(San Luis Obispo) North Coast school districts’ use of developer fees is criticized

July 18, 2014

The Cambrian

By Nick Wilson

Two North Coast school districts have failed to follow state guidelines in proper use of developer fees and how they justified fee increases, a San Luis Obispo County civil grand jury report found.

Fees collected, accounted for, justified, and spent by Cayucos Elementary School District and Coast Unified School District, which operate independently of one another, have been mismanaged with “several instances of questionable use,” the report stated.

Developer fees are collected by California school districts to provide funds for construction or reconstruction of school facilities to accommodate increased enrollment tied to new housing projects.

The fees in question were collected from development projects in Cayucos and are intended for use at Cayucos Elementary School and Coast Union High School in Cambria. Both schools serve students of Cayucos.

No former or current officials could be reached at Coast Unified, which has a new superintendent and finance administrator.

But a former Cayucos Elementary School District superintendent said that district has spent money appropriately and has initiated compliance with auditing and contractual obligations.

Both districts will be required to respond to the findings of the grand jury. No set timetable on the response was laid out.

Among the grand jury’s findings:

•    The two districts have been operating without a fee-splitting agreement since their previous agreement expired in 2010.

•    Funds drawn from Cayucos developments have been inappropriately spent at campuses other than Coast Union High by Coast Unified School District.

•    Neither district verified compliance with mandated five-year audits of their developer fee programs.

•    Higher fees were justified based on increased enrollment projected by both districts although enrollment has been stagnant or declined.

The report said both districts view the code sections pertaining to use of developer fees “permissively” as long as they can “make any connection to students in general.”

The grand jury said the California Education Code limits districts to uses of “any school-related consideration relating to a school district’s ability to accommodate enrollment.”

The Cayucos Elementary district collected about $44,000 over the past two years in developer fees while Coast Unified took in about $114,000 in fees over the past two years, the report states.

Jim Brescia, Cayucos Elementary’s former superintendent, who served from 2011 through June, said his district looked into using fees toward proposed projects such as a $320,000 solar electric system and $150,000 in improvements to the district office.

Both proposed projects were criticized in the grand jury report as improper uses of developer fees.

“When we looked into it, we got different opinions on whether we could use the money for those purposes,” Brescia said. “But we never moved forward on them. The money from developer fees isn’t enough to cover those costs anyway.”

As for Coast Unified, the report cited several expenditures it considered improper:

•    $505,000 to convert the old grammar school into district offices in 2005-06. The district is only using 50 percent of the converted facility, the grand jury found.

•    $60,000 spent in 2009-2011 to remodel an unused cafeteria into a boardroom at the newly converted district office.

•    $113,000 spent on projects off-site from Coast Union High School, including $92,000 in 2002-04 to replace windows at the district’s grammar school in Cambria.

“The Education Code does not allow the use of developer fees for the construction of items that the district would or should perform in the absence of new development,” the report states.

Justification studies approved this year by each district’s school board raised residential construction rates from $2.97 per square foot to $3.36 per square foot, which they said would be used to make classroom space available to handle increased enrollment.

But both districts have recently experienced stagnant or declining enrollment, according to the Grand Jury report.

In Cayucos’ fee justification study, current enrollment was reported as “approximately 220” when it actually was 206 with a capacity of 240, the grand jury report stated.

Coast Union High has an enrollment of 247 students with a capacity of 579 students.

However, Brescia said that classroom space at Cayucos Elementary is filled to the maximum because the district maintains smaller class sizes for lower grades.

“There’s no more classroom space for students there,” Brescia said. “It’s filled to the brim.”

Brescia came on a year after a fee sharing agreement between Coast Unified and Cayucos expired in 2010. He has been serving as interim superintendent for the Paso Robles school district since leaving in June.

He said the grand jury is likely correct that a new agreement should have been reached. But he said expired contracts, including employee compensation contracts, often remain in place as new deals are negotiated.

And he said the district initiated an auditor’s review of the developer fees this year.

“We took steps to meet all of our obligations,” Brescia said.