BILL ANALYSIS
AB 1022
Page 1
Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 1022 (Nava) - As Amended: April 14, 2009
SUBJECT : School Facilities: Surplus School Property
SUMMARY : Authorizes the Ventura Unified School District (VUSD)
to deposit the proceeds from the sale of surplus real property,
together with any personal property located on that property,
purchased entirely with local funds and sold before January 1,
2005, into the general fund of the school district and use the
proceeds from the sale for any general fund purpose.
Specifically, this bill :
1)Specifies that if the purchase of property was made using the
proceeds of a local general obligation bond act or revenue
derived from developer fees, the amount of the proceeds of
that sale that may be deposited into the general fund of the
school district shall not exceed the percentage computed by
the absolute difference between the purchase price of the
property and the proceeds from the transaction, divided by the
proceeds of the transaction. For the purposes of this section,
"proceeds of the transaction" means either of the following,
as appropriate:
a) For a case sale, the amount realized from the sale of
property after reasonable expenses related to the sale; or,
b) For a sale that did not result in a lump-sum cash
payment, the amount realized from the sale of the property
after reasonable expenses that is the sum of all cash
received and the net present value of the future cashflow
generated by the transaction.
2)Requires the State Allocation Board (SAB) to reduce the amount
of hardship assistance awarded to the Ventura Unified School
District, if the district exercises the authority granted by
this bill, by the proceeds of the sale of surplus real
property used for general fund purposes.
3)Specifies that if the Ventura Unified School District
exercises the authority granted pursuant to this bill, the
district is ineligible for hardship funding from the State
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School Deferred Maintenance Fund for five years after
enactment of this bill.
4)Provides that the deposit of proceeds in the school district
general fund pursuant to this bill does not disqualify the
school district from eligibility for state funding for any
school facilities program authorized by the state.
5)Specifies that before the district exercises the authority
granted pursuant to this bill, the governing board of the
school district shall first submit to the SAB documents
certifying all of the following:
a) The school district has no major deferred maintenance
requirements not covered by existing capital outlay
resources;
b) The sale of real property does not violate any
provisions of a local bond act; and
c) The real property is not suitable to meet any projected
school construction need for the next 10 years.
1)Requires that before the district exercises the authority
granted pursuant to this bill, the governing board of the
school district shall, at a regularly scheduled public
meeting, present a plan for expending the proceeds. Requires
the plan to identify the source and use of the funds.
2)Provides that the provisions of this bill shall remain in
effect only until October 31, 2013, and shall be repealed as
of January 1, 2014, unless a later enacted statute deletes or
extends that date.
3)Provides that the Legislature finds and declares that a
special law is necessary due to the unique circumstances
concerning the Ventura Unified School District.
EXISTING LAW :
1)Requires funds from the sale of surplus property to be used
for capital outlay or for costs of maintenance of school
district property that the local governing board determines
will not recur within a five-year period.
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2)Authorizes proceeds from the lease of a school district
property with an option to purchase to be deposited into a
restricted fund for the routine repair of district facilities
for up to five-years.
3)Provides that proceeds from the sale or lease with the option
to purchase may be deposited in the general fund if the school
district governing board and the SAB have determined that the
district has no anticipated need for additional sites or
building construction for the ten-year period following the
sale or lease with option to purchase, and the district has no
major deferred maintenance requirements. Authorizes proceeds
from the sale or lease with option to purchase of school
district property to be used for one-time expenditures, and
may not be used for ongoing expenditures including, but not
limited to, salaries and other general operating expenses.
4)Requires the SAB to reduce an apportionment of hardship
assistance awarded to a school district by an amount equal to
the amount of any proceeds from the sale of surplus property
used for a one-time expenditure of the school district for
five years following the expenditure.
FISCAL EFFECT : The Assembly Appropriations Committee estimates
potential state and local bond cost pressure in the hundreds of
thousands in prior similar bills.
COMMENTS : Background . Existing law requires districts to
establish routine facilities accounts and deferred maintenance
accounts, and requires proceeds from the sale of surplus
property to stay in capital facilities or maintenance funds to
ensure that districts protect and maintain their facilities. SB
1415 (Scott), Chapter 810, Statutes of 2006, authorizes the
proceeds from the sale of surplus property to be deposited into
the general fund for one-time expenditures and prohibits the use
for ongoing expenditures. As a condition for using funds for
one-time general fund purposes, a district must show that it has
no need for additional sites or building construction for a
ten-year period following the sale of the property and may not
apply for state bond funds during the ten-year period. The
district may apply for funds after five years if the SAB
determines that the district demonstrates enrollment growth or a
need for additional sites it could not have anticipated.
Existing law authorizes, on a district by district basis, the
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authority to sell surplus property purchased with local funds to
be used for one-time purposes that does not result in a ban from
applying for state bond funds. Such authorities are limited to
specified time periods and conditions. Two districts, Oakland
Unified School District and Vallejo City Unified School
District, are given the authority to sell surplus property so
that they can repay emergency loans from the state. All of the
authorizations were given prior to the enactment of SB 1415.
This bill authorizes VUSD to use the proceeds from property sold
prior to January 1, 2005 for any general fund purposes. The
VUSD states that through expertise and business acumen, the
district bought and sold property to maximize its return,
resulting in $30 million in proceeds from the sale of property
that are separate from local and state bond funds. The district
is seeking authority to use $10 million of the funds over three
years time for any general fund purpose.
The VUSD, states, "Existing law does not provide us the
flexibility to utilize this source of funds as our students
suffer from the recent devastating cutbacks to our budget? The
27 school sites in VUSD have been maintained and will continue
to be with existing resources. The VUSD district office is
located in the former corporate business campus of Kinkos and is
one of the most professional district offices in the State.
While VUSD understands the importance of building and
maintaining excellent facilities in which to teach our children,
this must not be at the expense of our primary mission. Our
primary mission being student achievement through programs and
the allocation of resources that actually increase student
achievement such as the resources in our classrooms, low class
size, academic and social intervention, technology, summer
school, music programs, extra-curricular programs,
transportation, and our recently hired innovative teachers in
our classrooms. In short, our programmatic needs are far
greater and more critical to our students than our facility
needs."
This bill differs from prior bills seeking authority to use
proceeds from the sale of property for non-facility purposes.
Prior bills and current law limit the use of funds to one-time
general fund purposes (e.g., purchasing equipment or furniture).
This bill seeks authority to use the proceeds for any purpose,
including ongoing expenditures, such as salaries. It is not
sound policy to use one-time funds for ongoing, continuous
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purposes. Staff recommends specifying that the proceeds can
only be used for one-time general fund expenditures, consistent
with authorizations for other districts.
The bill's provision to allow the use proceeds derived from
property sold before January 1, 2005 funds is too open-ended.
Should the bill limit the authorization to $10 million, which
represents the amount the district is seeking to use for
non-capital purposes?
Technical amendment . On page 2, line 18, replace "case" with
"cash".
Arguments in Support . The Ventura Unified School District
Parent Advisory Committee states, "While we understand the
State's rationale for limiting the use of these funds, our
programs and services are a much greater need right now. Our
facilities department has done an excellent job maintaining all
our sites; furthermore, the PAC organization gets a regular
update on maintenance completed and projected, and we are
encouraged to discuss site needs. We are confident in this
proposal to use approximately 10 million dollars over a few
years, and that our facilities will not suffer."
Arguments in Opposition . The Coalition of Adequate School
Housing opposes the bill because the bill eliminates the
traditional firewall between capital and operational funding and
expenditures.
Related Prior Legislation . AB 1908 (Wolk), Chapter 634,
Statutes of 2008, authorizes the Dixon Unified School District
to sell specified surplus property and to deposit the proceeds
into the general fund of the school district in order to
reestablish a 3% reserve.
AB 1934 (Ma), introduced in 2008, authorizes the San Francisco
Unified School District to use proceeds from the sale of surplus
property for any one-time general fund purposes. The author
held the bill in the Senate Education Committee.
AB 1948 (Evans), Chapter 636, Statutes of 2008, which, among
other provisions, extends, until July 1, 2010, the authority of
the Vallejo City Unified School District to sell surplus
property and use the proceeds to reduce or retire an emergency
loan from the state.
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SB 1447 (Yee), vetoed by the Governor in 2008, authorizes the
San Bruno Park School District to expend up to $1.4 million of
the proceeds from the sale of the Carl Sandburg Elementary
School for any one-time general fund purpose and requires the
district to repay the capital outlay account within 10 years,
with interest calculated at the rate received by the Pooled
Money Investment Account.
SB 1415 (Scott), Chapter 810, Statutes of 2006, prohibits the
use of proceeds from the sale or lease with option to purchase
of school district property for ongoing expenditures, including,
but not limited to, salaries and other general operating
expenses, and increases from five to ten years the time period
for which the district must demonstrate that it has no
anticipated need for additional sites or building construction.
AB 1895 (Coto), Chapter 269, Statutes of 2006, authorizes the
Oak Grove Elementary School District, until January 1, 2010, to
deposit proceeds from the sale of surplus real property and any
personal property located thereon, purchased entirely with local
funds, into the general fund of the school district or county
office of education (COE) and to use the proceeds for any
one-time general fund purpose.
SB 1488 (Hollingsworth), Chapter 661, Statutes of 2006, extends
for three years, the authority of the Santee Elementary School
District, the Valley Center-Pauma Unified School District, and
the Capistrano Unified School District to sell surplus real
property and related personal property and deposit the net
proceeds into the local general fund to use for any one-time
general fund purpose.
SB 177 (Hollingsworth), Chapter 839, Statutes of 2004,
authorized the Santee School District and the Capistrano Unified
School District, until January 1, 2007, to sell surplus school
and personal property, and deposit the net proceeds into the
local general fund to use for any one-time general fund purpose.
SB 1906 (Sher), Chapter 838, Statutes of 2004 authorized the
same for the Santa Clara Unified School District for two years.
SB 1129 (Johnson), introduced in 2004, authorized a school
district to sell, lease or leaseback certain surplus properties
and to deposit the proceeds into the general fund of the school
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district and to use the proceeds for any one-time general fund
purpose. The author dropped the bill in the Assembly.
AB 264 (Mullin), Chapter 891, Statutes of 2003, allows certain
school districts to deposit up to 25% of the proceeds of the
sale of surplus school real property, excluding any interest
earned thereon, that occurred between July 1, 1997 and June 30,
2000, into the school district general fund for one-time
expenses, except for salaries and benefits. The provisions of
this bill repealed on January 1, 2005.
REGISTERED SUPPORT / OPPOSITION :
Support
Ventura Classified Employees Association
Ventura County Superintendent of Schools
Ventura Education Partnership
Ventura Unified Education Association
Ventura Unified School District Board of Education
Ventura Unified School District Parent Advisory Council
Ventura Unified School District Personnel Commission
One individual
Opposition
Coalition for Adequate School Housing
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087