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School bond debt should be serviced by funds from sale or lease of school district properties

Original post made by Jack Hickey, Woodside: Emerald Hills, on Jun 12, 2019

Since the vote threshold for school bond measures was lowered to 55%, total school bond debt in San Mateo County has risen to more than $3.5 Billion. This debt is secured by property taxes. When a school district sells or leases properties upgraded by the bond revenue, it seems reasonable that proceeds from sale or lease of the properties improved with bond revenue should be applied to debt service of those bonds. This could be accomplished by having those proceeds flow into a fund managed by the Controllers Office for that purpose. Property tax reductions would result.

RCESD is projecting $3.1 million in lease revenue for FY2020/2021, from the lease of 3 school campuses. These campuses benefited from school bond measures passed by the 55% margin. Menlo Park City Elementary School District seems destined to have surplus capacity. The funding for teacher housing has been made easier by the State Legislature. Web Link

This is not good for taxpayers.

Comments (3)

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Posted by Jack Hickey
a resident of Woodside: Emerald Hills
on Jun 19, 2019 at 11:02 am

Jack Hickey is a registered user.

On June 6, 2019, I sent the following to Ken Kapphahn of the Legislative Analysts Office:
From: JOHN HICKEY [mailto:jackhick@comcast.net]
Sent: Thursday, June 06, 2019 11:09 AM
To: Kapphahn, Kenneth
Subject: Shouldn't surplus property lease revenue of school districts service the bond debt incurred to improve those properties?

His response on June 7:
"Thank you for letting me know about these developments in Redwood City. State law does impose some restrictions on proceeds from surplus property if a school district is selling that property or leasing it with an option to purchase. In this case, however, the district appears to be proposing a lease with no option to purchase. Under those conditions, the state does not require the revenue to be used in a specific way. Regarding your question, we are not aware of any state law that would prevent the district from using the lease proceeds to pay down outstanding bond debt. (If the district agreed to any specific terms about repayment when it sold the bonds, however, those terms remain legally binding.) Our understanding is that a growing number of districts in the state have surplus property, and we will keep the Redwood City example in mind as we continue to think about the state’s role in paying for school facilities."

I replied on June 7:
"I was thinking of having the district deposit the lease revenue in an account with the County Controller to be used for debt service.  This would result in a reduction of the tax rate for property owners."

His response on June 14:
"I was thinking of having the district deposit the lease revenue in an account with the County Controller to be used for debt service.  This would result in a reduction of the tax rate for property owners."

I suggest that a Constitutional Amendment is both necessary and would likely pass to correct this situation. If you would sign a petition for such an amendment, please "like" this comment.


2 people like this
Posted by Jack Hickey
a resident of Woodside: Emerald Hills
on Jun 19, 2019 at 10:41 pm

Jack Hickey is a registered user.

Correction!
On June 6, 2019, I sent the following to Ken Kapphahn of the Legislative Analysts Office:
From: JOHN HICKEY [mailto:jackhick@comcast.net]
Sent: Thursday, June 06, 2019 11:09 AM
To: Kapphahn, Kenneth
Subject: Shouldn't surplus property lease revenue of school districts service the bond debt incurred to improve those properties?

His response on June 7:
"Thank you for letting me know about these developments in Redwood City. State law does impose some restrictions on proceeds from surplus property if a school district is selling that property or leasing it with an option to purchase. In this case, however, the district appears to be proposing a lease with no option to purchase. Under those conditions, the state does not require the revenue to be used in a specific way. Regarding your question, we are not aware of any state law that would prevent the district from using the lease proceeds to pay down outstanding bond debt. (If the district agreed to any specific terms about repayment when it sold the bonds, however, those terms remain legally binding.) Our understanding is that a growing number of districts in the state have surplus property, and we will keep the Redwood City example in mind as we continue to think about the state’s role in paying for school facilities."

I replied on June 7:
"I was thinking of having the district deposit the lease revenue in an account with the County Controller to be used for debt service. This would result in a reduction of the tax rate for property owners."

His response on June 14:
"Yes, that does sound like a reasonable way to go about it. And I'm sorry for the delay, we have been tied up with the state budget passing this week."

I suggest that a Constitutional Amendment is both necessary and would likely pass to correct this situation. If you would sign a petition for such an amendment, please "like" this comment.


Like this comment
Posted by Jack Hickey
a resident of Woodside: Emerald Hills
on Aug 2, 2019 at 5:01 pm

Jack Hickey is a registered user.

RCSD hired 3D Strategies to manage leasing efforts of their surplus properties. Web Link

This is from that website:
REAL ESTATE SOLUTIONS FOR EDUCATIONAL ORGANIZATIONS
One of the toughest challenges that educational institutions face in California today is difficulty in securing the financial sustainability that is required to provide your students with the tools and environment that they need to thrive in their education. Creative solutions are often required in order to provide your students with the experience that will help them to succeed.
The shortage of qualified teachers is at historic levels and District’s need to find innovative ways to recruit and retain key staff. Using underutilized land and creative financing to provide affordable housing is quickly becoming a key part of every District’s recruiting and retention programs.
Real estate is often overlooked due to the challenge that can come along with trying to gain financial benefit from the property that the organization controls. 3D Strategies can help you to navigate the difficulties of converting your land or property to an asset, and help you to build strong financial sustainability – and affordable workforce housing – for your organization for years to come.


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