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Santa Clara Unified Faces $1.5 Billion Worth of Capital Needs, Considering $875 Million Bond Issue

Silicon Valley leads the world in generating wealth—it’s a valley of the “haves.” But its school buildings tell a different story—a valley of the “have nots,” so to speak.

A visit to many local school districts will reveal overcrowding, temporary classrooms, buildings sorely in need of renovation, and a long list of unfunded maintenance needs.

Santa Clara Unified School District (SCUSD) isn’t an exception. Although the district opened a new, refurbished elementary school, modernized another one, and is on the way to building three new schools to serve the Northside of the district, there is still a list of needs adding up to about $1.5 billion. (A detailed list by site can be found at www.santaclarausd.org/Page/75 under “Facility Needs Update”).

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The SCUSD Board of Trustees was supposed to decide at last week’s meeting whether to move ahead with an $875 million bond for capital improvements to existing schools and constructing new facilities for the June ballot. But the decision was postponed until March 27 in the face of what pollster Timothy McLarney of True North Research clearly regarded as a potential obstacle to voter support.

These projects include constructing the new Northside high school, which will serve 1,600 students; replacing aging and outdated roofs, plumbing, electrical and HVAC systems; renovating Patrick Henry and Monticello schools to re-open them; rebuilding Peterson’s pool; upgrading and building new science, engineering and career technical education facilities; rebuilding and upgrading playgrounds; bringing older schools up to new standards; and renovating and equipping classrooms for current instructional methods.

The bond would levy an additional property tax of $0.05 per $100 of assessed value—or $50 per $100,000—for 39 years.

The complication is AB 195, passed by the California legislature last summer, which requires the new disclosures for bond questions: “the ballot shall include …the amount of money to be raised annually and the rate and duration of the tax to be levied” and a “true and impartial synopsis of the purpose …that is neither argumentative nor likely to create prejudice.”

McLarney’s polling shows the measure currently with 56 percent support—one percent higher than needed for passage, but less than 60 percent approval level increased last June. When voters see the numbers—”financial mumbo jumbo” he called it—support drops, he said.

His contention is that voters pay more attention to the 75 words on the ballot than they will to any detailed information in the ballot pamphlet or from other sources. And when some of those 75 words are used for telling voters what the bond will cost, “That is the language that’s drawing voters attention from the school district needs,” he said.

McLarney further seemed to doubt homeowners’ ability to distinguish between assessed value and market value. “When they begin to see cost per hundred dollars of assessed value, the repayment per year,” he said, voters will be confused.

Voters should, however, have good reason to be happy with SCUSD’s bond record. For SCUSD’s four bond issues since 1997, tax levies have been less than half the forecast—a average total of $83 instead of $185. There are several reasons for this, says Lori Raineri, President of Government Financial Strategies.

One is that the district is conservative in its assumptions about tax base growth and interest rate. Another is that the district has been strategic about refinancing debt at lower rates. In addition, the district is well below its bonding limit.

All of this adds up to an AAA rating, which leads to additional benefits for taxpayers. Not only are tax levies lower, bond issuing costs are also less. The savings to taxpayers is a total of $446 million more for schools over the last decade.

While residential property makes up 77 percent of individual parcels, it only accounts for 30 percent of SCUSD’s property tax revenue. Commercial, industrial and manufacturing deliver almost three-quarters of the district’s property tax revenue. The district’s four largest taxpayers are Irvine Corp, Apple, Levi’s Stadium and Cisco. These companies together would pay an additional $3.8 million if the bond measure passed.

“Santa Clara Unified has a record of fiscal stewardship that is unmatched,” said Raineri.

 

California’s School Construction Rubik’s Cube

Bond financing is one of the few resources California school districts have for facilities and new school construction. State-capped developer fees cover a small portion—about 25 percent—of the upfront costs of new school construction. Operating revenue—property taxes and the state per-student allowance—cannot be used for school construction.

California’s school construction funding is a tortuous maze of state-set developer fees, state matching funds, and local bonds and parcel taxes—described by UC Berkeley’s Center for Cities and Schools as grossly and systematically “inadequate” and “inequitable,” and offering just enough money to keep schools perpetually in a “steady state of repair.” A 2015 study by the California Legislative Analyst’s office (LAO) concurred, calling California’s school construction funding an “administrative and programmatic labyrinth.”

 The complexity of application for state funds has only grown since 1998, according to the LAO, in some cases requiring school districts to work with 10—or more—state agencies to complete a construction project. Again, wealthier districts benefit because they can afford staff time to navigate the administrative maze, write proposals and develop detailed construction plans.

California isn’t alone in its school construction funding deficit. In a 2016 study, America’s K-12 School Facilities, the education advocacy non-profit 21st Century School Fund (www.21csf.org) estimated an annual national shortfall of $46 billion for school maintenance, renovation and construction.

 

*This article was corrected on Feb. 27, 2018 to reflect that the bond measure is for $875 million instead of $825 million*

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