BILL ANALYSIS �
AB 1903
Page 1
Date of Hearing: April 25, 2012
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 1903 (Buchanan and Hagman) - As Amended: March 29, 2012
SUBJECT : School facilities
SUMMARY : Suspends, commencing on January 1, 2013 until January
1, 2015, the authority of a local governing board of a school
district to increase the fee against any residential or
commercial or industrial construction within the boundary of the
school district, for the purpose of funding the construction of
school facilities.
EXISTING LAW :
1)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. (Education Code (EC) Section 17620)
2)Specifies various levels of fees that may be assessed to fund
school facilities and the types of construction projects
subject to the fees. (Government Code Section 65995)
3)Specifies that if state funds for new school facility
construction are not available, the governing board of a
school district that complies with provisions imposing Level
II fees may increase the fee by an amount that may not exceed
the Level II fees. Specifies that state funds are not
available if the State Allocation Board (SAB) is no longer
approving apportionments for new construction due to a lack of
funds available for new construction. Requires the SAB to
notify the Secretary of the Senate and the Chief Clerk of the
Assembly, in writing, of the determination that state funds
are no longer available and the date when state funds are no
longer available for publication in the respective journal of
each house. (Government Code Section 65995.7)
4)Requires, under the Leroy F. Greene School Facilities Act of
1998, the SAB to allocate to applicant school districts,
prescribed per-unhoused-pupil state funding for construction
and modernization of school facilities, including hardship
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funding, and supplemental funding for site development and
acquisition. (EC Section 17070.35)
5)Requires a 50% local match for education bond funds for the
construction of new schools and a 40% local match for funds
for the modernization of school facilities. (EC Section
17072.30 and 17074.16)
FISCAL EFFECT : Unknown
COMMENTS : This bill suspends the authority of school districts,
beginning January 1, 2013 until January 1, 2015, to assess Level
III fees for the construction of new school facilities.
Background . Prior to the enactment of SB 50 (L. Greene),
Chapter 407, Statutes of 1998, which established the School
Facility Program (SFP), builders were assessed a mitigation fee
of $1.50 per square foot of livable space for each newly
constructed house. This fee provided a share of the funds
needed for the construction of new schools to serve the pupil
population of the school district within which the development
occurred. In addition to this fee, local governments also had
the authority, confirmed by the courts through litigation
popularly known as the Mira, Hart and Murrieta line of cases, to
require developers to pay for additional school-related expenses
as identified in local environmental impact reports.
SB 50 changed the method for determining the share of school
construction costs that developers would pay and provided a
consistency in the amount of fees developers pay to build
schools to accommodate new developments. SB 50 suspended the
threat of lawsuits and the ability of local governments to deny
new developments on the basis of inadequate schools. After the
enactment of SB 50, local government and school officials
complained that the agreements in SB 50 were too low and would
not provide adequate funding to build schools.
SB 50 established per pupil grant amounts that local school
districts are entitled to receive from the state to build new
schools, equal to 50% of the estimated average cost per pupil
for school construction. The school district provides the
remaining 50% from local revenue sources that could include
local general obligation bonds, redevelopment funds and
developer's fees. SB 50 increased the developer's fee from
$1.50 to $1.93 per square foot and required an inflation
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adjustment every two years according to the class B construction
index as determined by the SAB, the body that allocates state
bond funds and oversees the administration of the SFP, at its
January meeting. The fee, also known as the Level I fee, is
currently at $3.20 per square foot for residential construction
and $.51 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. SB 50 also established
additional levels of assessments. Level II is assessed based on
a five-year Needs Assessment as prescribed in the Government
Code and adopted by a governing board, which takes into account
district capacity, projection of unhoused pupils resulting from
new residential development, and available funding to the
district. Level II is authorized when a district has submitted
an application for state bond funding and when a district meets
two of the following four conditions:
1)If the district has substantial enrollment (30% for unified
and elementary districts and 40% for high school districts) of
its pupil in multitrack year-round education;
2)The district has placed at least one local bond on the ballot
in the previous four years and received at least 50% plus one
vote;
3)The district has issued debt or incurred obligations for
capital outlay in an amount equal to 15% of the district's
local bonding capacity for indebtedness approved by voters
before November 4, 1998 and 30% for indebtedness approved by
voters after November 4, 1998; and,
4)The district has at least 20% of the teaching stations in
relocatable classrooms.
The amount of the Level II fees is based on the SFP new
construction per pupil grant level multiplied by the number of
unhoused pupils identified in the needs assessment. Current per
pupil grant levels are $9,455 for elementary schools, $9,999 for
middle schools, and $12,721 for high schools. In the event that
state bond funds for school facilities are depleted, developers
would be required to pay the Level III fee, which is double the
Level II fee. Level III is authorized when the SAB is no longer
approving apportionments for new construction projects.
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Level III has never been triggered as voters have approved four
education bond measures for K-12 school facilities since the
enactment of SB 50 in 1998: Proposition 1A in 1998, which
authorized $6.7 billion; Proposition 47 in 2002, which
authorized $11.4 billion; Proposition 55 in 2004, which
authorized $10 billion; and Proposition 1D in 2006, which
authorized $7.329 billion. However, with no new bonds since
2006, only $422.9 million in new construction bond authority
remains.
When does Level III trigger? Existing law specifies that Level
III is triggered when the SAB is no longer approving
"apportionments" for new construction due to a lack of funds
available for new construction. "Apportionment" is the term
used when the SAB, during a public hearing, approves a project
for funding and makes cash available to the district for that
project.
Due to the state's budget crisis and poor credit ratings, the
Pool Money Investment Board halted the regular sale of all
state-approved general obligation bonds in December 2008 and
slowed the disbursement of funds. Due to the lack of "cash",
the SAB has been making "unfunded approvals" since 2009 to
enable districts to continue their facilities planning. The
unfunded approvals are tentative approvals of the projects and
are converted to "apportionments" when bonds are sold and cash
becomes available. The State Treasurer's office has made more
than $6 billion in bond sales for school construction since
2009, but there remain almost $1 billion of projects waiting for
funds. Unfunded approvals are not apportionments. Until cash
is available, the SAB has ability to make apportionments.
Another factor to consider is that of the $422.9 million
available in new construction funds, $194.8 million is set aside
by the SAB for seismic projects. The allocation of seismic
funds has been slow; $5 million have been allocated in five and
a half years. There is one project totaling $12.9 million
waiting for SAB approval. According to the Division of State
Architect (DSA), there are currently three seismic projects
totaling $5.7 million being reviewed. The SFP requires approval
from the DSA to ensure that the architectural design plans meet
fire, life and safety requirements; Field Act requirements; and
access requirements under the Americans with Disability Act.
The approval processes can take months. Once the three projects
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receive DSA approval, it will take several more months before it
receives approval from the SAB. At the April 28, 2012 SAB
meeting, the SAB will be approving unfunded approvals for
applications that were submitted in November 2011. In short,
the seismic funds will not be exhausted any time soon. Seismic
funds are new construction funds.
Builders' Plight . This bill helps builders by suspending for
two years the authority for school districts to collect Level
III fees. The California Building Industry Association (CBIA)
states, "Assembly Bill 1903 is a critically important measure
that upholds the statutory framework of shared burden inherent
in the public school facilities financing program established by
the Legislature in 1998. Under that historic program, the cost
of constructing new school facilities is distributed among
public sources - state bonds and local revenues - and private
sources through school impact fees paid by homebuilders. School
fees are imposed by local school districts on both residential
and commercial construction and, depending on the area of the
state, typically run from $10,000 to $14,000 per unit.
If Assembly Bill 1903 is not enacted, the level of school fees
associated with the construction
of a new home could double. In today's economic climate with
continued high rates of unemployment and individuals and
households still struggling from the ravaging of their own
personal finances, a dramatic jump in costs associated with the
construction of a new home would severely hobble California's
housing markets and hold back the state's ultimate economic
recovery."
Governor's budget proposals . The Governor's proposed 2012-13
budget contains three proposals:
1)Shift existing bond authority from the Overcrowding Relief
Grant (ORG) Program to the New Construction Program;
2)Halt any further allocations of ORG funds for ORG projects;
and,
3)Regulate the allocation of New Construction and Modernization
funds.
The Governor's budget summary states, "This action will delay
local authority to impose a third level construction fee while
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continuing construction of new classrooms using bond proceeds,
fee revenues and local funds." Since the introduction of the
budget, Department of Finance officials have backed away from
saying that the purpose of the budget proposals is to delay the
Level III trigger. The Assembly Budget Subcommittee No. 2 on
Education Finance has rejected the proposals. The Senate Budget
Subcommittee No. 1 on Education has held a public hearing on the
proposals but has not taken action.
SAB recommendations . The SAB deliberated the Governor's
proposals at its February meeting. The SAB did not vote to make
a recommendation to the Legislature on the proposals to shift
ORG funds to new construction and halt allocations for ORG
projects due to objections from some SAB members and school
districts that ORG funds are intended to take kids out of
portable buildings and should not be used simply as a way to
delay Level III fees. While some members advocated strongly for
prolonging the allocations of new construction funds in order to
avoid the trigger of Level III by regulating or limiting the
amount of funds that can be allocated monthly through 2014, the
SAB did not ultimately recommend supporting the proposal, again
due to opposition from school districts. The vote to recommend
suspension of Level III fees did pass, with one member
abstaining due to concerns with the end date.
Need for school facilities funds . Despite declining enrollment
in some districts, there is anticipated future pupil enrollment
growth in the state. According to the Department of Finance's
Demographics Unit, the state is projected to have an overall
enrollment increase of approximately 113,000 students within the
next eight years. Districts are in the process of relieving
overcrowding and building enough seats to enable every student
to be on a traditional school schedule while ending multi-track
year round schedules that reduce the number of school days for
some kids. These efforts require sufficient facilities. There
is indication that with school buildings getting older,
modernization funds are becoming increasingly important.
Districts are also seeking to upgrade their facilities to be
more energy efficient or green, which will result in local
general fund savings.
Plight of school districts . Stakeholders involved in the
crafting of SB 50, which included CBIA, say that the program was
designed as a three-way partnership to build schools. The state
would provide state bond funds, school districts would pass
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local bonds or secure other type of local financing, and
developers would provide its share. The agreement was crafted
with the three levels of fees. Level III was designed
specifically for the times when the state is out of bond funds
to enable school districts to continue building schools to
accommodate new developments. This bill will relieve housing
developers of their obligations to pay Level III fees, while the
state has not put a bond on the ballot since Proposition 1D in
2006. In the meantime, local communities continue to pass local
bonds, with the expectation of getting a state match. Passage
of another statewide bond is the solution to avoid the trigger
of Level III and will uphold the agreement established by SB 50
for the state to partner with school districts and developers to
build adequate school facilities. Level III was suspended once
already in 2002, when AB 16 (Hertzberg), Chapter 33, Statutes of
2002, which put the November 2002 and June 2004 education bonds
on the ballot was enacted on April 29, 2002. Continuous
suspensions could raise a question of the purpose of a Level III
fee.
Suggested amendments . The lifting of the 2002 Level III
suspension was tied to the passage or failure of the 2002 or
2004 bonds. This bill contains an end date without any
reference to a potential bond in 2014. Staff recommends
consideration of an amendment to end suspension of Level III
fees if there is no education bond on the primary or general
2014 ballots. This will enable to the Legislature to recognize
the plight of builders while somewhat recognizing the plight of
school districts.
Urgency clause . The author is requesting the Committee to adopt
an urgency clause. The urgency clause amendment would strike
the effective date of January 1, 2013, and have the suspension
take effect upon enactment of this bill. The Committee may wish
to consider whether the effective date should be tied to the
date new construction funds are no longer available.
Arguments in support . The author states, "Home builders have
been hit hard by the current recession and home values have
dropped dramatically. In 2004, there were 212,960 new housing
units built in California; in 2010, there were only 44,925.
Industry experts predict that the imposition of Level III fees
could bring the already shaky new housing development industry
to a halt."
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Arguments in opposition . The Coalition for Adequate School
Housing states, "Suspension of the statute creating Level III
developer fees would violate the very purpose for which the
statute was created. In order to house future students that will
result from new development, school districts may levy fees
against development; this authority began with ideas deeply
rooted in the California Environmental Quality Act (CEQA).
Commencing in the 1970s, residential project development must
mitigate the need for schools. Statute and case law strongly
support this concept. Longstanding and even recent court
decisions such as Chawanakee support districts that may need to
sue to ensure mitigation of school facilities if they exhaust
the administrative remedies afforded to them under CEQA.
The need for construction of school facilities is ongoing; the
lack of state bond funds and no guarantee that a school bond
will be placed before voters on the November 2012 ballot creates
the need for a positive response to schools, not denial of
authority for levying Level III fees. Levying these mitigation
fees would provide districts with the resources needed to
accommodate developer-driven growth, as the statute originally
intended, if the state fails to provide a bond."
Previous related legislation . AB 1716 (Torlakson), provides
that if a governing board chooses to reimburse developer fees,
the reimbursement includes any interest for the supplemental
amount accrued during the period prior to a district receiving
state funds for the construction project for which those fees
were provided, as determined by the school district. The bill
was held by the author in the Senate Education Committee in
2010.
AB 2173 (Caballero), vetoed by the Governor in 2008, revises
requirements for assessing developer fees for the construction
of school facilities.
REGISTERED SUPPORT / OPPOSITION :
Support
California Building Industry Association
Los Angeles Unified School District
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Opposition
California School Boards Association
Coalition for Adequate School Housing
County School Facilities Consortium
Riverside County School Superintendents' Association
School Facility Manufacturers' Association
Small School Districts' Association
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087