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Mountain View Whisman’s school board voted unanimously this week to set aside roughly $29 million to fund the potential purchase of the land beneath its subsidized housing project for teachers and other school staff.
At a Thursday, March 20, meeting, the board members voted 5-0 to earmark various existing funds for the possible real estate deal.
According to Chief Business Officer Rebecca Westover, the $29.1 million total will likely not be enough on its own to finance the land purchase. The board has previously discussed other financing options to bring in additional money.
Mountain View Whisman has constructed 144 units of affordable housing at 699 N. Shoreline Boulevard, most of which are set aside for its employees. The project was completed last year and staff members have begun moving into their new apartments.
While the district owns the building itself, which was constructed using $88 million from the Measure T bond that voters approved in 2020, it doesn’t own the 1.8 acres of land beneath it. That’s owned by a real estate developer who is building an adjacent market-rate development. Currently, the district is on the hook to pay $1.9 million annually in a ground lease.
In January, the school board decided to enter into an “option to purchase” agreement with the developer. Under the terms of that deal, the district has until June 30 to negotiate a purchase price and finalize a deal. If the district buys the land, it would obviate the need for the ground lease.
In recent weeks, the school board has discussed various ways to fund the potential purchase. Thursday’s vote reserved $29.1 million in existing district funds, but it didn’t commit the board to actually using that money to buy the land.
A small portion of the $29.1 million will come from pausing certain bond-funded school improvements, but the vast majority of the total doesn’t rely on delaying projects.
Among the funding sources, the district could use roughly $9 million in fees that it collects from local developers. While the district isn’t allowed to use this money directly on buying the land, Westover said that it could cover the cost of a planned school roofing project, which would then free up Measure T bond money to pay for the land purchase.
Another large funding source is $5.3 million from a bond program contingency fund, which Westover said can be used for the land purchase, since most of the bond projects are now complete. There’s also another $5.9 million in unallocated bond funding, which came from a previously cancelled project. The district also expects to recoup $1.3 million in savings from existing bond projects.
About $2.2 million is expected to come from pausing three bond projects: upgrading projectors, fleet electrification and a portion of a lighting project.
At a meeting earlier this month, most of the board members were hesitant to engage in broader pauses of bond-funded projects. Parents had previously strongly objected to the idea of pausing an initiative to add trees and green spaces to local schools. That effort, along with other bond projects, are expected to continue to move forward.
An update on the housing project
Also at Thursday’s meeting, the board heard an update about the status of the employee housing project from Peter Ingram, a consultant that the district has brought on board to provide guidance on the initiative.
Ingram told the board that the district is in the process of analyzing rental rates, and looking at potential ways to lower them. Concerns have been raised that the prices for certain units may not be affordable for district teachers. The district is also investigating ways to set up a separate oversight entity for the project, Ingraham said.
The presentation also included updated information on the move-in process. As of March 13, there were 34 district employees who were already living in the building or soon planning to move in, including 11 teachers, Ingraham said. The renters include a range of other staff, such as counselors, instructional aides and school support staff.
The school board is planning to hold a study session on Thursday, March 27, to dive deeper into the project.
Way too much money to pay! It’s 1.7 acres of land that has already been developed and so can’t be developed further. The developer was obligated to subsidize some BMR housing and got out of it. The developer should give this to the school district at the price that was paid for it. It’s taxed at $13 Million valuation right now.
The plans were not well thought out in the first place. But taking advantage of the school district to make a profit of $20 M on what they originally paid for the land, not that long ago, takes the cake. They are coming out way ahead by not paying for the land (if reimbursed $13M) that they used to hold their required BMR units.
$29 millions sounds crazy high. I think another plot of land was around $10mm an acre. I’m sure they will find an appraiser who can sort this out.
These indignant comments about “crazy high” prices or what the developer “should” do are silly. The land has a very high value because there is a huge difference between the annual property tax bill and the value of the ground lease. If people don’t want big shakedowns surrounding land transactions, then they need to vote for a policy regime where the lion’s share of what a parcel can fetch via a ground lease is captured for public benefit instead of being securitized into private cash flows. It’s as simple as that.
Land is worth what similar parcels are worth. No more no less.
Even if you NPV the ground lease given a typical investment horizon (10yrs), the developer will come out ahead.
bottom line is that BMR units are required to be provided by the developer. Often they are sprinkled around in the same buildings are the market rate units. Then there BMR units incur no added land cost.
This is a scam where the developer has split out the BMR units all into a separate reduced cost building. Then he is trying to get money for the land under just those specific units. In normal practice, the projects owner would pay all the property tax. He’s wangled it so he escapes property taxes on some of the land, but that doesn’t mean he deserves to get paid for the partitioned off land. He certainly should not get reimbursed for more than he paid!
LongResident is absolutely correct here.
The Sevens complex was split into 2 parcels, to create a separate parcel for MVWSD, which is deeded affordable housing in perpetuity. So the annual property tax bill probably does reflect the (close to) true value of the land, since the revenue generated by the land and the building would be (much) less than comparable pieces of land in the city.
By creating this one-sided “partnership”, the developer was completely released from the liability of providing BMR units. And they are charging MVWSD $1.9M per year land lease with annual increases.
This was a predatory practice and only fools would’ve accepted such a “deal”.
Agreed. The $1.9mm is an abomination. But it is what it is. Rather than cry about it, it’s cheaper to pay for the land now.