BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: AB 308
AUTHOR: Hagman
AMENDED: May 20, 2013
FISCAL COMM: Yes HEARING DATE: June 19, 2013
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : School facility surplus property.
SUMMARY
This bill authorizes the State Allocation Board (SAB) to
establish a program to require the return of funding
received for purchase, construction, or modernization, of
under the School Facilities Program, unless the property is
sold or leased for specified purposes, or the proceeds are
used for capital outlay purposes.
BACKGROUND
Current law establishes the School Facility Program (SFP)
under which the state provides general obligation bond
funding for various school construction projects.
Current law authorizes the governing board of any school
district to sell or lease, for a term not exceeding 99
years, any real property of the school district that is not
or will not be needed by the district for school classroom
buildings, subject to specified conditions. Current law
requires that the proceeds from the sale or lease of
property be expended solely for capital outlay purposes.
(EC Section 17455, 17456)
Current law requires that funds derived from the sale of
surplus property be used for capital outlay or for costs of
maintenance of school district property that the governing
board determines will not recur within a five-year period.
Current law also authorizes proceeds from a 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 a five-year period. Current
law authorizes the proceeds from the sale or lease with
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option to purchase to be deposited in the general fund of
the district if the 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. Proceeds from the sale or lease with option
to purchase of school district property shall 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.
(EC � 17462)
Current law authorizes, until January 1, 2014, a school
district to deposit the proceeds from the sale of surplus
real property, together with any personal property located
on the property, purchased entirely with local funds into
the general fund of the school district and authorizes the
school district to use the proceeds for any one-time
general fund purpose. (EC � 17463.7)
Current law requires the governing board of a school
district seeking to sell or lease surplus real property
designed to provide direct instruction or instructional
support to first offer that property to any charter school
that has submitted a written request to the school district
and then to a contracting agency to be used for child care
and development services, any city within which the land
may be situated, any park or recreation district, any
regional park authority, or any county within which the
land may be situated. (EC � 17457.5, � 17458 and �17489)
ANALYSIS
This bill :
1) Authorizes the State Allocation Board (SAB) to
establish a program to require a school district,
county office of education or a charter school to
return funding received under the state School
Facility Program if it sells or leases real property
purchased, modernized or constructed with those funds.
2) Establishes conditions that serve as the basis for
requiring return of the moneys to the SAB. More
specifically it:
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a) Requires the return of state
funding unless the property is sold or leased to
a charter school, a school district, a county
office of education or an agency that will use
the property exclusively for the delivery of
child care and development services, pursuant to
existing provisions governing the sale or lease
of surplus property.
b) Requires the proceeds from the
sale or lease of the property to be used for
capital outlay.
3) Requires that any funding received within 10 years
prior to the property being sold or leased be
returned.
4) Requires the return of a proportionate share of the
funding if a portion of the property is sold or
leased, as specified.
STAFF COMMENTS
1) Need for the bill . According to the author, while
voters have approved over $38 billion in school
construction bonds since 1998, these funds are nearing
exhaustion, and it is uncertain whether a statewide
school construction bond will be placed on the ballot
in 2014. The author contends that it is an inefficient
use of state funds to allow a school district to build
or modernize a facility, sell that property, and then
apply for more state money to meet facility needs.
This bill ensures that money allocated by the State
goes to the purpose funded, and ensures that State
funds are spent on capitol improvements.
2) State School Facility Program (SFP) . The SFP provides
funding grants for school districts to acquire school
sites, construct new school facilities,
or modernize existing school facilities. The two major
funding types available are "new construction" and
"modernization". The new construction grant provides
funding on a 50/50 State and local match basis. The
modernization grant provides funding on a 60/40 basis.
Districts that are unable to provide some, or all, of
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the local match requirement and are able to meet the
financial hardship provisions may be eligible for
state funding at a reduced match amount.
With the authorization of Proposition 1D in 2006, $7.3
billion was made available for K-12 education
facilities, with specific amounts allocated for
modernization, new construction, charter schools,
career technical education facilities, joint use
projects, severely overcrowded schoolsites and high
performance incentive grants to promote energy
efficient design and materials.
As of the May meeting of the State Allocation Board,
the OPSC reports that about $350 million of bond
authority remains of the amount authorized in 2006.
In addition, the May agenda reflects that, as of April
30, the program has received over $70 million in
applications for new construction and modernization
projects beyond the bond authority list.
3) Related flexibility provisions . Existing law
generally requires that school districts deposit the
proceeds from the sale or lease of property in a
restricted capital outlay or maintenance fund. These
surplus property proceeds can be used for one-time
general operating expenses, under certain conditions.
Specifically, if a school district and the State
Allocation Board agree that the district has no major
deferred maintenance requirements and does not
anticipate new construction within the next ten years,
then the district may use surplus property proceeds
for any one-time general operating expense. Under
these provisions, the district forfeits its
eligibility for new construction and modernization
funding through the School Facility Program (SFP) for
at least five years.
In 2009, in light of the fiscal environment at the
time, the Legislature enacted budget provisions which
authorized school districts to deposit the proceeds
from the sale of surplus real property, purchased
entirely with local funds, into the general fund of
the school district and authorized the use of these
funds for any one-time general fund purpose. This
flexibility was provided to school districts until
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January 1, 2014. The Legislature recently acted to
extend these flexibility provisions for an additional
two years until January 1, 2016.
4) Office of Public School Construction (OPSC) report .
As noted in staff comment #3, districts were granted
temporary flexibility regarding the use of proceeds
from the sale or lease of surplus property. These
provisions also required the OPSC to submit an interim
and final report providing information on the exercise
of this authority by school districts. The final
report is now due in 2015. According to its 2011
interim report, three school districts utilized the
flexibility provisions authorized in the budget
between July 28, 2009, and October 1, 2010. The total
amount of proceeds requested for transfer to the
districts' general funds was approximately $15.8
million. It was reported that districts used these
proceeds for purposes ranging from updating school
technology to paying out post-employment benefits.
5) Greater flexibility for leasing ? Current law
establishes the same restrictions regarding the use of
proceeds whether a district sells or leases its
surplus real property. However, to the extent that
the school district chooses to lease rather than sell
property, it would seem that the intent of existing
law is being realized, i.e. the district would be
preserving a long-term asset for long-term needs.
Particularly in areas of the state where property
values are high, it would seem reasonable that a
district that has some amount of surplus property be
given some incentive to lease the property, in
anticipation of enrollment changes or increased costs
to purchase land for new construction, rather than
sell it. Staff recommends the bill be amended to apply
its provisions only to the sale of surplus property,
and omit the requirements to return funding for
property that is being leased.
6) Prior legislation .
a) AB 2434 (Block, 2012) would have extended
the sunset of the provisions authorizing a school
district to deposit proceeds from the sale of
surplus real property, purchased with local
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funds, into the general fund and use the proceeds
for any one-time general fund purpose, from
January 1, 2014 to January 1, 2016. AB 2434 was
held in the Assembly Appropriations Committee
suspense file.
b) AB 1622 (Eng, 2012) would have authorized
the San Marino Unified School District to sell
the site of the former Stoneman Elementary School
to the City of San Marino and use the proceeds
from the sale for school district education
programs. AB 1622 was held in the Assembly
Appropriations Committee suspense file.
c) SB 70 (Committee on Budget and Fiscal
Review, Chapter 7, Statutes of 2011), among other
things, extended the authority to use proceeds
from the sale of surplus school property for
one-time general fund purposes by two years,
until January 1, 2014.
d) AB 2 (Evans, Chapter 2, Statutes of the
2009-10 Fourth Extraordinary Session), among
other things, authorized school districts to use
the proceeds from the sale of surplus school
property for any one-time general fund purposes
until January 1, 2012.
e) AB 1022 (Nava, 2009)), would have
authorized the Ventura Unified School District to
deposit $10 million of the proceeds from the sale
of surplus property, purchased with local funds
and sold before January 1, 2005, into the general
fund of the school district and use the proceeds
for any one-time general fund purposes. AB 1022
was heard and passed by this committee in June
2009 by a vote of 8-1, but was subsequently
amended to address a different issue.
f) SB 1415 (Scott, Chapter 810, Statutes of
2006) authorized the use of proceeds from the
sale of surplus school property for any one-time
expenditures and prohibited the use of these
funds for ongoing expenditures. In exchange, it
prohibited the participation of the district in
the School Facility Program program for 10 years,
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with an exception provided if after five years,
the State Allocation Board made a determination
that the district demonstrated enrollment growth
or a need for additional sites or construction
which the district could not have reasonably
anticipated.
SUPPORT
None received on this version.
OPPOSITION
None received.