BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON EDUCATION
                              Senator Carol Liu, Chair
                                2015 - 2016  Regular 

          Bill No:             AB 715              
           ----------------------------------------------------------------- 
          |Author:    |Daly                                                 |
          |-----------+-----------------------------------------------------|
          |Version:   |May 20, 2015                              Hearing    |
          |           |Date:   June 17, 2015                                |
           ----------------------------------------------------------------- 
           ----------------------------------------------------------------- 
          |Urgency:   |No                     |Fiscal:    |No               |
           ----------------------------------------------------------------- 
           ----------------------------------------------------------------- 
          |Consultant:|Kathleen Chavira                                     |
          |           |                                                     |
           ----------------------------------------------------------------- 
          
          Subject:  Residential development:  school facilities fees

            SUMMARY
          
          This bill modifies the calculation of developer fees for  
          determining school facilities fees on residential construction  
          by redefining "assessable space" to exclude covered or uncovered  
          walkways and detached bike storage lockers.

            BACKGROUND
          
          Existing law authorizes the governing board of any school  
          district to levy a fee, charge, dedication, or other requirement  
          against any construction within the boundaries of the district  
          for the purpose of funding the construction or reconstruction of  
          school facilities, as specified.  (Education Code § 17620)

          Existing law provides for the payment of fees, charges,  
          dedications or other requirements against a development project.  
           (Government Code § 65995 - 65998) 

          Existing law authorizes a district to levy per square footage  
          fees of $1.93 per square foot of assessable space for  
          residential construction and $0.31 for commercial or industrial  
          construction for chargeable covered and enclosed space, and  
          provides for an inflation adjustment of this amount every two  
          years, as determined by the State Allocation Board at its  
          January meeting.   In the case of residential construction,  
          "assessable space" is defined as all of the square footage  
          within the perimeter of a residential structure, not including  







          AB 715 (Daly)                                           Page 2  
          of ?
          
          
          any carport, walkway, garage, overhang, patio, enclosed patio,  
          detached accessory structure, or similar area.  Existing law  
          requires the building department of the city or county issuing  
          the building permit, in accordance with the standard practice of  
          that city or county, to calculate the amount of the square  
          footage within the perimeter of a residential structure.   
          (Government Code § 65995)

            ANALYSIS
          
          This bill modifies the calculation of developer fees for  
          determining school facilities fees on residential construction.   
          It:

       1)Maintains the definition of "assessable space" to mean all the  
            square footage within the perimeter of a residential space.

       2)Specifically excludes a covered or uncovered walkway from this  
            definition.

       3)Specifically excludes a detached bike storage locker from this  
            definition. 
          STAFF COMMENTS
          
       1)Need for the bill.  According to the author, advances in  
            apartment design and construction have created confusion for  
            local jurisdictions regarding what is considered "assessable  
            space." Many new apartment complexes feature covered walkways  
            for the comfort of tenants and to meet American with  
            Disabilities Act (ADA) requirements.  In addition,  
            particularly in urban areas, apartment communities are adding  
            detached bike storage.  According to the author, this bill is  
            intended to clarify existing law with regards to assessable  
            space and ensure that it is consistently applied state-wide. 

       2)Related disputes.  Both the Orange County Department of Education  
            (OCDE) and the Santa Ana Unified School District report that,  
            prior to the introduction of this bill, there has been  
            disagreement, and two recent appeals of decisions by the  
            cities of Tustin and Santa Ana, in relation to development  
            projects within the Tustin Unified School District.  These  
            disputes arose over whether space internal to the perimeter of  
            a development should be assessable.  In this case, the  
            developer challenged the payment of fees on internal hallways  








          AB 715 (Daly)                                           Page 3  
          of ?
          
          
            that the developer deemed to be 'non-livable space.'  An  
            appeal to the City's Planning Commission was found in favor of  
            the school district.  The OCDE reports that challenges by  
            developers regarding the internal hallway fees totaled  
            $930,343,000 in developer fees.  Both the District and the  
            OCDE assert that the provisions of this bill would have  
            resulted in a reduction of fee revenue for local school  
            construction of almost $1 million for the Tustin Unified  
            School District. 
           
        3)Developer fees.  SB 50 (Green, Chapter 407, Statutes of 1998) in  
            addition to authorizing a $9.2 billion education bond and  
            revising the School Facility Construction program, revised  
            developer fee procedures for school facility purposes.  SB 50  
            authorized three different levels of developer fees to be  
            assessed under specified conditions:

          a)   Level 1 - A district is authorized to levy per square  
               footage fees of $1.93 per square foot for residential  
               construction and $0.31 for commercial or industrial  
               construction to be adjusted for inflation every two years.   
               This fee level is currently at $3.36 per square foot for  
               residential construction and $0.54 per square foot for  
               commercial/industrial construction, and is assessed if the  
               district conducts a Justification Study that establishes  
               the connection between the development coming into the  
               district and the assessment of fees to pay for the cost of  
               the facilities needed to house future students.  

          b)   Level 2 - A district may levy Level 2 fees, which may not  
               exceed 50% of construction and site acquisition and  
               development costs. If it has conducted a needs analysis, as  
               specified, has SAB approval of eligibility for state  
               funding and meets two of four conditions related to the  
               passage of a local bond, debt capacity, and demonstrated  
               facilities needs.  

          c)   Level 3 - A district is authorized to seek 100 percent of  
               school facilities costs if the state has exhausted state  
               school bond funds and the State Allocation Board is no  
               longer approving apportionments for new construction  
               projects.

            This bill proposes changes to the definition of "assessable  








          AB 715 (Daly)                                           Page 4  
          of ?
          
          
            space" for purposes of calculating Level 1 developer fees. 

       4)Current status of the School Facilities Program (SFP).  Bond  
            authority for new construction and modernizations programs has  
            essentially been depleted, respectively, since July 2012 and  
            May 2012.  

            Since 2009, the State Allocation Board (SAB) has been making  
            "unfunded approvals" which represented approved projects  
            waiting to convert to funding apportionments when bonds are  
            sold and cash becomes available.  In addition, since November  
            1, 2012, the SAB has maintained an "Applications Received  
            Beyond Bond Authority" list.  This list is presented to the  
            SAB for acknowledgement, but not approval.  Because the  
            applications are not fully processed for final grant  
            determination, the project funding amounts on the list are  
            only estimates.  As of January 2015, the list indicated 116  
            new construction applications totaling $571 million and 200  
            modernizations applications of about $330 million. 

       5)Related Governor's proposal.  Amid concerns about the complexity  
            and structure of the current program and the state's  
            increasing debt service obligations, the Governor has proposed  
            significant changes to the way school facilities are funded.   
            In order to allow districts to better meet their facilities  
            needs at the local level, the Governor's 2015-16 budget  
            proposed to: 

          a)   Expand revenue generation tools at the local level by  
               expanding local funding capacity and increasing caps on  
               local bond indebtedness;

          b)   Restructure developer fees to set one level for all  
               projects at a level between existing Level II and Level III  
               fees subject to local negotiation; and
           
          c)   Expand allowable uses of Routine Restricted Maintenance  
               Funding to authorize the pooling of these funds over  
               multiple years for modernization and new construction  
               projects. 

            The Governor has also noted that he is prepared to engage with  
            the Legislature and education stakeholders to shape a future  
            state program that is focused on districts with the greatest  








          AB 715 (Daly)                                           Page 5  
          of ?
          
          
            need, including communities with low property values and few  
            borrowing options, as well as overcrowded schools. 

       6)Is this the right time for change?  Under current law funding for  
            new construction and modernization of school facilities comes  
            from both state and local sources.  Current law establishes  
            the School Facility Program under which the state provides  
            general obligation bond funding for various school  
            construction projects.  Local funding comes from a variety of  
            sources including local General Obligation bonds, Mello-Roos  
            bonds and developer fees. 

            Notwithstanding the potential need for clarity, in light of  
            the lack of state general obligation bond funding, and the  
            uncertain future of such funding, should this Committee  
            endorse any changes to the definitions of "assessable space"  
            for purposes of calculating developer fees? 

       7)Clarity or more confusion?  Current law specifies that all square  
            footage within the perimeter of a residential structure is  
            assessable space and specifically excludes any carport,  
            walkway, garage, overhang, patio, enclosed patio, detached  
            accessory structure or similar area from this definition. City  
            and County building departments determine which areas within  
            the perimeter are counted for this purpose, in accordance with  
            the standard practice of that city or county in calculating  
            structural perimeters. 

            Current law already provides for the exclusion of a detached  
            accessory structure or similar area.  Arguably, current law  
            would already accommodate bike storage lockers outside of the  
            residential structure.  But would this bill create an  
            incentive for developers to avoid fees by shifting interior  
            closet space to exterior "bike storage" that would still be  
            within the perimeter of the residential structure?  Should  
            bike storage lockers be excluded, if similar to closets within  
            a unit, they increase the square footage available to a  
            resident? 

            Staff recommends the bill be amended to delete "including a  
            detached bike storage locker." 

            SUPPORT
          








          AB 715 (Daly)                                           Page 6  
          of ?
          
          
          California Apartment Association

            OPPOSITION
           
           Association of California School Administrators
          California Association of School Business Officials
          California School Boards Association
          Coalition for Adequate School Housing
          Orange County Department of Education
          Santa Ana Unified School District



                                      -- END --