Grand Jury Reports for 2007-2008*

Recommendations 17

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  0 0 0 0 0 0 0 Y 13,574,237 2005-06 20,011,841 3,068,854 6,437,604 1,722,565 1,646,185 1,303,250 342,935 964,684 524,800 186,564 46,517
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  Special districts considering new assessment fees should consult the E Placer County Clerk / Recorder / Registrar for guidance in conducting an P impartial procedure. 0 2. Signature requirements should be made verifiable by balloting officials R and required to meet the recognized California State Election Code stand- Т ards of confidentiality. 3. Informational pamphlets pertaining to special benefit assessments should 2 be written with an impartial analysis of both primary and rebuttal argu- 0 ments, if any. In order for ballot counting procedures to be transparent and accessible to 4. 7 public viewing, the ballots should be opened, qualified and counted at the - hearing location at the conclusion of the public hearing. P L
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  Thus the near-term focus would be to add another elementary school, Υ at an estimated cost of $33 million, by 2011. Next in priority would be a new high school by 2013, at an estimated cost of $136 million; then a R middle school by 2014, estimated to cost $64 million. E 3. Glen Edwards School must continue to serve as a middle school for many P years. WPUSD must be aggressive in obtaining funding for future schools. 4.
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  What is the timeline for the new high school? T In February 2007, Curt Pollack presented the results of his analysis to the board. He stated that the debt was $189 million ($127 million borrowed plus $62 0 million in eventual interest). He presented six recommendations to the Board. Postpone any new projects. 1. 7 2. Perform a full debt analysis. Reconsider the configuration of future schools. 3. P L 6. Renegotiate joint-use agreements with the city. Α C In June 2007 Bruce Kerns, an employee of the investment firm, Stone and Ε Youngberg, presented his analysis of the district's debt to the board. He R demonstrated that the CFD and developer fees would not cover the existing C debt. By 2009 the expenditures for debt service would outweigh revenues, and 0 by 2012 it could affect the district general fund. He recommended the district U issue a new GO or CFD bond and tie any financing plan to the facilities plan N that was being revised. T Y The board found this report useful, but did not feel additional GO bonds would be passed by the voters. A consultant, Cathy Dominico from Capital Public G Finance Group, was hired to find other creative ways to finance the debt. On R November 20, 2007 the board held a budget workshop where she presented her Α suggestions. [Appendix G.] As noted previously, there were five outstanding N COPs. Ms. Dominico suggested the district refinance three of the COPs with D a shorter life and variable interest rates. By extending the time to pay these J off and locking in interest rates, the monthly payments could be lowered to something manageable. To cover these payments the district should use all U R available remaining facilities money (approximately $6 million), Mello-Roos Υ fees, and developer fees (projected at $800,000 per year, increasing 5% each year). Using conservative assumptions, it was expected this plan would avoid R affecting the General Fund until at least 2018. The district accepted this course Е of action. P 0 Some other observations at that time about the budget were R The district is still obliged to pay its share of the projects being built in Т partnership with the city, which were the library and the city hall. 90% of the general fund is used to pay employees, leaving only 10% for 2 other expenses. Having to pay for the debt from the general fund would 0 affect all other school programs. Cost-of-living salary increases were funded for 2007-2008, but were ten- P L near future, the district will probably need to pursue several avenues. Α Apply and qualify for state hardship funds. C Receive state money through grants for career technical programs. E Get special funding as a small school district. R Plan to build at future school sites in phases. Use less expensive designs, possibly even borrowing site plans from C other districts. U Design, Contracts, and Construction N In 1995 WPUSD selected the architectural firm, NTD, as the school district's T Y architect, after a competition with two other finalists. NTD is headquartered in San Diego and has a local branch office in Auburn. WPUSD came to trust G and rely on an architect at NTD. In 2003, when it needed to implement its R aggressive building program, the board stayed with NTD, rather than seek new Α competitive bids. N D WPUSD wanted to be sure the new facilities would meet the expectations of the residents, so NTD was directed to make the school facilities "comparable" J with Rocklin and Roseville. NTD designed unique, high-end schools with many U amenities and received several awards for these designs. NTD was compensated R based on the total cost of the projects; it was paid $5,179,249 in design-related Υ fees for the Twelve Bridges High School. R NTD entered into a limited partnership with Edge Development, a contractor E P also headquartered in San Diego. NTD/Edge solicited bids from sub-contractors 0 and negotiated a Maximum Price Contract, with WPUSD. They also engaged R in a value engineering exercise before the project began. Value engineering Т is a review of the design and materials to see if there are any opportunities to substitute less expensive construction techniques, materials, or design elements 2 without compromising the quality of the facility. WPUSD relied on NTD to 0 represent the district, because it lacked in-house staff qualified to manage this 0 activity. Very few value engineered changes were documented. P L mechanism. If an inspector finds a deviation, either the contractor needs to Α correct it or the architect must change the design to accept the deviation. The C architect then sends the accepted change to the Division of State Architects to Ε update the design drawings. R C The Grand Jury heard testimony that a state-certified school building inspector, 0 hired by the WPUSD, required a change in construction, to meet plan U requirements. The change was not made; instead the architect revised the plans N retroactively to accommodate the actual construction There were also instances T where an inspector requested a change and the contractor covered the area with Y drywall, so it couldn't be reinspected. G Although the contracts are called "Maximum Price Contracts," they include R certain contingencies, along with inflation factors, and percentages for cost Α over-runs. After projects are complete, the contracts should be audited to be N sure a district receives any refunds due them. D J Based on staff testimony, the initial bids and awards were reviewed by the school board. However, before June 2006, all contracts and change orders were U R negotiated and approved by Mr. Stewart and Superintendent Yohe, without Υ review by the board members. Today, these types of contracts are managed by Cathy Allen, Assistant Superintendent of Facilities, and changes are reviewed R and approved by the board. E P In August 2007, the district maintenance staff raised concerns about the 0 district's relationship with NTD/Edge, contractual irregularities, and poor R quality construction. The Grand Jury did not look into these allegations in detail Т because the district hired a consultant, Bob Aaronson, to investigate them. The district has since retained a new architect. 0 0 7 Western Placer Unified School District Foundations There are three foundations associated with WPUSD: . P L Α The Lincoln High School Farm Foundation was established over 30 years ago C on land donated by the federal government. It is a unique gem that most school Ε districts in the state would envy. The function of the farm is to expose students R to agriculture and the environment and to show how these can work together. C The foundation's purpose is to provide education in and appreciation for both 0 farm production and natural resources. U N The Western Placer Education Foundation (WPEF) was established in early T 1998 as "a non-profit public benefit corporation to support and promote Y excellent education in the Western Placer Unified School District." It manages 151 acres of donated property and administers an educational fund. It awards G grants to district schools and teachers which are generated from this fund. R Α The Western Placer Financing Corporation was created for the purpose of N issuing COPs for the district's needs. D J The foundations have volunteer governing boards, including members of the WPUSD School Board, the administration, the teaching staff, and members of U R the community. Foundation members who were interviewed were passionate, Υ dedicated and proud of their organizations. Volunteers put in many hours of service and some have supported these foundations for decades. However, R as volunteers, they often do not have a complete understanding of non-profit E reporting requirements and responsibilities. Also, the public is easily confused P about the foundations' roles and relationships with the school district. R Land and Facilities Transactions T WPUSD, the Lincoln High School Farm Foundation, the Western Placer Education Foundation, and the City of Lincoln were involved in several 2 transactions involving land swaps and integrated facilities projects. 0 0 7 The Lincoln Community Center is next to Creekside Elementary School, at First Street and Joiner Parkway. The city built the community center . in 1993, but could not service the debt a few years later. The district took P L tions. In early 2006, the district sold the facility back to the city for $6.1 Α million, to raise money for its share of the city hall construction. WPUSD C planned to build a new multi-purpose room/cafeteria at Creekside Ele- Ε mentary, but the current debt problems caused the board to suspend those R plans. C The City of Lincoln built a new four-story city hall on Sixth Street for ap- 0 proximately $22 million. WPUSD contributed $5 million to the construc- U tion in exchange for one floor of the building for district offices. In addi- N tion to this payment, the district signed a 55-year lease with the city. At T the end of that period the district will own its share of the building. Staff Y occupied the new building in February 2008. G The new Lincoln library was a joint project with the City of Lincoln, R WPUSD, and Sierra College. It was planned to be a multi-use library at Α the Twelve Bridges Learning Center, used by the city, the future Twelve N Bridges High School, and a future Sierra College extension. State fund- D ing was secured with the understanding that it would be primarily used as a high school library. The high school and the community college exten- J sion plans have been suspended, so the library is currently used only as U a city library. WPUSD contributed $2.2 million to the construction costs R and, in accordance with the original agreement, continues to pay approxi- Υ mately $120,000 annually in operational funds R Twelve Bridges Placer Holdings, Inc., a developer, donated 179 acres to E the Western Placer Education Foundation in 1999. This property is ad- P ministered by the foundation for WPUSD as an "Outdoor Learning En- 0 vironment," and includes a Native American archaeological site. In 2007 R the foundation sold 28 acres to Westpark, a developer, for $1.4 million. Т The foundation is currently using these monies to generate income for educational grants within the district. It plans eventually to use the money 2 to build a learning center on the site. The remaining 151 acres has an 0 easement that prevents the foundation from selling it for development. 0 7 Three decades ago, WPUSD was offered 280 acres of former Beale Air - Force Base property by the federal government. After using the property P L coln High School Farm, an agricultural educational facility. In May 2006 Α WPUSD entered into an agreement with Wildlands, Inc. for a "Western C Placer Vernal Pool Conservation Bank." Ε R Wildlands agreed to give WPUSD 126 additional acres adjacent to the existing farm and $750,000. The $750,000 was deposited in the general C fund as a restricted account and the income generated from this account 0 supplements the farm budget. Wildlands also set up an endowment that U generates additional money for property maintenance. In exchange the N district agreed to deed 224 acres to be used solely for "future wetlands T mitigation purposes." Wildlands was granted these environmental ease- Y ments, which it can sell to developers. The original 280 acres, plus the 126 acres from Wildlands, totals 406 acres. The balance of this prop- G erty, after deducting the 224 acres that will be used for wetlands mitiga- R tion, is planned to be divided into 60 acres for a future high school and Α 122 acres for the Lincoln Farm. N D The Zebra Housing Project is a joint program with the city at Creekside Village. This is a self-funded program for low-income housing. It is an J educational program, where students get on-the-job experience in the U building trades. The city and developers collaborate on the land and fees. R The students contribute the labor, and the sale of each home built sup- Υ ports the other building costs, such as materials. Four homes were built under this program, with one left for sale. Once sold, all costs should be R covered and the program should have zero balance. At the school board E meeting on December 4, 2007, board members expressed surprise that P there was not a positive balance, since the land and labor were donated. The school board is re-assessing this program and there are no plans to R build additional homes. T All new schools built in the district have adjoining city parks. The 2 schools have priority in using the parks. To reduce cost, the school dis- 0 trict is managing the bidding and construction of the schools and parks 0 as one project. Once complete, the city will pay the district for the cost of P L Observations about District Communication, Relationships and Oversight A C The School District Ε During its investigation, the Grand Jury discovered that past communication R within the district was not as open as it should have been. It heard instances C of dialog being stifled, warnings going unheeded or not being passed to the 0 responsible parties and important questions being left unanswered. This lack of U accessibility and dialog led to staff frustration and, it appeared, contributed to N poor decision making. T Y The Grand Jury saw indications that communication and relationships within the district had improved, but they were still inadequate. There was still some G unhealthy tension within the district organization that could distract the staff R from focusing on solving problems and serving students. Α N The Public D The Grand Jury was also told that under the prior district administration, the district was not very open with the public. It was difficult for citizens to access J data and to voice concerns. This increased the public's apprehension and U distrust. R Υ It appears the new superintendent has made an effort to be candid and R transparent. He quickly disclosed problems as they were discovered and held E "Facilities Forums" to directly and publicly answer questions. Although the P community did not like many of the answers, this openness has definitely 0 improved community relations. The Grand Jury still heard complaints from R citizens that access to public information is slow and the board appears T indifferent to some individuals' comments. The City of Lincoln 0 WPUSD has a close, rather complicated relationship with the City of Lincoln. 0 7 It is good for a school district to nurture a positive relationship with its local cities. It depends on the city to use its leverage during the planning process - P L the parks, to the library, to the community center, to the Zebra Housing Project, Α to the city hall. C Ε School Board Decisions R The school board makes many decisions, usually based on information C supplied by the district administration. However, the Grand Jury saw a pattern 0 of complacency and lack of oversight that concerned jurors. According to U testimony, Superintendent Yohe manipulated a passive school board to follow N his vision. Here are examples. T Y 1. Superintendent Yohe hired Ken Gammelgard as District Director of Site Development. Gammelgard did not have the experience and qualifica- G tions for this position, especially given the expected growth in facilities R construction projects. Gammelgard was a school principal, and it was Α simply convenient to retain existing personnel within the district. N D 2. District Superintendent Yohe was transferred to the new position of Facil- ities Superintendent. He also had no apparent experience or qualifications J in managing construction. This move was approved at a board meeting U on April 4, 2006. He was given a three-year contract and his salary was R raised to $155,000 a year, an increase of $4,730. At the same meeting the Υ board named Scott Leaman to replace Roger Yohe as Superintendent, at a salary of $139,000 per year, an increase of $22,788. This created two R superintendent roles and confusion about reporting relationships. These Е changes were effective July 3, 2006. P 0 3. On December 5, 2006, the board decided that the position of Facili- R ties Superintendent was no longer needed. The parties came to a mutual Т agreement to cancel the contract. The board agreed to keep Yohe in this position and pay his full salary until June 30, 2007. The board also agreed 2 to pay health, dental, and welfare benefits for Yohe and his spouse until 0 they become eligible for Medicare benefits at age 65. 0 7 The board did not closely monitor the growth of debt and the cost of 4. - construction. The Grand Jury did not find evidence that the funding P L regarding construction contracts, negotiations with the builders, and con- Α tract change orders. C E R FINDINGS C WPUSD made many errors and misjudgments in facilities construction 0 and financing during the last decade. The WPUSD board and administra- U tion, under Roger Yohe's leadership, did not follow generally accepted N sound business practices in the performance of their duties regarding the T design, funding, and construction of new schools. Examples are Y Superintendent Yohe influenced the board to follow a fiscally ir- \triangleright responsible path toward his overly ambitious vision. G He initiated and approved design and construction of high-end, R state-of-the-art facilities with no sound, achievable financing plan Α in place. N \triangleright The WPUSD hired unqualified individuals to lead the aggressive D new facility construction. The board's lack of oversight and pattern of complacency did not J meet its fiduciary responsibilities. U R In the early 2000's the district had a short-term Facilities Master Plan that Υ was loosely coupled to the funding plan. The district based their deci- sions on the same assumptions of growth, in development and equity, R which most lenders and home buyers were using to make decisions. With E the economic downturn, WPUSD suffered the same reversal as many P others. The evidence indicates the district personnel and the school board 0 thought the finances were fine and were surprised in Fall 2006 to discover R their dilemma. The evidence also indicates they should have anticipated Т the problem. They should have used more checks and balances, better communication, and more conservative assumptions. The Grand Jury be- 2 lieves the school board should have examined the school costs and fund- 0 ing mechanisms more closely. P L Although COPs are a less secure form of school financing than CFDs, Α and WPUSD relied heavily on them, the Grand Jury found them an ap- C propriate method of financing new schools. Since Proposition 13, most Ε school districts had to discover creative funding avenues, especially for R building new facilities. Some were less desirable due to increased risk. Many districts turned to COPs. The district could not raise enough up- C front funding through CFD bonds and it believed that GO bonds would 0 not be supported by a majority of the community in Lincoln. WPUSD U expected the COPs to act as short-term bridge loans, to be covered by N developer fees and the CFDs, but the downturn in the housing market T altered those plans. Y The Grand Jury found no evidence of misuse of the CFD funds. There are G clear accounts designated to manage these funds within the school dis- R trict. Some of the funds can lawfully be used for operations tied to build- Α ing new facilities. WPUSD is audited annually and the funds appear to be N managed correctly. D The facilities building program was under-staffed and the people appoint- J ed to oversee construction did not have the expertise required to plan and U manage the projects. This problem was addressed, to some degree, with R Lincoln Crossing Elementary School. Υ The district performed little or no oversight of the architect and the con- R tractor, and there was not appropriate administration of some contracts. E The partnership between NTD and Edge gave the appearance, at the very P least, of a conflict of interest. R The community had unrealistic expectations about the quality of new Т schools the district could afford. It also anticipated unrealistically low numbers of students in each school. 2 0 The community was told the district would build a new high school. However, Superintendent Leamann and the board acted properly in halt- 7 ing construction when they realized the extent of the district's debt. The - subsequent interim Master Facilities Plan is well-documented and logi- P L Within the district, staff relationships were strained and communication Α was inhibited. The district had confusing organization structures, causing C internal quarrels, and restrained information flow. Ε R The non-profit foundations within the district are managed correctly and benefit it. The Grand Jury believes that Lincoln High School Farm is a C valuable and unique asset, not only for the high school, but for the entire 0 district. U N The many land and facility transactions between the district, and the city Т and developers were done to benefit the district. However, the Grand Jury Υ believes that the district did not always maximize those benefits. In the long term it may be good to have land available to build new schools. G Yet, in the short term, the administration of these transactions, manage- R ment of the farm, and nurturing relationships with the city and Sierra Α College, may have distracted the district from the focus needed for their N major construction program. D The Grand Jury believes the current district administration has taken ap- J propriate steps to address the district's financial situation. U R Υ Conclusions / Recommendations R The school board members must clearly understand their role and respon- 1. E sibilities. The board plays a vital role in the well-being of the district. P They must work with the administration, but examine information criti- 0 cally. They must support and assist the superintendent to achieve district R goals, and must hold the superintendent accountable for district finances, Т practices and policies. They must require high standards, to maintain dis- trict financial health. 2 0 2. WPUSD should guarantee all building projects are tied to defined and 0 specific funding sources. The school board should perform an annual re- P L 3. WPUSD must be determined to protect its own interests. Given its cur- Α rent financial situation, there is little margin for error. It should make no C commitment to schools in the new developments until clear, firm and Ε sustainable funding mechanisms are in place. Schools are an asset for the R entire community and WPUSD must encourage developers and the city to jointly shoulder this burden. The Grand Jury agrees with Dr. Ron Feist, C who said it is vital for the district to partner with the City of Lincoln to 0 develop the financial resources needed to build future school facilities. U N 4. WPUSD must ensure it is receiving fair value in all transactions with Т other organizations, such as the City of Lincoln or Wildlands, Inc. Υ • It must negotiate business arrangements, such as the selling of environ- mental mitigation rights, to maximize district benefits. G • It must use competitive bidding for all contracts. R • It must be sure it is promptly paid by the city for joint projects, such as Α parks. N • It must be very confident joint ventures with the city, such as the library D and city hall, are in the best, long-term interest of the school district. J 5. The school district should not allow partnerships between its architect U and primary contractor, to avoid even the appearance of a conflict of R interest. Districts must rely on the architect to be a representative of the Υ district's interests. Decisions made by the contractor directly influence the profits of the architect, and vice versa. R E 6. The Grand Jury recommends WPUSD create a department dedicated to P new construction, separate from facility maintenance. The district needs 0 to make certain it has staff competent to oversee facility construction. R This department must have qualified experts who can negotiate contracts, Т monitor construction, and work actively with inspectors and architects, guarding the district's interests. 2 0 7. The Grand Jury is concerned that there are still relationship and commu- 0 nication issues within the district. The district must adhere to clear organ- 7 izational reporting lines and job descriptions. - P L that the district continue to communicate aggressively with the public. Α The district needs to make better use of its website. As all district and C project information becomes available, it should be posted and main- Ε tained on the district website. The site should include details on the CFDs R and their requirements, the COPs, the facilities building plans, the project plans, and the district's foundations.
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  Certificate of Participation (COP) [Appendix B] T A COP has few restrictions and can be used to generate significant fund- ing. These became popular in California after Proposition 13 because 2 issuing COPs do not require voter approval and are not capped by land 0 value appraisal. This type of debt is much riskier for the district than 0 CFDs. Homeowners assume all the risk for CFDs, up to and including 7 foreclosure. The school district is responsible for COPs and if property . fees do not cover the payments then the district must pay COP obliga- P L Α Because COPs are not secured by real property, interest on this type of C bond is higher than on CFDs. The COPs WPUSD sold had variable inter- E est rates. Based on school district revenue projections and the urgent need R for facilities funding, the school board decided to use COPs for financing. C The district has issued five COPs, totaling $132.3 million 0 $27 million in 2003 U $12 million in 2003 N $35 million in 2004 T $8 million in 2006 Y $50.3 million in 2006 G Two important points R Α 1. The district is required to house students from households paying CFD N fees, but it is not necessary that it build new schools in the CFD neigh- D borhood. The district planned to use the long-term revenue generated by J CFD assessments and future developer fees to pay off the COPs. This is standard practice, because the CFD fees can be used to pay off any debt U that is incurred for school facilities, even facilities that have already been R built. Y 2. R The $177 million in fees from the two existing CFDs would only cover the $130 million in COPs and $15 million in CFD bonds, plus interest, E which had already been issued. The district knew the CFD fees approved P to date would only pay for the elementary and middle schools already 0 built. To build additional facilities, including the Twelve Bridges High R School, new sources of financing would be required. The district assumed Т continued growth would keep this revenue stream stable and sufficient to 2 pay off the COPs and build new schools. 0 0 The Grand Jury did not review in detail all the COP documents for all the P L dependent on growth of the tax base. As growth slowed in 2005, the revenue Α stream began drying up. Also, the schools built during the previous few years C had many expensive amenities and cost more than originally expected. By the Ε school board meeting on November 9, 2006, the trustees were faced with some R hard realities. They would soon be unable to meet the current debt obligations C and they had insufficient funding to complete existing projects. At that time the 0 district was financially committed to several construction projects, including U Lincoln Crossing Elementary School N Infrastructure for the new high school ▶ T The new library, a joint project with the City of Lincoln Y One floor of the new City Hall for offices, another joint project with the city G R The board made several decisions during this time. Α 1. Approved the issuance of an additional $50 million COP, to complete N several of the active projects, especially Lincoln Crossing Elementary D and the library. There was a proposal to issue even more debt for the high school, another middle school, and a multi-purpose room at Creekside J Oaks, but the board rejected this proposal U 2. Hired financial consultants to analyze facilities funding and debt service, R including Curt Pollack, Bruce Kerns, and Cathy Dominico Υ 3. Hired a consultant to update the Master Facilities Plan, Dr. Ron Feist R At this time the administration felt there were three urgent questions that needed E to be answered. P 1. How will the district manage its debt? 0 2. How will it continue building?
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  It is estimated that the district will grow to over 9,000 students by 2014. Т The district must determine how to service the existing debt while build- ing new facilities to meet student needs. U An important finding in this analysis is the new high school does not need to 0 7 be built until the fall of 2013. This is certainly influenced by the fiscal realities of the district. WPUSD does not expect to need a new high school until the - P L high school student population is that WPUSD allows many students to transfer Α to other districts, including Rocklin's Whitney High School, which is near the C southern limits of Lincoln. During the school year 2007-2008, WPUSD granted Ε 81 inter-district transfers out to other districts for students in 9th through 12th R grades. This is 6% of the total high school population. As a benchmark, The C Grand Jury looked at inter-district transfers from Placer High School in Auburn. It granted transfers out for 4.5% of their high school population. While the U Lincoln High School transfer rate is higher, it is not significant enough to have N an impact on when the new high school is built. T Y The new plan is also based on a more pragmatic approach to facilities growth than was used in the past. The report states that the district needs a high school G population over 2,000 before there is a need for two facilities. Even then it R would create two relatively small schools and it would be difficult to sustain full Α academic and extra-curricular programs at both schools. An additional reason N the administration wanted to bring the current Lincoln High School capacity to D over 2,000 was to help maximize eligibility for state aid. J Lincoln High School ended the 2006-2007 school year with 1,160 students and U R started the fall of 2007-2008 with 1,400 students, so it is still growing. As of Υ Fall 2007, the high school has a capacity of 1,528, while maintaining current programs and labs. Because the district offices moved to the new city hall R building in February 2008, Lincoln High School is adding three classrooms E by renovating some of the old district space. This will increase capacity by 96 P students for the 2008-2009 school year, bringing the total to 1,624. The total 0 acreage of the current Lincoln High School site is approximately 39 acres, R including Phoenix Continuation High School, so there is room to expand using T portable classrooms. Once there are enough students to justify an additional high school, the district 0 will face several sobering issues and decisions. It is possible the cost of a new 0 7 high school in five years could be as high as $136 million as opposed to the $80 million projected in 2006. Significant funds were spent on the Twelve Bridges • P L and the current infrastructure may need to be modified. In addition, the district Α must build a new elementary school before a new high school. C Ε Cost of New Schools R As stated earlier, the new schools were designed to be first-class, with many C extra amenities. Based on the directives of "Project Build" and the school 0 district, the architect planned high-end design and materials. Twelve Bridges U Elementary was designed as a "statement" of the new Lincoln expectations. N Mr. Stewart said he became alarmed at the actual cost of the school; it was T significantly more than originally budgeted. This was the first red flag that the Y level of spending could not be sustained. At the same time construction costs were increasing dramatically. G R After the Twelve Bridges Elementary construction experience, the district Α provided cost estimates to the architect and contractor of what it thought was N reasonable and what it could afford. The design of each subsequent school was D reduced, but not quickly enough to get control over spending. Because of the J upscale designs of the schools, and materials and construction costs at the time, the current administration said it would not be surprised if the cost was higher U R than the average school in the area. At the school board meeting on November Y 9, 2006, board member Paul Carras stated that the schools may be "overbuilt." R It is difficult to compare school costs because districts include different items in E their cost analyses, and land costs can vary considerably. The project analysis P prepared by Curt Pollack [Appendix E] shows that Lincoln certainly spent more 0 than budgeted. R Т Financing the Schools The district launched a major building and borrowing program in 2003. The 2 state contributes money to school construction based on a formula. Since 0 Lincoln decided to build first-class facilities, it had to pay a larger percentage 0 7 of the cost than most communities. By November 2006, the administration and board became aware the district was burdened by risky debt and they would . P L To understand what happened, one must look at how schools are funded in Α California. Historically, all homeowners in a community shared the cost of new C schools through property taxes. Proposition 13 limited property tax to 1% of the Ε assessed value. Since this proposition passed, the cost of school facilities has R been borne primarily by developers, new home buyers, and General Obligation C bonds. A study in 1997 showed in one California community, developer fees 0 and homeowner assessments accounted for 19% of the average sales price. U N Besides state money, WPUSD used four types of funding for facilities T construction. Y 1. General Obligation Bonds (GO) [Appendix B] G In the 1990s the voters passed a GO to help finance schools. The district R still owes approximately $10 million on this bond and this is paid by all Α residents of Lincoln through property taxes. The district decided not to N offer another GO in 2003 because it thought many residents in the com- D munity would not vote for it. J 2. Developer Fees U When developers first propose building on a site, they negotiate plans R and fees with the school district. Schools and other infrastructure can be Υ paid 100% by the developer, or the developer can pay a smaller percent- age, and the future home owners fund the balance through a Community R Facilities District (CFD). E P The City of Lincoln did not want to discourage development and the state 0 limits how much developers are required to pay for schools. The school R district allowed most developers to pay 30% of the cost of the schools, Т with the rest shouldered by the homeowners. 2 3. Community Facilities District / Mello-Roos (CFD) [Appendix B] 0 The new homeowners pay this cost through CFDs, which has become a 0 standard financing mechanism for school districts. It is more commonly 7 known as "Mello-Roos," named for the legislative sponsors of the bill that established that type of CFD. The CFD has two components, (A) P L built. The few original land owners voted to create Community Facili- Α ties Districts. The home buyers within these districts agreed, when they C purchased their homes, to pay CFD fees based upon the square footage of Ε their homes. Details about the CFD obligations were in the closing docu- R ments. It is the obligation of the buyer to read and understand these docu- ments. These fees are collected each year when property taxes are paid.
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  Renegotiate joint-use agreements with the city. Α C In June 2007 Bruce Kerns, an employee of the investment firm, Stone and Ε Youngberg, presented his analysis of the district's debt to the board. He R demonstrated that the CFD and developer fees would not cover the existing C debt. By 2009 the expenditures for debt service would outweigh revenues, and 0 by 2012 it could affect the district general fund. He recommended the district U issue a new GO or CFD bond and tie any financing plan to the facilities plan N that was being revised. T Y The board found this report useful, but did not feel additional GO bonds would be passed by the voters. A consultant, Cathy Dominico from Capital Public G Finance Group, was hired to find other creative ways to finance the debt. On R November 20, 2007 the board held a budget workshop where she presented her Α suggestions. [Appendix G.] As noted previously, there were five outstanding N COPs. Ms. Dominico suggested the district refinance three of the COPs with D a shorter life and variable interest rates. By extending the time to pay these J off and locking in interest rates, the monthly payments could be lowered to something manageable. To cover these payments the district should use all U R available remaining facilities money (approximately $6 million), Mello-Roos Υ fees, and developer fees (projected at $800,000 per year, increasing 5% each year). Using conservative assumptions, it was expected this plan would avoid R affecting the General Fund until at least 2018. The district accepted this course Е of action. P 0 Some other observations at that time about the budget were R The district is still obliged to pay its share of the projects being built in Т partnership with the city, which were the library and the city hall. 90% of the general fund is used to pay employees, leaving only 10% for 2 other expenses. Having to pay for the debt from the general fund would 0 affect all other school programs. Cost-of-living salary increases were funded for 2007-2008, but were ten- P L near future, the district will probably need to pursue several avenues. Α Apply and qualify for state hardship funds. C Receive state money through grants for career technical programs. E Get special funding as a small school district. R Plan to build at future school sites in phases. Use less expensive designs, possibly even borrowing site plans from C other districts. U Design, Contracts, and Construction N In 1995 WPUSD selected the architectural firm, NTD, as the school district's T Y architect, after a competition with two other finalists. NTD is headquartered in San Diego and has a local branch office in Auburn. WPUSD came to trust G and rely on an architect at NTD. In 2003, when it needed to implement its R aggressive building program, the board stayed with NTD, rather than seek new Α competitive bids. N D WPUSD wanted to be sure the new facilities would meet the expectations of the residents, so NTD was directed to make the school facilities "comparable" J with Rocklin and Roseville. NTD designed unique, high-end schools with many U amenities and received several awards for these designs. NTD was compensated R based on the total cost of the projects; it was paid $5,179,249 in design-related Υ fees for the Twelve Bridges High School. R NTD entered into a limited partnership with Edge Development, a contractor E P also headquartered in San Diego. NTD/Edge solicited bids from sub-contractors 0 and negotiated a Maximum Price Contract, with WPUSD. They also engaged R in a value engineering exercise before the project began. Value engineering Т is a review of the design and materials to see if there are any opportunities to substitute less expensive construction techniques, materials, or design elements 2 without compromising the quality of the facility. WPUSD relied on NTD to 0 represent the district, because it lacked in-house staff qualified to manage this 0 activity. Very few value engineered changes were documented. P L mechanism. If an inspector finds a deviation, either the contractor needs to Α correct it or the architect must change the design to accept the deviation. The C architect then sends the accepted change to the Division of State Architects to Ε update the design drawings. R C The Grand Jury heard testimony that a state-certified school building inspector, 0 hired by the WPUSD, required a change in construction, to meet plan U requirements. The change was not made; instead the architect revised the plans N retroactively to accommodate the actual construction There were also instances T where an inspector requested a change and the contractor covered the area with Y drywall, so it couldn't be reinspected. G Although the contracts are called "Maximum Price Contracts," they include R certain contingencies, along with inflation factors, and percentages for cost Α over-runs. After projects are complete, the contracts should be audited to be N sure a district receives any refunds due them. D J Based on staff testimony, the initial bids and awards were reviewed by the school board. However, before June 2006, all contracts and change orders were U R negotiated and approved by Mr. Stewart and Superintendent Yohe, without Υ review by the board members. Today, these types of contracts are managed by Cathy Allen, Assistant Superintendent of Facilities, and changes are reviewed R and approved by the board. E P In August 2007, the district maintenance staff raised concerns about the 0 district's relationship with NTD/Edge, contractual irregularities, and poor R quality construction. The Grand Jury did not look into these allegations in detail Т because the district hired a consultant, Bob Aaronson, to investigate them. The district has since retained a new architect. 0 0 7 Western Placer Unified School District Foundations There are three foundations associated with WPUSD: . P L Α The Lincoln High School Farm Foundation was established over 30 years ago C on land donated by the federal government. It is a unique gem that most school Ε districts in the state would envy. The function of the farm is to expose students R to agriculture and the environment and to show how these can work together. C The foundation's purpose is to provide education in and appreciation for both 0 farm production and natural resources. U N The Western Placer Education Foundation (WPEF) was established in early T 1998 as "a non-profit public benefit corporation to support and promote Y excellent education in the Western Placer Unified School District." It manages 151 acres of donated property and administers an educational fund. It awards G grants to district schools and teachers which are generated from this fund. R Α The Western Placer Financing Corporation was created for the purpose of N issuing COPs for the district's needs. D J The foundations have volunteer governing boards, including members of the WPUSD School Board, the administration, the teaching staff, and members of U R the community. Foundation members who were interviewed were passionate, Υ dedicated and proud of their organizations. Volunteers put in many hours of service and some have supported these foundations for decades. However, R as volunteers, they often do not have a complete understanding of non-profit E reporting requirements and responsibilities. Also, the public is easily confused P about the foundations' roles and relationships with the school district. R Land and Facilities Transactions T WPUSD, the Lincoln High School Farm Foundation, the Western Placer Education Foundation, and the City of Lincoln were involved in several 2 transactions involving land swaps and integrated facilities projects. 0 0 7 The Lincoln Community Center is next to Creekside Elementary School, at First Street and Joiner Parkway. The city built the community center . in 1993, but could not service the debt a few years later. The district took P L tions. In early 2006, the district sold the facility back to the city for $6.1 Α million, to raise money for its share of the city hall construction. WPUSD C planned to build a new multi-purpose room/cafeteria at Creekside Ele- Ε mentary, but the current debt problems caused the board to suspend those R plans. C The City of Lincoln built a new four-story city hall on Sixth Street for ap- 0 proximately $22 million. WPUSD contributed $5 million to the construc- U tion in exchange for one floor of the building for district offices. In addi- N tion to this payment, the district signed a 55-year lease with the city. At T the end of that period the district will own its share of the building. Staff Y occupied the new building in February 2008. G The new Lincoln library was a joint project with the City of Lincoln, R WPUSD, and Sierra College. It was planned to be a multi-use library at Α the Twelve Bridges Learning Center, used by the city, the future Twelve N Bridges High School, and a future Sierra College extension. State fund- D ing was secured with the understanding that it would be primarily used as a high school library. The high school and the community college exten- J sion plans have been suspended, so the library is currently used only as U a city library. WPUSD contributed $2.2 million to the construction costs R and, in accordance with the original agreement, continues to pay approxi- Υ mately $120,000 annually in operational funds R Twelve Bridges Placer Holdings, Inc., a developer, donated 179 acres to E the Western Placer Education Foundation in 1999. This property is ad- P ministered by the foundation for WPUSD as an "Outdoor Learning En- 0 vironment," and includes a Native American archaeological site. In 2007 R the foundation sold 28 acres to Westpark, a developer, for $1.4 million. Т The foundation is currently using these monies to generate income for educational grants within the district. It plans eventually to use the money 2 to build a learning center on the site. The remaining 151 acres has an 0 easement that prevents the foundation from selling it for development. 0 7 Three decades ago, WPUSD was offered 280 acres of former Beale Air - Force Base property by the federal government. After using the property P L coln High School Farm, an agricultural educational facility. In May 2006 Α WPUSD entered into an agreement with Wildlands, Inc. for a "Western C Placer Vernal Pool Conservation Bank." Ε R Wildlands agreed to give WPUSD 126 additional acres adjacent to the existing farm and $750,000. The $750,000 was deposited in the general C fund as a restricted account and the income generated from this account 0 supplements the farm budget. Wildlands also set up an endowment that U generates additional money for property maintenance. In exchange the N district agreed to deed 224 acres to be used solely for "future wetlands T mitigation purposes." Wildlands was granted these environmental ease- Y ments, which it can sell to developers. The original 280 acres, plus the 126 acres from Wildlands, totals 406 acres. The balance of this prop- G erty, after deducting the 224 acres that will be used for wetlands mitiga- R tion, is planned to be divided into 60 acres for a future high school and Α 122 acres for the Lincoln Farm. N D The Zebra Housing Project is a joint program with the city at Creekside Village. This is a self-funded program for low-income housing. It is an J educational program, where students get on-the-job experience in the U building trades. The city and developers collaborate on the land and fees. R The students contribute the labor, and the sale of each home built sup- Υ ports the other building costs, such as materials. Four homes were built under this program, with one left for sale. Once sold, all costs should be R covered and the program should have zero balance. At the school board E meeting on December 4, 2007, board members expressed surprise that P there was not a positive balance, since the land and labor were donated. The school board is re-assessing this program and there are no plans to R build additional homes. T All new schools built in the district have adjoining city parks. The 2 schools have priority in using the parks. To reduce cost, the school dis- 0 trict is managing the bidding and construction of the schools and parks 0 as one project. Once complete, the city will pay the district for the cost of P L Observations about District Communication, Relationships and Oversight A C The School District Ε During its investigation, the Grand Jury discovered that past communication R within the district was not as open as it should have been. It heard instances C of dialog being stifled, warnings going unheeded or not being passed to the 0 responsible parties and important questions being left unanswered. This lack of U accessibility and dialog led to staff frustration and, it appeared, contributed to N poor decision making. T Y The Grand Jury saw indications that communication and relationships within the district had improved, but they were still inadequate. There was still some G unhealthy tension within the district organization that could distract the staff R from focusing on solving problems and serving students. Α N The Public D The Grand Jury was also told that under the prior district administration, the district was not very open with the public. It was difficult for citizens to access J data and to voice concerns. This increased the public's apprehension and U distrust. R Υ It appears the new superintendent has made an effort to be candid and R transparent. He quickly disclosed problems as they were discovered and held E "Facilities Forums" to directly and publicly answer questions. Although the P community did not like many of the answers, this openness has definitely 0 improved community relations. The Grand Jury still heard complaints from R citizens that access to public information is slow and the board appears T indifferent to some individuals' comments. The City of Lincoln 0 WPUSD has a close, rather complicated relationship with the City of Lincoln. 0 7 It is good for a school district to nurture a positive relationship with its local cities. It depends on the city to use its leverage during the planning process - P L the parks, to the library, to the community center, to the Zebra Housing Project, Α to the city hall. C Ε School Board Decisions R The school board makes many decisions, usually based on information C supplied by the district administration. However, the Grand Jury saw a pattern 0 of complacency and lack of oversight that concerned jurors. According to U testimony, Superintendent Yohe manipulated a passive school board to follow N his vision. Here are examples. T Y
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  <1% Warrant recalled by court T 6 <1% Bail bond reinstated by court 3 <1% Wrong defendant 2 1 <1% Duplicate 0 No show 1 <1% 0 Sentence modification 1 <1% 7 15,048 100% Total - Does not include citations issued by law enforcement officers in the P L
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  The Grand Jury recommends the district staff actively communicate with U local realtors and developers to ensure they have the latest school facili- N ties information for prospective homebuyers. T Y
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  The Grand Jury commends the volunteers who invest their time and energy as district foundation board members and advisors. The founda- G tions are separate entities but not autonomous from WPUSD. The district R must be sure the foundations' directors are familiar with the laws and Α regulations under which a public foundation operates, and make sure they N comply with those processes. The foundations should be as transparent in D their operations as the district. J
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  The Grand Jury commends the district for its longstanding farm educa- U tion program. It recommends the district expand the use of the Lincoln R High School Farm as an educational tool. The district might develop Υ agricultural or environmental programs for elementary or middle schools, or offer its programs to other districts and colleges. R E
• R12
  The Grand Jury recommends the Lincoln community support the district P school board. When board vacancies occur, the district administration, 0 other board members, citizens, and city officials should aggressively re- R cruit well-qualified candidates to run for the board. Т
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  The Grand Jury recommends the community remain engaged and voice 2 its opinions, and work with the district administration and board. The 0 community must bind together and use its energy to create a solid plan 0 for the future. The Grand Jury encourages the public to attend school 7 board meetings. . P L strong school district is integral to a healthy community. Α C
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  The Grand Jury commends the local press for covering the board meet- Ε ings. The media need to continue school coverage. R C 0
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  <1% DA Filed for further investigation Υ Probation released 45 <1% R Released no charges filed 33 <1% <1% Booked in Error 29 E 7 P <1% Released en-route 0 7 <1% Superior Court release
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  Α FY 1998-99 (1) 10-Year Reconciliation of Revenue and Expenditures N 2 690 332 2 148 522 171,746 115,268 D 15,246 37,425 52,013 18,804 26,952 11,280 34,229 13,071 14,094 5,457 8,271 9,227 7,839 152 736 FY 1999-00(1) J Sewer Enterprise Fund 2,687,380 3,818,423 U 812,355 193,407 City of Auburn 59,706 14,438 23,036 6,548 9,573 4,299 3,505 2,73 201 477
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  days; governments or agencies must respond The following T year's grand jury publishes the responses to the final report. Citizen Requests – As part of the civil function, the grand jury receives 0 complaints from citizens alleging official mistreatment, suspicious con- 0 duct, or government inefficiencies. The grand jury investigates reports 7 from citizens for their validity. All such requests are kept confidential un- . P L A Criminal Investigations – Upon occasion, the district attorney asks the C grand jury to hold hearings to determine whether evidence he presents is Ε sufficient to indict an individual, who would then stand trial in court. A R minimum of 12 grand jurors must vote for an indictment in any criminal C proceeding. U Qualifications N Prospective grand jurors must possess the following qualifications, under Penal Т Code Section 893. Y Be at least 18 years old ▶ Be a resident of California and Placer County for at least one year imme- G diately prior to selection R Α Be in possession of his or her natural faculties, of ordinary intelligence, N of sound judgment and fair character D Possess sufficient knowledge of the English language to communicate both orally and in writing J U A person is NOT competent to act as a grand juror if any of the following apply. R The person is serving as a trial juror in any California court. Y ▶ The person has been discharged as a grand juror in any California court F within one year of the beginning date of service, July 1. I The person has been convicted of malfeasance in office or any felony or N other high crime. A The person is serving as an elected public official. L Desirable qualifications for a grand juror include the following. R Be in good health E Be open-minded with concern for the views of others P Have the ability to work with others 0 R Have genuine interest in community affairs T Have investigative skills and an ability to write reports Have modest computer and internet communications skills 2 0 Selection 0 In the spring each year the presiding judge selects citizens at random from a list P L A siding judge, the foreman of the outgoing grand jury, and perhaps the presiding C judge's assistant. Each applicant will be interviewed to determine if the qualifi- Е cations above have been met. R C After the interview process, prospective applicants are requested to appear for 0 the final selection, held in a Placer County Superior Courts courtroom. At this U time, with outgoing grand jurors in attendance, 19 names are drawn randomly N by the court clerk. Another 12 names are drawn and ranked to form a list of Т alternate jurors. The new 19 grand jury members are sworn in and given a Υ description of their duties and responsibilities by the presiding Superior Courts judge. The jurors begin a one-year term on July 1. G R Α Commitment N Persons selected for grand jury service can expect to serve 25 to 30 hours per D month for a period of one year, July 1 through June 30. J Remuneration U Grand jurors receive nominal payment for meetings they attend, and they are R reimbursed for mileage to attend meetings, training, and possibly other minor Y expenses. F I Orientation Ν New jurors are encouraged to attend an orientation training about grand jury Α functions, and on county, city and special district governments. L Why become a grand juror? R Those who volunteer and are accepted for grand jury service should feel privi- E leged to be selected. They enter this service with interest and curiosity to learn P 0 more about the administration and operation of Placer County government. R Serving as a grand jurur requires many hours and serious effort, and reflects a Т generous commitment to public service. Grand Jury Reports 0 The Placer County Courts maintains web pages for the Grand Jury on the Placer REQUEST FOR GRAND JURY ACTION Ρ Placer County Grand Jury L DeWitt Center Α 11490 C Ave., Auburn, CA 95603 C E Notice: This form and any supplemental material will be treated confidentially. The Grand Jury is prohibited by law from disclosing any aspect of an inquiry prior R to issuing a final report. For various reasons the grand jury cannot investigate all requests for action, therefore you may wish to pursue other avenues. Your Name С 0 Your Mailing Address City Zip Code U N Home Telephone Work Telephone Т Υ PERSON / AGENCY YOU ARE REPORTING G R Name Α Address City Zip Code N D Telephone J Please use space on back of form for a brief narrative of key events. U Attach any correspondence or documents about the subject. R LIST OTHER OFFICIALS/AGENCIES YOU HAVE CONTACTED ABOUT THIS SUBJECT Y Official/Agency Address Approximate date of contact F ı N Α L R E PAST OR PENDING LAWSUITS P Explain what you know of past or pending lawsuits related to this matter. R Т 2 0 Your Signature: Date: 0 7 Please mail completed form to the Placer County Grand Jury Foreperson at the above address. For Official Use Only. Do not write in the space below. . REQUEST FOR GRAND JURY ACTION, CONTINUED P L NARRATIVE OF KEY EVENTS Α (Please include dates and names of persons /agencies involved) C Ε R