Santa Paula: Measure P School Bonds

By Sheryl Hamlin

Hosted by the Santa Paula Chamber of Commerce, the May 17^th 2016 panel featured three “pro” speakers and two “con” speakers. The panel was moderated by David Marin. The “pro” team consisted of Superintendent Alfonso Gamino, Assistant Superintendent of the Business Services Division, Donna Rose, and the consultant Jon Isom of Isom Advisors. The “con team” consisted of Steve Smead and Maiya Herrera, both long time Santa Paula residents.

Mr. Gamino opened the discussion with a statement about the demographics of the schools and its population. He said that Santa Paula Unified School District (SPUSD) had 535 “certificated employees” and about 5,500 students in pre-K through 12^th grade. The decision to attempt a bond measure started in 2013, he said. The board started by identifying $58 million in critical needs. Of this $58 million, $39.6 will be fulfilled by the bond, $1.5 million by developer fees, $10 million by SPUSD existing monies and grants of about $5 million. He said that California had 977 school districts with 653 of these using bonds for financing since 2004 and 20 of those in Ventura county.

Steve Smead, a Cardinal himself, said the $66 million debt of the bond will be passed to homeowners and renters who are already buried with $50 million in school debt. This debt will continue for thirty years. SPUSD said that unification was supposed to save money when actually they have hired 40 more employees since unification. SPUSD spent $1.2 million on three houses to create parking for a cost of $20,000 to $30,000 per parking spot. SPUSD spent $48,000 on a traffic study for which they already knew the answers. SPUSD sold land which they had obtained from Limoneira in East Area I to buy a Future Farmers of America (FFA) site in the Oaks outside of Santa Paula boundaries for $1.5 million without LAFCO approval which is burdened with easements. SPUSD responded by saying that their forecast indicated the existing high school was sufficient. Smead said that SPUSD spent $150,000 on a master plan which is already obsolete and that the Measure P literature does not show the total cost of the bond including all principal and interest payments nor the cost of the consultants.

No one questioned the district’s wisdom in destroying sparsely available, moderately priced housing in favor of vehicular parking.

The discussion moved back and forth on issues surrounding the school’s use of funds and how and what ability would be used to monitor the Prop P funds. Jon Ison, consultant, said that since the previous elementary school bond, the citizens of California approved Proposition 39, which mandates safeguards like an oversight committee, sample projects and financial audits. The seven member oversight committee is appointed. He said the oversight committee will mitigate issues of mismanagement of funds.

The discussion returned several times to the cost of the bond to the “average” family. The term “average” was represented as an assessed value of $400,000, which would be $240 annually assuming a $60 per each assessed $100,000. Jon Ison mentioned people who have lived in a home for a long time with low assessed values such as $50,000 who would pay less than $60 a year. Steve Smead said he had no evidence of such low valuations in Santa Paula and reminded the audience that renters will pay when the landlords pass on the property tax to the renters.

Neither SPUSD nor the consultant appeared to have a frequency distribution of properties in Santa Paula based on assessed valuation. The consultant said he did not know the average assessed value. No one challenged SPUSD to produce a repayment schedule of the $39.6 million in bonds plus interest payments based on $60 per assessed valuation, so it is not clear at this time if the $60 rate will repay the principal and interest or conversely will generate excess for the district.

Note that according to the Legislative Analyst Office (LAO) of the State of California, this is the maximum amount which can be assessed in this type of school bond measure and the district cannot incur debt in excess of 2.5% of the maximum valuation of the district. No calculations for the latter were provided or if a waiver was requested from the State of California to exceed the 2.5%. Note that $39.6 million would be 2.5% of $1.584 billion in district property values. The measure requires 55% to pass.

Another unchallenged question was the effect of East Area I (EA1) in the bond repayment calculation. Is SPUSD depending on 1500 homes to repay the bond debt? What assumption is SPUSD making about the rate of sales in EA1 in the bond repayment schedule? What if it takes 30 years to sell all 1500 units if EA1?

No one questioned the wisdom of saddling new residents of EA1 with an HOA (Home Owners Association) fee, a Mello-Roos tax and a new school district tax. How does this limit Limoneira’s ability to sell houses?

Several audience questions related to existing bond debt: elementary school debt, community college debt and other school. The audience expressed feelings about inappropriate use of funds, to which Donna Rose said that they built the football stadium and the Science and Technology building. The $10 million elementary school bond was too small, she said.

Smead noted that school spending has increased 45% over the last five years on the state level. And in fact, Ms. Rose described new state funds to lower income communities from the State enacted during Governor Brown’s tenure: Local Control Funding Formula (LCFF) 2014. She said these funds, although generous, must be used for supplemental programs and cannot be used for repairs unless tied to a supplemental activity. From a document posted on a local website, SPUSD forecast a surplus for FY 2016/2017 of $2,965,061. The effect of LCFF to which Ms. Rose referred can readily be seen in this chart. Note that the school district population forecast is relatively flat (ADA – Average Daily Attendance).

Jon Ison disclosed part of his fee. He has a contract with the district for the campaign itself. Then he has a separate contract as a financial advisor to package the bonds to sell to investor, for which his company will receive about $60,000 per sale. Smead said such fees must be deducted from the $39.6 being sold so that the net proceeds can be known. Ison said that total cost of this bond offering was about $79 million (fees and interest) over 30 years which was considerably higher that the amount Mr. Smead estimated at $66 million. Interest rates on the bonds will be determined at the time of sale and based on market conditions. Ison did not discuss if the bonds would sell for a premium which would net more money to the district, but would require a higher coupon value.

Both Mr. Gamino and Mr. Snead made closing remarks reiterating previous statements. Mr. Gamino stressed that the repairs were large systems such as sewers and electrical, not simply maintenance, for which they had money. He said that SPUSD spends 85% on services leaving only 15% for maintenance. Presumably the 85% includes personnel and benefits. Smead stressed the profligacy of SPUSD in the wasted money for the parking study, an outdated facilities master plan and purchases of homes and property and suggested the school should create a maintenance plan.

Note that in the SPUSD marketing brochure, the ballot text includes new construction for “science labs and classrooms” which appears to conflict with the closing statement made by the Superintendent about infrastructure maintenance such as sewers and electrical systems.

No one asked the speakers about the effects of demographics on the district and the population’s ability to pay. The world’s population is taking a turn not seen in history: there will be more old people than young people before 2020. Demographers call it “peak youth”. This means there will be few children to educate but fewer workers to pay for the old people. The chart below has profound consequences for society, and, as SPUSD is a microcosm of society, the changes will be immense. No system will be immune to changes including the way we educate the dwindling supply of youth.

Recall that the school district indicated that they had sold the EA1 high school property because their forecasts indicated the existing high school was sufficient, which seems to corroborate this demographic shift as shown in the graph below.

Graph source: http://static2.businessinsider.com/image/5739b64691058427008c2f85-898-788/screen%20shot%202016-05-16%20at%207.59.13%20am.png

So the question remains to the voters. Of the multiple taxes on the ballot -the proposed Santa Paula sales tax increase, the Ventura County Transit tax and/or the Santa Paula Unified School District tax – which is best for you and your family?

The forum will be broadcast on Time Warner. Click on the city’s website for a link.

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