Developer Fees: a School Lesson in Justification

Conclusions 1

• CL1
  The Grand Jury recognizes that funding for school facility infrastructure is complex since the majority of school resources are used for salaries and benefits. Although funding was restricted by reduced state budget allocations in recent years, Cayucos Elementary and Coast Union appear to be doing an admirable job of providing for their students. Grand Jury members who toured both facilities found the schools to be well maintained and managed by professional staff. Still, financial constraints do not remove the burden that is placed upon school districts regarding the proper justification and use of developer fee funds. Both Cayucos Elementary and Coast Unified are operating under a fee splitting agreement that expired in 2010. Neither Cayucos Elementary nor Coast Unified seem willing to compromise and negotiate a new contract. For now, it appears that Coast Unified will collect its share of developer fees in Cambria, and the portion of the fees designated for Cayucos Elementary will be collected at the County Office of Education. 21 Miller Brown and Dannis, Developer Fees – Do’s and Don’ts, March 11, 2007, p.1. Developer Fees 6/5/14 Page 11 Neither Cayucos Elementary nor Coast Unified produced data regarding the five-year audit of their developer fee programs as requested by this Grand Jury. Therefore, there remains a question as to whether or not they are in compliance with the Government Code. The administrations of both districts and the County Superintendent of Schools stated to the Grand Jury that they view the code sections relating to developer fees “permissively” such that expenditure of the fees is deemed appropriate as long as districts can make any connection to students in general. Even allowing for this interpretation, the code contains explicit prohibitions concerning the use of developer fees for construction of items that the district would or should perform in the absence of new development.22 Despite this restriction, Coast Unified justified expenditures of developer fees on a district office and boardroom. The Grand Jury also noted the expenditure of developer fees on the off-campus district office and boardroom was in violation of the fee splitting contract between Cayucos Elementary and Coast Unified designating the funds for Coast Union High School. The replacement windows at the grammar school in Cambria and the study for an off-site soccer field would also violate the fee splitting agreement. School district justification studies are meant to demonstrate the relationship between the district’s needs and the projected impact from new development. A review of these studies suggests that some projects are included to ensure that district costs exceed the threshold, thereby justifying the increased developer fee rate. An example of this is the inclusion of the solar electrical system installation and the improvements to the district offices in the 2014 Cayucos Elementary Justification Study, estimated at $320,000 and $150,000 respectively. If these projects were deemed outside the appropriate use of developer fees, then the estimated cost per student for the new construction projects would decrease to $8,557.50.23 If the district used this amount, there would be no justification to increase the fee as the preexisting rate was estimated to generate $8,800 per potential new student. The 2014 Justification Study for Coast Unified also contains many projects that are within the scope of prohibited deferred maintenance; however 22 Ibid. 23 $2,181,500 (original estimate) - $470,000 (estimated solar and district office) = $1,711,500/200 students (estimated enrollment) = $8,557.50. Developer Fees 6/5/14 Page 12 the sum total of its projects are so substantial that even eliminating those, the threshold would probably be met. The legislative intent of developer fee funds is to allow for school facilities to accommodate anticipated increased enrollment.24 Coast Unified and Cayucos Elementary school districts have the issue of declining or stagnant enrollments that have created unfilled student capacity. The districts do not address how this excess capacity, especially substantial at Coast Union High School, is available, or unavailable, to accommodate these projected new students. The developer fee legislation does not authorize oversight of the school districts’ programs on a county level, specifically by the County Office of Education. The broad interpretation of the code, combined with a lack of oversight, has allowed for a continued increase of developer fee rates as well as the use of the fees to expand beyond their original intent with a nearly limitless threshold of what is permitted.

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