July 1, 2015
Facility Planners Meeting
State School Bond Efforts
Efforts in the Legislature
Efforts on a state school bond have taken a backseat to other priorities in the Legislature, which does not need to act until next year to place a bond on the November 2016 ballot.
Only one of the three main bond bill vehicles met recent legislative deadlines to make it out of Appropriations Committee and to the floor. SB 114 (Liu) was passed out of Senate Appropriations Committee without the addition of a specific dollar amount; however this bill failed to obtain the necessary 27 votes to pass out of the Senate in time to meet legislative deadlines. Bond bills require a two-thirds vote in each house, and the bill would have needed at least one Republican vote to pass off the floor. The final vote count was 26-8, with Democrats voting yes and only Republicans voting no.
Senator Liu has since amended the bill to insert an urgency clause, meaning that it is no longer subject to legislative deadlines and could continue to move through the legislative process this year.
Californians for Quality Schools Initiative
Signature-gathering for the Californians for Quality Schools (CQS) State School Bond Initiative is on pace to finish in mid-to-late July. The final certification of the results is expected by the end of September. We are confident that we will obtain the signatures needed to proceed, however we still need the support of the school facilities community to ensure our success.
Davis v. Fresno USD
The recent Appellate Court ruling in the case of Davis v. Fresno USD will have impacts that reverberate throughout the school construction community for a long time. C.A.S.H. staff have been working closely with various attorneys, school districts, and others to understand the interpretations regarding the decision. Ultimately, school districts should be able to forge ahead with lease-leaseback arrangements, assuming they address the court’s concerns regarding financing and occupancy issues in their agreements. The conflict of interest issue also continues to be of great significance, though it will ultimately require additional consideration by the trial court in order to determine whether or not a conflict of interest did exist in the Fresno USD case. It is possible that we will see legislation introduced by contractors or others to address the financing and lease concerns and/or the conflict of interest issue.
C.A.S.H. is actively working to disseminate information to our members regarding this case, as updates occur. We recently hosted three regional meetings in Fresno, Kern, and Orange County to review and discuss the court decision in detail. If you have a project that may be affected by the decision, consult your legal counsel to discuss your options.
The Legislature is working toward a summer recess deadline. Bills still moving through the legislative process are now in the second house and must be passed out of that house’s policy committee by July 17, at which time the Legislature adjourns for a month-long summer recess. Members return to Sacramento on August 17. Below is an update on a selection of C.A.S.H. priority bills.
AB 566 (O’Donnell) – Prequalification and Lease-Leaseback
This bill pertains to prequalification requirements and Lease-Leaseback. Amendments were recently taken to AB 566 when it was heard in the Senate Education Committee regarding the prequalification provisions. Previously, the bill extended the new prequalification requirement established by AB 1565 (2013) to all school construction projects above $1 million regardless of funding source, excluding projects in small school districts. These prequalification requirements currently apply only to projects funded by the School Facility Program (SFP). The adopted amendments remove this expansion and clarify that the requirements do apply to SFP reimbursement projects. Regarding lease-leaseback, the bill continues to create more stringent requirements for projects using this delivery method by requiring the use of a skilled and trained workforce (apprentices and journeypersons). C.A.S.H. is particularly concerned with the skilled workforce provisions and has proposed amendments to the author’s staff and sponsors, the State Building and Construction Trades Council, to address implementation concerns regarding availability of appropriate workers. The bill is pending in Senate Appropriations Committee.
AB 715 (Daly) – Assessable Space
This bill revises the definition of assessable space for the purposes of calculating developer fees, specifying that the following are excluded from the definition: covered walkway, uncovered walkway, enclosed walkway, bike storage locker, and detached personal property storage. The bill is sponsored by the California Apartment Association, which argues that such spaces are not considered “livable space.” C.A.S.H. has taken an oppose position and has worked in coordination with a coalition of other education stakeholders to negotiate amendments accepted by the author in the Senate Education Committee. These amendments remove the exclusion for bike storage lockers and should remove C.A.S.H.’s opposition.
AB 882 (Wilk) – Portable Electronic Devices and Local Bond Funding
This bill seeks to ensure that school districts are appropriately matching the term of a bond with the anticipated useful life of the objects being purchased, a requirement that already exists in current tax code. The author is especially concerned about appropriate use of local bond funds for the purchase of portable electronic devices and seeks to avoid the use of long-term bonds for such purposes. C.A.S.H. has an “oppose unless amended” position and has suggested including a statement in California law that use of local bond proceeds must comply with Federal requirements. C.A.S.H. staff have worked with the author’s office and Senate Education Committee staff to express our belief that the bill is unnecessary and to ensure it does not include any unintended consequences that may impact the structuring of long-term bond issuances. As a result of this work, the bill was amended in the Senate
Education Committee to better reflect the language used in the Federal tax code, and as such we are hopeful that C.A.S.H. may be able to remove opposition.
AB 1126 (Rendon) – HVAC Inspections
As amended on April 20, 2015, this bill requires the posting of the date of the most recent HVAC inspection report and information on how to obtain the report. C.A.S.H. is opposing the bill because of the California Public Records Act requirement that such reports be made available for public inspection upon request, and that existing processes involving the Facility Inspection Tool (FIT), the School Accountability Report Card (SARC), and the Local Control Accountability Plan’s (LCAP) “Good Repair” standard. The bill was approved by the Senate Education Committee 6-0.
AB 1347 (Chiu) – Claims Process
This bill establishes a new claims process aimed at achieving timely payment for undisputed claim amounts. The author accepted amendments negotiated by a coalition of public works sector representatives, including C.A.S.H. We have removed our opposition and have taken a neutral position on the bill. The bill has been amended to deem a claim rejected, rather than approved in its entirety, if the owner does not respond within 30 days to identify disputed and undisputed amounts. This is a significant change that gives the public entity the upper hand in the claims process. Additional amendments establish a meet and confer process that can be requested by the contractor for disputed amounts and reduce the interest on undisputed amounts not paid in a timely manner from ten to seven percent per annum. While we continue to believe that the existing claims process is sufficient and a new process is unnecessary, this bill represents a reasonable compromise between the sponsor, United Contractors, and the public works community.
State Budget Update
On Wednesday, June 24, 2015, the Governor signed the 2015-16 Budget Act and accompanying trailer bills to implement the budget with very little fanfare. He did not hold a press conference to mark the occasion, instead announcing the signing via a photo on Twitter. A negotiated deal between legislative leadership and the Governor was announced last Tuesday, June 16, one day after the Legislature approved its initial budget package in order to meet the constitutional deadline for passage. The Legislature passed modifications to the first budget bill and most of the accompanying trailer bills on Friday, June 19. The Legislature did not make any changes to the school facilities provisions included in the budget adopted on June 15. The main budget bills are AB 93 and SB 97. Education trailer bills include AB 104, the K-12 omnibus bill, and SB 78, which makes mainly technical adjustments to the Local Control Funding Formula.
The negotiated 2015-16 budget deal includes $115.4 billion in General Fund spending, reflecting the Governor’s more conservative revenue estimate, which is approximately $2 billion lower than the Legislature’s estimate. In 2015-16, Proposition 98 will receive $68.4 billion, an increase of 12.4% above the funding level adopted in the 2014 Budget Act. This budget includes an additional $6 billion for implementing the Local Control Funding Formula (LCFF), bringing LCFF funding to $52 billion, a 13 % year-over-year increase.
Phase-In of Three Percent Routine Restricted Maintenance Contribution
Included in the budget education trailer bill is a phase-in of the 3% Routine Restricted Maintenance Account (RRMA) contribution, rather than full restoration of the RRMA contribution in 2015-16, which was scheduled to take place under current law. The following are the details of the provision:
For 2015-16 and 2016-17
The minimum amount required to be deposited into the account shall be the lesser of the following amounts:
- 3% of the total general fund expenditures for that fiscal year.
- The amount that the school district deposited into the account in the 2014-15 fiscal year.
For 2017-18, 2018-19 and 2019-20
The minimum amount required to be deposited into the account shall be the greater of the following amounts:
- The lesser of 3% of the general fund expenditures for that fiscal year or the amount that the school district deposited into the account in the 2014–15 fiscal year.
- 2% of the total general fund expenditures of the applicant school district for that fiscal year.
Specifies that districts which received at least ten percent of the total funding under the School Facility Program (SFP) must deposit the full three percent of their general fund into the RRMA, unless the district has locally negotiated an alternative minimum annual deposit percentage in a collective bargaining agreement with representatives of the school district’s skilled trade employees. The Los Angeles Unified School District is the only district that meets this criteria.
Use of Funds for Drought Related Purposes
The bill also specifies that funds in the account may be used for drought mitigation purposes related to implementation of the Executive Order B-29-15.
Unfortunately, this means that effectively “Budget Flexibility” that was enacted in 2008-09 is still in effect for school maintenance departments, who will likely have to strongly advocate for some of the billions in new state funding allocated to school districts in order to have sufficient local resources in their Local Control Accountability Plans in order to meet the “Good Repair” standard.
The 2015-16 budget includes an additional $1.8 billion in one-time resources to continue immediate response to the drought, for a total of $3.7 billion over the past two years. Funds will be used for programs administered primarily by the Water Board and Department of Water Resources for the following purposes: protect and expand local water supplies ($1.5 billion), water conservation ($117 million), and emergency response ($114.9 million).
The budget provides additional enforcement authority to local water agencies, allowing them to enforce their own water conservation ordinances and the emergency regulations adopted by the Water Board. The Water Board is authorized to require consolidation of local water systems in disadvantaged communities when the system fails to provide an adequate supply of safe drinking water. The budget also provides a California Environmental Quality Act (CEQA) exemption for certain types of water recycling pipeline projects during a declared drought and for the next update of the Building Standards Commission Building Code cycle related to water recycling requirements.
Water Restrictions for Schools
Following the Governor’s Executive Order on water restrictions and the State Water Board’s development of a broad regulatory framework for implementing the Executive Order, it has fallen to the Division of the State Architect (DSA) to develop the program that governs school outdoor irrigation. Discussion to date indicates that the regulations will focus on new construction rather than modernization; sports fields and other outdoor instructional areas are exempt, and efforts are being made to make it as simple as possible. The question of how state regulations and local water agency authority will be adjudicated remains unanswered. C.A.S.H. has been involved in DSA’s working group to help develop the regulations and represent the concerns of schools. The DSA took placeholder language to the Building Standards Commission (BSC) on Friday May 29, and will take a final proposal to the BSC on July 21.
For the latest updates on important matters affecting school facilities, be sure to check the new CASH Register news website at www.cashfacilitiesnews.org.
~ C.A.S.H. Staff