BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
592 (Romero)
Hearing Date: 05/26/2009 Amended: 05/06/2009
Consultant: Dan Troy Policy Vote: ED 9-0
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BILL SUMMARY: SB 592 would authorize a local government
entity, including a county board of education, a city or a
county, and authorizes a charter school to hold title to a
charter school facility constructed with state bond funds. The
bill also requires a district currently holding title to such
facilities to transfer title to these entities upon the request
of the charter school, unless the school district has
contributed at least 50 percent of the local matching share or
provided the land for the project.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
SAB lien State exposure to lien
actions or obligations General
Mandatory title transfer Uncompensated loss for
districts/potential General
litigation costs for state
Administrative costs Minor costs for regulations and
review Bond
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
The state provides general obligation bond funding for various
school new construction and modernization projects through the
School Facility Program (SFP). In addition to authorizing over
$11 billion in general obligation school facilities bonds,
Proposition 47 of 2002 authorized established the Charter
Schools Facilities Program (CSFP) and provided $100 million in
funding for this purpose. Subsequent ballot initiatives,
Proposition 55 (2004) and Proposition 1D (2006) provided an
additional $800 million for the CSFP.
Under the CSFP, only school districts may hold title, in trust,
for the benefit of the state public school system, to school
facilities constructed with state general obligation bond funds.
Currently, if a charter school housed in a facility constructed
through the CSFP fails to have its petition renewed or the
petition is revoked, the facility may be used by another charter
school or by the school district. If the facility is no longer
needed for public school purposes it may be disposed of by the
district in the manner of other surplus property.
This bill would alter the CSFP, principally, by allowing
entities other than the school district to hold title to the
facility. The bill would require that prior to the release of
funds, the applicant school would provide one of the following:
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SB 592 (Romero)
1. Documentary evidence that the school district holds
title to the project facilities in trust for the benefit of
the public school system.
2. Documentary evidence that a local government entity,
including a county office of education, a city and/or a
county, holds title to the project facilities in trust for
the benefit of the public school system, as specified.
3. A request that the charter school be authorized to hold
fee simple title to the property, on which a lien shall be
recorded in favor of the State Allocation Board for the
total amount of funds allocated for the project.
The bill also provides that upon the request of the applicant
charter school, a district that agreed to hold title to the
facility prior to January 1, 2010 would be required to transfer
title to the entity requested by the charter school (i.e.,
either the charter school or a local government entity that has
agreed to hold title). The district would not be subject to
this provision if it contributed at least 50 percent of the
local matching share of the project or if the facility is
located on a site purchased and owned by the district.
Prior to release of funds, among other requirements, a school
district and a charter school must agree to a use agreement.
Some districts are reluctant to sign the use agreement due to
liability concerns. Also, some charter schools contend that
districts place onerous conditions on the school as part of the
use agreement negotiation. This bill is intended to address
some of these concerns.
By requiring the State Allocation Board to secure a lien against
the value of the facility, the bill would create potential
liabilities for the state. These costs are indeterminable, but
any action against a facility could result in significant legal
costs or payments relating to existing or future CSFP projects.
Charter schools do not have the same legal standing as local
government agencies, such as school districts and cities, and it
is not clear that charters could be held fully liable for all
obligations relating to the lien if, say, the charter were
dissolved prior to completion of a project.
Also, the bill, in its current form, would require a transfer of
title from the district to the charter school even if the
district has a substantial financial interest in the property.
Would this provision constitute an abrogation of an existing
contract and subject the state to litigation costs? It would
seem reasonable to, at the least, provide for compensation in
these cases and/or mutual agreement to the transfer.
Additionally, there would also likely be some minor
administrative costs to adopt regulations and for review of
required documentation.
The author's office has indicated a willingness to work on many
of the issues addressed in the analysis.