State may dock school district in Riverside County $53 million

The financially strapped Val Verde Unified School District in Riverside County may be docked more than $53 million in state school construction money after it allegedly failed to disclose some of the special bonds it issued while the state was paying for the district’s new schools, according to state officials.

Officials from the district, which includes parts of Perris, Moreno Valley and the Mead Valley area, have told state officials the bonds were used to cover both past and expected construction overruns. The bond money also was needed because state funding was “woefully inadequate” and did not allow the 19,000-student district to build suitable facilities, district officials said in correspondence to the state.

However, according to a draft report by the state’s Office of Public School Construction, millions of dollars in cost-overruns were caused by the district spending money on elaborate additions at some of its facilities, including a 5,000-square-foot weight room at Citrus Hills High School in Perris, a bell tower and a stainless-steel whirlpool bath in a high school locker room.

The district also failed to collect more than $30 million in developer fees from two new housing projects, according to the report. A draft of the report was provided to members of the State Allocation Board, which makes decisions about how to parcel out state school bond funds.

Officials with the Office of Public School Construction are investigating the school district’s accounting methods and trying to determine why the developer fees were never collected.

Val Verde School District officials declined to comment about the draft report’s findings Friday. The bonds in question were approved by the school board and did not require voter approval.

The district is also facing scrutiny from the Riverside County Board of Education, which sent a letter to Val Verde officials last week restricting the district’s ability to issue additional bonds that have not been approved by voters.

Riverside County Deputy Supt. of Schools Kenn Young said he agreed that state funding for new schools has been inadequate -- in part because of rising construction costs. However, county education officials are concerned about Val Verde’s growing bond debt, even though he thinks the district has the revenue to pay it off.

“It’s just a disproportionately high amount of debt for the size of the district. We’re asking them to consult with the county office of education before they issue any more debt.”

Val Verde has been classified as a “hardship” school district by the state, meaning that it has declared it does not have the revenue or debt capacity to pay its 50% share of new school planning and construction costs. As a result, the state pays up to 100% of the costs for building schools, but restricts how the money can be used. The state also may reduce its funding if a district raises money by issuing new bonds not approved by voters, as Val Verde has done.

The district also has recently informed the state that it expects to have an $81-million shortfall for projects in the planning stages and will have to issue bonds to cover that shortfall, according the Office of Public School Construction draft report.

State officials cautioned that they are still in the midst of investigating whether the Val Verde School District should be penalized for issuing the bonds while it was classified as a hardship district.

Lori Morgan, acting executive director of the Office of Public School Construction and the State Allocation Board, noted that the findings were preliminary.

She said if the board determines Val Verde raised money improperly, the state would subtract that amount from future school construction funding -- forcing the district to pay the shortfall, which could create serious financial problems for the district.

The State Allocation Board is scheduled to discuss Val Verde’s school construction funding at in Sacramento next week.

Several state senators who sit on the board said they wanted to hear more about whether the Val Verde district supplied all details over the last five years when it applied for financial hardship status.

Since it gained that status in 1999, the Val Verde district has received $340 million from the state for 26 projects -- with the state paying the entire cost of 23.

Some of the low-interest bonds the district issued since then were designated as “bridge loans,” an allowable practice in which districts start planning or construction when state bond funding has run out and is no longer immediately available for approved projects but which will be supplied in the future.

Val Verde also used bond money to pay for such items as start-up equipment for music, library and athletic programs, according to the legal papers detailing the loans.

The amount of borrowing, along with pictures on the Internet of a state-of-the-art weight room at Citrus Hills High School, raised the curiosity of some State Allocation Board members, including State Sen. Bob Margett (R-Arcadia).

“I’m just not comfortable with what I see so far,” said Margett. “I’m convinced that they’re an impoverished district. But there’s not a school district in [my congressional] district that has the athletic facilities this school has,” said Margett, who drove out to Riverside County on Friday.

maeve.reston@latimes.com