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CMAA Northern California Chapter

October 3, 2012William Savidge, Assistant Executive Officer

State Allocation Board

Kathleen Moore, Director School Facilities and Transportation Services Division

California Department of Education

The Future of School Facilities Funding & Construction in California

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Agenda

A decade of strong commitmentA new world of State/local bond debt constraintsState school facilities funding in transitionSchool facilities construction over the next 2 yearsWhere do we go from here?

UC Berkeley Center for Cities and Schools Report:

“California’s K-12 Educational Infrastructure Investments: Leveraging the State’s Role for Quality School Facilities in Sustainable Communities.”

3Over a Decade of Strong Commitment

School Facilities funding prioritizedMeeting California’s growth needsModernizing existing schools

Over $35 billion in State Bond Funds1998 School Facility ProgramGrowth of targeted state funding programs Not just New Construction & Modernization High Performance Charter Schools Overcrowding Relief Grants Seismic Mitigation Joint Use

4Over a Decade of Strong Commitment

$66 billion local funding for school facilitiesGeneral obligation bonds Passage of Proposition 39 was a huge impact Growing local responsibility State partnership important in selling to voters

Developer Fees in addition to local bondsLocal residential growth impact fundingLocal development districts CFD’s, Mello Roos, others

5The New World: Debt Constraints

Changed economic climate—financial crisis!State infrastructure investment impacts

Schools one infrastructure area competing for voter-authorized fundingParks, levees, transportation, high-speed rail…

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The New World: Debt ConstraintsImpacts to the State General Fund

Debt-service payments continue to riseCompete with other funding priorities In a time of difficult choices, reduced revenue,

limited budgets

Solution—measured pace of bond sales In the new era of restricted school facilities fundingBi-annual bond sales SAB instituted Priority Funding process Certify to be under contract in 90 days to receive cash The “shovel-ready” project is king!

7California’s Bond Debt Has Increased Significantly Since 2003

– The rating agencies generally consider the State’s debt burden moderate, but note its rapid growth and significant use for deficit borrowings

– California currently has the among lowest credit rating of any state in the country

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Notes: Includes Non Self-Liquidating General Obligation (GO) bonds, SPWB Lease Revenue Bonds (LRBs), Economic Recovery Bonds (ER Bs) and Prop 1A bonds. Does not include Enterprise Fund Self-Liquidating bonds such as Vets GO Bonds or outstanding GO commercial paper notes. ERBs were authorized in 2004. Prop 1A bon ds were authorized in 2009 and issued by the California Statewide Communities Development Authority.

8As a Result, Debt Service Has Also Increased

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Notes: Includes Non Self-Liquidating GO bonds, SPWB LRBs, and Prop 1A bonds. Does not include Enterprise Fund Self -Liquidating bonds such as Vets GO Bonds, ERBs or outstanding GO commercial paper notes. Does not reflect offsets due to subsidy payments from the Federal Government for Build America Bonds or transfers from special funds.

9State Debt Service Forecast

We’ve come out of the recession strongerBalanced state budgets from legislature and governorReducing long-term structural deficit

Future scenarios regarding infrastructure investmentStrategic Growth Plan future investment needsWith anticipated new debt—including school

bondsWill still have a high level of bond debt as percent

of General Fund revenues

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State Debt Service Forecast

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Local Debt ConstraintsLocal funding for school facilities

Developer fees have dried up with the housing market…

Local General Obligation BondsProposition 39 limits The 55% majority blessing But…individual tax limitation @ $60/$100,000 of assessed

valuation (“AV”) for Unified Districts

And…overall bonding capacity limitations @ 2.5% of AV

As local Districts continue facilities investmentsTax rate limitations become critical LAUSD has billions in voter-authorized bonds—unable to sell

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Local Debt Constraints

Local debt service and limitations—finding ways to create room under the line!

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tate funding end gam

e…

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State funding in transitiion…Still $2.4 billion in the “pipeline”

Including Unfunded Approvals waiting for cashFunds/programs with remaining authority

Earliest date for new state school facilities bondNovember 2014

OPSC has applications in-houseThat exceed remaining bond authority

Modernization $116 millionNew Construction $58 million As of August 31, 2012

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State funding in transitionState Allocation Board actionAcceptance of Applications Beyond Bond AuthorityCreation of new process “SAB-Acknowledged Workload List”Limited processing of applicationsNo “Unfunded List” as in the past

Board concerns regardingNo guarantee of state funding in future Changes to state program

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School Facilities Construction

Navigating the next 2 yearsLocal bond funding continues for schoolsGreen building standards, renewable energy

systems Increasing regulatory complexity for state-funded

projects Locally funded projects that may be funded/reimbursed in

the future by state funds

172012 School Facilities BondsMount Pleasant ESD Santa Clara $25.00 LMountain Empire USD San Diego $30.80 GNuview Union SD Riverside $4.00 VOakland USD Alemeda $475.00 JOcean View SD Orange $198.00 POcean View SD Ventura $4.20 POxnard SD Ventura $90.00 RPacific ESD Santa Cruz $0.83 MPajaro Valley USD Santa $150.00 LPalmdale ESD Los Angeles $220.00 DDPanama-Buena Vista Union Kern $147.00Perris Union HSD Riverside $153.42 TPorterville USD Tulare $90.00 JRamona City USD San Diego $66.00 RRedondo Beach USD Los Angeles $63.00 QRipon USD San Joaquin $25.24 GRoseland ESD Sonoma $7.00 NRowland USD Los Angeles $158.80 RSacramento City USD Sacramento $346.00 QSacramento City USD Sacramento $68.00 RSan Bernardino City USD San Bernardino $250.00 NSan Carlos ESD San Mateo $72.00 HSan Diego USD San Diego $2,800.00 ZSan Dieguito Union HSD San Diego $449.00 AASan Jose USD Santa Clara $290.00 HSan Juan USD Sacramento $350.00 NSan Ramon Valley USD Contra Costa $260.00 DSanger USD Fresno $50.00 SSanta Monica-Malibu USD Los Angeles $385.00 ESSanta Ynez Valley Union Santa Barbara $19.84 L2012Soledad USD Monterey $40.00 CSomis Union SD Ventura $8.00 SSonora Union HSD Tuolumne $23.00South Bay Union ESD San Diego $26.00 YSpreckels Union ESD Monterey $7.00 BSt. Helena USD Napa $30.00 CStandard ESD Kern $11.20Stockton USD San Joaquin $156.00 ESummerville Union HSD Tuolumne $8.00 HTemecula Valley USD Riverside $165.00 YTemple City USD Los Angeles $128.80 STempleton USD San Luis Obispo $35.00 H-12Visalia USD Tulare $60.10 EWashington USD Fresno $22.00 WWeaver Union SD Merced $9.00 GWest Contra Costa USD Contra Costa $360.00 EWestside Union ESD Los Angeles $18.51 WRWillows USD Glenn $14.70 PWilmar Union ESD Sonoma $4.00 PWheatland Union HSD Yuba $9.00 UWhittier City ESD Los Angeles $55.00 ZYucaipa-Calimesa Joint USD San Bernardino $98.00 O

District CountyAmount

(in millions)Measure

Alum Rock Union ESD Santa Clara $125.00 JAlvord USD Riverside $79.00 WAnderson Union HSD Shasta $12.30 CAntioch USD Contra Costa $56.50 BArcata ESD Humboldt $7.00 FBellflower USD Los Angeles $79.00 BBBurlingame ESD San Mateo $56.00 DButteville Union ESD Siskiyou $3.50 RBrawley ESD Imperial $7.50 SCajon Valley Union SD San Diego $88.40 CCalexico USD Imperial $41.00 XCaruthers USD Fresno $12.00 CCastaic Union ESD Los Angeles $51.00 QSChaffey Joint Union HSD San Bernardino $848.00 PChico USD Butte $78.00 EChula Vista ESD San Diego $90.00 ECoachella Valley USD Riverside $41.00 XCollege ESD Santa Barbara $12.00 K2012Covina-Valley USD Los Angeles $129.00 CCDel Mar Union ESD San Diego $76.80 CCDehesa ESD San Diego $3.00 DDelhi USD Merced $8.00 EEarlimart ESD Tulare $3.60 HEast Side Union HSD Santa Clara $120.00 IElk Hills ESD Kern $6.20Escalon USD San Joaquin $19.50 BFolsom Cordova USD Sacramento $68.00 PFortuna Union HSD Humboldt $10.00 DFountain Valley ESD Orange $23.50 NGravenstein Union ESD Sonoma $6.00 MGridley Butte $11.00 GHemet USD Riverside $49.00 UHueneme ESD Ventura $19.60 TInglewood USD Los Angeles $90.00 GGJefferson ESD San Mateo $67.50 IJefferson Union HSD San Mateo $41.90 EKings Canyon USD Fresno/Tulare $40.00 KKnightsen ESD Contra Costa $3.00 HLancaster ESD Los Angeles $63.00 LLindsay USD Tulare $16.00 LLittle Lake City ESD Los Angeles $18.00 EELynwood USD Los Angeles $93.00 KMcFarland USD Kern $25.00Mendota USD Fresno $19.00 MMorgan Hill USD Santa Clara $198.30 G

Local Districts have placed $11.4 billion in

bonds on the November ballot.

In addition, $750 million was passed by locals in

November 2011—an “off” year.

Most recently $1.6 billion was passed by locals in

June 2012.

Significant opportunities for continuing school

facilities construction.

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Energy, Renewables, Green Building

Continued focus on school projectsEnergy efficiency Performance Contracting Rebates, utility and local agency programs

Renewable energy systems Local bond funding State funding when available Energy Commission Loans—”Bright Schools” program

Green building standardsSchools a focus—CHPS, LEED for SchoolsLeading the green construction team

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Construction in our regulated world

School construction ongoing requirementsState funded projectsContinue these programs in order maintain the

option of filing to receive state funds

Labor compliance DIR Compliance Monitoring UnitRequired for all public works projects receiving

state bond funds

Mandatory pre-qualification for Contractors Including MEP Subcontractors

Major Benefits from Past 10+ Years of

Investment

• ~20% enrollment growth• Overcrowding relieved• Upgraded thousands• 70/30 local/state share

• Sound planning?• Wise investment?• Policies needed?

Comprehensive Look at Past and Future

Today’s Context• New economic era• New state policy framework on

infrastructure & land use: climate change & sustainable communities– “communities that promote equity, strengthen

the economy, protect the environment, and promote public health and safety” (Public Resources Code § 75125, originally SB 732)

State Planning Priorities for Infrastructure

• Promote infill development and equity• Protect environmental and agricultural resources• Encourage efficient development patterns

(Government Code § 65041.1, originally AB 857)

CA cannot afford to not be strategic:A shift is needed

• To existing facilities focus• To investing in community sustainability• To intentional innovation

Why School Facilities Matter

• Affect teaching and learning

• Affect land use, growth, travel

patterns, VMT, housing choicesU.S EPA. (2003). Travel and Environmental Implications of School SitingU.S. EPA. (2011). Voluntary School Siting Guidelines. PACE and CC&S. (2009). Smart Schools, Smart Growth. UC Berkeley

Uline, C. (editor). (2009). Special Issue, Journal of Educational Administration 47(3).Higgins, et al. (2005). The Impact of School Environments. University of Newcastle.

Source: PPIC 2008

K-12 Schools34%

Californian’s Invest in K-12 Infrastructure

Appropriate Accountability

Adequate Equitable Funding

Infrastructure Best Practices Framework

Effective Management

Sound Planning

Estimating K-12 Capital Needs:

• New Construction– Enrollment growth/crowding– Building Replacement

• Modernization– For health, life-safety, and ADA– For educational program delivery

• Capital Renewals– Scheduled replacement or restoration (2-4%)

Estimating Needs:

$117 billion to ensure safe, modern, equitable, and sustainable learning environments for all students

Recommendations:Leveraging the State Role

1. Establish state vision & master plan2. Promote local intergovernmental planning3. Assemble needed information4. Review & update Title 5 (CCR)5. Set funding priorities6. Establish state funding of capital renewals7. Identify multiple revenue sources8. Improve public accountability

Harnessing Efficiencies & Benefits

Three levers:1. Policy reforms2. Process innovations3. Technology tools

1. Adopt vision & master plan

a. K-12 on Strategic Growth Council

2. Promote local inter-agency planning

a. Include K-12 in SB 375, etc.b. Require standards-based LEA master plansc. Provide guidance for local joint planningd. Set minimum green building criteriae. Use CEQA strategically

3. Assemble info to bestrategic and prioritize

a. Develop inventory & assessment tool

4. Review & update Title 5, CCR

a. Statewide comparison of schoolsb. Supports sustainable communities

5. Set priorities to remedy inadequate facilities and support new construction

a. Identify state-level needb. Establish criteria for rankingc. Bring all schools to minimum leveld. Develop transparent funding formula

6. Establish capital renewals funding

a. Shift from reactive to proactive approach

7. Identify multiple revenue sources

a. Consider statewide special taxb. Public/private partnership legislationc. Periodic bond use

8. Improve accountabilitya. Produce annual reportb. Inter-agency info systemc. SFP Citizen’s Oversight Committeed. Maintain Implementation Committeee. Streamline approval processesf. Support technology tools

Stakeholder Input Sessions

• October 1 School Implementation Advisory Committee Roundtable

• October 16 CASH Fall Conference

• November 13 Video Conference

• December 6 Symposium by Center for Cities and Schools, California Department of Education, and Strategic Growth Council

Implementation Recommendations

• Prepare Implementation Recommendations for the State Superintendent of Public Instruction by December 31.