1 The Future of School Facilities Funding & Construction in California CMAA Northern California Chapter October 3, 2012 William Savidge, Assistant Executive Officer State Allocation Board Kathleen Moore, Director School Facilities and Transportation Services Division California Department of Education Agenda 2 A decade of strong commitment A new world of State/local bond debt constraints State school facilities funding in transition School facilities construction over the next 2 years Where 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.” Over a Decade of Strong Commitment School Facilities funding prioritized Meeting California’s growth needs Modernizing existing schools Over $35 billion in State Bond Funds 1998 School Facility Program Growth of targeted state funding programs Not just New Construction & Modernization High Performance Charter Schools Overcrowding Relief Grants Seismic Mitigation Joint Use 3 Over a Decade of Strong Commitment $66 billion local funding for school facilities General 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 bonds Local residential growth impact funding Local development districts CFD’s, Mello Roos, others 4 The New World: Debt Constraints Changed economic climate—financial crisis! State infrastructure investment impacts Schools one infrastructure area competing for voter-authorized funding Parks, levees, transportation, high-speed rail… 5 The New World: Debt Constraints Impacts to the State General Fund Debt-service payments continue to rise Compete 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 funding Bi-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! 6 California’s Bond Debt Has Increased Significantly Since 2003 7 – 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 Notes: Includes Non Self-Liquidating General Obligation (GO) bonds, SPWB Lease Revenue Bonds (LRBs), Economic Recovery Bonds (ERBs) 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 bonds were authorized in 2009 and issued by the California Statewide Communities Development Authority. 2 As a Result, Debt Service Has Also Increased 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. 3 8 State Debt Service Forecast 9 We’ve come out of the recession stronger Balanced state budgets from legislature and governor Reducing long-term structural deficit Future scenarios regarding infrastructure investment Strategic Growth Plan future investment needs With anticipated new debt—including school bonds Will still have a high level of bond debt as percent of General Fund revenues State Debt Service Forecast 10 Local Debt Constraints 11 Local funding for school facilities Developer fees have dried up with the housing market… Local General Obligation Bonds Proposition 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 investments Tax rate limitations become critical LAUSD has billions in voter-authorized bonds—unable to sell Local Debt Constraints 12 Local debt service and limitations—finding ways to create room under the line! 13 State funding end game… State funding in transitiion… 14 Still $2.4 billion in the “pipeline” Including Unfunded Approvals waiting for cash Funds/programs with remaining authority Earliest date for new state school facilities bond November 2014 OPSC has applications in-house That exceed remaining bond authority Modernization $116 million New Construction $58 million As of August 31, 2012 State funding in transition State Allocation Board action Acceptance of Applications Beyond Bond Authority Creation of new process “SAB-Acknowledged Workload List” Limited processing of applications No “Unfunded List” as in the past Board concerns regarding No guarantee of state funding in future Changes to state program 15 School Facilities Construction Navigating the next 2 years Local bond funding continues for schools Green 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 16 2012 School Facilities Bonds District 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. Alum Rock Union ESD Alvord USD Anderson Union HSD Antioch USD Arcata ESD Bellflower USD Burlingame ESD Butteville Union ESD Brawley ESD Cajon Valley Union SD Calexico USD Caruthers USD Castaic Union ESD Chaffey Joint Union HSD Chico USD Chula Vista ESD Coachella Valley USD College ESD Covina-Valley USD Del Mar Union ESD Dehesa ESD Delhi USD Earlimart ESD East Side Union HSD Elk Hills ESD Escalon USD Folsom Cordova USD Fortuna Union HSD Fountain Valley ESD Gravenstein Union ESD Gridley Hemet USD Hueneme ESD Inglewood USD Jefferson ESD Jefferson Union HSD Kings Canyon USD Knightsen ESD Lancaster ESD Lindsay USD Little Lake City ESD Lynwood USD McFarland USD Mendota USD Morgan Hill USD Amount (in millions) Santa Clara $125.00 Riverside $79.00 Shasta $12.30 Contra Costa $56.50 Humboldt $7.00 Los Angeles $79.00 San Mateo $56.00 Siskiyou $3.50 Imperial $7.50 San Diego $88.40 Imperial $41.00 Fresno $12.00 Los Angeles $51.00 San Bernardino $848.00 Butte $78.00 San Diego $90.00 Riverside $41.00 Santa Barbara $12.00 Los Angeles $129.00 San Diego $76.80 San Diego $3.00 Merced $8.00 Tulare $3.60 Santa Clara $120.00 Kern $6.20 San Joaquin $19.50 Sacramento $68.00 Humboldt $10.00 Orange $23.50 Sonoma $6.00 Butte $11.00 Riverside $49.00 Ventura $19.60 Los Angeles $90.00 San Mateo $67.50 San Mateo $41.90 Fresno/Tulare $40.00 Contra Costa $3.00 Los Angeles $63.00 Tulare $16.00 Los Angeles $18.00 Los Angeles $93.00 Kern $25.00 Fresno $19.00 Santa Clara $198.30 County Mount Pleasant ESD Santa Clara San Diego Riverside J Nuview Union SD Alemeda W Oakland USD Ocean View SD Orange C Ocean View SD Ventura B Oxnard SD Ventura F Pacific ESD Santa Cruz BB Pajaro Valley USD Santa D Palmdale ESD Los Angeles R Panama-Buena Vista Union Kern Riverside S Perris Union HSD Tulare C Porterville USD San Diego X Ramona City USD Los Angeles C Redondo Beach USD Ripon USD San Joaquin QS Roseland ESD Sonoma P Rowland USD Los Angeles E Sacramento City USD Sacramento E Sacramento City USD Sacramento X San Bernardino City USD San Bernardino K2012 San Carlos ESD San Mateo San Diego CC San Diego USD San Diego CC San Dieguito Union HSD Santa Clara D San Jose USD Sacramento E San Juan USD San Ramon Valley USD Contra Costa H Sanger USD Fresno I Santa Monica-Malibu USD Los Angeles Santa Ynez Valley Union Santa Barbara B Soledad USD Monterey P Somis Union SD Ventura D Sonora Union HSD Tuolumne San Diego N South Bay Union ESD Monterey M Spreckels Union ESD Napa G St. Helena USD Kern U Standard ESD Stockton USD San Joaquin T Summerville Union HSD Tuolumne GG Temecula Valley USD Riverside I Temple City USD Los Angeles E Templeton USD San Luis Obispo K Visalia USD Tulare H Washington USD Fresno Merced L Weaver Union SD Contra Costa L West Contra Costa USD Los Angeles EE Westside Union ESD Glenn K Willows USD Wilmar Union ESD Sonoma Wheatland Union HSD Yuba M Whittier City ESD Los Angeles G Yucaipa-Calimesa Joint USD San Bernardino MeasureMountain Empire USD 17 $25.00 $30.80 $4.00 $475.00 $198.00 $4.20 $90.00 $0.83 $150.00 $220.00 $147.00 $153.42 $90.00 $66.00 $63.00 $25.24 $7.00 $158.80 $346.00 $68.00 $250.00 $72.00 $2,800.00 $449.00 $290.00 $350.00 $260.00 $50.00 $385.00 $19.84 $40.00 $8.00 $23.00 $26.00 $7.00 $30.00 $11.20 $156.00 $8.00 $165.00 $128.80 $35.00 $60.10 $22.00 $9.00 $360.00 $18.51 $14.70 $4.00 $9.00 $55.00 $98.00 L G V J P P R M L DD T J R Q G N R Q R N H Z AA H N D S ES L2012 C S Y B C E H Y S H-12 E W G E WR P P U Z O Energy, Renewables, Green Building Continued focus on school projects Energy 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 standards Schools a focus—CHPS, LEED for Schools Leading the green construction team 18 Construction in our regulated world School construction ongoing requirements State funded projects Continue these programs in order maintain the option of filing to receive state funds Labor compliance DIR Compliance Monitoring Unit Required for all public works projects receiving state bond funds Mandatory pre-qualification for Contractors Including MEP Subcontractors 19 Major Benefits from Past 10+ Years of Investment • ~20% enrollment growth • Overcrowding relieved • Upgraded thousands • 70/30 local/state share Comprehensive Look at Past and Future • Sound planning? • Wise investment? • Policies needed? 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 Uline, C. (editor). (2009). Special Issue, Journal of Educational Administration 47(3). Higgins, et al. (2005). The Impact of School Environments. University of Newcastle. • Affect land use, growth, travel patterns, VMT, housing choices U.S EPA. (2003). Travel and Environmental Implications of School Siting U.S. EPA. (2011). Voluntary School Siting Guidelines. PACE and CC&S. (2009). Smart Schools, Smart Growth. UC Berkeley Californian’s Invest in K-12 Infrastructure K-12 Schools 34% Source: PPIC 2008 Sound Planning Effective Management Adequate Equitable Funding Appropriate Accountability Infrastructure Best Practices Framework 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. 2. 3. 4. 5. 6. 7. 8. Establish state vision & master plan Promote local intergovernmental planning Assemble needed information Review & update Title 5 (CCR) Set funding priorities Establish state funding of capital renewals Identify multiple revenue sources Improve public accountability Harnessing Efficiencies & Benefits Three levers: 1. Policy reforms 2. Process innovations 3. Technology tools 1. Adopt vision & master plan a. K-12 on Strategic Growth Council 2. Promote local inter-agency planning a. b. c. d. e. Include K-12 in SB 375, etc. Require standards-based LEA master plans Provide guidance for local joint planning Set minimum green building criteria Use CEQA strategically 3. Assemble info to be strategic and prioritize a. Develop inventory & assessment tool 4. Review & update Title 5, CCR a. Statewide comparison of schools b. Supports sustainable communities 5. Set priorities to remedy inadequate facilities and support new construction a. b. c. d. Identify state-level need Establish criteria for ranking Bring all schools to minimum level 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 tax b. Public/private partnership legislation c. Periodic bond use 8. Improve accountability a. b. c. d. e. f. Produce annual report Inter-agency info system SFP Citizen’s Oversight Committee Maintain Implementation Committee Streamline approval processes 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.