ON FEBRUARY 29, 2024, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 135, AS AMENDED.
AMENDMENT #1 rewrites the bill to change definitions under the Tennessee Public Charter Schools Act of 2002 ("Act"), as well as add new provisions to that Act.
DEFINITION OF UNDERUTILIZED OR VACANT PROPERTY
Under present law, an "underutilized or vacant property" means an entire property or portion thereof, with or without improvements, which is not used or is used irregularly or intermittently by the LEA for instructional or program purposes, and does not include real property on which no building or permanent structure has been erected.
This amendment provides for separate definitions for "underutilized property" and "vacant property." Under this amendment, "underutilized property" means a building or portion thereof, with or without improvements, which is not used or is used irregularly or intermittently, as defined by the state board of education, by an LEA for instructional or program purposes, including spaces suitable for classroom use that are currently being used for storage of any kind; and does not include real property on which a building or permanent structure has not been erected or vacant property. Under this amendment, "vacant property" means a building, with or without improvements, which is closed or no longer used for direct academic instruction for students in grades pre-K-12, or any combination thereof, including spaces suitable for classroom use that are currently being used for storage of any kind; and does not include real property on which a building or permanent structure has not been erected.
CATALOGING AND PUBLISHING PROPERTIES
No later than October 1 of each year, in any LEA in which one or more charter schools operates, present law requires the LEA to catalog each year all underutilized or vacant properties owned or operated by the LEA and all underutilized or vacant properties within any educational facility owned or operated by the LEA. The LEA must submit a comprehensive listing of all such properties to the department of education and the comptroller of the treasury, and the department must make an LEA's list available to any charter school operating in the LEA or to any sponsor seeking to establish a public charter school in the LEA.
Present law also requires an LEA having underutilized or vacant properties to make the underutilized or vacant properties available for use by charter schools operating in the LEA. Any lease agreement executed between a charter school and an LEA must not reflect any outstanding bonded debt on the underutilized or vacant property, except as agreed upon to reflect any necessary costs associated with the occupation or remodeling of the facility. Moreover, on or before October 11, 2011, present law requires the department to have adopted uniform guidelines to be used to determine what constitutes the irregular or intermittent use of property by an LEA. In any LEA in which one or more charter schools operates, the LEA must use such guidelines to catalog all underutilized or vacant properties owned or operated by the LEA.
This amendment removes and replaces the above provisions to require, instead, that by May 1, 2025, and by each May 1 thereafter, an LEA in which one or more public charter schools operate is required to publish the following information on the LEA's website for each building operated by the LEA, including buildings owned by the LEA that are currently being used by a public charter school:
(1) The address or location of each building and the total square footage of, and the number of classrooms in, each school building;
(2) The portion of the total square footage of a building that is used by the LEA for direct instruction to students in grades pre-K-12, or any combination thereof;
(3) The enrollment capacity of each building and the number of students in grades pre-K-12, or any combination thereof, receiving academic instruction in the building; and
(4) If a building is not used by the LEA for direct academic instruction for students in grades pre-K12, or any combination thereof, the manner in which the school building is used, including whether the building is vacant or is being used for administration, storage, or professional development.
This amendment also requires an LEA in which one or more public charter schools operate to submit a comprehensive listing of all underutilized property or vacant property to the department of education and the comptroller of the treasury. The department must make an LEA's list available to a public charter school operating in the LEA or to a sponsor seeking to establish a public charter school in the LEA. Further, this amendment provides that a public charter school may petition the comptroller of the treasury for an audit of the list of all underutilized property or vacant property submitted by the LEA in which the public charter school is, or will be, geographically located. The comptroller of the treasury is authorized to promulgate rules for the administration of these provisions.
RIGHT OF FIRST REFUSAL
This amendment further provides that a public charter school operating within the geographic boundaries of an LEA, excluding public charter schools in the achievement school district, has a right of first refusal to (i) purchase vacant property listed by the LEA under this amendment at or below fair market value for educational purposes, or (ii) lease underutilized property or vacant property listed by the LEA under this amendment at or below fair market value for educational purposes. A lease agreement executed between a public charter school and an LEA must not reflect any outstanding bonded debt on the underutilized property or vacant property, except as agreed upon to reflect any necessary costs associated with the occupation or remodeling of the facility. For purposes of this amendment, "fair market value for educational purposes" is determined by taking the average of two separate appraisals conducted by two independent, qualified appraisers, one selected by the LEA and one selected by the public charter school.
This amendment provides that, upon the execution of a lease agreement pursuant to this amendment, a public charter school has unrestricted use of the property. The public charter school is required to provide for routine maintenance and repair so that the leased property is maintained in as good of order as when the lease was executed, and is responsible for paying all utilities used by the public charter school at the leased property. Extensive repairs to buildings or facilities considered capital expenses are the responsibility of the LEA funding body and not the public charter school. If the public charter school makes extensive repairs to buildings or facilities considered capital expenses, then the capital expenses must be credited against the cost of the lease. Further, any fixtures, improvements, or tangible assets added to leased property by the public charter school pursuant to this amendment must remain at the leased property upon the public charter school's return of the leased property to the LEA.
Under this amendment, if the LEA decides to sell the school building that the public charter school is leasing, then the public charter school must be provided the right of first refusal to purchase the school building at or below fair market value for educational purposes, less the value of all rental payments made to the LEA during the term of the lease. If, during the term of the lease, the charter school closes or ceases using the building, then the building must be placed on the LEA's vacant or underutilized property list pursuant to this amendment. The state board of education is authorized to promulgate rules for the administration of these provisions .
TAX EXEMPTIONS
This amendment provides that the property tax exemptions under present law regarding government property and religious, charitable, scientific, and educational institutions ("Assessment Act") apply to public charter school property, including any facility, or portion thereof, used to house a public charter school.
ON APRIL 18, 2024, THE HOUSE SUBSTITUTED SENATE BILL 135 FOR HOUSE BILL 1191, ADOPTED AMENDMENT #2, AND PASSED SENATE BILL 135, AS AMENDED.
AMENDMENT #2 provides that if, after the purchase of vacant or underutilized property from an LEA pursuant to the bill, the public charter school closes or ceases using the property, then the LEA has the right of first refusal to purchase the property from the public charter school at or below fair market value for educational purposes. However, this provision does not require a public charter school to sell property owned by the public charter school or charter management organization.

Statutes affected:
Introduced: 49-7-144(b)(1), 49-7-144