Requirements for lease agreements.

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  • (1) Each lease agreement between a local building authority and its creating local entity shall:
    • (a) provide for the payment of lease payments sufficient:
      • (i) to pay:
        • (A) the principal of and interest on local building authority bonds the proceeds of which were used to construct, acquire, improve, or extend the project;
        • (B) all fees and expenses of trustees and paying agents for bonds described in Subsection (1)(a)(i)(A); and
        • (C) all costs of maintaining and operating the project; and
      • (ii) to accumulate any reasonable reserve that the local building authority considers necessary;
    • (b) provide that the creating local entity, if not in default under the lease agreement, may:
      • (i) subject to Subsection (2), renew the lease for a fixed term beyond the initial term by giving specified notice before the expiration of the initial term; and
      • (ii) subject to Subsection (3) and the terms of the lease agreement, purchase the leased property on a date fixed in the agreement;
    • (c) provide that a creating local entity under the lease agreement is not under any obligation:
      • (i) to purchase the leased property; or
      • (ii) to a creditor, shareholder, or security holder of the local building authority; and
    • (d) require that:
      • (i) title to the project vest in the creating local entity upon payment in full of all outstanding local building authority bonds issued to construct, acquire, improve, or extend a project; and
      • (ii) any remaining assets and net earnings of the local building authority be paid to the creating local entity upon dissolution of the local building authority, as provided in Section 17D-2-702.
  • (2) The term of a lease agreement under this part, including any renewal of the lease agreement, may not exceed the lesser of:
    • (a) the estimated useful life of the project, as certified under Subsection 17D-2-302(1); and
    • (b) 40 years.
  • (3) The purchase price of leased property under Subsection (1)(b)(ii) may not exceed the project costs that the local building authority actually invested in the project.




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