Santa Clara Unified School District will be conducting a Mello Roos Community Facilities District election on March 8, 2011. The purpose of the election will be to get approval by the voters of North San Jose to tax new residential development to pay for new schools in the area. The ballot item will be named Measure A and will be the only item on the ballot. The election will be by mail only ballot. Ballots will be sent out by the Registrar of Voters on or about February 7, 2011 and must be returned to the Registrar of Voters by March 8, 2011, 8:00 PM to be counted. There will no polling places for you to go to to cast your vote.

The City of San Jose is planning to build 32,000 new living units in North San Jose, 16,000 of those within the Santa Clara School District boundaries. The City will be creating 83,000 new jobs and living units for 50,000 additional people. As you are aware, the City has not planned for community amenities to serve the new units (or the existing housing) such as parks, schools, retail outlets, etc.. The school district is taking it upon itself to provide for schools to serve the area. However, the district has to find funding for the schools.

All existing living units have paid for their schools already through previous bonds, and property taxes. The district believes that it is fair for the new development to pay for the schools to house students generated out of the new housing units. Existing housing units will, however, be asked to pay $19.00 per unit per year to pay for part of the cost to have a new school in the neighborhood.

Santa Clara Unified has been searching for ways to fund the needed schools for over five years and has consulted with many finance experts. A tentative deal had been worked out with the City of San Jose Redevelopment Agency in late 2008, but the City eventually reneged on that deal. The district has also been negotiating with the developers for five years, but they do not want to do their part to pay for schools or other community amenities. This left a Mello Roos Communities Facilities District as the only viable alternative to funding new schools.

One of the advantages of a Mello Roos is that the school district only needs to tax the developers for the actual cost of schools actually built to house the number of students that actually show up for school. A quirk in the Mello Roos law requires the School Board to set a maximum tax limit for the voters to approve. However, the actual tax imposed can be much lower than this amount. This method makes sure the district has the money to build schools in the future and covers inflation and unanticipated growth while also not charging the developers more than is required to build schools. Mello Roos is a way for the school district to cover the risks of number of students, when they show up, the number of schools and the future cost of schools, without taxing more than is actually needed.

If you have any questions please email RONA at info@ro-na.org.

Further reading material:

• Santa Clara Unified School District Resolution 10-47 which establishes the rules and boundaries of the Mello Roos district. Page 5 has direct mention of annual reports to the School District on the funds. Page 9 has a MAP of the relevant area. Page 14 summarizes the overall needs of the community in the next 30 years, and the plans drawn up in response.
• Minutes from SCUSD Board meeting, December 8, 2010, where resolution 10-47 was passed.
• Arguments for and against Measure A, a preview of what will arrive in the official ballot material.

As of 12/8/2010 filing, the ballot reads (emphasis added):

Measure A

To prevent severe overcrowding and excessive busing of students, maintain local neighborhood schools, and meet future classroom facility needs created by new residential housing, shall CFD No. 2011-1 of the Santa Clara Unified School District levy an annual special tax of $19.00 on existing residential units, and a one-time and annual special tax on new residential units as prescribed in Resolution 10-47, issue up to $788,000,000 in bonds, and establish an annual appropriations limit?

YES
NO

The $788 million is the maximum amount of debt the school district could ever incur based upon the value of all of the property the school district owns. This number was placed in the election formation documents to let Wall Street investors know that even if SCUSD borrowed money for theses new schools, SCUSD is not mortgaging themselves to the maximum.

The actual amount of debt SCUSD anticipates incurring is closer to $135 million. SCUSC estimates that cost of schools we are asking the developers to pay for is approximately $200 million and under the Mello Roos, they will pay $65 million up front, leaving a debt of about $135 million that will be paid off with revenue from the Mello Roos tax.

The arguments against a Mello Roos boil down to:

• "No new taxes!"
• it is weighted heavily against residents moving in to new units
• it is a large cost on developers, which might drive some away or slow development in NSJ
• that $788 million number is scary (see above)
• Mello Roos districts may be vulnerable to constitutional challenge
• There are some concerns there is not enough oversight or that SCUSD does not manage their money well (see the yahoogroup discussion for more information).
• more arguments here and here.

• Bizjournals.com: Santa Clara School District eyes Agnews State Hospital site for expansion
• An example of how to build a K-12 school on the Agnews site: pdf
• Information about how school districts affect housing prices: pdf
• 1/17/2011 RONA Board Meeting Minutes: meeting with developer representatives
• 1/10/2011 RONA Board Meeting Minutes: meeting with SCUSD representatives
• 9/15/2010 RONA Board Meeting Minutes
• A study of housing values and school quality: here
   
• The last school SCUSD built was Don Callejon, a K-8 schools in Rivermark. This school cost $35,000,000 and the land and infrastructure were donated by the developers and the City of Santa Clara picked up the cost of the turf play area. Most of the money was donated by the residential developers because they wanted a school to support their development and they understood the value of a school for the community. Here is the cost breakdown for Don Callejon (xls). And here is the estimate for the proposed Agnews K-8 school.
   
• Why a Mello Roos?
  • New residential units in the North San Jose area are only required to pay $3000 per unit to the school district to fund new schools. The NSJ plan adds 16,000 new residential units within the boundaries of SCUSD. $3000 multiplied by 16,000 is $48 million. The Santa Clara Unified School District estimates it will cost at least $35 million to build a single K-8 school that will cover less than 1/2 of the new students. A high school to cover our area would cost at least $150 million. It's obvious the math for what the developers are paying does not work.
  • Responses in italics are from Roger Barnes:
    • We have been working on a solution to funding schools in North San Jose for five years. We have been in detailed discussion with builders, the City of San Jose, Joint Venture Silicon Valley and the Chamber of Commerce. No one has come up with any ideas on how to fund the schools. We did have a tentative agreement with the City of San Jose to fund part of the schools, but they reneged on that agreement (and then lost the money to the State of California). These other parties want the school district to carry the cost of new schools and the risk of the actual cost of the schools. The only two ways we have of funding schools are through a General Obligation tax that the whole school district pays for, or a specific tax that the developers (who are causing the problem) pay for. Measure A is the only solution that keeps the taxes to existing home owners, who have already paid for their schools, low and requires that the builders of new residential units pay their fair share for new schools. We are still open to ideas.
    • The only other way we have to fund schools is through a General Obligation Bond. This means every home owner in the school district would pay part of the cost. If we were to use General Obligation Bonds to pay the estimated $200,000,000 for schools in North San Jose, it would cost someone who owns a home worth $200,000 about $64 per year. If your home is worth $500,000, it would cost you $160 per year for thirty years. This is based on the cost to home owners for the district's last two Bonds (Measure J and Measure H). This is far more than the flat $19 per year through Measure A. It is only fair that existing homes pay part of the cost because they will benefit from a school in their neighborhood.
   
• Roger Barnes on the $788 million figure:

  The appropriations limit is the amount of bonds we actually sell. By setting the Bonding limit artificially high - $788,000,000, we can borrow the amount of money we actually need to build the schools (bonding limit is different than appropriations limit). Bonding limit is the maximum amount the district could borrow and is based on the assessed value of our property. The appropriations limit is the amount we actually do borrow, which I would guess at this time as somewhat less than $135,000,000. This amount depends on how many developers take out building permits for how many units and when. The sooner and the more building permits taken out, the less we will have to borrow because we can fund construction out of the $6,500 up front money. A General Obligation Bond, like our Measure J and Measure H, has specific borrowing needs and we know the timing of construction and a close ballpark of the cost. We can, in those cases set an appropriations limit up front (at election time). However, as mentioned above, since we do not know the timing or the cost (due to inflation for schools being built three to ten years out), we do not set an absolute appropriations limit for Measure M. It floats instead, based on our need at the time we sell bonds.