Builder fee fix comes with new bond money

Builder fee fix comes with new bond money

(Calif.) A legislative dilemma over how to deactivate a big jump in fees paid by home builders for school construction will resolve itself once money starts to flow from a $9 billion bond measure passed by voters in November, sources said late last week.

The Level 3 developer fees were authorized for the first time last spring after the state’s pool of money for school construction was officially declared exhausted. When voters approved the statewide bond, however, lawmakers and representatives of the building industry were stunned to learn that the prevailing state law was silent on how to reel back the fees that were no longer needed.

Without a vehicle to rescind the fees, some policy analysts said, districts could take their share of the bond money while also imposing fees on builders.

Although there were expectations that a legislative fix would be introduced, sources said the Legislature’s in-house counsel has concluded that once the State Allocation Board, or SAB,  formally begins distribution of the new bond money, the fees will automatically roll back.

At this point, there have been no reports of any school district attempting to impose the Level 3 fees, although several were prepared to take action prior to the November election.

Capitol insiders say the SAB is not likely to be in a position to begin distributing any of the new money until fall, assuming legislative leaders and Gov. Jerry Brown come to an agreement on how that process will work.

Brown said in his January budget plan that he wanted to issue $655 million in school bonds during the 2017-18 fiscal year. But he conditioned his support for the bond sale with the imposition of new school audit requirements on the use of the bond money.

Currently, the Office of School Construction is charged with making sure districts use bond money appropriately. But a 2016 review of those audits by the governor’s Department of Finance found a logjam of some $3 billion in spending that had not been analyzed.

Brown’s new plan is to shift the accountability reviews to the county auditors or third-party contractors. The administration has said it wants the SAB to act on the new process as early as next month.

A hearing before the SAB on the new proposal is set for this Thursday

The non-partisan Legislative Analyst has raised a number of questions with Brown’s plan.

For one, the LAO said that the amount of money the governor wants to raise from bond sales next year will not cover the existing backlog of badly-needed school improvements.

There is an existing list of some $370 million in approved projects that are waiting for state matching funds and another $2 billion in line pending approval.

Given that the last statewide school bond was passed by voters in 2006, the LAO estimates that the waiting list of new projects could grow by more than $1.1 billion by January, 2018.

The LAO also warned that the governor’s threat to withhold the sale of bond money could be challenged in court because by approving the measure, voters were also instructing the Legislature and the governor to follow through with funding school facility projects.

The LAO did say, however, that the governor’s plan to shift audit responsibilities from the OPSC had merit. They noted that under the new plan, all school projects would undergo review, unlike the current system where OPSC only targets some projects. Secondly, the LAO said the idea builds on the state’s broader effort to move more compliance activity down to the local level.

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