Effective September 1, 2001, Section 12.128 of the Texas Education Code provides that a property interest acquired by a charter holder with state funds after September 1, 2001, is considered public property held in trust by the charter holder for the benefit of the students of its charter school. The same law fixes a public property interest in certain real estate already owned by a charter holder as of that same date. This state property interest, which is described in Section 12.128 of the Texas Education Code, results under the following situations:

The following information is the product of a discussion with the TEA Charter School staff and legal department. Although we believe it to represent the TEA approach to implementing this new statute, the final decision of the Agency in this matter will be most accurately reflected in the Commissioner's Rules to soon be published. You may wish to contact and discuss these matters with your attorney and accountant:

Real Property
For real property in which 51% or more of state funds has been invested, the state interest is fixed at 51% on September 1, 2001, and increases with continued investment of state funds subsequent to September 1, 2001.

For example: A charter holder invests 51% of state funds or more in a building. On September 1, 2001, the state has a 51% interest. On or after September 1, 2001, the charter holder invests an additional 10% of the remaining cost of the building using state funds. The state's interest is carried over and now increases to a 61% interest in that building

But, for real property in which less than 51% of state funds has been invested as of September 1, 2001, the state's interest would be only that of the state funds invested in the building subsequent to September 1, 2001, because no state interest is fixed in the property prior to September 1, 2001.

For example: Prior to September 1, 2001, a charter holder invests 49% of state funds in a building. On or after September 1, 2001, the charter holder continues to invest in the building and invests an additional 10% of the remaining cost of the building out of state funds. The state's interest is not 49%, but only 10% because the state's interest does not carry over prior to September 1, 2001.

Personal Property
Any state investment of any amount in personal property after September 1, 2001, results in a state interest only to the extent of the state's investment subsequent to that date.

Bob Schulman
Schwartz and Eichelbaum, P.C.
210-228-9944