School construction costs may fall entirely on home builders

School construction costs may fall entirely on home builders

(Calif.) For the first time ever, home builders throughout California could be required to pony up the lion’s share of new school construction if a long-neglected state grant fund is formally declared exhausted.

Hoping to head off that action, lawmakers who oversee school facility funding may seek a budget appropriation that would create a loan program in the short term and avoid saddling the economically critical housing industry with a costly new burden.

School officials, however, say time is running out.

“Our bottom line message to you is we need help in Fremont,” Superintendent Jim Morris told panel members, who set policy and approve financial decisions for the School Facility Program. “We have in our school district today over 2,000 students who, on a daily basis, are overloaded out of their neighborhood school and sent any place that we have space available. We currently are out of classrooms in Fremont. We have no space left.”

The discussion comes at a critical juncture for many school districts across California, facing burgeoning student enrollment at a time when the Brown administration has sought to scale back the state’s role in funding school construction and repair. Brown has thwarted several legislative attempts in recent years to place before voters a school construction bond – needed to replenish the School Facility Program, which matches district contributions to build new schools and provides up to 40 percent of the cost of modernization projects.

The governor has also called on lawmakers to simplify what he says is an overly bureaucratic system and to find a new source of funding that doesn’t create more debt for the state.

So far, no one’s been able to do that.

But an improving economy is reviving the housing construction industry, especially in areas where jobs are available, and some districts can’t build schools fast enough to house their growing student populations.

A large contingent of administrators, teachers, students, parents and residents from both the Fremont and Dublin Unified School Districts pleaded with the State Allocation Board at a meeting last week to take action that would open up the remaining revenue source that will help them build the new schools they so badly need.

One member, Assemblywoman Susan Bonilla – whose district includes Dublin Unified – said the board needs to take the issue up in earnest at its next meeting.

“I feel it’s very important for us to be responsive in May to have a discussion about an actual solution,” she said. “If that means we take an action at a later date, I understand that, but I don't want to just see us not address this in May. It is time sensitive and I think we need to have a full discussion with the full board.”

The School Facilities Program has little new money to hand out – especially for the more costly new construction and modernization projects – but the board has been reluctant to declare it depleted. To do so would trigger a provision in state law that places the burden of school construction costs fully on the backs of housing developers by allowing districts who meet the criteria to charge them 100 percent of building costs.

Level III developer fees, as they are known, are allowed when the board declares the state’s new school construction program out of money, and when a district meets a set of criteria that includes completion of a facility needs assessment and at least two of the following:

  • 30 percent of pupils must be multi-track-year-round in unified or elementary district
  • In the previous four years, a local general obligation bond must have received a majority of the vote
  • District has issued debt for capital outlay in an amount of at least either 15 percent or 30 percent of the district’s local bonding capacity
  • At least 20 percent of teaching stations within the district are in relocatable units  

Fremont and Dublin both qualify, officials from the districts testified.

Fremont’s Morris said the district’s student population increased by 3,000 students to 35,000 between 2010 and today, and is projected to go over 40,000 by 2022. The district has in use 383 portable classrooms with more on the way this summer, as well as a fleet of portable bathrooms because long lines are keeping kids out of class for too long. Kindergartners are no longer being enrolled because there are no seats for them, he said, and in one area, 90 kindergartners from one community must travel across town to an elementary school that has space for them.

“Ninety five-year-olds being pulled out of bed a half hour earlier instead of sleeping in and walking down the street to their neighborhood school,” said Morris. “This is their introduction to education.”

The SAB, however, has been reluctant to make the official determination that would pull the Level III trigger, afraid that such a move would stall the housing industry’s comeback.

Indeed, members of the building industry – working with school construction advocates – want the board to hold off on making the determination at least until after November when voters will decide on a $9 billion facilities bond that they helped qualify for the ballot. The group leading the bond campaign, Californians for Quality Schools, also includes the nonprofit Coalition for Adequate School Housing or CASH, which presented the plan for a temporary loan program to the SAB Wednesday.

“This interim funding proposal has value and I think it's an important thing for the board to consider,” said Richard Lyon on behalf of the California Building Industry Association. “I don't know that we want to live and die by the specific language on it right now, but direct the staff at the appropriate time to go through the rule-making process so that we can get this up and running because there isn't that much time between now and November and there are needs that need to be addressed.”

SAB acting chair Eraina Ortega, chief deputy director of Brown’s finance department, said, however, that the board should not move forward with a rule-making process until funding has been approved for a new program. That, she said, should take place as a budget negotiation between those lawmakers who want to see an interim loan program put in place.

Sen. Loni Hancock, a longtime member of the SAB, said the board should also consider whether or not conditions of the School Facility Fund warrant pulling the developer fee trigger.

“I don't know how we set up a loan program for some districts and not everybody, so it would have to be a very large loan program,” she said. “Now, if we set up a loan program with the finding that should the bond not pass, we would immediately trigger Level III, that would give a path forward for districts to pay back the loan. Otherwise, it doesn't seem like a path forward.”

Office of Public School Construction staff will bring back an analysis of options for the board to consider next month.

Since 1998, the School Facilities Program has provided state funding of $35.4 billion through general obligation bonds approved by voters. School districts in that time have provided $75.2 billion from local school bonds, and developer fees have accounted for $9.4 billion.

The last statewide school facilities bond was approved in 2006.

“We want to continue that program,” Lyon said. “We have qualified a $9 billion K-community college bond for the November ballot. It will be on the ballot and we believe that it will pass, and we believe that once that happens, these issues naturally will go away.”

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