Face-off over developer fees for schools heads to court

Face-off over developer fees for schools heads to court

(Calif.) Litigants fencing over new authority given to school districts to raise developer fees to cover classroom construction costs face an important hearing next week in Sacramento Superior Court.

Level 3 developer fees were triggered in May after the California State Allocation Board made a finding that state facility matching funds had run dry—a fact that the California Building Industry Association quickly challenged in a suit filed in early June.

The BIA argues that the state officials who oversee school construction have access to $150 million in untapped bond money that could be transferred into accounts that serve classroom construction and remodeling projects. State officials have said those dollars are restricted to seismic-related school improvements and defend their action to allow districts to raise the facility money they need from new housing developers.

The dispute comes forward as voters prepare to consider a $9 billion statewide school bond measure on the November ballot, which would seem to diminish the importance of the BIA suit. But because Level 3 fees have never before been imposed on builders, the process that state and local officials must follow to implement the hike has also never been tested.

Currently, there is only a handful of districts that are even considering the new fees—most prominent among them are Dublin Unified and Fremont Unified school districts. To qualify for the rate hike, districts must meet enrollment growth benchmarks and have exhausted other borrowing options.

Although the suit from the BIA calls on the court to order the State Allocation Board to reverse its finding that the facility money is gone, the action is equally aimed at preventing Dublin USD and Fremont USD from moving forward.

Officials at Fremont USD point out that they had a classroom capacity of 33,632 seats in the 2015-16 school year, but an enrollment of 34,565 and project growth to require the construction of one new high school, two middle schools and five elementary schools by 2035.

Last year, Dublin USD had an enrollment of 10,034 but classroom capacity of 9,143. It also expects growth in the next seven years to require two new K-8 campuses and one additional high school.

Central to the BIA’s complaint is that leaving the status quo unchecked would damage the state’s housing industry, and thus, the economy overall. The BIA argues Level 3 fees will double school impact expenses on builders overnight.

Economists give some credence to BIA’s claim, but the threat is probably more regional than statewide, because few parts of California are currently moving in young families that tend to spur school enrollment numbers.

For decades, the cost of new school construction and facility improvements was shared between the state and local communities through the use of bond financing. In 1986, the construction industry was folded into the mix through program changes that established a three-tiered fee structure, allowing districts to charge developers for growth impacts.

Although voters have repeatedly approved school bonds on both a local and statewide level, Gov. Jerry Brown has resisted recent attempts by the Legislature to put the issue before voters. Instead, he has called for a restructuring of the school construction system, but at the same time, has not put forward a comprehensive alternative.

School groups and builders—led by the BIA—helped qualify the $9 billion bond on the November ballot. If voters approve the measure, expectations are that the SAB would rescind the Level 3 authorization. If the bond is rejected, then new fees would likely have significant economic implications over the long term, especially in those communities were the population is growing, and more is expected.

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