidences of indebtedness.
(b) As used in this section, "improvement" or "improvements"means one (1) or more of the following:
(1) Construction of a school building.
(2) An addition to a school building owned by a lessorcorporation or owned by the school corporation to which alessor corporation has leased property under this chapter, andany remodeling incidental to that addition.
(3) Remodeling of or construction of appurtenances to a school
building owned by a lessor corporation.
(c) A lessor corporation having outstanding bonds that by theirterms are redeemable before their maturities may issue bonds in themanner provided under section 16 of this chapter to refund theoutstanding bonds and construction of improvements.
(d) Refunding and improvement bonds issued under this section:
(1) are legal and proper investments;
(2) are exempt from taxation; and
(3) may be sold without registration with or approval of thesecurities division of the office of the secretary of state or thesecurities commissioner;
in the same manner, under the same conditions, and subject to thesame limitations as any other bonds issued by lessor corporationsunder section 16 of this chapter.
(e) In connection with the issuance of refunding and improvementbonds, the lessee school corporation or school corporations mayenter into an amendment to the lease with the lessor corporationproviding for:
(1) an extension of the time set forth in the lease before theoption of the lessee or lessees to purchase may be exercised toa time agreed upon between the lessee school corporation orschool corporations and the lessor corporation;
(2) an extension of the term of the lease, not to exceed ten (10)years, to include the improvements in the description of theleased property; and
(3) increased lease rental payments after the completion of theimprovements.
(f) No proceedings or actions by the lessee nor approval by anyboard, commission, or agency are required in connection with arefunding under this section, and the refunding does not affect theobligation of the lessee to pay the lease rental under the lease of thebuilding or buildings. However, all provisions, restrictions, andlimitations of this chapter that are not inconsistent with this section,including the petition of school patrons, notice of hearing, hearing,notice of execution, and right to file an objecting petition, apply toan amendment of the lease increasing the lease rental payments as ifthe amendment were an original lease.
(g) An action to contest the validity of refunding andimprovement bonds issued under this section may not be broughtafter the fifteenth day following the receipt of bids for the bonds.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-19
Option to purchase; bonds to fund purchase
Sec. 19. A school corporation that decides to exercise an optionto purchase a school building under this chapter may issue generalobligation bonds to procure funds to pay the cost of acquisition.General obligation bonds issued under this section must beauthorized, issued, and sold in the manner provided for theauthorization, issuance, and sale of bonds by school corporations for
school building purposes.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-20
Required levy; payment of obligations
Sec. 20. A school corporation that executes a lease under thischapter shall annually appropriate from its debt service fund orgeneral fund an amount sufficient to pay the lease rental requiredunder the lease. The appropriation is reviewable by other bodiesvested by law with such authority to ascertain that the specifiedamount is sufficient to meet the lease rental required under the lease.The first specific appropriation shall be made at the first budgetperiod following the date of the execution of the lease, and the firstannual appropriation must be sufficient to pay the estimated amountof the first annual lease rental payment to be made under the lease.Thereafter, the annual appropriations provided for in this sectionshall be made, and payments shall be made from the debt servicefund.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-21
Exemption of lessor corporation property from taxes
Sec. 21. Property owned by a lessor corporation entering into alease with a school corporation or corporations under this chapter,and all stock and other securities (including the interest or dividends)issued by a lessor corporation, are exempt from all state, county, andother taxes, except the financial institutions tax (IC 6-5.5) andinheritance taxes (IC 6-4.1).
As added by P.L.2-2006, SEC.170.
IC 20-47-2-22
Statutory construction; supplemental legislation; limitation ofapplication of other laws
Sec. 22. This chapter shall be construed as being supplemental toall other laws covering the acquisition, use, and maintenance ofschool buildings by school corporations. However, as to schoolbuildings constructed, acquired, leased, or purchased under thischapter, it is not necessary to comply with other laws concerning theacquisition, use, and maintenance of school buildings by schoolcorporations except as specifically required in this chapter.
As added by P.L.2-2006, SEC.170.
IC 20-47-2-23
Termination of lease; disposition of surplus revenues
Sec. 23. (a) Upon the termination of a lease entered into under thischapter, the lessor corporation shall return to the school corporationany money held by the lessor corporation that exceeds the amountneeded to retire bonds issued under this chapter and to dissolve thelessor corporation.
(b) A school corporation shall deposit the money received under
subsection (a) in its debt service fund or capital projects fund.
As added by P.L.2-2006, SEC.170.