BILL ANALYSIS
AB 1874
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Date of Hearing: April 14, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1874 (Evans) - As Amended: April 6, 2010
Policy Committee: Education
Vote:9-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill extends the time period from June 30, 2010 to June 30,
2015 for Vallejo City Unified School District (VCUSD) to sell
property and use the proceeds from the sale to reduce or retire
its emergency loan. Specifically, this bill:
Prohibits VCUSD from being eligible for hardship assistance
under the state school facilities program.
FISCAL EFFECT
VCUSD's emergency loan balance is $48.3 million. In 2003, the
school district chose to utilize only $50 million of the
original $60 million appropriation. However, in May 2007, VCUSD
drew down the remaining $10 million. To date, the district has
paid $15.2 million on its loan, with an annual payment of
approximately $3 million.
VCUSD received a "negative" certification of its financial
status at the 2009-10 First Interim Report (January 15) issued
by the State Department of Education (SDE). This "negative"
certification is given to a local education agency that will not
meet its financial obligations in the 2009-10 or 2009-10 fiscal
years, as determined by the Fiscal Crisis Management and
Assistance Team (based on current revenue projections). The
second interim report is due to SDE by April 15 of each year;
however, additional time is needed for SDE to certify the
report.
COMMENTS
AB 1874
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1)Background . SB 1190 (Chesbro), Chapter 53, Statutes of 2004,
appropriated $60 million for an emergency loan to VCUSD and
required the Superintendent of Public Instruction (SPI) to
assume all the rights, duties, and powers of the governing
board of VCUSD and appoint an administrator to serve during
the term of the loan. The school district has hired a
superintendent; however, a state administrator maintains
control over financial management issues and partial control
over facilities management issues, including the sale of
surplus property.
Chapter 53 also authorized the school district to sell its
surplus property and use the proceeds from the sale to reduce
or retire its emergency loan. This initial authorization was
provided until July 30, 2007. AB 1948 (Evans), Chapter 636,
Statutes of 2008, extended the authorization until June 30,
2010.
In 2006, VCUSD sold an 18 acre parcel to KB Home for a minimum
price of $17 million (this figure had the potential to
increase over time depending on certain provisions of the sale
agreements). KB Home made two $3 million payments to the
school district and in June 2008, they defaulted on the sale
agreement. Currently, the school district is in litigation
with KB Home to obtain either the remaining payments or the
ability to assume ownership of the parcel. If the school
district is successful in obtaining ownership of the parcel,
it would place it up for sale again.
In 2007, VCUSD took steps to sell four other pieces of
property, which have the potential of providing the district
with a minimum of $13 million to repay their emergency loan.
The school district is in various stages of review and
approval with the City of Vallejo in anticipation of placing
these properties on the market in the summer or fall of 2010.
This bill would continue the school district's authorization
to sell surplus property until June 30, 2015, with the
proceeds being used to repay their emergency loan.
2)AB 1200, Chapter 1213, Statutes of 1991 established a process
that delineates the duties and responsibilities of both the
state and the school district when emergency loans need to be
granted to school districts due to insolvency. Chapter 1213
AB 1874
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provides that if the state makes a loan to a school district
the State Superintendent of Public Instruction (SPI) shall
assume all legal rights, duties, and powers of the governing
board of the school district. The SPI may appoint an
administrator to act on his or her behalf in exercising
specified authority over the district and may, on a short-term
basis, assign any staff necessary to assist the administrator.
There are five school districts (excluding VCUSD) that have an
outstanding emergency loan balance with the state: Emery
Unified School District ($960,000), Kings City Joint Union
High School District ($5 million), Oakland Unified School
District ($78.3 million), West Fresno Unified School District
($681,039), and West Contra Costa ($11.9 million).
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081