Joint Use Facilities And Modernization Projects Legislation Approved By Assembly Higher Education Committee

July 9, 1999

Joint Use Facilities And Modernization Projects Legislation
Approved By Assembly Higher Education Committee

The Assembly Higher Education Committee has approved two bills that are intended to provide community college districts with additional options for capital outlay projects. Both SB 1123 (Poochigian, R-Fresno) and SB 1283 (Polanco, D-Los Angeles) have been approved by the Senate and are only two steps away from being on the Governor's desk for his consideration. The bills have received mixed review by the community college system.

The joint use facility legislation has generally received system support however, the legislation pertaining to modernization projects has been opposed by the Chancellor's Office and Community College League. SB 1283, regarding modernization projects, is sponsored by the Los Angeles Community College District.

Bill Summary

School and Community College Joint Use Facilities (SB 1203)

This measure amends current law pertaining to K-12 and community college facilities by:

Establishing the criteria by which "joint use facilities" are to be evaluated by the State Allocation Board (SAB) and the California Community College Board of Governors (BOG)
Requiring that the BOG grant priority to joint use projects meeting specified criteria.
Authorizing a financing "bridge" program whereby the California School Finance Authority provides temporary funding for approved joint use projects, with the principal debt ultimately being reimbursed by General Obligation (GO) Bond Funds approved by the voters for K-12 and higher education facilities.

According to the author, sharing joint use facilities provide an opportunity for the state to more efficiently utilize educational facilities and ultimately save on the long-term costs associated with facility construction. The temporary financing mechanism proposed by this bill establishes a way for local districts to expedite joint use projects. Under the parameters of SB 1203, a joint use project that has been approved by both the SAB and the BOG is eligible for financing from the School Finance Authority. It is the intent of the author that the loan would then be repaid with GO bond funds either when the funds become available (upon passage of the next bond measure) or when the project reaches the top of the queue for available GO bond funds.

It is important to note that there are additional costs and potential pitfalls associated with utilizing this temporary funding mechanism. The School Finance Authority is only authorized to issue "revenue" bonds, which have higher interest rates than GO bonds and are therefore more expensive for the borrower. Additionally, the measure was amended to clarify that any additional costs that result from the use of the bridge funding (i.e., higher interest rate costs) are to be borne by the participating districts and not the GO bond fund. Under the current system, any district wishing to utilize revenue bonds must illustrate a "revenue" stream, funding source or collateral from which the bonds would be repaid. In the case of the temporary financing program, the author anticipates that many districts will pledge their state apportionment funding or state revenue limit, which are the same funds used to support the ongoing educational programs of the districts.

Community College Modernization Projects (SB 1283)

This measure, SB 1283, would statutorily establish a facilities modernization program for the California Community Colleges to be administered by the Board of Governors (BOG). The bill is sponsored by the Los Angeles Community College District, which argues that the current community college capital outlay process severely underfunds the modernization and renovation of existing buildings. This bill is an attempt to ensure that a higher priority is placed on modernization projects and that more funds are made available to upgrade deteriorating buildings.

This measure contains a requirement that modernization projects be funded with 80% state funds and 20% local funds. As originally written, SB 1283 could have had the effect of placing a higher priority on modernization projects than on other types of projects and could result in the displacement of those already-approved facility projects currently in the funding queue. The bill was amended to clarify that it will not take effect until the next GO bond funding cycle.

The Chancellor's Office is in the process of developing new guidelines for funding facilities that would include a higher prioritization of modernization projects. As a result, they are not in support of SB 1283.

-- Arnold Bray