Article 8Bonded Indebtedness of School Districts

Section § 35570

Explanation

This law specifies when a school district in California can reallocate its debt from general obligation bonds. It applies if the debt was approved by voters before July 1, 1978, or if it was approved after that date for buying or improving property and met specific voter approval thresholds. After July 1, 1978, it requires either a two-thirds or 55 percent majority approval, depending on the election type.

This article applies only to the reallocation of bonded indebtedness of a school district on general obligation bonds under one of the following conditions:
(a)CA Education Code § 35570(a) The bonded indebtedness was approved by the voters prior to July 1, 1978.
(b)CA Education Code § 35570(b) The bonded indebtedness was incurred for the acquisition or improvement of real property and was approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition.
(c)CA Education Code § 35570(c) The bonded indebtedness was incurred for the acquisition or improvement of real property and was approved on or after July 1, 1978, by 55 percent of the votes cast by the voters voting on the proposition at a regularly scheduled election or a statewide special election.
bonded indebtedness school district debt general obligation bonds voter approval thresholds two-thirds vote 55 percent vote July 1 1978 property acquisition property improvement regularly scheduled election statewide special election voter-approved bonds school finance California education debt
(Amended by Stats. 2006, Ch. 730, Sec. 6. Effective January 1, 2007.)

Section § 35571

Explanation

When a school district is changed or affected, whether by being created, annexed, or having its boundaries changed, there are specific rules about how it will handle any previous debt it owes through bonds. The people who manage taxes will determine how much each part of the district pays for that debt based on this article's rules.

When a school district is created, annexed, or abolished, or the boundaries thereof changed, the liability to taxation for the outstanding bonded indebtedness of the district or the territory affected thereby is as provided in this article. The authorities whose duty it is to levy taxes for the payment of principal and interest on the outstanding bonds shall levy the taxes upon the districts affected in such proportions as are provided in, or are determined under, the authority of this article.
school district bonded indebtedness tax liability district boundaries taxation outstanding bonds annexed abolished principal and interest tax levy district creation territory affected proportions payment of bonds debt responsibility
(Added by Stats. 1980, Ch. 1192, Sec. 2.)

Section § 35572

Explanation

This law ensures that a school district with existing debt cannot have its territory reduced and transferred to another district if the transfer would cause its remaining taxable property to fall so low that the debt becomes more than 5% of that property's value. This rule applies to the date when the reorganization becomes official.

No territory shall be taken from any school district having any outstanding bonded indebtedness and made a part of another school district where the action, if taken, would so reduce the last equalized assessed valuation of the divided district so that the outstanding bonded indebtedness of the divided district would exceed 5 percent of the assessed valuation in the remaining territory of the divided district for each level maintained, on the date the reorganization is effective pursuant to Section 35766.
school district reorganization outstanding bonded indebtedness assessed valuation territory transfer divided district 5 percent threshold equalized assessment remaining territory territory reduction debts and valuation Section 35766 taxable property school finance law
(Amended by Stats. 2016, Ch. 186, Sec. 14. (AB 2659) Effective January 1, 2017.)

Section § 35573

Explanation

If multiple school districts combine to create one single district, that new district is responsible for paying off any existing bond debts of the merged districts.

When any school district is in any manner merged with one or more school districts so as to form a single district by any procedure, the district so formed is liable for all of the outstanding bonded indebtedness of the districts united or merged.
school district merger bonded indebtedness outstanding debt merged districts liability single district formation school bond obligations district consolidation financial responsibility united districts bonds debt takeover combined district duties district formation process school finance district debt bond liabilities
(Added by Stats. 1980, Ch. 1192, Sec. 2.)

Section § 35574

Explanation

This law section explains that when calculating how much borrowing power a new or acquiring school district has under the State School Building Aid Law of 1952, any debts from previous districts that the new district takes on are counted as part of the new district's debt. This is important for figuring out the new district’s total allowed debt capacity.

Notwithstanding any other provision of this code, for the purposes of applying the State School Building Aid Law of 1952 (Chapter 6 (commencing with Section 16000) of Part 10 of Division 1 of Title 1), the amount of outstanding bonded indebtedness, exclusive of interest, of the former or divided districts that is equal to the liability incurred by the new or acquiring district pursuant to Section 35576 shall be considered a liability of the new or acquiring district for purposes of computing the bonding capacity of the school district.
bonded indebtedness borrowing power liability new school district divided districts acquiring district outstanding debt bonding capacity school district borrowing State School Building Aid Law 1952 bonding limits debt computation former districts debts
(Amended by Stats. 2016, Ch. 186, Sec. 15. (AB 2659) Effective January 1, 2017.)

Section § 35575

Explanation

If a piece of land is moved from one school district to another and there are no public schools or buildings on it, the land will no longer be responsible for the previous district's debts. Instead, it will take on its fair share of any debts that the new district has.

When territory is taken from one school district and annexed to another school district and the area transferred contains no public school property or buildings, the territory shall drop any liability for outstanding bonded indebtedness in the district of which it was formerly a part and shall automatically assume its proportionate share of the outstanding bonded indebtedness of the district of which it becomes a part.
territory transfer school districts public school property bonded indebtedness liability annexation proportionate share outstanding debts district boundaries educational zoning debt assumption school district reorganization public buildings
(Added by Stats. 1980, Ch. 1192, Sec. 2.)

Section § 35576

Explanation

When a part of one school district is transferred to another district, the new district takes over any property there and becomes responsible for a fair share of the previous district's debt, based on the value of the transferred land compared to the original district's total value. This share is reassessed annually until the debt is paid off. The county board sets a tax rate to cover this debt, which is in addition to regular property taxes and not subject to certain legal tax limits.

(a)CA Education Code § 35576(a) If territory is taken from one school district and annexed to, or included in, a new or acquiring district by any procedure, and the area transferred contains real property, the new or acquiring district shall take possession of the real property, pursuant to paragraph (1) of subdivision (a) of Section 35560, on the day when the action to reorganize becomes effective for all purposes. The reorganized territory shall cease to be liable for the bonded indebtedness of the school district of which it was formerly a part, and shall automatically assume its proportionate share of the outstanding bonded indebtedness of any school district of which it becomes a part.
(b)CA Education Code § 35576(b) The new or acquiring district shall be liable for the greater of the amounts determined under provisions of paragraph (1) or (2), or the amount determined pursuant to a method prescribed under Section 35738.
(1)CA Education Code § 35576(b)(1) The proportionate share of the outstanding bonded indebtedness of the original district, which proportionate share shall be in the ratio that the total assessed valuation of the transferring territory bears to the total assessed valuation of the original district in the year immediately preceding the date on which the action to reorganize is effective for all purposes. This ratio shall be used each year until the bonded indebtedness for which the new or acquiring district is liable has been repaid.
(2)CA Education Code § 35576(b)(2) The portion of the outstanding bonded indebtedness of the original district that was incurred for the acquisition or improvement of real property, or fixtures located on the real property, and situated in the reorganized territory.
(c)CA Education Code § 35576(c) The county board of supervisors shall compute for the reorganized districts an annual tax rate for bond interest and redemption that will include the bond interest and redemption on the outstanding bonded indebtedness specified in paragraph (1) or (2) of subdivision (b), or the amount determined pursuant to a method prescribed under Section 35738. The county board of supervisors shall also compute tax rates for the annual charge and use charge prescribed by former Sections 1822.2 and 1825, as they read on July 1, 1970, when those charges were established before November 23, 1970. All of those tax rates shall be levied in excess of any other ad valorem property tax authorized or required by law, and shall not be included in the computation of the limitation specified in subdivision (a) of Section 1 of Article XIII A of the California Constitution.
school district reorganization territory transfer property annexation bonded indebtedness assessed valuation tax rate computation real property transfer debt assumption county board of supervisors tax levy ad valorem property tax outstanding debt ratio annual tax rate Article XIII A California Constitution
(Amended by Stats. 2016, Ch. 186, Sec. 16. (AB 2659) Effective January 1, 2017.)

Section § 35577

Explanation

When a school district with unsold bonds gets completely divided into new districts, the original district ends. Before this happens, it's up to the board of supervisors to divide the rights to issue those unsold bonds among the new districts. They do this based on how the property values of the new districts compare to the old one. Any issued bonds become a financial responsibility for the new districts, impacting their ability to get state building funds.

Whenever a school district having authorized but unsold bonds is completely divided between two or more new or acquiring districts so that the original district ceases to exist, pursuant to any provision of this chapter, the board of supervisors shall, before the date the action is effective for the purposes of Section 35534, make and enter an order in the minutes of its proceedings that the authorization to issue the unsold bonds be divided between each new or acquiring district in the ratio that the assessed valuation of the reorganized territory included in each school district bears to the total assessed valuation of the former district. The bonds, if issued by any new or acquiring district, shall be considered a liability of the school district for purposes of computing the bonding capacity of the school district when applying the State School Building Aid Law of 1952 (Chapter 6 (commencing with Section 16000) of Part 10 of Division 1 of Title 1).
unsold bonds school district division new and acquiring districts assessed valuation reorganization board of supervisors bonding capacity State School Building Aid Law financial liability property value comparison district reorganization bond issuance school financing educational funding district liability
(Amended by Stats. 2016, Ch. 186, Sec. 17. (AB 2659) Effective January 1, 2017.)

Section § 35578

Explanation

If an elementary, high, or unified school district is reorganized and becomes part of a new or acquiring district, any of its unsold bonds can still be issued under the name of that new district. Money earned from selling these bonds belongs to the new district but must be used for the originally intended purposes.

Any unsold bonds of an elementary, high, or unified school district that is included as a whole in a new or acquiring district through any kind of reorganization may be issued by the board of supervisors in the name of the new or acquiring district and the proceeds derived upon the sale thereof shall be the funds of the new or acquiring district. However, the proceeds derived upon the sale thereof shall be expended only for the purpose, or purposes, for which those bonds were authorized.
unsold bonds school district reorganization board of supervisors acquiring district bond proceeds bond issuance elementary district high school district unified school district fund allocation authorized purposes district reorganization proceeds expenditure new district funding bond sale
(Amended by Stats. 2016, Ch. 186, Sec. 18. (AB 2659) Effective January 1, 2017.)

Section § 35579

Explanation

If a school district is reorganized and merges into a new district, any bonds from the old districts that haven't been sold yet will be considered part of the new district's debt. This is important when calculating how much the new district can borrow under the State School Building Aid Law of 1952.

Any unsold bonds of an elementary, high, or unified school district that is included as a whole in a new or acquiring district through any kind of reorganization, if issued by the board of supervisors in the names of the former districts shall be considered a liability of the new or acquiring district for purposes of computing the bonding capacity of the school district when applying the State School Building Aid Law of 1952 (Chapter 6 (commencing with Section 16000) of Part 10 of Division 1 of Title 1).
unsold bonds elementary school district high school district unified school district new district acquiring district reorganization liability bonding capacity State School Building Aid Law of 1952 school district finances debt computation bond issuance board of supervisors school reorganization
(Amended by Stats. 2016, Ch. 186, Sec. 19. (AB 2659) Effective January 1, 2017.)