HB 2640
Initials CH Page 1 House Engrossed
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature
First Regular Session
House: ED DPA 7-4-1-0
HB 2640: school districts; leases; termination; nonrenewal
Sponsor: Representative Gress, LD 4
House Engrossed
Overview
Extends right of first refusal to purchase a school district building to a charter school or
charter authorizer if prescribed criteria are met. Implements public hearing, public comment
and timeframe requirements a school district governing board (governing board) must follow
when proposing to terminate or refuse to renew a lease. Removes restrictions on the
permissible uses of proceeds from the sale of school property to other schools.
History
The Division of School Facilities (SFD) is required to annually publish a list of both vacant
and partially used buildings that are owned by the state or school districts and that may be
suitable for the operation of a school. This list is to be made available on SFD's website and
to: 1) charter school applicants; 2) applicants applying to SFD for additional space; and 3)
existing school districts and charter schools. A vacant building is a building that has been
vacant and unused for at least two years. A partially used building has at least 4,500 square
feet of contiguous, unused space.
A school district wishing to sell or lease a vacant or partially used building cannot: 1) prohibit
a charter school or private school from negotiating to buy or lease the property in the same
manner as other potential buyers or lessees; or 2) accept an offer for the sale or lease of a
vacant or partially used building from a buyer or lessee that is less than an offer from a
charter school or private school. More generally, the owner of a building on the vacant and
partially used buildings list cannot withdraw the property from sale or lease solely because
a charter school or private school is the highest bidder. However, statute does not require the
owner of a building on the list to sell or lease the building or a portion of the building to a
charter school or any other school or prospective buyer or tenant.
Once a lease for an existing tenant that is a public school or that provides services to public
school students concludes, the lease may be terminated, renewed according to the terms of
the existing agreement or renewed with a negotiated increase. If the building owner intends
to negotiate an increase, the owner must provide a rationale for the proposed increase to the
lessee (A.R.S. § 15-119).
A school district may expend the proceeds from the sale or lease of school property for the
payment of any outstanding bonded indebtedness of the school district or to reduce school
district taxes. Statute details the permissible uses of such monies based on a school district's
percent of outstanding bonded indebtedness. However, the restrictions on the permissible
uses of proceeds from the sale or lease of school property do not apply to proceeds from: 1)
leases of school property to other schools; 2) leases of school property for less than one year;
or 3) sales of school property of less than $100,000 per transaction (A.R.S. § 15-1102).
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note HB 2640
Initials CH Page 2 House Engrossed
Provisions
Right of Refusal (Retroactive to January 2, 2025) (Sec. 1, 3)
1. Grants a charter school, or its charter authorizer, that is leasing a building from a school
district or that is the most recent lessee of a vacant building owned by a school district
the right of first refusal to purchase the building if the school district decides to sell the
building.
2. Prohibits the owner of a building on the vacant and partially used buildings list from
withdrawing the property from sale or lease solely because a charter school exercises its
right of first refusal.
Termination or Refusal to Renew a Lease (Retroactive to January 2, 2025)
(Sec. 1, 3)
3. Stipulates a school district, as the building owner, may terminate or refuse to renew a
lease for an existing tenant that is a public school, private school or that is providing
services to public school students only if the governing board:
a) announces it is proposing to refuse to renew or terminate the lease in a public hearing;
b) provides an opportunity for public comment regarding the proposal for at least 90 days
after the date of the announcement and before the governing board may vote on the
proposal;
c) reviews and considers any submitted public comments before approving the proposal;
and
d) approves the proposal in a public hearing before the date of the proposed termination
or the date on which the lease is scheduled to expire.
4. Specifies that public comment may include written or emailed comments or oral
comments during the required public hearings.
Miscellaneous
5. Exempts the proceeds from the sales of school property to other schools, including charter
authorizers, from statutory restrictions relating to the required disposition of proceeds
from the sale or lease of school property. (Sec. 2)
6. Makes technical and conforming changes. (Sec. 1, 2)