BILL NUMBER: SB 1624 CHAPTERED 09/29/02 CHAPTER 1081 FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2002 APPROVED BY GOVERNOR SEPTEMBER 29, 2002 PASSED THE ASSEMBLY AUGUST 26, 2002 PASSED THE SENATE MAY 28, 2002 INTRODUCED BY Senator Romero FEBRUARY 21, 2002 An act to amend Sections 94100, 94110, 94140, 94147, and 94154 of, and to add and repeal Article 9 (commencing with Section 94215) of Chapter 2 of Part 59 of, the Education Code, relating to educational facilities, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST SB 1624, Romero. Educational facilities: California Educational Facilities Authority. Existing law establishes the California Educational Facilities Authority Act, the purpose of which is to provide private institutions of higher education within the state an additional means by which to expand, enlarge, and establish dormitory, academic, faculty and staff housing, and related facilities, finance those facilities, refinance existing facilities, and to provide private and public institutions of higher education within the state an additional means to assist students in financing their costs of attendance. This bill would authorize the authority to make up to a total of $2,000,000 in grants in aid to private colleges to provide a program of academic assistance to high school pupils attending a qualified school, as defined, in accordance with prescribed selection criteria. This provision would be repealed as of January 1, 2009. Because this bill would authorize the authority to expend funds for new purposes, it would make an appropriation. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 94100 of the Education Code is amended to read: 94100. It is the purpose of this chapter to accomplish all of the following: (a) To give this and future generations of youth the fullest opportunity to learn and develop their intellectual and mental capacities by providing private institutions of higher education within the state with an additional means by which to expand, enlarge, and establish dormitory, academic, and related facilities, to finance those facilities, and to refinance existing facilities. (b) To provide private and public institutions of higher education within the state with an additional means to assist students in financing their costs of attendance. (c) To develop student, faculty, and staff housing on or near public and participating private institutions of higher education through the use of agreements with participating nonprofit entities. (d) To make grants to private institutions of higher education to assist students in preparing for higher education and college entrance, pursuant to Article 9 (commencing with Section 94215). SEC. 2. Section 94110 of the Education Code is amended to read: 94110. As used in this chapter, the following words and terms have the following meanings, unless the context indicates or requires another or different meaning or intent: (a) "Authority" means the California Educational Facilities Authority created by this chapter or any board, body, commission, department, or officer succeeding to the principal functions thereof or to whom the power conferred upon the authority by this chapter is given by law. (b) "Bond" means bonds, notes, debentures, or other securities of the authority issued pursuant to this chapter. (c) "Cost," as applied to a project or portion thereof financed under this chapter, embraces all or any part of the cost of construction and acquisition of all lands, structures, real or personal property, rights, rights-of-way, franchises, easements, and interests acquired or used for a project, the cost of demolishing or removing any buildings or structures on land so acquired, including the cost of acquiring any lands to which the buildings or structures may be moved, the cost of all machinery and equipment, financing charges, interest prior to, during, and for a period after completion of, the construction as determined by the authority, provisions for working capital, reserves for principal and interest and for extension, enlargements, additions, replacements, renovations and improvements, the cost of engineering, financial and legal services, plans, specifications, studies, surveys, estimates, administrative expenses, and other expenses necessary or incident to determining the feasibility of constructing any project or incident to the construction or acquisition or financing thereof. (d) "Dormitory" means a housing unit with necessary and usual attendant and related facilities and equipment. (e) "Educational facility" means a structure suitable for use as a dormitory, dining hall, student union, administration building, academic building, library, laboratory, research facility, classroom, health care facility (including for an institution of higher education that maintains and operates a school of medicine, structures or facilities providing or designed to provide services as a hospital or clinic, whether the hospital or clinic is operated directly by the institution of higher education or by a separate nonprofit corporation, the member or members of which consist of the educational institution or the members of its governing body), faculty and staff housing, and parking, maintenance, storage, or utility facilities and other structures or facilities related thereto or required or useful for the instruction of students or the conducting of research or the operation of an institution for higher education, and the necessary and usual attendant and related facilities and equipment, but does not include any facility used or to be used for sectarian instruction or as a place for religious worship or any facility used or to be used primarily in connection with any part of the program of a school or department of divinity. (f) "Faculty and staff housing" means a residential unit owned by a participating college or participating nonprofit entity for use by an individual holding a faculty appointment or a staff position at a public university, public college, or participating college. (g) "Participating nonprofit entity" means an entity within the meaning of paragraph (3) of subsection (c) of Section 501 of Title 26 of the United States Code that, pursuant to this chapter for the purpose of owning student, faculty, or staff housing, as approved by, and for participation with, the authority, undertakes the financing and construction or acquisition of student, faculty, or staff housing, on real property owned or leased by the entity, for the benefit of a public college, public university, or participating private college. The authority may determine any additional qualifications of a participating nonprofit entity through regulations or guidelines. (h) "Participating private college" or "participating college" means a private college that neither restricts entry on racial or religious grounds nor requires all students gaining admission to receive instruction in the tenets of a particular faith, and that, pursuant to this chapter, participates with the authority in undertaking the financing and construction or acquisition of a project. (i) "Private college" means an institution for higher education other than a public college, situated within the state and that, by virtue of law or charter, is a nonprofit private or independent degree-granting educational institution that is regionally accredited and empowered to provide a program of education beyond the high school level. (j) (1) "Project" means a dormitory or an educational facility, faculty or staff housing, or any combination thereof, or any function concerning student loans, or interests therein, as determined by the authority. (2) For a participating nonprofit entity, "project" means the construction or acquisition of student housing or faculty and staff housing. The authority, in consultation with the top administrative officials and the participating nonprofit entity, shall develop and adopt regulations to ensure, to the greatest extent practicable, that each project involving a participating nonprofit entity is used to house students, faculty, or staff of the participating private college, public college, or public university. The student, faculty, or staff housing shall meet all of the following criteria: (A) Upon completion or acquisition of the project, the project will be owned by a participating nonprofit entity and located on real property owned, or leased by, that entity. (B) The top administrative official of the public university, public college, or participating private college that the project is intended to benefit, verifies the need for housing and financing assistance in a specific area pursuant to subparagraph (D). (C) The project is monitored on an annual basis by the authority to ensure that it meets the requirements of subparagraph (E) and all other regulatory agreements entered into by the authority. (D) The project is located within a five-mile radius of the boundary of a campus or satellite center of the public college, public university, or participating private college that the project is intended to benefit. The participating nonprofit entity may request approval from the top official of the institution for a project that is located outside the five-mile radius, provided that all of the following criteria are met: (i) There are no available and feasible sites within the five-mile radius. (ii) The project is near a mass transit destination. (iii) The time required to commute from campus to the mass transit destination, as estimated by the top administrative official, typically does not exceed 30 minutes. (E) (i) The project includes and maintains for 40 years a restriction to the grant deed on the real property on which the student or faculty and staff housing is to be located. The grant deed shall accomplish all of the following: (I) Give the public college, public university, or participating private college that the project is intended to benefit the right, but not the obligation, to purchase the property at fair market value. (II) Ensure that students, faculty, or staff of the affected campus will have first right of refusal to all available units. (III) Require that, to the greatest extent feasible, at least 50 percent of student residents will meet the criteria for need-based financial assistance, as determined by the top administrative official of the affected campus. (IV) Require that all contracts for construction and renovation of the proposed project shall be subject to, and comply with the provisions referenced in, Section 10128 of the Public Contract Code. (ii) For the purposes of this subparagraph, the authority shall, through regulation or rule, define "student" and "faculty," taking into consideration enrollment status requirements and employment status requirements. The definitions of "student" and "faculty" may be different for each participating campus. (k) "Public college" means a community college. (l) "Public university" means any campus of the University of California or the California State University, or the Hastings College of the Law. (m) "Student housing" means a residential unit owned by a participating nonprofit entity, and located on real property owned by that entity, for use by an individual enrolled at a public college, public university, or participating private college. (n) "Student loan" means any loan having terms and conditions acceptable to the authority that is made to finance or refinance the costs of attendance at any private college or a public college and that is approved by the authority, if the loan is originated pursuant to a program that is approved by the authority. (o) "Top administrative official" means the chancellor in the case of a campus of the University of California, the dean in the case of the Hastings College of the Law, the trustees in the case of a campus of the California State University, the president in the case of a campus of the California Community Colleges, or the president or highest ranking official in the case of a participating private college. SEC. 3. Section 94140 of the Education Code is amended to read: 94140. The authority shall have power to do all of the following: (a) Adopt bylaws for the regulation of its affairs and the conduct of its business. (b) Adopt and have an official common seal and alter it at pleasure. (c) Sue and be sued in its own name, and plead and be impleaded. (d) Borrow money, issue bonds and notes and other obligations of the authority, and provide for the rights of the holders thereof as provided in this chapter. (e) Acquire, lease as lessee, hold, and dispose of real and personal property or any interest therein, in the exercise of its powers and the performance of its duties under this chapter. (f) Acquire, in the name of the authority by purchase or otherwise, on the terms and conditions and in the manner as it deems proper, any land or interest therein and other property that it determines is reasonably necessary for any project, including any lands held by any county, municipality, or other governmental subdivision of the state; and to hold and use the same and to sell, convey, lease, or otherwise dispose of property so acquired, no longer necessary for the authority's purposes. (g) Receive and accept, from any federal or other public agency or governmental entity, grants or loans for or in aid of the acquisition or construction of any project, and to receive and accept aid or contributions from any other source, of either money, property, labor, or other things of value, to be held, used, and applied only for the purposes for which the grants, loans, and contributions may be made. (h) Prepare, or cause to be prepared plans, specifications, designs, and estimates of costs for the construction and equipment of projects for participating colleges and participating nonprofit entities under this chapter, and from time to time to modify those plans, specifications, designs, or estimates. (i) By contract or contracts or by its own employees to construct, acquire, reconstruct, rehabilitate and improve, and furnish and equip, projects for participating colleges and participating nonprofit entities. (j) Employ consulting engineers, architects, accountants, construction and financial experts, superintendents, and other employees and agents that may be necessary in its judgment and to fix their compensation. (k) Determine the location and character of any project to be undertaken pursuant to this chapter, and construct, reconstruct, repair, lease, as lessee or lessor, the same; enter into contracts for any or all of those purposes; and designate a participating private college or participating nonprofit entity as its agent to determine the location and character of a project undertaken by the participating private college or participating nonprofit entity under this chapter and, as the agent of the authority, construct, reconstruct, maintain, repair, operate, lease, as lessee or lessor, and regulate the same, and, as agent of the authority, to enter into contracts for any and all of those purposes including contracts for the management and operation of the project. (l) Establish rules and regulations for the use of a project or any portion thereof and to designate a participating private college or participating nonprofit entity as its agent to establish rules and regulations for the use of a project undertaken by the participating private college or participating nonprofit entity. (m) Generally establish, revise from time, to time and charge and collect, rates, rents, fees, and other charges for the use of and for the services furnished or to be furnished by a project or any portion thereof and contract with holders of its bonds and with any other person, party, association, corporation, or other body, public or private, in respect thereof. (n) Enter into any and all agreements or contracts, execute any and all instruments, and do and perform any and all acts or things necessary, convenient, or desirable for the purposes of the authority or to carry out any power expressly given in this chapter. (o) Invest any moneys held in reserve or sinking funds, or any moneys not required for immediate use or disbursement, at the discretion of the authority, in obligations that are authorized by law for the investment of trust funds in the custody of the Treasurer. (p) Charge, and equitably apportion among participating private colleges and participating nonprofit entities, its administrative costs and expenses incurred in the exercise of the powers and duties conferred by this chapter. (q) Finance, directly or through an intermediary, or purchase or take assignments of, or make commitments to finance, directly or through an intermediary, or purchase or to take assignments of, student loans, to contract in advance for those student loans, and to contract in advance for that financing, purchase, or assignment, and to pay any amounts payable in respect thereto. A student loan shall be eligible for financing or purchase by the authority or for assignment hereunder regardless of the repayment status of the loan. Any pledge made to secure authority financing for student loan project purposes shall be valid and binding from the time the pledge is made. The revenues and receipts of property or interest in the property pledged and thereafter received by the authority, a participating college or public institution of higher education, a servicer, a trustee, or a custodian shall immediately be subject to the lien of the pledge without any physical delivery thereof or further act, and the lien of any pledge shall be valid and binding against all parties having claims of any kind in tort, contract, or otherwise against the authority, participating college or public institution of higher education, servicer, trustee, or custodian irrespective of whether the parties have notice thereof. Neither the resolution nor any other instrument by which a pledge is created need be recorded. (r) Hold or invest in student loans, create pools of student loans, and sell bonds bearing interest on a taxable or tax-exempt basis or other interests backed by the pools of student loans. (s) Contract or otherwise provide for the distribution, processing, origination, purchase, sale, servicing, securing, and collection of student loans, the payment of fees, charges, and administrative expenses in connection therewith, and the funding of reserves required or provided for in any resolution authorizing, or trust agreement securing, authority financing for student loan purposes. (t) Assist in providing support to participating colleges or participating nonprofit entities to enhance the market acceptance of potential bond issues by the authority, including securing probable or actual credit ratings from nationally recognized bond rating agencies, providing or obtaining liquidity or credit enhancement, providing or securing bond reserve funds, performing any other action deemed necessary by the authority, and incurring necessary expenses, payable from available authority funds, for any of these purposes. SEC. 4. Section 94147 of the Education Code is amended to read: 94147. (a) The authority may fix, revise, charge, and collect rates, rents, fees, and charges for the use of and for the services furnished or to be furnished by each project, and may contract with any person, partnership, association or corporation, or other body, public or private, in respect thereof. These rates, rents, fees, and charges shall be fixed and adjusted in respect of the aggregate of rents, rates, fees, and charges from the project so as to provide funds sufficient with other revenues or moneys, if any, to accomplish all of the following: (1) Pay the cost of maintaining, repairing, and operating the project and each and every portion thereof, to the extent that the payment of that cost has not otherwise been adequately provided for. (2) Pay the principal of, and the interest on, outstanding bonds of the authority issued in respect of that project as the same shall become due and payable. (3) Create and maintain reserves required or provided for in any resolution authorizing, or trust agreement securing, bonds of the authority. (b) (1) The rates, rents, fees, and charges referenced in subdivision (a) are not subject to supervision or regulation by any department, commission, board, body, bureau, or agency of this state other than the authority. A sufficient amount of the revenues derived in respect of a project, except a part of those revenues that is necessary to pay the cost of maintenance, repair, and operation and to provide reserves for renewals, replacements, extensions, enlargements, and improvements as may be provided for in the resolution authorizing the issuance of any bonds of the authority or in the trust agreement securing the same, shall be set aside at regular intervals provided in the resolution or trust agreement in a sinking or other similar fund. (2) The fund established pursuant to paragraph (1) is pledged to, and charged with, the payment of the principal of and the interest on, the bonds as the same shall become due, and the redemption price or the purchase price of bonds retired by call or purchase as therein provided. (3) The pledge required by paragraph (2) shall be valid and binding from the time when the pledge is made. The rates, rents, fees and charges and other revenues or other moneys so pledged and thereafter received by the authority shall immediately be subject to the lien of the pledge without any physical delivery thereof or further act, and the lien of that pledge shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the authority, irrespective of whether the parties have notice thereof. Neither the resolution nor any trust agreement by which a pledge is created need be filed or recorded except in the records of the authority. (4) The use and disposition of moneys to the credit of the sinking or other similar fund shall be subject to the resolution authorizing the issuance of those bonds or of that trust agreement. Except as may otherwise be provided in that resolution or that trust agreement, the sinking or other similar fund shall be a fund for all of those bonds issued to finance projects at a participating college, or bonds issued to finance a project of a participating nonprofit entity, without distinction or priority of one over another. (5) The authority, in the resolution or trust agreement, may provide that the sinking or other similar fund shall be either of the following: (A) The fund for a particular project at a participating college and for the bonds issued to finance a particular project and may, additionally, permit and provide for the issuance of bonds having a subordinate lien in respect of the security herein authorized to other bonds of the authority and, in this case, the authority may create separate sinking or other similar funds in respect of those subordinate lien bonds. (B) The fund for a particular project of a participating nonprofit entity. SEC. 5. Section 94154 of the Education Code is amended to read: 94154. The State of California pledges and agrees with the holders of the bonds, notes, and other obligations issued pursuant to authority contained in this chapter, and with those parties who may enter into contracts with the authority pursuant to the provisions of this chapter, that the state will not limit, alter, or restrict the rights hereby vested in the authority and the participating private colleges and participating nonprofit entities to maintain, construct, reconstruct, and operate any project as defined in this chapter or to establish and collect the rents, fees, receipts, or other charges as may be convenient or necessary to produce sufficient revenues to meet the expenses of maintenance and operation thereof and to fulfill the terms of any agreements made with the holders of bonds authorized by this chapter, and with the parties who may enter into contracts with the authority pursuant this chapter, or in any way impair the rights or remedies of the holders of those bonds or those parties until the bonds, together with interest thereon, are fully paid and discharged and the contracts are fully performed on the part of the authority. The authority as a public body corporate and politic may include the pledge herein made in its bonds and contracts. SEC. 6. Article 9 (commencing with Section 94215) is added to Chapter 2 of Part 59 of the Education Code, to read: Article 9. Grants 94215. The authority shall have power to make grants in aid to any private college in accordance with an agreement between the authority and a private college. 94215.3. Grants may be made to enable a private college to provide a program of academic assistance and services to pupils attending a qualified school, as defined in Section 94215.9, in order to inform the pupils of the benefits of, and the requirements for, higher education; prepare these pupils for college entrance; or to provide programs, such as academic enrichment and mentoring programs, that advance the academic standing of those pupils. The Legislature finds and declares that these grants will provide a benefit to the residents of the state. 94215.5. The authority is authorized to incur necessary expenses, payable from available funds, to provide grants for the purposes of this article, and the funds provided by the private college may be fully or partly matched by funds provided by the authority. 94215.7. (a) The authority, in consultation with representatives of private colleges, qualified schools, and other appropriate parties, shall develop selection criteria and a process for awarding grants under this article, which shall include all of the following: (1) The extent to which the program to be funded will provide academic assistance, guidance in college admissions, or will otherwise contribute to the expansion of postsecondary educational opportunities for low- and very low income students. (2) The extent to which the program, if it is already in existence, has a demonstrated record of success in providing academic assistance, guidance in college admissions, or in otherwise expanding the educational opportunities of students. (3) If the program to be funded is new, the extent to which the applicant has demonstrated that the program is feasible, ready to be implemented, and well-structured to provide academic assistance, guidance in college admissions, or to expand the educational opportunities of students at qualified schools. (4) The extent to which the program will serve qualified schools in geographic areas that are not currently being served by similar programs. (5) The extent to which the applicant has demonstrated its commitment to providing need-based financial assistance to students who otherwise could not afford to attend the applicant's institution. (6) The extent to which the applicant has committed its own funds, or funds obtained from other sources, to the program. (7) The total amount of funds appropriated and available for purposes of this section. (b) In no event shall a grant to finance a program exceed the total cost of the program, as determined by the applicant and approved by the authority. Grants shall be awarded only to applicants that have certified to the authority that all requirements established by the authority for grantees have been met. The authority shall not award more than a total of two million dollars ($2,000,000) in grants under this article, nor shall it award more than two hundred fifty thousand dollars ($250,000) to any applicant. (c) All programs that are awarded grants shall be implemented within a reasonable period of time, to be determined by the authority. The authority shall not release any funds until the applicant demonstrates, to the authority's satisfaction, that the program is ready to be implemented. If the authority determines that the applicant has failed to implement the program under the terms specified in awarding the grant, the authority may require remedies, including the return of all or a portion of the grant. (d) Any applicant receiving a grant under this section shall commit to using the grant funds for the purposes for which the grant was awarded. 94215.9. For purposes of this article, "qualified school" means any comprehensive school providing instruction in any of grades 7 to 12, inclusive, as determined by the authority, which shall take into consideration whether the school is in a low- or very low income area and whether, where applicable, the percentage of pupils who graduate from the school and are eligible for admission to the California State University or the University of California is below the statewide average according to the most recent information from the California Postsecondary Education Commission. 94216. Commencing with the 2004 calendar year, the authority shall annually submit to the Legislature a report setting forth the amount of funds awarded pursuant to this article in the preceding calendar year, the amount of each grant awarded, and a description of each of the outreach programs to which funding has been awarded under this article. 94216.9. The authority may adopt regulations to implement the grant program described in this article as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). The adoption of any emergency regulation pursuant to this section filed with the Office of Administrative Law on or before July 1, 2003, shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding subdivision (e) of Section 11346.1 of the Government Code, any emergency regulation adopted pursuant to this section shall remain in effect for no more than 360 days. 94216.11. This article shall remain in effect only until January 1, 2009, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2009, deletes or extends that date. SEC. 7. The Legislature finds and declares that the appropriation made by Section 6 of this act is a one-time appropriation from existing resources.