Orange County Grand Jury • 2013-2014

School Bonds – the Untold Story of Assessed Values

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Findings and Recommendations 9 findings

F1
Taxpayers in the Westminster, Cypress and Savanna Elementary School Districts will potentially be faced with significantly higher tax rates in future years to repay school construction bonds.
No recommendations for this finding
F2
The funds raised through these school bonds for the Westminster, Cypress and Savanna Elementary School Districts have been spent on much needed capital improvements. All three of these districts were faced with schools that in some cases had not been renovated in over 50 years. These districts are making tremendous progress in bringing their schools up to a 21st Century standard.
No recommendations for this finding
F3
Savanna Elementary School District received a waiver from the State Board of Education in July 2012 to exceed the bonded indebtedness limit of 1.25% of assessed values (AVs). Savanna applied for the waiver before exceeding the bonded indebtedness limit.
No recommendations for this finding
F4
School districts located in lower AV areas are at a distinct disadvantage in terms of their bonding capacity per student. For instance, Laguna Beach Unified School District has over ten times the bonding capacity per student as Garden Grove Unified School District.
No recommendations for this finding
F5
The 20 year average for growth in AVs for the Savanna, Cypress and Westminster Elementary School Districts are approximately 4% per year.
No recommendations for this finding
F6
The assumptions made for the expected growth in AVs in the future years has a very significant effect on the corresponding tax rates. For example, in the Savanna Elementary School District, the tax rate will be $60.74 per $100,000 of AV in the year 2052 if the AVs continue to grow at an average of 4% per year. The tax rate falls to $20.04 per $100,000 of AV in the year 2052 if the AVs grow at an average rate of 7%.
No recommendations for this finding
F7
The homeowners and property owners will pay additional taxes of $2,025, $809 and $628 per $100,000 of AV over the term of the bonds in the Savanna, Cypress and Westminster Elementary School Districts respectively if AVs continue to grow at the historical rate of 4%.
No recommendations for this finding
F8
The methodology used by the Savanna, Cypress and Westminster Elementary School Districts to estimate the future growth rates for AVs does not appear to be reliable to the Grand Jury. Savanna and Cypress relied on average growth of AVs over a 35-year period. The first 10 to 15 years of this historical data includes a considerable amount of original development, thereby inflating the average AV growth rate. Westminster developed an estimate of AV growth that appears to have no historical or factual basis. AV growth is projected to average around 6% from the years 2017 – 2041, and then tails off dramatically for the last 10 years of the bonds, averaging less than 2%. Using this estimate, Westminster projects the district will never exceed the legal tax rate of $30 per $100,000.
Related Recommendations (1)
R1
All school districts in Orange County should include a clear explanation of the assumed future growth rate of assessed values in the bond election materials made available to voters for future bond issues. This explanation should reference the relevant historical assessed value data for the individual district. For instance, if the district is fundamentally built out, the historical assessed value data should not include years with significant development because that is not indicative of the district’s current and future situation. (F.1., F.5., F.6., F.7., F.8.)
F9
Orange County Department of Education (OCDE) does not have any statutory authority to ensure all Orange County school districts properly disclose assessed value assumptions for bond measures being presented to voters for approval. RECOMMENDATIONS In accordance with California Penal Code Sections 933 and 933.05, the 2013-2014 Grand Jury requires (or, as noted, requests) responses from each agency affected by the recommendations presented in this section. The responses are to be submitted to the Presiding Judge of the Superior Court. Based on its investigation of School Bonds – The Untold Story of Assessed Values, the 2013- 2014 Orange County Grand Jury makes the following two recommendations:
Related Recommendations (1)
R2
Although there is no statutory requirement, the Orange County Department of Education (OCDE) should evaluate whether to assume voluntary oversight responsibility, with concurrence of the individual school district issuing the bonds, to ensure all Orange County school districts properly disclose their assessed value assumptions used for future bond measures. (F.9) REQUIRED RESPONSES The California Penal Code §933 requires any public agency which the Grand Jury has reviewed, and about which it has issued a final report, to comment to the Presiding Judge of the Superior Court on the findings and recommendations pertaining to matters under the control of the agency. Such comment shall be made no later than 90 days after the Grand Jury publishes its report (filed with the Clerk of the Court); except that in the case of a report containing findings and recommendations pertaining to a department or agency headed by an elected County official (e.g. District Attorney, Sheriff, etc.), such comment shall be made to the Presiding Judge with an information copy sent to the Board of Supervisors. Furthermore, California Penal Code Section §933.05 (a), (b), (c), details, as follows, the manner in which such comment(s) are to be made: (a) As to each Grand Jury finding, the responding person or entity shall indicate one of the following: (1) The respondent agrees with the finding (2) The respondent disagrees wholly or partially with the finding, in which case the response shall specify the portion of the finding that is disputed and shall include an explanation of the reasons therefore. (b) As to each Grand Jury recommendation, the responding person or entity shall report one of the following actions: (1) The recommendation has been implemented, with a summary regarding the implemented action. (2) The recommendation has not yet been implemented, but will be implemented in the future, with a time frame for implementation. (3) The recommendation requires further analysis, with an explanation and the scope and parameters of an analysis or study, and a time frame for the matter to be prepared for discussion by the officer or head of the agency or department being investigated or reviewed, including the governing body of the public agency when applicable. This time frame shall not exceed six months from the date of publication of the Grand Jury report. (4) The recommendation will not be implemented because it is not warranted or is not reasonable, with an explanation therefore. (c) If a finding or recommendation of the Grand Jury addresses budgetary or personnel matters of a county agency or department headed by an elected officer, both the agency or department head and the Board of Supervisors shall respond if requested by the Grand Jury, but the response of the Board of Supervisors shall address only those budgetary /or personnel matters over which it has some decision making aspects of the findings or recommendations affecting his or her agency or department. Comments to the Presiding Judge of the Superior Court in compliance with Penal Code section §933.05 are required from: Responses Required: Savanna, Cypress and Westminster Elementary School Districts: F.1., F.2., F.5., F.6., F.7., F.8. Savanna Elementary School District: F.3. Superintendent of Schools, Orange County Department of Education: F.4., F.9. Elementary Districts: Anaheim City, Buena Park, Centralia, Cypress, Fountain Valley, Fullerton, Huntington Beach, La Habra, Magnolia, Ocean View, Savanna, Westminster: R1 High School Districts: Anaheim Union, Fullerton Joint, Huntington Beach: R1 Unified Districts: Brea-Olinda, Capistrano, Garden Grove, Irvine, Laguna Beach, Los Alamitos, Newport-Mesa, Orange, Placentia-Yorba Linda, Saddleback Valley, Santa Ana, Tustin: R1 Superintendent of Schools, Orange County Department of Education: R.1., R.2. APPENDICES

Agency Responses 3

Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.