Developer Fee Deal Spells Good, Bad News for Schools

The compromise on developer fees approved Thursday as part of the Legislature’s multibillion-dollar bond package brought mostly good news to school districts.

Forged after several days of intensely partisan negotiating, the agreement enables districts to continue to impose the fees, established in 1986 to help pay for school construction. But under the compromise, they cannot collect more than a maximum of $1.53 per square foot of residential construction for the next three years, even if school bonds slated for the June and November ballots fail.

After 1991, if a state school bond measure fails to win voter approval, the $1.53 cap will be lifted and districts will be able to set higher fees.

Existing law provided a “safety net” for districts that would allow them to charge higher fees this year in the event that bonds are not approved. This provided an incentive for developers to support school bonds as a means of avoiding higher fees.

Potential Bad News

But the potential bad news is that the state--which funds most school building and remodeling projects--will run out of construction money this June. If voters fail to approve the school bonds, districts will not be able to turn to higher fees as an alternative source of construction money.

“Now what legislators and builders have done is create a system that . . . leaves schools with a cap on fees that are only supposed to take care of a fraction of the total problem,” said Kevin Gordon, a legislative advocate for the California School Boards Assn. “If the bond fails, it will just cripple the school districts’ ability to serve the state’s growing number of schoolchildren.”

Mary Anne Houx, president of the California School Boards Assn., said what is troubling about the compromise is that “developers have nothing to lose financially if the bond proposals fail” because the cap will still be in effect. Various education sources estimated that developer interests provided half of the $300,000 war chest used to pass an $800-million bond measure in 1986.

$2 Billion Needed

State Education Department officials project that developer fees will bring in about $300 million of the $2 billion needed each year over the next several years to build new classrooms. California’s kindergarten-through-12th-grade enrollment is growing by 150,000 students a year, which will require 10 new classrooms a day.

That is why passage of the two bond measures is critical, state Supt. of Public Instruction Bill Honig said Thursday. Although he said he would have preferred not to freeze the fees for three years, he is happy that the compromise allowed the Legislature to reach agreement on the even more critical issue of putting the bonds on this year’s ballots.

“I think we’ve got a good chance of getting (the bonds) passed,” he said.

Los Angeles Unified has received almost $40 million in developers’ fees since last January--almost enough to pay for four of the two dozen elementary schools it will build over the next five years. It needs $2.6 billion over that period.

Crucial Element

The fee issue was a crucial element in the package of bills the Legislature sent to the governor Thursday. More than $5 billion in bonds will be placed on the June and November ballots, including two school construction bonds totaling $1.6 billion. Republican lawmakers threatened to block the bond measures unless they won certain concessions on the fees.

The Senate also gave final passage Thursday to a package of bills that made a number of technical changes in the fee law. Among the changes were exemptions for residential remodeling projects costing less than $20,000 and construction of “uninhabitable space” such as garages, porches and overhangs. In addition, fees on senior citizen housing projects will be assessed at the lower rate of 25 cents per square foot that was established for commercial construction.