Homebuilders back state bond initiative that would help build schools

The measure, which will appear on the November ballot, would end the need for construction and refurbishment fees mandated by school districts that the building industry considers excessive. If it doesn’t pass, some housing construction could disappear, developers say.

In November, Californians will vote on the California Public Education Facilities Bond Initiative, which if passed will issue $9 billion in bonds to pay for construction and improvements to schools.

This initiative, the first education-related bond measure to appear on the state ballot in 10 years, applies to students in kindergarten through high school along with community colleges.

The nine-page measure doesn’t mention the state’s homebuilding industry, but there may be no other organization in the state – including any affiliated with education – more eager to see the initiative passed.

That’s because if fails, California homebuilders will have to make up much of the revenue that would have gone toward building and refurbishing school facilities, in the form of raised fees. The Building Industry Association of Southern California, a trade organization for the homebuilding industry, estimates that fees in some markets could go from $8,000 a house to more than $30,000 per house.

That’s why the association will do everything it can to make sure the initiative passes, said Carlos Rodriguez, chief executive officer of the association’s Baldy View chapter.

“This is one of the most significant issues we’ve faced in the last two decades,” said Rodriguez, whose chapter covers all of San Bernardino County. “If the bond measure doesn’t pass, and the homebuilders have to pay those fees, the fees will be passed on to the homebuyers.

“That will price a lot of homebuyers, especially first-time buyers, out of the market.”

California has a long history of education-related bond initiatives: 42 of them have appeared on state ballot since 1914, according to ballotpedia.org, a non-profit website that provides political data from the local, state and federal level.

California voters last approved an education-related bond measure, Proposition 1D, in 2006.

The initiative on the ballot this fall would raise $3 billion to build schools, $3 billion for overall school improvements and $500 million for facilities at charter schools. It would also create $2 billion for construction and renovation at community colleges and $500 million for facilities that would be used for technical education programs.

School districts are required by law to set fees that pay for the construction or refurbishment of school facilities.

Why might developer fees double in an estimated 200 school districts if the bond measure does’t pass? That issue traces to School Facilities Act of 1998, which established that school districts would charge developer fees at one of three levels.

Level One is $3.48 a square foot for residential development and 56 cents per square foot for commercial development, regardless of the school district.

Homebuilders, who acknowledge the need for fees to help build schools, are generally comfortable paying Level One rates, Rodriguez said.

Level Two, which is what developers are paying now, varies from district to district and is updated every year. Level Two requires developers to pay approximately half the cost of a school that is needed because of new residential development, a major step up from Level One.

Last month, the State Allocation Board approved the implementation of Level Three fees, which can double the fees paid under Level Two if it’s determined the allocation board is low on money for school construction.

In some cases, depending on location and need, Level Three would require a developer to pay virtually all of the fees connected with building or refurbishing a school, according to Rodriguez.

That was the first time Level Three fees were approved since the three-tiered system was put in place. State law prohibits any district from implementing Level Three fees if it’s not already at Level Two.

Faced with that, the Sacramento-based California Building Industry Association filed a lawsuit.

The suit, which was upheld by Superior Court Judge Michael P. Kenny, won a temporary restraining against the allocation board regarding the implementation of Level Three fees. A hearing is scheduled for July 8, where it will be decided whether to extend the injunction until the issue can be decided at trial.

In the meantime, the BIA and its regional chapters will lobby on behalf of the bond initiative, the passage of which would replenish the allocation board’s coffers for school construction and make the Level Three  issue moot.

If it doesn’t pass, homebuilders up and down the state will have to scramble, and some developers might have to avoid high-end locations where the fees would be too expensive, said Michael Garrison, director of governmental affairs for the BIA’s Riverside County chapter.

Level Three fees would be catastrophic for the California homebuilding industry, which has improved during the past few years but hasn’t fully recovered from the recession, Garrison said.

“You can’t pass on all of the extra costs to the buyer all of the time,” Garrison said. “It’s not that easy. Every city is different, and how much you can pass on depends on the market. At Level Three, we’re looking at going from $8,000 to maybe $29,000 a [house]. That would be quite an increase.”

But homebuilders will pass on the extra costs to the buyer whenever they can, just as they do with any tax or fee they believe to be excessive, said Phil Burum, executive vice president of Diversified Pacific Communities in Rancho Cucamonga.

“Level Three is supposed to be a backstop for when the state runs out of money, but if we have to pay those fees we could lose one-fourth of our business,” said Burum, whose company builds single-family homes in Riverside and San Bernardino counties. “That would be bad, especially since we’re already underproducing. We aren’t building enough homes as it is.”

Refurbishing schools, especially retrofitting for earthquake safety, is always an issue, especially in districts with older buildings, said Justin Grayson, spokesman for the Riverside Unified School District.

“We have 33 schools that were built more than 40 years ago, and five schools that are more than 100 years old,” Grayson said. “There’s always going to be a need to keep up with the districts you’re competing with.”