La Verne Hopes Novel Plan Can Finance School

For the past five years, residents of this city’s burgeoning northern area have pushed for a new elementary school in their neighborhood.

But the Bonita Unified School District has been unable to get money from the state to build the school because of budget constraints in the wake of Proposition 13. The district also lacks a sufficient credit rating to float the $5 million in bonds needed for the project.

As a result, more than 300 children from La Verne’s northern neighborhoods must be bused 45 minutes each way to the district’s existing elementary schools, where overcrowding has forced some classes into trailers.

Now the City of La Verne is embarking on a novel approach: It hopes to finance the school’s construction itself by using developers’ fees. The plan is so unusual that city officials are not sure whether it is permissible under state law.

‘New, Innovative’

“What we’re trying to do is fairly new and innovative,” said La Verne City Manager Martin Lomeli. “Schools are usually financed by school districts, not cities.”

To clear up any legal questions, the city intends to file a “friendly suit” against itself, Lomeli said. City officials will present evidence to show why the area needs a new school and why the city is the best agency to finance it. A Superior Court judge will hear any objections to the plan and determine whether it is legal.

If the idea is approved, the school could be financed either by the city or by its Community Redevelopment Agency.

Under one proposal, the city would issue bonds, called “certificates of participation,” to raise the money for the school. The bonds would be repaid by a $5,000 fee assessed on each home built by developers. At present, the city anticipates the construction of about 1,100 new homes within the next few years.

The district would still have to purchase the land for the school, which is expected to cost between $800,000 and $1 million. School officials are negotiating with the owners of an eight-acre parcel on Wheeler Avenue, near the corner of Via de Mansion, said interim Supt. Mitchell Gilbert.

Lacking Collateral

Barring any unforeseen snags, the school and an adjacent city park could be ready by fall, 1989, he said.

Gilbert said the district, with $600,000 in reserves, did not have the collateral to issue bonds to pay for the school construction project.

“Our reserves are less than 2% of our overall budget, which doesn’t exactly inspire confidence in the minds of prospective creditors,” Gilbert said. “La Verne has offered to use its good credit to finance certificates of participation. . . . This has never been done before, and La Verne is trying to pioneer in this direction, which is commendable.”

Councilman Tom Harvey, who has led the drive to have the city finance construction of the school, said he will be happy if the city can help get the school built. However, he blamed the Bonita school board and former Supt. James T. Johnson for failing to plan ahead to avert a school shortage in north La Verne.

“They were, I think, asleep at the wheel all those years,” Harvey said. “As new development was being built, we asked them, ‘Do you need additional school fees?’ They kept saying, ‘No, we’re fine.’ ”

Harvey said that over the past year the school board reacted “grudgingly” to the city’s offer to finance the new school. That has changed, he said, since the Nov. 3 election of three new board members, all of whom had cited the need for a new school for north La Verne in their campaigns.

‘Very Positive’

“With the new board in there, it’s gone very positive,” Harvey said. “It’s like night and day.”

Biff Green, the top vote-getter in the election, voiced enthusiastic support for La Verne’s offer.

“There’s no question that the new board members are behind the city’s efforts 100%,” Green said. “I think it’s quite admirable that the city has taken on this project, and I think that it could become a model of cooperation between cities and school districts.”

Green also blamed the school crisis in La Verne on the district’s failure to respond to the city’s growing population.

“I think in some ways that the former school board and even the former superintendent were never convinced of the need for a school in north La Verne,” Green said. “They never really jumped in with both feet and said, ‘How can we get this done?’ ”

Gilbert said the district could not set aside school construction funds from developers’ fees and meet the needs of La Verne’s new residents.

“If we could have stockpiled the money and put our kids in half-day sessions, we could have built that school,” Gilbert said. “But then the developers would get upset because the people who are buying the homes don’t want to have their kids attending half-day sessions.”

Robert Green, who has been on the board since 1977, said the district’s only failure in its attempts to respond to the need for a new school was its inability to inform the public of the difficult financial issues involved.

“I think the district did what it could,” said Green, who is not related to Biff Green. “If we made a mistake, it was that . . . we could have done a better educational program. You’re dealing with a very complex subject.

Supports Plan

“I think the city came to the conclusion that the district had looked into all the avenues it could and that there was no way the district could raise the funds.”

Robert Green, who is facing a recall vote in February, has been criticized for being unduly conservative in fiscal matters and for failing to look into alternative means of funding district programs. However, he said he has been negotiating with La Verne city officials for several months and strongly supports the city’s innovative financing proposal.

“I feel that what the city is trying to do financially makes a lot of sense,” he said. “We’ve looked at all the worst cases and covered every conceivable ‘what if?’ I’m very positive and I’m hoping that by this time next month all these (legal) questions will be resolved.”

The city is hoping to defray the cost of repaying the bonds by investing developers’ fees in accounts that yield more than the 6% interest the bonds would earn. Harvey said this practice, known as arbitrage, “makes borrowing cheaper than cash.”

Nonetheless, Harvey said La Verne is taking some chances in committing to pay for the new school. In light of the Oct. 19 stock market crash, he said, the city would be vulnerable in the event of a severe economic recession, which could bring development in La Verne to a halt.

Harvey’s other concern is that because the fees to pay for the school would be assessed on each housing unit, the City Council would feel pressure to permit greater housing densities in new developments.

“I’m strongly pushing this school, but I don’t want to be in a position where I’m going to give high density just to get more money,” Harvey said.

Idea May Catch On

Biff Green said that if the experiment in La Verne is successful, he would like to see a similar approach used to build a new school in San Dimas, the other city served by the Bonita district. However, Gilbert said that because San Dimas is near “saturation” of its housing capacity, the city could not depend on developers’ fees to pay for a new school.

Robert Green said city financing of schools could catch on with other districts experiencing overcrowding and budgetary hardship.

“I’ve already had people in the Department of Education in Sacramento ask me what we’re doing down here,” he said. “There are a lot of people looking at it. If it works, I think you’ll see a lot of other communities try it.”