LAO - 2015-16 Budget: Rethinking How the State Funds School Facilities

For years our State Legislature has used our children as a means of seeking higher and higher revenues claiming that “it was for the kids”. In reality, most of the revenue has been spent on new entitlement programs and increased employee compensation for State workers. During the peak of the economic recession, the State allowed Districts to use deferred maintenance funds for general fund purposes. Fast forward to the present and we have an education funding crisis on our hands. How are school districts across the State suppose to pay for new construction and more importantly facilities maintenance that has been neglected for years. The LAO just released a report explaining the issues and suggesting some fixes.

“Executive Summary Recommend Transitioning to a New School Facility Financing Program. Many groups over the years have raised serious concerns with the state’s current school facilities program. Notably, the existing program fails to treat school facility costs as an ongoing expense despite the recurring nature of facility needs, allows disparities based on school district property wealth, fails to target funding according to greatest need, results in excessive administrative complexity, and lacks adequate accountability mechanisms. Given these issues, the Governor indicates a strong interest in changing how the state funds school facilities, though he has not introduced a specific proposal to date. We recommend the state replace the current program with a new grant program. Specifically, we recommend the Legislature (1) establish an annual per-student facility grant; (2) base the grant on the replacement value of existing school buildings and an estimate of their average useful life; (3) adjust the grant to reflect local resources, with larger grants for districts with lower property wealth; (4) adjust the grant during the transition to account for existing state debt service incurred on the district’s behalf; (5) provide one-time funds to address the existing backlog of facility projects; and (6) require school districts that receive grant funds to adopt five-year facility accountability plans.”

The full report can be read at:
http://www.lao.ca.gov/reports/2015/budget/school-facilities/school-facilities-021715.pdf

Capistrano Unified School District Facilities Issues:

Deferred Maintenance

During the economic downturn, the State allowed Districts to use Deferred Maintenance Funds for General Fund purposes. According to the District’s Facilities Master Plan developed in 2009 and updated in 2013, CUSD facilities need $822 million in repairs and maintenance. CUSD currently has $44.9 million for facilities.

Source: Capistrano Unified Board Presentation “Facilities Funding Report” dated Nov 6th, 2013 at page 11
Source: Facilities Funding Report November 6, 2013http://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/7695162819501468512.pdf

New Construction

CUSD will need to build a new K- 8 School for Rancho Mission Viejo development that is slated to be open in 2016 and have the capacity to serve between 1,200 and 1,600 students.

Where will that money come from?
The State is no longer matching funds for new construction.
The estimated cost of this new school is $30 million.

Facilities Funding Sources:

CUSD has 19 individual funds in six major categories with a Total Balance of $56,701,087

Deferred Maintenance Fund: $ 2,376,674
Developer Fees: Balance $ 6,172,349
Redevelopment Agency Pass-through Funds:
RDA San Juan Capistrano $ 1,614.759
RDA San Clemente $ 344,589
RDA Mission Viejo $ 7,900,200
State Facilities Funds: Balance
SSFF1A OPSC $ 1,120,782
SSFF 47 OPSC $ 1,030,499
School Facility Improvement District (SFID): $ 4,903,932
Community Facilities District (CFD) Funds:
CFD No. 87-1 –MV/AV $10,197,218
CFD No. 88-1 – RSM $ 885,824
CFD No. 90-1 - Cota De Caza $ 2,015,892
CFD No. 90_2 IA2002-1 – Talega $ 1,082,518
CFD No. 90-2 – Talega $ 5,090,802
CFD No. 92-1 – Las Flores $ 6,417,529
CFD No. 94-1 – RSM II $ 1,825,563
CFD No. 98-1A – Pacifica San Juan $ 1,721,241
CFD No. 98-2 – Ladera $ 1,969,656
CFD No. 2004-1 – Rancho Madrina $ 31,060
CFD No. 2005-1 – Whispering Hills TBD
Total $56,701,087
CFD 87- 1 is ending early ($10,197,281)
RDA SJC (Funds are spoken for) ($ 1,614,759)
Leaving a fund balance of: $44,889 million

CUSD does not have enough funding to bring facilities up to minimum code standards.

Revenue Generated from Funding Sources:

The District has been generating revenue streams from facilities funds. Revenues for 2013-2014 were $13,621,000. Revenues from facilities funds are projected to decline to $7,647,000 which means that CUSD will have less revenue generated each year than previously anticipated for facilities.

In addition- it has come to light that the District has engaged is some questionable practices regarding it’s Mello Roos Districts. CUSD has been using them as an income stream for general fund purposes by generating substantially more revenue than is necessary to pay the bond obligations. CFD 90-2 Talega is currently in dispute. CUSD may have to reduce potential revenues even farther; and may have to repay residents for any excess taxes collected beyond what was needed to service the bond.

Deferred Maintenance Fund: $1,000,000
Developer Fees: Balance $ 900,000
Redevelopment Agency Pass-through Funds:
RDA San Juan Capistrano $ 460,000
RDA San Clemente $ 48,000
RDA Mission Viejo $1,700,000
State Facilities Funds: Balance
SSFF1A OPSC $ 5,000
SSFF 47 OPSC $ 6,000
School Facility Improvement District (SFID) Fund:$ 20,000
Community Facilities District (CFD) Funds:
CFD No. 87-1 –MV/AV $3,833,000
CFD No. 88-1 – RSM ($ 62,000)
CFD No. 90-1 - Cota De Caza $ 42,000
CFD No. 90_2 IA2002-1 – Talega $ 300,000
CFD No. 90-2 – Talega $1,073,000
CFD No. 92-1 – Las Flores $ 310,000
CFD No. 94-1 – RSM II $1,681,000
CFD No. 98-1A – Pacifica San Juan $ 337,000
CFD No. 98-2 – Ladera $1,692,000
CFD No. 2004-1 – Rancho Madrina $ 276,000
CFD No. 2005-1 – Whispering Hills TBD
Total $13,621,000
CFD 87- 1 is ending early ($3,833,000)
RDA SJC (Funds are spoken for) ($ 460,000)
94-1 ends 2014 ($1,681,000)
Revenue Generation: $ 7,647,000

Source: Facilities Funding Report November 6, 2013http://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/7695162819501468512.pdf at page 13

Source: May 22, 2013 Board Meeting Exhibit 2: CFD Refinancing Report:http://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/5665548576433686348.pdf

Source: August 14, 2013 Board Meetinghttp://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/7603813809991434121.pdf Agenda Items #5, 6, 20, 21, 22, 23, 24, 25, 26, 27, 28

Community Facilities District Annual Administration Reports for the Capistrano Unified School District Fiscal year 2013-2014:
• Exhibit 5: CFD No. 90_2 IA2002-1
• Exhibit 6: CFD No. 92-1
• Exhibit 20: CFD No. 87-1
• Exhibit 21: CFD No. 88-1
• Exhibit 23: CFD No. 90-2
• Exhibit 24: CFD No. 94-1
• Exhibit 25: CFD No. 98-1A
• Exhibit 26: CFD No. 98-2
• Exhibit 27: CFD No. 2004-1
• Exhibit 28: CFD No. 2005-1

Source: March 7, 2014 Special Board Meetinghttp://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/6161367213028837328.pdf

Power Point Presentationhttp://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/1767656086837219923.pdf

The District does not have sufficient future revenue streams to bring facilities up to code. It will be difficult for CUSD to raise local revenues when the Public Trust has been violated both at the State and District level.