BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Jack Scott, Chair
2005-2006 Regular Session
BILL NO: AB 1492
AUTHOR: Evans
AMENDED: August 29, 2005
FISCAL COMM: Yes HEARING DATE: September 1,
2005
URGENCY: No CONSULTANT:Lynn Lorber
NOTE : This bill was heard by this Committee on June 8,
2005, and was subsequently amended to address a different
topic. The subject of this bill has not been heard by this
Committee.
SUBJECT : Sale or lease of community college district
property
SUMMARY
This bill exempts the sale-sale back or lease-leaseback of
California Community College (CCC) facilities from
construction and property disposal provisions if the
proceeds are used for capital outlay projects involving
energy efficient buildings. This bill also authorizes
"apportionment intercept" for the payment of debt service
obligations for bonds or short-term loans used to finance
energy efficient buildings. The overall purpose is to
allow the California Community Colleges to utilize a
facilities financing mechanism that is currently only
enjoyed by some K-12 school districts .
BACKGROUND
Lease-leaseback : Current law provides that current
requirements relative to the sale or lease of K-12 school
district surplus property do not apply to the sale or lease
of a school district's real property, together with any
personal property located thereon, if all of the following
conditions are met:
The property is sold or leased for the purpose of
assisting a local governmental agency in obtaining
financing.
In the case of a sale, the school district
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simultaneously repurchases the same property
(sale-sale back).
In the case of a lease, the school district
simultaneously leases back the same property
(lease-leaseback).
The financing proceeds are used solely for capital
outlay purposes.
Apportionment intercept : K-12 public schools that request
an emergency apportionment currently have the option to ask
the State Controller to withhold from apportionments an
amount of funds necessary to satisfy its annual bond
payment obligation. This process, whereby school funding
is diverted to the Controller, who directly pays the bond
holders, can assist districts in securing better rates on
bonds and loans.
ANALYSIS
This bill :
1) Provides that current requirements relative to the
sale or lease of surplus property do not apply to the
sale or lease of community college real property,
together with any personal property located thereon,
if all of the following conditions are met:
a) The property is sold or leased for the
purpose of assisting a local governmental agency
in obtaining financing for a qualified community
college facility.
b) In the case of a sale, the community college
district simultaneously repurchases the same
property (sale-sale back).
c) In the case of a lease, the community
college district simultaneously leases back the
same property (lease-leaseback).
d) The financing proceeds are used solely for
capital outlay relating to a qualified community
college facility.
2) Defines "qualified community college facility" as real
and personal property, improvements and related
facilities that are determined by the governing board
of the community college district to satisfy each of
the following:
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a) The facilities will assist the district in
reducing energy and resource consumption and to
operate as energy and resource efficient
buildings, as specified.
b) The facilities are affordable, as specified.
3) Requires, when a community college district enters
into a sale or lease as described above, the district
to authorize the chancellor and Controller to withhold
from its annual apportionment the amount of funds
necessary to satisfy its annual payment obligation
under the sale contract or lease.
STAFF COMMENTS
1) What's the rush ? This bill was recently amended to
replace its contents and this is the first time it is
being heard in its current form by any committee.
Although the purpose of the bill is to create parity
with K-12 school districts, as noted in staff comment
#3, this bill's provisions significantly exceed the
option currently granted to K-12 districts. Is it
prudent to implement a facilities financing mechanism
which is essentially untested within the CCCs without
thorough policy and fiscal discussion and review?
2) Fiscal implications . This bill authorizes the use of
CCC apportionments (Proposition 98) for capital
outlay. Proposition 98 funds are currently used only
for instruction and student services. Is capital
outlay an appropriate use of Proposition 98 funds?
Additionally, state apportionments for the CCCs have
fluctuated significantly from year to year based upon
fee levels and the condition of the state General
Fund. This bill authorizes CCC apportionments (off
the top) to be diverted to the Controller for payment
of debt obligations. Particularly during tough budget
years, the level of state apportionments to the CCCs
may be reduced. Would this apportionment intercept
compromise instruction and student services?
3) Not just like K-12 . Although the stated purpose of
this bill is to create parity with K-12 school
districts, its provisions significantly exceed the
option currently granted to K-12 districts. If the
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committee chooses to extend this option to the CCCs,
staff recommends several amendments to ensure parity
with K-12 provisions.
Only K-12 schools that request an emergency apportionment
(fiscally troubled schools) currently enjoy the option
to use an apportionment intercept. This bill allows
any CCC district to use apportionment intercept as a
financing mechanism. Staff recommends this bill be
amended to allow only fiscally troubled community
college districts to use the apportionment intercept
mechanism.
This bill allows financing proceeds to be used for design,
planning and acquisition (in addition to construction,
reconstruction and renovation), whereas provisions for
K-12 school districts do not specifically authorize
the use of financing proceeds for design, planning or
acquisition. Staff recommends this bill be amended to
strike reference to design, planning and acquisition.
This bill requires CCCs to use an apportionment intercept
whereas current law authorizes K-12 districts to
utilize apportionment intercept. Staff recommends
this bill be amended to authorize, rather than
require, CCCs to utilize apportionment intercept.
Finally, this bill authorizes the use of the proposed
financing mechanism only for the purpose of
constructing or renovating energy efficient buildings.
K-12 provisions do not impose such a limited use of
financing proceeds. Are energy efficient buildings
the greatest priority? Should the optional financing
mechanism be available for other construction or
renovation purposes?
4) Role of the Controller . This bill requires the State
Controller to withhold certain amounts of funds from
CCC apportionments for the payment of the debt service
obligation for bonds or loans issued on behalf of CCC
districts. There are 72 CCC districts. It is not
clear how difficult it would be for the Controller to
manage apportionment intercepts for up to 72 separate
bonds or loans.
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SUPPORT
Los Angeles Community College District (sponsor)
OPPOSITION
None on file