With just six weeks left before the expiration of a lease agreement that has transferred approximately $140 million from the city to the school district over the last 25 years, the city council and school board have finally reached agreement on a new five-year lease that begins to wean the district from what has become an outdated and lopsided arrangement.
The two public agencies have been at an impasse for almost two years because the school district, which today receives more than $7 million a year under the expiring lease, has insisted that there be no changes from a deal worked out in 1989 when the district needed financial rescue from the effects of declining enrollment.
Back then city leaders rallied to help the district by entering into an agreement that was essentially a funding scheme designed to transfer city funds to the financially strapped school district. To raise money to pay for it and various city infrastructure projects, voters passed a 5 percent utility tax.
The deal had three components: The school district agreed not to sell off or redevelop its then-surplus school sites, the district provided space (not funding) for after-school child care at each elementary school and the city agreed to lease the closed Cubberley High School, which at the time was entirely owned by the school district. (Today the city owns 8 acres in the northeast corner of the site, including classrooms and the tennis courts, while the school district owns the rest of the 35 total acres.)
The city has subleased space at Cubberley to a variety of users, including Foothill College, 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 has been taking a bath on this deal and with the school district's current strong financial condition the city council correctly decided to seek to rein in the lease terms.
The city wanted to eliminate the $1.86 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 have since been re-opened as schools or are lucratively leased by the district to private schools. It also wanted to end the cost-of-living increases that have steadily driven up the lease costs.
The deal reached this week, which is expected to be formally ratified by both the school board and the council, successfully eliminates the $1.86 million annual payments, sets an annual 3 percent rent escalator and partially protects the city from the loss of more than $1 million in rental income when Foothill College vacates its space at Cubberley by sharing the impact with the school district, subject to a complicated formula.
The city also agrees to allocate the $1.86 million per year it has been paying the district for the covenant to a fund for repairing, renovating or improving the Cubberley property, and both agencies are committing to develop a long overdue master plan for the site before the five-year lease extension runs out at the end of 2019.
We are especially pleased to see this provision, which will keep pressure on both agencies to finally plan for the long-term future of this valuable publicly owned property.
City Manager Jim Keene and Superintendent Max McGee deserve credit for getting this deal done after a lot of foot dragging by the school district, which tried to argue that voter passage of the utility tax 27 years ago obligated the city to provide funding to the district under the original formula in perpetuity.
It is unfortunate that the positive outcome of these negotiations was marred by the comments of school trustee Melissa Baten Caswell, who misleads the community by suggesting that the school budget will need to be cut as a result of the deal and that the schools will have to "figure out how to work with less operating funds in order to be successful for the students going forward."
In fact, the school district's finances are in the best shape they've been in for decades due to large increases in both property-tax revenues and reserves, and the effects of the lease renewal will only be to modestly slow the rate of increased spending by the district.
The renewal of the Cubberley lease is a win for the community. An even bigger win will come when the school board finally commits to redeveloping the site for one or more schools, thereby enabling a definitive plan to emerge. Until that occurs, this immensely valuable piece of property will continue to be an underused, outdated and deteriorating symbol of government ineffectiveness.
Comments
College Terrace
on Nov 14, 2014 at 10:48 am
on Nov 14, 2014 at 10:48 am
Dear City Council Members + School Board
Wonderful news that you have a deal.
Let get the location rebuilt with modern amenities to have a paved grounds, nice paint, good looking building roof; bath rooms that work; a potential new school!
It is in a great location surrounded by schools + learning centers + library!
Our community will highly benefit from it a lot. High return on our investments!
Let us not prolong; get it done by next Christmas!
Respectfully
Palo Verde
on Nov 14, 2014 at 11:39 am
on Nov 14, 2014 at 11:39 am
To the Weekly:
Please explain how $7million per year, suddenly becomes $1.8 million a year.
What is this.... New Math????
Monroe Park
on Nov 14, 2014 at 11:45 am
on Nov 14, 2014 at 11:45 am
The $1.8 million/year refers to the amount paid for the covenant not to sell any school sites for development. That will now be used to for maintenance and improvement. The balance of the annual payments have been to lease all or, since the Terman School land swap, or a portion of the property.
(note that those of us in Monroe Park have watched our utility tax go to support a school district we're not park of. Monroe Park is in the Los Altos school district.)
Palo Verde
on Nov 14, 2014 at 12:06 pm
on Nov 14, 2014 at 12:06 pm
Anon,
The City's budget lists $7 million for that covenant. When I was on the Infrastructure Commission, that is what the City repeatedly told us they paid. Were they lying then.... or now??
Another Palo Alto neighborhood
on Nov 14, 2014 at 12:08 pm
on Nov 14, 2014 at 12:08 pm
> those of us in Monroe Park have watched our utility tax go to
> support a school district we're not park of.
This is only partially true. Since the Utility Tax is now generating over $11M a year, and the transfer to the school district is only about $7M a year--the difference goes into the general fund, from which services are provided to all residents. And let's not forget that this $7M is not a gift (although it does seem like it), it is really rent on the Cubberley Center, which is open to everyone (more-or-less). It's open for use by folks in Monroe Park, even.
Charleston Gardens
on Nov 14, 2014 at 12:18 pm
on Nov 14, 2014 at 12:18 pm
The enrollment figures for the next 5 years will be very interesting because kindergarten enrollment has dropped in the last two years, will this continue? However, Middle School enrollment has increased very slightly.
What needs replacing is Terman Middle School but rebuilding Cubberley as a Middle School may not work because we'd have two Middle Schools close together. Also, Terman serves students from Los Altos Hills and Stanford and now that Arastradero/Charleston has been narrowed from 4 to 2 lanes even transporting them to Cubberley will be a nightmare.
I remember when Terman was closed before there was a huge outcry from both Stanford and Los Altos Hills parents who had to transport their children to Wilbur (now JLS) for Middle School. The outcry was so loud that Stanford offered the School District 18 acres of land off Page Mill/Deer Creek Roads to build a Middle School.
You have to remember that 40 percent of the taxes that support the PAUSD come from Los Altos Hills and Stanford and they deserve a Middle School on their side of town not at Cubberley, which leaves the question what should we build at Cubberley?
Another Palo Alto neighborhood
on Nov 14, 2014 at 12:34 pm
on Nov 14, 2014 at 12:34 pm
> You have to remember that 40 percent of the taxes that support the
> PAUSD come from Los Altos Hills and Stanford
Source, please.
Monroe Park
on Nov 14, 2014 at 12:47 pm
on Nov 14, 2014 at 12:47 pm
@senor Blogger,
From the above article ..
"The deal had three components: The school district agreed not to sell off or redevelop its then-surplus school sites, the district provided space (not funding) for after-school child care at each elementary school and the city agreed to lease the closed Cubberley High School, which at the time was entirely owned by the school district. (Today the city owns 8 acres in the northeast corner of the site, including classrooms and the tennis courts, while the school district owns the rest of the 35 total acres.)"
The covenant not to sell land is/was only one of the three parts.
@joe
Yes, I've used the Cubberley site - for Foothill College classes, book drop-off at the FoL, etc. I'm just tired of what in essence amounts to paying taxes to two school districts. (I once mentioned that to someone who was on the City Council when the utility tax passed and was told "Oh, we never thought about PA residents who weren't in the PAUSD." And wasn't the utility tax supposed to sunset at some point?
Another Palo Alto neighborhood
on Nov 14, 2014 at 1:00 pm
on Nov 14, 2014 at 1:00 pm
> mentioned that to someone who was on the City Council
> when the utility tax passed and was told "Oh, we never thought about PA residents
> who weren't in the PAUSD."
There are only a handfull of you folks in this situation, so the amount of money collected is not that large--although it's certainly understandable to not want to pay for what is effectively two school taxes.
Since the City now has a sophisticated GIS and billing systems, they could, if they wanted to, exempt you folks in the MV school districts from 7/11ths of the UUT.
> And wasn't the utility tax supposed to sunset at some point?
No, not really. If you were around back then, you might remember that those who pushed this through the ballot initiative processed saw to it that the language "in perpetuity" was included in the authorizing ballot text.
Sadly, there was almost no one at the time who opposed this tax. So, until someone decides that enough is enough, and can convince enough people that giving hundreds of millions of dollars to the school district to fatten up their salaries and pensions--this tax will be with us--in perpetuity.
Duveneck/St. Francis
on Nov 14, 2014 at 3:38 pm
on Nov 14, 2014 at 3:38 pm
What is the history of Monroe Park that it ended up attached to the Los Alto School District?rB
Monroe Park
on Nov 14, 2014 at 4:01 pm
on Nov 14, 2014 at 4:01 pm
The Los Altos School District was set up in 1909, at a time that much of the area was still unincorporated county land. (Los Altos wasn't incorporated until 1952.) School districts and city boundaries around here are not congruent.
The LASD student body includes children from Los Altos, Mountain View, Palo Alto, and Los Altos Hills. Some Los Altos kids are in the Cupertino district. Meanwhile, PAUSD includes the portion of Los Altos Hills not in the LASD.
One disadvantage of the mismatch between districts and cities can be seen in all the new residential growth in the LASD portion of Mountain View along El Camino and San Antonio. MV has been quite happy to grow that area without putting aside any land for a school (land owners shriek at the mere mention of the use of eminent domain to build a much needed new facility.)
Charleston Gardens
on Nov 15, 2014 at 6:41 am
on Nov 15, 2014 at 6:41 am
The Utility Tax goes into Palo Alto's general fund. Passing the tax originally was sold to the voters as supporting the leasing of Cubberley but in fact there was no specially designated account to keep the money separate from all the rest of the money in the general fund.
I have sympathy for those who live in Monroe Park but you have every opportunity to use the Cubberley facilities as do all the residents of Palo Alto.
Another Palo Alto neighborhood
on Nov 15, 2014 at 1:43 pm
on Nov 15, 2014 at 1:43 pm
> The Utility Tax goes into Palo Alto's general fund.
> Passing the tax originally was sold to the voters as supporting
> the leasing of Cubberley but in fact there was no specially
> designated account to keep the money separate from all the rest
> of the money in the general fund.
While that’s true—what’s your point? While money generated by Enterprise Funds (such as the Utility) are necessarily to be kept in separate funds—the UUT is a tax on top of your Utility bill, not a service generating revenues because of commodities sold to you via the Enterprise Fund.
The tax goes into the General Fund, and the lease payments are made out of the General Fund. That was the point of the tax, and obviously this works.
The issue which pops up from time to time, is that now that the UUT is generating a lot of money over the leasing fees—what is that money to be used for? As it turns out, there was no promise via the Ballot language, so the City/Council is free to use it as it wants. Sadly, most of this money (about 4M this year) ends up in salaries, and other costs, such as benefits. The Council could have earmarked the extra funds for infrastructure—but they never have, and no one in town seems to care much.
At $4M a year, it would only take about 10 years to generate $40+M—which is surprisingly close to the amount that the City is claiming it needs for a police station. We just went though an election cycle—and it was clear from the powder-puff questions, the non-questions, and the silence about important Palo Alto issues, that none of the Candidates were about to talk to the electorate about anything other than “goodies for your votes”.
Palo Alto, and the PAUSD, now spends about 3 Billion dollars ever ten years, between them. Anyone care to point out what that 3 Billion dollars is buying for us?