SB 49: School Property Disposal Changes

Executive Summary:

Ohio Senate Bill (S.B.) 49 proposes significant changes to the process by which Ohio public school districts can dispose of real property. The primary aim of this bill is to eliminate the right of first refusal currently held by certain schools (specifically, community schools, college-preparatory boarding schools, and STEM schools) when a school district decides to sell real property. The bill amends existing sections of the Revised Code (3313.41, 3318.08, and 5705.10), enacts a new section (3313.411), and repeals existing sections (3313.411, 3313.412, and 3313.413). The implications of this bill could be substantial for both traditional public school districts and the aforementioned categories of non-traditional public schools in Ohio.

Main Themes and Important Ideas/Facts:

1. Elimination of the Right of First Refusal:

• The core purpose of S.B. 49 is to remove the existing statutory right that allowed community schools, college-preparatory boarding schools, and STEM schools to have the first opportunity to purchase certain real property that a traditional public school district intended to dispose of.
• The bill explicitly states its intent “to eliminate the right of first refusal for certain schools in the acquisition of school district real property.” (Lines 5-6)
• The repeal of sections 3313.412 and 3313.413, which currently outline the procedures and conditions for this right of first refusal, directly achieves this objective.

1. Changes to Section 3313.41 (Disposal of Property by Boards of Education):

• The bill amends Section 3313.41 to reflect the removal of the right of first refusal. The introductory clause of division (A) is modified to remove the references to sections 3313.412 and 3313.413 as exceptions to the general rule of selling property at public auction.
• The general process for disposing of real or personal property valued over $10,000 remains largely the same: public auction with at least 30 days’ notice, followed by the possibility of private sale if no bids are received at auction.
• The existing provisions allowing for direct sale to specific entities (adjutant general, subdivisions, taxing authorities, universities, colleges, nonprofit institutions of higher education, governing authorities of chartered nonpublic schools or community schools, and school district libraries) remain in place under division (C).

1. Enactment of New Section 3313.411:

• The new Section 3313.411 introduces restrictions on the resale of property purchased by community schools, college-preparatory boarding schools, or STEM schools under the provisions of the previous version of 3313.411.
• Division (A) of the new section prohibits these entities from selling any property purchased under the prior 3313.411 within five years of the purchase.
• Division (B) provides a narrow exception to this restriction, allowing a sale within the five-year period only if the property is sold or transferred to another governing authority, board of trustees, or governing body within the same categories of schools.
• This new section appears to address concerns about the potential for quick resale of property acquired under the previous right of first refusal provisions.

1. Amendment of Section 3318.08 (Agreement for School Facilities Projects):

• Section 3318.08 outlines the provisions that must be included in agreements between the Ohio Facilities Construction Commission (OFCC) and school district boards for school facilities projects.
• The amendment to division (U) now requires school districts to comply with “sections section 3313.41, 3313.411, and 3313.413 of the Revised Code” (note the apparent error in the bill draft with the repeated “section”) throughout a project and to notify the Department of Education and Workforce and the Ohio Community School Association when planning to dispose of facilities by sale under that section. This suggests continued oversight of property disposal even during OFCC-funded projects.
• Similarly, division (V) is amended to state that the OFCC will not approve a demolition contract until the school district board has complied with “sections section 3313.41, 3313.411, and 3313.413 of the Revised Code” (again, with the apparent error) regarding the facility, unless the demolition is for a replacement facility within the project. These amendments seem to align OFCC procedures with the proposed changes in property disposal.

1. Amendment of Section 5705.10 (Distribution of Revenue):

• Section 5705.10 governs how different types of revenue received by subdivisions (including school districts) are to be distributed among various funds.
• The amendment to division (H) updates the reference to the sections under which a school district disposes of real property. It now includes “section 3313.41, 3313.411, or 3313.413 of the Revised Code.” This ensures that the provisions regarding the use of proceeds from the sale of school district real property (for debt retirement or capital and maintenance fund) remain consistent with the proposed changes.

1. Repeal of Existing Sections 3313.411, 3313.412, and 3313.413:

• The bill explicitly repeals existing sections 3313.411, 3313.412, and 3313.413.
• The repeal of 3313.412 and 3313.413 directly eliminates the statutory framework for the right of first refusal.
• The repeal of the existing 3313.411 and the simultaneous enactment of a new 3313.411 suggests a complete overhaul of the regulations concerning the sale of property to community schools, college-preparatory boarding schools, and STEM schools, particularly focusing on resale restrictions for past acquisitions.

Quotes from the Original Source:

• “to eliminate the right of first refusal for certain schools in the acquisition of school district real property.” (Lines 5-6)
• “Except as provided in divisions (C), (D), and (F) of this section and in sections 3313.412 and 3313.413 of the Revised Code…” (Line 8 – This language is being amended to remove the reference to 3313.412 and 3313.413).
• “(A) Except as provided in division (B) of this section, the governing authority of a community school, the board of trustees of a college-preparatory boarding school, or the governing body of a STEM school shall not sell any property purchased under division (B) of section 3313.411 of the Revised Code as it existed prior to the effective date of this section within five years of purchasing that property.” (Lines 148-153 – This is the new Section 3313.411(A)).
• “…the school district shall comply with sections section 3313.41, 3313.411, and 3313.413 of the Revised Code throughout the project…” (Lines 387-391 – Amended language in Section 3318.08(U)).
• “If a board of education of a school district disposes of real property under section 3313.41, 3313.411, or 3313.413 of the Revised Code, the proceeds received on or after September 29, 2013, from the sale shall be used for either of the following purposes:” (Lines 472-477 – Amended language in Section 5705.10(H)).
• “That sections 3313.411, 3313.412, and 3313.413 of the Revised Code are hereby repealed.” (Lines 490-491)

Potential Implications:

• Increased Flexibility for Traditional Public School Districts: Removing the right of first refusal could give traditional school districts more flexibility in disposing of unused property, potentially leading to quicker sales and better financial outcomes. They would no longer be obligated to offer the property to specific non-traditional public schools first, potentially opening up the market to a wider range of buyers.
• Impact on Community Schools, College-Preparatory Boarding Schools, and STEM Schools: These schools may face greater difficulty in acquiring suitable real property for expansion or relocation, as they will need to compete on the open market rather than having a preferential opportunity.
• Resale Restrictions: The new Section 3313.411 imposes limitations on the ability of certain non-traditional public schools to quickly resell property acquired under the previous regulations, potentially discouraging speculative purchases.
• Oversight by OFCC: The amendments to Section 3318.08 indicate that the OFCC will continue to play a role in overseeing the disposal of school district property, particularly in the context of state-funded construction projects.

Further Considerations:

• The rationale behind eliminating the right of first refusal is not explicitly stated in the provided excerpt. Understanding the arguments for and against this change would provide further context.
• The potential impact on property values and the real estate market in areas with significant numbers of both traditional and non-traditional public schools warrants consideration.
• The specific circumstances under which the previous Section 3313.411(B) allowed for property acquisition by community schools, etc., would be helpful in fully understanding the implications of the new resale restrictions.

This briefing document provides an initial overview of the key provisions and potential implications of Ohio Senate Bill 49 based on the provided excerpts. Further analysis of the bill’s legislative history and potential stakeholder perspectives would offer a more comprehensive understanding of its impact.