The city and school district have been negotiating behind closed doors for months over the renewal of a complicated lease for 27 acres at the former Cubberley High School site that was originally penned in 1989 as a way to help the schools deal with a financial crisis brought on by declining enrollment.
Back then city leaders, with support from the Weekly, rallied to help the district by entering into an agreement that was essentially a funding mechanism designed to transfer city funds to the needy school district. The deal had three components: The district agreed not to sell off or redevelop unused school sites; the district provided space for after-school child care at each elementary school; and the city agreed to lease the closed Cubberley High School.
Today, with built-in escalators, the deal is transferring more than $7 million each year from the city to the school district, or about 4 percent of the district's budget. The city then leases out space at Cubberley to a variety of users and uses some itself, but generates barely enough income to simply pay for the operating expenses, with nothing offsetting the lease payments to the school district. The city is taking a bath on this deal, and with its expiration at the end of the year the time has come to rein it in.
Over the last 25 years, about $136 million has been transferred from city coffers to the school district.
During the depths of its financial problems, it was appropriate for the city to step up, successfully pass the utility tax and use some of that money to help out the schools. But no one dreamed that 25 years later this transfer of money from the city to the school district would still be taking place, especially given the district's current healthy financial condition.
The city is seeking relatively minor concessions in the lease-renewal negotiations compared to what it could and should be asking for. It wants to eliminate the $1.8 million a year currently being paid for the covenant not to develop or sell school sites that were considered surplus back in 1989, but which are now being utilized as schools or are lucratively leased. It also wants to end the cost-of-living increases that have driven up the lease costs.
As a result of the open discussion on Monday night, the public learned that the school district is taking the position that the city should continue paying for this covenant, even though the sites are no longer even remotely at risk of development. The school district wants to renew the current agreement without any changes when it expires at the end of the year, a position that is simply indefensible.
Quite appropriately, the City Council voted unanimously in public to affirm what it undoubtedly has been advising City Manager Jim Keene in closed session: There is no longer any legal or moral justification for giving $1.8 million a year to the school district. In fact, the case can be made it is an illegal conveyance of public funds.
As Councilmember Larry Klein, one of the major advocates of the plan 25 years ago, said, "I don't see how anyone can explain to our voters, most of whom are voters in the city and the school district, why the city should be paying for something that has no value."
The council voted to instruct Keene to hold firm with the school district, and several Council members suggested that if the district would not yield then the city should consider not renewing the lease at all.
For its part, the school district has argued that the city has a strong interest in supporting the schools given their importance to the community, and the agreement is an appropriate ongoing investment.
With other important city infrastructure needs and greater-than-expected growth in property-tax revenues for the school district, now is the time to begin phasing out the Cubberley lease without it having negative impacts on the schools.
The City Manager and Council were right to bring news of the impasse to the public and conduct a full discussion of their reasons for insisting on changes to the lease. By its unanimous vote, the Council also demonstrated a powerful united front.
Now it's time for the school board to move quickly to abandon its position on the $1.8 million covenant so it doesn't put the entire lease at risk.