New Law on Sale of School Sites to Aid Districts

In the same week that Supt. of Public Instruction Bill Honig declared that the state would need to build a school a day for the next five years to meet booming enrollment, Gov. Pete Wilson signed into law a bill championed by a South Bay school district that gives small districts with declining enrollments an incentive to sell sites they no longer need.

The law, which was spearheaded by the El Segundo Unified School District, makes it easier for small districts to spend interest from the proceeds of surplus property sales on general education expenses, such as salaries and books.

Under previous state law, all money from the sale of school property was earmarked for the construction of new schools or major maintenance projects. The law goes into effect Jan. 1.

The new law, which benefits several small school districts in the South Bay, illustrates an irony in public education statewide: while some districts are scrambling to find enough portable classrooms to house their students, others are closing schools because of declining enrollment.

“On the surface, that sounds like a paradox, but it’s not,” said Honig, who supports the change. “It points up that this is a diverse state and you need flexibility in how you manage education. The money is sitting there. Why shouldn’t it be used to educate kids?”

Under the law, districts with fewer than 10,000 students--or about 60% of the state’s school districts--may hold the proceeds of property sales in an account and use the interest generated on it for operating costs. The 10,000-student cap was created because the problem of declining enrollment tends to hit smaller districts, supporters said. Also, smaller districts tend to be better at predicting enrollment trends than larger districts, they said, and so are less likely to sell buildings that they may later need.

Larger school districts that can prove they do not need the school sites for additional students and that want to use either the proceeds of property sales or the interest on it for operating expenses must still receive permission on a case-by-case basis from the state Allocation Board, which oversees state spending on school construction.

To discourage smaller districts from selling school sites that might be needed in the future, the new law requires districts that take advantage of the statute to wait 10 years before they can apply for state construction funds.

Statewide, the districts that will benefit most from the new law tend to be in communities that are landlocked with no room to grow, or where property values are so high that families with young children cannot afford to buy homes there.

Among the most immediate beneficiaries in the South Bay, are school districts in El Segundo and Lawndale, which have been looking for ways to generate income with surplus property they no longer need for schools.

Other districts in the South Bay, including those in Manhattan Beach and the Palos Verdes Peninsula, have already obtained waivers from the state Allocation Board allowing them to use interest income from previous property sales for operating expenses.

However, school officials in these districts also welcomed the new law because they no longer have to appeal to the state agency for a waiver, a cumbersome and time-consuming process. In addition, interest income they can use under the waiver process diminishes each year according to a formula set by the state.

Although the bill garnered only four negative votes as it wound its way through the Legislature, there were other voices against it. Among the bill’s opponents were officials with the state Allocation Board, who argued that school districts need some oversight to ensure that they don’t frivolously divert funds that had been designated for the construction of new schools.

“I don’t want to see a state-level agency stand in the way of the local decision-making process,” said Bill Van Gundy, executive officer of the state Allocation Board. “However, when you’re dealing with (scarce resources), we’re really hard pressed to see a district misusing these assets and then turning around and saying ‘I’m broke, I need money for new facilities.’ ”

But Assemblyman Curtis Tucker Jr., who introduced the bill, expressed more faith in the fiscal prudence of local school officials. And economic realities, he insisted, require that something be done for school districts with declining enrollments.

“I don’t see school districts expanding operations (as a result of the new law), because the money they will derive from the sale of property isn’t going to be that great,” Tucker said. “But I can see them using the money to tide them over while we’re in a recession. This will allow them to weather the storm without negatively impacting on the education they are delivering.”

The plight of small school districts that are losing students was brought to Tucker’s attention by trustees of the El Segundo Unified School District, which owns two surplus school sites, but nevertheless had to cut five teaching positions to balance its $9-million 1991-92 budget.

The 2,045-student district has been so strapped for cash it stopped paying for field trips and library services and has been charging each of its athletes $55 a year for rides to athletic events.

As a result of the new law, the district is likely to sell a six-acre parcel that used to be Imperial Avenue Elementary School, which was closed 15 years ago. Trustees estimate the property is worth about $8 million and that once sold, interest income--perhaps as much as $650,000--would allow the district to reinstate swimming classes, buy new desks and maybe even cover expenses currently paid by a local property tax.

“Don’t even ask me because I have a wish list a mile long,” said trustee Nancy Wernick, who made about 20 trips to Sacramento in the last year with trustee Ken Schofield to lobby for the bill.

Both Wernick and Schofield, co-writers of the bill they affectionately call “our David and Goliath” measure or “the little bill that could,” said they were ecstatic about its passage because of the benefits it will bring their district. Emboldened by their success, the trustees have since gone into business together as legislative and lobbying consultants.

“I don’t think I came off the ceiling for five minutes,” Wernick said of her reaction when she learned the bill had been signed into law. “I called Ken immediately and I don’t think he came off the ceiling either. We’re still pinching ourselves.”

Other South Bay officials also hailed the law, saying it gives local districts more control over their own destinies by letting trustees use their assets as they see fit.

“It’s a good decision. We’re happy about it and pleased it finally passed,” said Michael Caston, superintendent of the Palos Verdes Peninsula Unified School District, which recently consolidated three high schools into one because of declining enrollment.

The 9,000-student district, which sold a high school site seven years ago, has a waiver to spend some of the interest income on general education costs. But Caston said that he doubted the district would move to sell any of its other four surplus sites just because the law makes it easier to access those funds.

“Selling is a major decision,” Caston said. “I wouldn’t think it would be something that would cause us to want to go out and sell all our surplus school sites. It’s helpful, but that’s about it.”

South Bay Union High School District Supt. Walter Hale was also enthusiastic about the law.

“I think it’s great,” said Hale, whose 3,000-student district also has permission from the state Allocation Board to use interest income on former property sales to cover about $1 million in operating costs. “I would say all of the districts in the South Bay area are spending more on educational programs than we get from the state. . . . We have to look at other means to get money.”

Even officials with the 19,600-student Torrance Unified School District, which is too large to qualify under the law, praised the Legislature for recognizing the needs of districts with declining enrollments. Torrance officials, however, plan to lobby in favor of expanding the law to all districts, not just those with fewer than 10,000 students.

“I’m glad for Palos Verdes and all the districts that benefit (from the law) because they deserve it and they need it,” said Torrance Supt. Edward J. Richardson. “But basically I don’t think the state should be restricting the use of interest income anyway. The state’s just correcting something they should have kept their nose out of.”