BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: AB 1874
AUTHOR: Evans
AMENDED: April 6, 2010
FISCAL COMM: Yes HEARING DATE: June 16, 2010
URGENCY: No CONSULTANT:Daniel Alvarez
SUBJECT : Vallejo City Unified School District: sale of
property.
KEY POLICY ISSUE
Are there any unintended consequences for the state to
extending the time period that Vallejo City Unified School
District has to sell surplus property as a means to retire or
reduce emergency loan debt?
SUMMARY
This bill extends the time period Vallejo City Unified School
District is authorized to sell property and use the proceeds
to reduce or retire its emergency loan from the state.
BACKGROUND
1) SB 1190 (Chesbro), Chapter 53, Statutes of 2004,
appropriated $60 million for an emergency loan to the
Vallejo City Unified School District (VCUSD). The bill
required the state Superintendent of Public Instruction
(SPI) to assume all the legal rights, duties and powers
of the Governing Board of the Vallejo City Unified
School District (VCUSD) and to appoint, in consultation
with the Solano County Superintendent of Schools, an
administrator to act on his behalf in exercising
authority over the school district.
Furthermore, SB 1190 authorized the school district,
between June 1, 2004 and July 30, 2007, to sell any
properties owned by the district and to use the proceeds
from the sale to reduce or retire the emergency loan.
The bill also prohibited the district from being
eligible for financial hardship assistance under the
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state's School Facility Program from June 2004 through
June 2006. These timeline provisions were extended by
AB 1948 (Evans).
2) Current law requires that emergency loans to districts
in fiscal crisis be provided by legislative
appropriation. Requires, upon a district's acceptance of
a loan exceeding 200 percent of a district's recommended
reserve, that the Superintendent of Public Instruction
(SPI) assumes all the legal rights, duties and powers of
the district governing board, authorizes the SPI to
appoint an administrator to act on his or her behalf,
and requires that the district governing board become
advisory to the administrator. The authority of the SPI
and the state-appointed administer shall continue until
the loan has been repaid, the district has adequate
fiscal systems and controls in place, and the SPI has
determined that the district's future compliance with
the fiscal plan approved for the district is probable.
(Education Code 41325 et. seq.)
3) 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
This bill extends the time period from June 30, 2010, to June
30, 2015, for the Vallejo City Unified School District
(VCUSD) to sell property and use the proceeds to reduce or
retire its emergency loan.
In addition, the bill extends the ineligibility period from
January 1, 2011, to June 30, 2015, for VCUSD to participate
in the financial hardship assistance program under the School
Facility Program.
STAFF COMMENTS
1) Need for the bill : According to the author's office,
allowing the VCUSD additional time to sell property
would allow the district to maximize the potential
revenue from any possible sale. Using property sale
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proceeds to pay down the loan would free up local funds
that the district could use to balance its budget or
improve programs.
2) School district diligence on property sales encounters
problems . The VCUSD has had the authority, between June
1, 2004 and July 1, 2010, to sell property owned by the
district and to use the proceeds from the sale to reduce
or retire the emergency loan.
VCUSD made use of this authorization in 2006 to sell an
18 acre parcel, known as the Rollingwood property, to KB
Homes for a minimum price of $17 million (the price was
set as a minimum in that it could have increased over
time depending on revenues generated by the developer,
with the district sharing up to $23.5 million from any
increased proceeds, based on a specified formula). Two
payments of $3 million each were made to the district;
however, KB Homes defaulted on this agreement on June
23, 2008. After various attempts at mediation, the
district has pursued legal action to either force
payment of the balance of funds by KB Homes or to
clarify that the district retains clear title. It is
anticipated that this issue will go to trial in the fall
of 2010.
However, the VCUSD indicates it has plans for future
sales of property, including four parcels that the
district has moved toward sale and development over the
last three years, additional unused portions of sites,
and the possibility of consolidating and selling surplus
school sites resulting from continued and projected
future declining enrollment.
3) Prior and related legislation .
AB 1948 (Evans), Chapter 636, Statutes of
2008, extended VCUSD's authority to sell property
owned by the district and to use the proceeds from
the sale to reduce or retire the emergency loan
through July 1, 2010.
SB 1190 (Chesbro), Chapter 53, Statutes of
2004, appropriates $60 million for an emergency
loan to VCUSD, requires the Superintendent of
Public Instruction to assume all the rights,
duties, and powers of the governing board of the
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district and to appoint an administrator to serve
during the term of the loan.
AB 1554 (Keene), Chapter 263, Statutes of
2004, requires that existing emergency loans for
the West Contra Costa Unified School District
(WCCUSD), Oakland Unified School District (OUSD)
and VUSD, be refinanced through I-Bank, with any
difference between interest paid on the existing
loans and the costs of refinancing those loans paid
by the state.
AB 1303 (Daucher), Chapter 97, Statutes of
2005, revises statutes and terms pertaining to the
lease financing that the state is using to replace
General Fund financing of school district emergency
loans.
SUPPORT
State Superintendent of Public Instruction (sponsor)
Vallejo City Unified School District
OPPOSITION
None received.