Senate committee substitute makes the following changes to the 1st edition.

Amends the long and short titles.

Amends GS 115C-530(a), concerning operating leases of school buildings and school facilities, to add to the conditions required to be met to enter into operating leases, specifying that any construction, repair, or renovation of the property must be in compliance with the requirements of GS 115C-521(c1) relating to science laboratory areas, in addition to GS 115C-521(c) relating to energy guidelines. Makes conforming change to subsection (b). Deletes the proposed provision that exempted any lease entered into pursuant to the statute from being subject to the requirements of GS 143-128.1B (design-build bridging).

Deletes proposed subsection (b1), which added a requirement for the local board of education, before it enters into an operating lease, to adopt a resolution upon 10 days' notice of its intent to enter into the lease.

Deletes the proposed revision to SL 2006-232, Section 3, which removed the July 1, 2015, expiration of GS 115C-531 and GS 115C-532, which authorize capital leases of school buildings and facilities. 

Deletes proposed revisions to GS 105-134.14, which extended the authorization of annual refunds of sales and use taxes indirectly incurred by a government entity on public construction projects to a private developer of a school leased to a county or a local board of education under an operating, capital, or build-to-suit lease with a term of 10 or more years. 

Enacts GS 115C-531.1, Capital leases of school buildings and school facilities, to authorize local boards of education to enter into capital leases of real or personal property for use as school buildings or school facilities. Specifies that the capital lease may relate to an existing building or a new school building to be constructed. Defines capital lease and private developer as they apply to the statute. Prohibits the term of any capital lease, including any renewal periods, from exceeding 40 years from the expected date that the local board of education will take occupancy of the property that is the subject of the capital lease. Exempts a capital lease entered into under the statute from the provisions of subsections (c) and (d) of GS 115C-521 (which require the erection or repair of school buildings be under the direction and control of the local board of education, and require the property be owned by the board in fee simple).

Establishes that the provisions of GS 115C-530(b) apply to a capital lease under the statute. Allows a capital lease to require that the private developer is responsible for providing, or contracting for, construction, repair, or renovation work. Provides that construction, repair, or renovation work undertaken or contracted by a private developer is not subject to the requirements of Article 8 of GS Chapter 143. Provides that, if construction, repair, or renovation work undertaken or contracted by the private developer involves the estimated expenditure of $300,000 or more, then the work undertaken or contracted by the private developer is subject to the provisions of GS 115C-532.1 related to build-to-suit capital leases. 

Prohibits a capital lease from containing a nonsubstitution clause that restricts the right of a local board to continue to provide a service or activity or to replace or provide a substitute for any property financed or purchased by the capital lease. Bars any deficiency judgment from being rendered against any local board of education or unit of local government in any action for breach of a contractual obligation authorized by the statute. Prohibits the taxing power of a unit from being pledged directly or indirectly to secure any moneys due under the contract authorized by the statute. Requires the capital lease to state that it does not constitute a pledge of the taxing power or full faith and credit of the local board of education or board of county commissioners.

Sets out provisions relating to the budgetary accounting of a capital lease entered into under the statute, and provides that the appropriation of funds by the county for payment of amounts due under the capital lease is subject to the discretion of the board of county commissioners.

Establishes that capital leases entered into under the statute are subject to the approval by the Local Government Commission under Article 8 of GS Chapter 159 if they meet the standards set out in GS 159-148(a)(1), GS 159-148(a)(2), and GS 159-148(a)(3) (financing agreements by a unit of local government). Provides that only the $500,000 threshold in GS 159-148(a)(3) applies for purposes of determining whether the standards set out have been met.

Prohibits a capital lease from containing any provision with respect to the assignment of specific students or students from a specific area to any specific school. Establishes that lien laws relating to private property are not affected by the statute. Establishes that the public-private partnership construction contract provisions under GS 143-128.1C do not apply to the statute.

Enacts GS 115C-532.1, Additional provisions applicable to build-to-suit capital leases, to establish provisions that apply to build-to-suit capital leases in addition to the provisions of GS 115C-531.1, as enacted by the act. Defines build-to-suit capital lease as a capital lease that provides for the construction of new facilities or the renovation of existing facilities by the private developer, the cost of which is estimated to be greater than $300,000. 

Allows a build-to-suit capital lease to include contractual provisions by the private developer regarding the provision of products, services, and guaranties related to the facility that is the subject of a capital lease. Allows the local board of education to enter into a separate agreement or series of related agreements regarding the provision of products, services, and guaranties related to a facility that is the subject of the capital lease, as long as all agreements are approved by the board of county commissioners in connection with the approval of the build-to-suit capital lease.

Requires approval by the local board of education, with provisions similar to the provisions of proposed subsection (b1) of GS 115C-530 deleted by the act. Requires the local board of education, before it enters into a build-to-suit capital lease, to adopt a resolution upon 10 days' notice of its intent to enter into the lease. Specifies that the resolution must state that the build-to-suit capital lease is in the local school administrative unit’s best interests under all the circumstances, and that the private developer is qualified to provide the products and services called for under the lease and any related agreements.

Requires the local board to submit the resolution to the board of county commissioners, along with any supporting documentation. Requires the board of county commissioners to affirm or reject the resolution no later than 45 days after receiving the resolution and supporting documentation from the local board of education. Prohibits the local board of education from entering into the lease if the board of county commissioners rejects the resolution.

Sets out statutory requirements that must be complied with regarding design services, including all architectural, engineering, and survey services. Provides that all applicable requirements for the review or approval of design and specifications for school buildings by the Department of Public Instruction and the Department of Insurance apply to school buildings constructed, repaired, or renovated under a capital lease authorized under the statute.

Requires a private developer to seek competition and minority business participation as specified in proposed subsection (g).

Authorizes local boards of education to enter into predevelopment agreements with a private developer in advance of entering into a build-to-suit capital lease, and may include provisions for (1) site selection, land acquisition, and site preparation and (2) building programming and design. Requires predevelopment agreements to be approved by the board of county commissioners.

Authorizes a city, county, or local board of education to sell, lease, or otherwise transfer real or person property, pursuant to the procedures set out in GS 160A-267, to any private developer for construction, repair, or renovation of a school facility under a build-to-suit capital lease. Authorizes the conveying unit to subject the property to any covenants, conditions, or restrictions as the unit deems necessary to carry out the purposes of the statute. Establishes that the disposition of property pursuant to proposed subsection (i) is not subject to the requirements of GS 115C-518 (disposition of school property).

Sets out nine additional permitted lease terms that may be included in any build-to-suit capital lease to impose responsibility on the private developer or any identified affiliated entity.

Requires a private developer to provide an irrevocable letter of credit in an amount not less than 5% of the total cost of the improvements which are the subject of the build-to-suit capital lease. Requires the private developer to maintain the letter of credit throughout the construction of the project and for the succeeding six-month period.

Establishes that the public-private partnership construction contract provisions under GS 143-128.1C do not apply to the statute.

Amends GS 143-129(e), which sets out exemptions to Article 8 of GS Chapter 143 (Public Contracts), to exempt build-to-suit capital leases with a private developer under GS 115C-532.1 from the Article.

Amends the proposed new subdivision (5a) to GS 115C-426(f) to specify that the capital outlay fund includes appropriations for lease payments for operating leases, capital leases, and build-to-suit capital leases entered into under GS 115C-530, GS 115C-531.1, and GS 115C-532.1. Deletes the proposed addition to subsection (f), which provides that the appropriations may be funded from staff and operational savings achieved through the consolidation of existing school facilities into new or renovated facilities leased from a private developer under these statutes. Makes technical changes to subsection (f). 

Establishes that, if H 242 (Various Charter School Law Changes) of the 2015 Regular Session becomes law, then Section 6.5 of H 242 will be amended as follows. Will be amended to require the State Board of Education to ensure that the rules for a fast-track replication process, required by Section 6.5, provide that decisions by the Board on whether to grant a charter through the replication process are completed in less than 120 days from the application submission date but in no event later than October 15 of the year immediately preceding the year of the proposed school opening (currently, H 242 requires completion no later than October 15 of the year immediately preceding the year of the proposed school opening). Will be amended to delete the remaining revisions to Section 6.5 and reinstate the original language.

Changes the effective date to July 1, 2016 (previously July 1, 2015), and provides that the act is applicable to contracts entered into on or after that date.