BILL ANALYSIS �
AB 1015
Page 1
Date of Hearing: April 3, 2013
ASSEMBLY COMMITTEE ON EDUCATION
Joan Buchanan, Chair
AB 1015 (Hagman) - As Introduced: February 22, 2013
[Note: This bill is doubled referred to the Assembly Revenue and
Taxation Committee and will be heard as it relates to issues
under its jurisdiction.]
SUBJECT : School facilities: joint occupancy: high-performance
grants and tax credits
SUMMARY : Authorizes high performance incentive (HPI) grants for
school districts and tax credits for developers, contractors,
investor, or combination of private sector partners that enter
into joint-occupancy agreements. Specifically, this bill :
1)Specifies that with funds made available by this bill, the
State Allocation Board (SAB) may provide HPI grants to fund
the use of designs and materials characteristic of
high-performance schools for those school districts executing
a joint-occupancy agreement for facilities on schoolsites for
kindergarten and grades 1 through 12.
2)Specifies that a school district with a joint-occupancy
agreement entered into may apply to the SAB for an incentive
grant. The incentive grant may be used for high-performance
components of new construction or modernization projects at a
schoolsite within the school district.
3)Specifies that a school district is not required to apply for
state funding of a new construction or modernization project
in order to be eligible for an incentive grant.
4)Specifies that eligibility for an incentive grant is
established by entering into a joint-occupancy agreement.
5)Specifies that a joint-occupancy agreement entered into shall
generate income for the school district within seven years
after the joint-occupancy agreement is entered into.
6)Specifies that the SAB may provide an incentive grant for
high-performance components of a new construction or
modernization project funded in whole or in part with proceeds
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from the sale or lease of surplus property by a school
district.
7)Specifies that for purposes of this bill, high-performance
components include, but are not limited to, designs and
materials that promote the efficient use of energy and water,
the maximum use of natural lighting, improved indoor air
quality, the use of recycled materials and materials that emit
a minimum of toxic substances, the use of acoustics conducive
to teaching and learning, and other characteristics of
high-performance schools.
8)Provides, for taxable years beginning on or after January 1,
2014, a developer, contractor, investor, or combination of
private sector partners that execute a joint-occupancy
agreement with the governing board of a school district, a
credit against the "net tax," as defined in Section 17039 of
the Revenue and Taxation Code, or "tax," as defined in Section
23036 of the Revenue and Taxation Code, as applicable, as
follows:
a) Commencing in the first taxable year of construction, as
demonstrated by a construction contract for all or a
portion of the joint-occupied property of the school
district, 8 percent of the total cost to the developer,
contractor, investor, or combination of private sector
partners of the joint-occupancy project for the first four
taxable years and 6 percent of the total cost to the
developer, contractor, investor, or combination of private
sector partners of the joint-occupancy project for three
subsequent taxable years if the joint-occupancy agreement
requires the developer, contractor, investor, or
combination of private sector partners to contribute at
least 50 percent of the cost for any of the following:
(1) Certified rehabilitation of certified historic
structures on the schoolsite of the joint-occupancy
facility or at a different schoolsite location within
the geographical boundaries of the school district or
county office of education (COE). Renewing,
rehabilitating, repairing, or replacing non-historic
schools, classrooms, ancillary facilities, and
structures built before 1976 on the schoolsite of the
joint-occupancy facility or at a different schoolsite
location within the geographical boundaries of the
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school district or COE.
(2) Renewing, rehabilitating, repairing, or
replacing non-historic schools, classrooms, ancillary
facilities, and structures built before 1976 on the
schoolsite of the joint-occupancy facility or at a
different schoolsite location within the geographical
boundaries of the school district or county office of
education.
b) Commencing in the first taxable year of construction of
a joint-occupancy project, 8 percent of the total cost to
the developer, contractor, investor, or combination of
private sector partners of the joint-occupancy project for
the first four taxable years and 6 percent of the total
cost to the developer, contractor, investor, or combination
of private sector partners of the joint-occupancy project
for three subsequent taxable years.
9)Specifies that for taxable years beginning on or after January
1, 2014, there shall be allowed to a developer, contractor,
investor, or combination of private sector partners that
execute an agreement with the governing board of a school
district to purchase, lease, or exchange, school property,
consistent with applicable provisions of law, a credit against
the "net tax," as defined in Section 17039 of the Revenue and
Taxation Code, or "tax," as defined in Section 23036 of the
Revenue and Taxation Code, as applicable, and as described in
paragraph (2), if the agreement requires the developer,
contractor, investor, or combination of private sector
partners to provide financing, preconstruction services, or
construction services that address infrastructure needs at one
or more properties of the school district.
10)Specifies that commencing in the first taxable year of an
agreement for services related to infrastructure needs of the
school district that include, but are not limited to,
financing, environmental or seismic investigations,
architectural or engineering services, or construction, 8
percent of the total cost to the developer, contractor,
investor, or combination of private sector partners of the
services required by the agreement for the first four taxable
years and 6 percent of the total cost to the developer,
contractor, investor, or combination of private sector
partners of the services required by the agreement for three
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subsequent taxable years.
11)Authorizes a school district or COE to establish a nonprofit
organization exempt from taxation pursuant to Section
501(c)(3) of the Internal Revenue Code for purposes of
receiving and managing tax-deductible donations to the school
district or COE from a private sector entity that has entered
into a joint-occupancy agreement with the school district or
COE. The donations may be used for furthering the purposes of
the joint-occupancy agreement.
12)Specifies that this bill shall not prohibit the governing
board of a school district from entering into a collaborative
agreement with a private sector entity or nonprofit entity for
purposes of improving schoolsite infrastructure, including,
but not limited to, the construction of new buildings, the
renewal, modernization, repair, or replacement of existing
buildings, or the construction or installation of equipment
within a building or on a schoolsite.
13)Specifies that a private sector entity or nonprofit entity
may be authorized, pursuant to an agreement described in the
paragraph above to use the school buildings, grounds, or
equipment included within the agreement, if the use does not
conflict with the operations or extracurricular activities of
the school district and if any of the following apply:
a) The private sector entity or nonprofit entity has,
pursuant to the agreement, contributed substantial
resources, including, but not limited to, funding, building
construction, schoolsite construction, construction
materials, labor, or instructional materials.
b) The private sector entity or nonprofit entity will,
pursuant to the agreement, contribute future one-time or
ongoing maintenance of school buildings, grounds, or
equipment.
EXISTING LAW :
1)Authorizes any school district to enter into leases and
agreements relating to real property and buildings on a site
owned by the district to be used jointly by the district and
any private person, firm, local governmental agency, or
corporation. "Building" includes onsite and offsite
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facilities, utilities and improvements that as agreed upon by
the parties, are appropriate for the proper operation or
function of the building to be occupied jointly by the
district and the private person, firm, or corporation.
(Education Code (EC) 17515, 17516)
2)Specifies that the term of any lease or agreement entered into
by a school district shall not exceed 66 years. (EC 17517)
3)Specifies that for purposes of receiving proposals for the
joint occupancy of a building to be constructed on school
property, the board shall, in a regular open meeting, adopt a
resolution declaring its intention to consider the proposals.
Requires the resolution to describe the proposed site on which
the building to be jointly occupied is to be constructed in a
manner so as to identify the site, specify the intended use of
that portion of the building that is to be occupied by the
district, and fix a time not less than 90 days thereafter for
a public meeting of the governing board, at which meeting the
board shall receive and consider all plans or proposals
submitted. (EC 17521)
4)Prohibits a governing board from approving any proposal or
entering into a lease or contract until the governing board
has submitted the proposal to the State Board of Education
(SBE), and the SBE has approved the proposal. Requires a
governing board to require any person, firm, local
governmental agency, or corporation with whom it enters into a
lease or agreement to file one of the following, as determined
by the governing board:
a) A bond for the performance of the lease or agreement.
b) An irrevocable letter of credit issued by a state or
national bank or a federal or state credit union for the
performance of the lease or agreement. (EC 17524)
5)Specifies that any building constructed for use by a school
district is subject to review by the Department of General
Services. (EC 17525)
6)Requires, under the School Facility Program (SFP), as part of
its application for funding, a school district to certify that
it has considered the feasibility of using designs and
materials for the construction or modernization project that
promote the efficient use of energy and water, the maximum use
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of national lighting and indoor air quality, the use of
recycled materials and materials that emit a minimum of toxic
substances, the use of acoustics conducive to teaching and
learning, and other characteristics of high performance
schools. (EC 17070.96)
7)Authorizes $100 million for incentive grants to promote the
use of designs and materials in new construction and
modernization projects that include the attributes of
high-performance schools. (EC 101012)
FISCAL EFFECT : Unknown
COMMENTS : According to the sponsor, the Coalition for Adequate
School Housing (C.A.S.H.), the purpose of this bill is to
incentivize the use of underutilized school district property,
incentivize applications for high performance grants, and
incentivize private sector use of district property. This bill
allows school districts to apply for a HPI grant available
through state education bond funds if a school district enters
into a joint-occupancy agreement. The funds may be used for any
new construction or modernization project within the school
district. SB 50 (L. Greene), Chapter 407, Statutes of 1998,
established the SFP which governs the allocation of state
education bond funds and the construction and modernization of
kindergarten through grade 12 school facilities. In November,
2006, voters approved Proposition 1D, the
Kindergarten-University Public Education Facilities Bond Act of
2006, which provided $10.416 billion for the construction and
rehabilitation of kindergarten through grade 12 and higher
education school facilities. Among others, Proposition 1D set
aside $100 million for HPI grants pursuant to regulations
adopted by the SAB.
The SAB established a program that models the rating scale used
by the Collaborative for High Performance Schools (CHPS) to
identify high performance schools. CHPS is a nonprofit
organization that promotes the design of high performance
schools, focusing on elements that will provide learning
environments that are energy efficient, healthy, comfortable,
and well lit. CHPS certifies buildings considered high
performance. Modeling the CHPS model for certifying high
performance schools, under the HPI grant program, a district
must meet specified prerequisites and earn points in the areas
of sustainable sites, water, energy, materials and indoor
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environmental quality that result in an increase in the base SFP
grant of between two to just over 11 percent. In May 2010, the
SAB, the ten-member board responsible for overseeing state
education bond funds, concerned about the low level of interest
in the program, adopted regulations that resulted in higher
levels of grant funds, including a base grant of $150,000 for
new construction projects and $250,000 for modernization
projects. As of March 2013, 239 projects have been awarded HPI
grants for new construction, modernization, critically
overcrowded schools, charter schools and overcrowding relief
programs; the majority are new construction projects.
Currently, $41.6 million remains in the HPI grant program.
The HPI grant is awarded in conjunction with an application for
new construction or modernization project funds. This bill
authorizes a school district to apply for funds without
submitting a new construction or modernization application. The
SAB is currently reviewing the program and at the March meeting
voted to develop regulations to allow facility hardship projects
to apply for a HPI grant. It is unclear whether the SAB is
authorized to issue HPI grants absent an application for state
bond funding. The language in Proposition 1D passed by voters
provides "the amount of one hundred million dollars
($100,000,000) for incentive grants to promote the use of
designs and materials in new construction and modernization
projects that include the attributes of high-performance
schools, including, but not limited to, the elements set forth
in Section 17070.96, pursuant to regulations adopted by the
State Allocation Board." The language does not require an
application for new construction and modernization funding under
the SFP. However, Section 17070.96, which is referenced in the
bond language, specifically requires " as part of its application
for funding under this chapter , a school district shall certify
that it has considered the feasibility of using designs and
materials for the construction or modernization project that
promote the efficient use of energy and water?."
If the HPI grants were determined to be allowable as stand-alone
grants, it is unclear whether the existing process for
determining funding would be applicable for the purposes of this
bill. Projects are required to provide matching funds. It is
not clear whether it makes sense to require matching funds
absent an application for state funding. It is not clear how
the points for additional funding will be calculated as they are
based on a percentage of the base grant amount. If the
Committee chooses to pass this bill, staff recommends an
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amendment to require the SAB to develop regulations for the
purpose of implementing this bill. Staff also recommends
identifying the HPI grant program as the source of funding for
this bill.
Joint occupancy versus joint use . The Education Code contains
two sections that authorize joint occupancy. Under the joint
occupancy law, a district may enter into long term leases (up to
66 years) for the use of district-owned real property and
buildings by a private person, firm, or local governmental
agency. A district may allow a private entity to build on or
make alterations of existing property. If the school district
will be using the facilities, the buildings must comply with the
Field Act. The SBE must approve a joint-occupancy agreement.
Under the joint-use sections of the law, a district may rent or
lease vacant classrooms or other space in school buildings to
other school districts, educational agencies, except private
educational institutions, governmental units, nonprofit
organizations, community agencies, professional agencies,
commercial and noncommercial firms, corporations, partnerships,
businesses, and individuals for no more than 5 years. No more
than 45% of the total classroom space at a school and no more
than 30 percent of a district's total classroom space may be
leased during normal school hours. This bill promotes longer
term joint-occupancy agreements.
This bill requires the joint-occupancy agreement to generate
income for the district within seven years after the
joint-occupancy agreement is entered into. According to the
sponsor, this presumes that the developer, contractor, or
investor that entered into a joint-occupancy agreement with the
district has taken advantage of the seven years of tax credit
offered by the bill, which is provided if the private entity
provides rehabilitation work in lieu of lease payments.
This bill also authorizes the SAB to provide a HPI grant for a
new construction or modernization project funded in whole or in
part with proceeds from the sale or lease of surplus property by
a school district. Since a project is eligible to apply for HPI
funds with a new construction or modernization application
regardless of the source of the local match, the purpose of this
provision is unclear. According to the sponsor, this provision
is intended to allow a HPI grant for a project funded solely by
local funds and to incentivize a district to use proceeds from
the sale of surplus property for facilities purposes rather than
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for general fund purposes. Is this really an incentive? Why
shouldn't any projects funded by local dollars, such as local
bond funds, or developer fees, be eligible? If the Committee
chooses to pass this bill, staff recommends specifying that any
project funded completely by local funds is eligible for a HPI
grant.
Tax Credit . The other component of this bill is a tax credit
program for any developer, contractor, investor, or combination
of private sector partners that execute a joint-occupancy
agreement with a school district. The tax credit can be
accessed through four types of agreements:
1)An 8 percent credit of the net tax can be claimed for the
total cost of a construction contract for all or portion of
the joint-occupied property for a developer, contractor,
investor, or combination of private sector partners for the
first four taxable years and 6 percent for the three
subsequent taxable years if the joint-occupancy agreement
requires the developer, contractor, investor or combination of
private sector partners agree to contribute at least 50
percent of the cost for either of the following:
a. Rehabilitation of a certified historic structure on the
site of the joint-occupancy facility or at a different
schoolsite location within the geographic boundary of the
district or county office of education (COE).
b. Renewing, rehabilitating, repairing, or replacing
non-historic schools, classrooms, ancillary facilities and
structures built before 1976 on the site of the
joint-occupancy facility or at a different schoolsite
within the geographic boundary of the district or COE.
This scenario presumes that construction work is done as part of
the joint-occupancy agreement and the private entity is
contributing to at least 50% of the cost for rehabilitation work
for the district's other projects. According to the sponsor,
the rehabilitation work on a historic structure or pre-1976
facility may be in lieu of lease payments to the district.
2)A developer, contractor, investor, or combination of private
sector partners may also get an 8 percent tax credit for the
first four taxable year and 6 percent the subsequent three
years of the total cost of a construction of a joint-occupancy
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project without contributing rehabilitation work.
3)A developer, contractor, investor, or combination of private
sector partners that execute an agreement to purchase, lease
or exchange school property can get a tax credit if the
private sector party provides financing, preconstruction
services, or construction services at one or more property of
the school district. This provision does not specify the
amount of the tax credit or what the tax credit is based on.
4)A developer, contractor, investor, or combination of private
sector partners that provides services related to
infrastructure needs of the school district, including but not
limited to financing, environmental or seismic investigations,
architectural or engineering services, or construction is
eligible for the 8 percent credit for the first four years and
6 percent for the subsequent three years for the total cost to
the private entity of the services required by the agreement.
The Committee may wish to consider whether tax credits should be
given for this purpose, which is currently only eligible for
developers, contractors, investors, or combination of private
sector partners.
The bill authorizes a school district or COE to establish a
nonprofit 501 c(3) organization to receive and manage
tax-deductible donations to the district or COE from a private
sector entity that has entered into a joint-occupancy agreement
with the school district or COE. The donations may be used for
furthering the purpose of the joint-occupancy agreement.
According to the sponsor, this provision is to enable the
private entity to get a federal tax credit, in addition to the
state tax credit. It is unclear what "furthering the purpose of
the joint-occupancy agreement" means.
The author states, "Assembly Bill 1015 is beneficial to both
partners in a joint-occupancy agreement. A school district will
see a benefit by finding an alternative use for a piece of
property that's under-utilized and in return will receive access
to funds for important energy-saving purposes. The private
sector partner executing a joint occupancy agreement or an
agreement to purchase, lease or exchange property will be
granted tax benefits including a credit equal to 8% of the total
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cost of the corresponding project for the first four years and a
6% credit for the subsequent three years."
REGISTERED SUPPORT / OPPOSITION :
Support
Coalition for Adequate School Housing (sponsor)
Opposition
None on file
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087