BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: AB 1859
AUTHOR: Buchanan
AMENDED: April 30, 2012
FISCAL COMM: No HEARING DATE: June 13, 2012
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : School facilities; charter schools.
SUMMARY
This bill requires a charter school that applies for any
federal bond borrowing authority to notify the district
superintendent and the school district governing board in
which it is physically located, in writing, of its intent to
rehabilitate, encumber or otherwise alter school district
property at least 30 days before submitting its application.
BACKGROUND
The American Recovery and Reinvestment Act of 2009 (ARRA)
authorized $22 billion in Qualified School Construction Bonds
(QSCBs) nationally, providing for the issuance of $11 billion
of QSCBs by states and large local educational agencies
(LEAs) in 2009 and $11 billion in 2010. California received
authorization for $1.3 billion in QSCB tax credits in 2009
and $1.26 billion in 2010. QSCBs can be used for the
construction, rehabilitation, or repair of a public school
facility. In addition, a portion of the proceeds of such a
bond may be used for the acquisition of land on which a
public school facility is to be constructed.
Qualified School Construction Bonds QSCBs are subsidized by
the federal government. Investors who buy these bonds receive
federal income tax credits at prescribed tax credit rates in
lieu of interest that would normally be paid by states and
districts to holders of these taxable bonds. These tax
credits essentially allow state and local governments that
issue bonds to borrow without incurring interest costs. The
ARRA provided for an allocation to each state, along with
separate allocations for large LEAs with the amount of the
allocation determined via a statutory formula based upon each
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state's share of Title I Basic Grant funds.
Current law authorizes the assignment and provides for the
distribution of the state's 2009 and 2010 federal tax credit
bond volume cap for qualified school construction bonds
(QSCB's). The California Department of Education was
authorized to assign and distribute the tax credits to, and
for the benefit of, school districts and county offices of
education. The California School Finance Authority (CSFA)
was authorized to assign and distribute QSCB's to, and for
the benefit of, charter schools. Current law also establishes
specified conditions on the assignment and distribution of
the QSCB's. Among other things, it requires that charter
schools comply with all requirements of the Charter School
Facilities Program if it uses the QSCB tax credits in
conjunction with a bond that would serve as the match for the
Charter School Facilities Program.
(Education Code § 12001.5, § 12001.6)
ANALYSIS
This bill requires a charter school that applies for the
federal qualified school construction bond volume cap, or any
other federal bond borrowing authority, to notify the
district superintendent of schools and the governing board of
the school district in which it is physically located, in
writing, of its intent to rehabilitate, encumber, or
otherwise alter school district property at least 30 days
before submitting its application.
STAFF COMMENTS
1) Is the bill necessary ? According to the author, this
bill stems from a situation in the Livermore Unified
School District where the district learned of a charter
school's intent to seek federal bond authority to build,
encumber or otherwise alter school district property
through a notice in a newspaper. According to the
author, while the lease agreement between the school
district and the charter school requires that the
charter school notify the district and receive
permission to rehabilitate, or modify a district owned
building, the district is concerned that the charter
school was able to apply for financing without first
notifying and securing the district's approval.
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According to the CSFA, all 2009 and 2010 QSCB's have
been allocated, and, given the extensive requirements
that charter schools had to meet to secure an
allocation, it is unlikely that there will be any
rescission of credits allocated. Additionally, it is
unclear whether future QSCB's will be assigned to states
by the federal Government. While it is reasonable that
a notice requirement provides some encouragement to
school districts and charter schools to work
collaboratively on school facilities issues and jointly
plan to meet student housing requirements, the
provisions of this bill are limited to a program that
may no longer exist.
2) Related state requirements . School Facility Program
regulations require that a charter school notify a
school district when it applies for financing through
the Charter School Facilities Program. In addition,
legislation authorizing the distribution of QSCB's to
charter schools requires compliance with these
regulations (including notice requirements) if and when
a charter school applies for federal bond authority to
meet the local match requirements of the Charter School
Facilities Program. According to the author, while
federal law requires a charter school to provide legal
notice of a public hearing on its application for
federal bond authority (which, according to the author,
is usually a legal notice in a newspaper) there is no
requirement that the charter school directly notify a
school district even when school district property may
be involved or cited in the application for financing.
The provisions of this bill would extend this
requirement to instances in which a charter school
applies for federal bonding authority without a
companion application for state facility construction
funds.
3) QSCB status in California . In California, the QSCB
volume cap were authorized to be distributed by the CDE
to school districts, by the California School Finance
Authority to charter schools, and were directly
allocated to large school districts in the amounts
outlined in the table below:
--------------------------------------------------------------
|California QSCBs | 2009 | 2010 |
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|--------------------+--------------------+--------------------|
|Total Federal |$1,355,491,000 |$1,266,626,000 |
|Allocation | | |
|--------------------+--------------------+--------------------|
|CDE |$ 700,000,000 |$ 651,652,000 |
|--------------------+--------------------+--------------------|
|CSFA |$ 73,525,000 |$ 68,406,000 |
|--------------------+--------------------+--------------------|
|Direct Allocation | $ 581,966,000 |$ 546,568,000 |
|to LEAs | | |
--------------------------------------------------------------
As noted in staff comment #1, all QSCBs authorized for
California School Finance Authority to distribute to
charter schools have been allocated.
4) Prior legislation .
a) SB 2560 (Brownley, Chapter 266 Statutes of
2010) provided for the distribution of the state's
2010 federal tax credit bond volume cap for
Qualified School Construction Bonds (QSCBs).
b) SB 205 (Hancock, Chapter 11, Statutes of
2010), an urgency measure, provided statutory
authority for the CDE and the CSFA, to administer
the 2009 QSCB's federal tax credit program
authorized through the federal ARRA of 2009. The
bill assigned specified amounts for distribution to
school districts and county offices of education
and to charter schools, and extended the timeframe
for districts that were notified of eligibility for
this program on or before December 31, 2009, to
issue qualifying local bonds until 120 days after
its enactment.
SUPPORT
Alameda County Board of Education
Alameda County Superintendent of Schools
California Charter Schools Association Advocates
OPPOSITION
None received.
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