Assigned to ED AS VETOED
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
VETOED
FACT SHEET FOR H.B. 2640
school districts; leases; termination; nonrenewal
Purpose
Grants a charter school that is leasing or is the most recent lessee of a building owned by a
school district the right of first refusal to purchase the building if the building is up for sale.
Prescribes actions a school district must take before terminating or refusing to renew a lease for
school buildings. Exempts proceeds derived from the sale or lease of school property to other
schools from the statutory restrictions on the expenditure of proceeds derived from the sale or lease
of school property.
Background
The Division of School Facilities (Division) must annually publish a list of vacant or
partially used buildings that are owned by the state or an Arizona school district and may be
suitable for the operation of a school. The Division must make this list publicly available on the
Division website and on request to: 1) applicants for charter schools; 2) applicants applying to the
Division for additional space; and 3) existing district and charter schools. If a school district
decides to lease or sell a vacant or partially used building, the school district may not 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. A school district may not accept an offer for the sale or lease
of a property that is less than an offer from a charter school or private school and may not withdraw
the property from sale or lease because the charter school or private school is the highest bidder.
At the conclusion of a lease for an existing tenant that is a public school or that provides
services to public school students, a lease may be terminated, renewed according to the terms of
the existing agreement or renewed with a negotiated increase. When negotiating an increase, the
building owner must provide the rationale for a proposed increase (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 a reduction of school
district taxes. Statute prescribes restrictions on the expenditure of proceeds derived from the sale
or lease of school property based on the type of transaction and a school district's percentage of
outstanding bonded indebtedness. A school district is exempt from the restrictions if the proceeds
are derived from: 1) leases of school property to other schools; 2) leases of school property for less
than one year; and 3) sales of school property for less than $100,000 per transaction (A.R.S.
§ 15-1102).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation. FACT SHEET – Vetoed
H.B. 2640
Page 2
Provisions
Right of First Refusal and Lease Termination or Nonrenewal (Retroactive to January 2, 2025)
1. Grants a charter school or its charter authorizer that is leasing a building from a school district
or is the most recent lessee of a vacant school district building the right of first refusal to
purchase the building if the school district decides to sell the building.
2. Specifies that a school district may not withdraw a property from sale or lease solely because
a charter school exercises the right of first refusal.
3. Stipulates that a school district may terminate the lease or refuse to renew the lease for a public
school, private school or existing tenant that provides services to public school students only
if the school district governing board (governing board):
a) announces in a public hearing that the governing board proposes to refuse to renew or
terminate the lease;
b) provides an opportunity for public comment regarding the announced 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 public comments submitted before approving the nonrenewal
or termination of the lease; and
d) approves the proposal to refuse to renew or terminate the lease in a public hearing before
the date of the proposed termination or the date on which the lease is set to expire.
4. Specifies that public comment may include written comments, comments submitted through
email or oral comments during the required public hearings.
Miscellaneous
5. Exempts proceeds derived from the sale of school property to other schools, including charter
authorizers, from the restrictions on the expenditure of proceeds derived from the sale or lease
of school property.
6. Makes technical and conforming changes.
7. Becomes effective on the general effective date, with retroactive provisions as noted.
Governor's Veto Message
The Governor indicates in her veto message that, while sufficient time for public comment
and discussion is critical in governing board decisions, she cannot support wholesale attempts to
retroactively undo decisions of elected governing boards.
House Action Senate Action
ED 2/11/25 DPA 7-4-1-0 ED 3/19/25 DP 4-3-0
3
rd
Read 2/26/25 33-27-0 3
rd
Read 4/16/25 17-13-0
Vetoed by the Governor on 4/18/25
Prepared by Senate Research
April 22, 2025
MH/KK/ci