School district shifts gears on paying off new school construction | August 30, 2019 | Mountain View Voice | Mountain View Online |

Mountain View Voice

News - August 30, 2019

School district shifts gears on paying off new school construction

With development slowing down, Mountain View Whisman to divert money from general fund

by Kevin Forestieri

Mountain View Whisman School District officials are switching up how to pay off millions of dollars in construction debt, diverting more money away from the general fund to pay off a $40 million loan used to build a new school and district office.

In a report to the school board Thursday, Aug. 22, the district announced it would no longer be using developer fees to pay off debt incurred by a $40 million "certificate of participation" used to pay for late-stage construction projects after the 2012 Measure G bond ran out of money.

Instead, the district will be "banking" developer fees for future projects, and will pay off the $2.64 million annual bill exclusively with lease revenue. While developer fees are restricted funds largely meant to offset enrollment growth, lease revenue flows into the general fund and can be put toward a wide range of academic uses.

In 2016, Mountain View Whisman school board members faced a conundrum, seeking to create a new school — the just-opened Jose Antonio Vargas Elementary — without enough money to pay for it. Trustees voted in October 2016 to supplement the bond fund with a $40 million certificate of participation, or COP, and use it to build Vargas and a new district office. Cost estimates from October 2018 pinned a $25.8 million price tag on Vargas and $8.4 million on the district office.

At the time, district staffers sought to use developer impact fees, which are sent to the district periodically from residential and commercial developers on a per-square-foot basis, since it was a way to pay off the costs while having a limited impact on the district's budget.

The developer fees came pretty close to paying the bill at first — in the 2016-17 school year, the district received just shy of $2.5 million. The rest was backfilled with revenue generated by leasing land and facilities to private schools and Google's day care center on Gladys Avenue.

But construction appears to be slowing down in Mountain View, or at least fluctuating unpredictably. In the 2017-18 school year, developer fees dropped to $1.7 million, and in 2018-19 they sank to just $638,000.

"One thing that we've learned in years past is that we can't rely on revenue streams that are unpredictable," district spokeswoman Shelly Hausman said in an email. "We're taking a more conservative approach and will use lease revenue in the future to pay the COP."

Unlike developer fees, lease revenue has grown quickly over the same period, and now constitutes a big portion of the district's annual budget. For the 2019-20 year, the district is expected to rake in $5.3 million, making it a far more reliable way to pay off the district's debt obligation, said Superintendent Ayinde Rudolph.

Despite paying off the bills with money bound for the general fund, the budgetary pivot will not affect academic programs and school services, Rudolph said.

With developer fees now freed up, Rudolph told trustees at the Aug. 22 board meeting that the funding could be used to house the hundreds of students projected to enter the district following new housing construction in several areas of Mountain View, including North Bayshore and East Whisman. The district intends to pull together a facilities plan by Nov. 21.

"It's our goal to come back with a 10-year master plan that takes into account the totality of all the future growth that's going to be taking place, as opposed to just project-by-project," Rudolph said. "So we'll have a clear plan of action moving forward as well as a recommendation of which projects we should do first."

All dried up

The 2019-20 school year signals the end of five straight years of construction in the Mountain View Whisman School District, with an ever-evolving scope of projects and a constant effort to control cost overruns.

The original $198 million bond program has ballooned to $262.4 million since 2012, drawing from 12 different sources of funding in order to keep up with escalating construction costs and school board-authorized changes that tacked on tens of millions of dollars over time. As the dust settled and classes began earlier this month, all of the money has officially been exhausted.

Some projects didn't make the cut. When asked by board member Devon Conley about plans to revamp the front office at Mistral Elementary — which were put out to bid and rejected in May for being too expensive — Rudolph said it was no longer an option.

"Based off of the cost overruns, we will deplete all the funds before we can do anything else," Rudolph said. "We've actually been taking items off. Solar has come off, Mistral has come off, the kinder(garten) playground expansions have come off, shade structures have come off. We don't have the funds to complete those types of projects at this time."

The construction budget ran dry at an accelerated rate due to "cumulative overages" during many of the projects, as well as some unexpected costs. Vargas Elementary School has yet to be hooked up to the power grid due to a dispute between PG&E and a nearby homeowners association, forcing the district to spend $35,000 a month on a gas generator. That money is coming out of the bond fund.

Soil conditions at the district office site also added last-minute costs to the construction budget.

Email Kevin Forestieri at kforestieri@mv-voice.com

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