Lay of the Land
Yesterday, California voters approved Proposition 51, a $9 billion bond to replenish the State’s school construction fund. Proposition 51 was passed just in the nick of time because, according to the California State Allocation Board (SAB), the State has run out of money for new school construction.
Just last week, despite the outstanding legal efforts of the California Building Industry Association (CBIA) to forestall it, SAB published a notice to initiate significant “Level 3” school fee increases throughout California. The passage of Proposition 51 (for which we can thank CBIA leadership, among others) will replenish the State’s coffers and should provide a defense against the imposition of Level 3 fees. Politics being what they are, however, it remains to be seen whether Proposition 51 will actually induce cash-strapped school districts to drop their guard.
Given the uncertainty surrounding school construction in California, builders are looking for creative alternatives. Just this year, Cox Castle lawyers negotiated two widely-touted developer-built-school deals with districts in the Bay Area (Fremont and Foster City-San Mateo). These highly-specialized transactions can provide great benefits to builders, including assurance of timely delivery of new schools to serve their neighborhoods and the potential for reduced costs in light of the significant upward pressure on statutory school fees. These deals also provide benefits to school districts in the form of state reimbursement of funds from Proposition 51.
These transactions are complex and take time to negotiate. If you or your building or development company are looking for ways to navigate this uncertain regulatory environment, it may be worth your while to consider building a school.