State Allocation Board Adopts Developer Fee Increases

February 2018
Number 3

The State Allocation Board (SAB) has increased the amount of “Level 1” developer fees that school districts are authorized to collect to $3.79 per square foot of residential development and $0.61 per square foot of commercial development. The increase takes effect immediately, and may now be implemented by school districts through local action.

The new rates, which the SAB approved on January 24, 2018, represent an 8.78 percent increase over the maximum amounts authorized as of February 2016. The SAB based its increase on the RS Means cost index for Class B construction.

Government Code section 65995 authorizes the SAB to increase the amount of Level 1 developer fees that school districts are authorized to collect. Such an increase may be adopted in every even-numbered year. The SAB increase does not affect “Level 2” developer fees, which a school district must adopt annually based on its own school facilities needs analysis. The change also does not affect “Level 3” fees, which school districts may only collect when the SAB certifies that state funds for new school facility construction are no longer available.

Based on this and other legal developments, Lozano Smith is preparing an update for the firm’s publication, Developer Fee Handbook for School Facilities: A User’s Guide to Qualifying for, Imposing, Increasing, Collecting, Using and Accounting for School Impact Fees in California. The handbook is intended to help school districts reduce their legal costs by providing comprehensive information regarding California law and process for school impact fees. The handbook contains procedures, timelines, checklists, and forms to be used when adopting and implementing fees and/or increases.

Lozano Smith is making the handbook available at a cost of $100 to public school districts that are also clients of Lozano Smith. The handbook will be available to non-client public school districts at a cost of $200. Non-public agencies can purchase the handbook at the full price of $300. Districts wanting a second or replacement copy may request one for $75. School districts may order the handbookhere. For more information on the Developer Fee Handbook, or to order a copy, you may also contact our Client Services department at clientservices@lozanosmith.com or call (800) 445-9430.

If you have any questions regarding the adoption or implementation of fee increases or any other developer fee issue, please contact an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Harold M. Freiman

Partner

Kelly M. Rem

Partner

Ellen N. Denham

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

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Tax Bill Eliminates Advance Refunding Opportunities

January 2018
Number 1

On December 22, 2017, President Donald J. Trump signed the Tax Cuts and Jobs Act of 2017, putting into place the most sweeping tax reform seen in three decades, including significant cuts to corporate and individual tax rates. The new law also effectively eliminates a critical tool local agencies have long used to save taxpayers money.

The tax bill eliminated the tax-exempt status of advance refunding bonds, effectively ending their use by local government agencies. Local agencies may still issue them, but the interest is no longer tax exempt for bondholders. The revocation of this long-standing subsidy eliminates a tool that local government agencies, including school and community college districts, have used to restructure existing debt and provide savings to taxpayers.

An advance refunding occurs when issuers replace outstanding bonds with new bonds with a lower interest rate before payment of the original bonds is fully due. Borrowers advance refund their outstanding debt to take advantage of a favorable interest rate environment. Such an approach results not only in a reduction of borrowing costs, but may also free up resources for new projects.

Since 1986, federal tax law has permitted governmental bonds to be advance refunded once. Under the new tax bill, one of the key advantages to advance refundings-tax exempt status- will no longer exist.

Lozano Smith has expertise in public finance matters, serving as bond counsel on more than $1 billion in school district and community college district bond issues. Lozano Smith will be conducting school bond workshops across the state, covering topics that include:

  • Elections: Timelines and requirements
  • Bonds: Types, validity and tax treatment
  • Roles and Responsibilities: Committees, consultants, and counsel
  • Disclosure and Record Keeping: Regulations and legal considerations
  • Statewide Bond: Matching and impact

If you have any questions regarding the tax bill’s impact on your agency, please contact an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

School District Bid Threshold Raised for 2018

December 2017
Number 85

School districts’ bid threshold for purchases of equipment, materials, supplies and services (except construction services) has been adjusted to $90,200, effective January 1, 2018. This represents an increase of 2.20 percent over the 2017 bid limit. The notice may be viewed here.

Under Public Contract Code section 20111(a), school districts must competitively bid contracts over the bid limit and award to the lowest responsible bidder, unless an exception applies. Contracts for amounts that fall under the bid limit may be awarded without competitive bidding.

The California Community Colleges Chancellor’s Office is expected to announce a similar adjustment to the bid threshold for community college districts’ purchases of equipment, materials, supplies and services except construction services, pursuant to Public Contract Code section 20651(a), sometime in the next few days. Once released, that information will be available here.

The bid limit for construction projects remains at $15,000.

The bid thresholds for cities, counties and special districts are not affected by the bid limits discussed here.

For more information on the new bid limits or bidding in general, please contact an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Ruth E. Mendyk

Partner

Michael Dunne

Paralegal

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

New Law Squeezes Local Ballot Measures for Bonds

December 2017
Number 82

A significant new law will require local public agencies to include additional information in summary statements for local ballot measures that raise taxes, including school district general obligation bond measures. Assembly Bill (AB) 195 will amend section 13119 of the Elections Code by requiring summary statements for all local ballot measures that impose or raise a tax to include the amount of money the tax will raise annually and the rate and duration of the tax to be levied. The new law goes into effect on January 1, 2018, and affects measures already approved for an election to be held after that date.

This requirement will apply to all local tax measures, whether submitted to the voters by a local governing body such as a school district governing board or City Council or by citizens through the initiative process. In addition to general obligation bonds, AB 195 also applies to local sales and parcel tax measures.

According to its author, AB 195 was meant to fix a drafting error in an earlier ballot transparency bill, AB 809 (2015), which was intended to apply to all local measures but was found by a court to apply to citizen-backed initiatives only.

As a result of AB 195, the precious real estate of the summary statement, which is limited to 75 words, becomes less available as an opportunity to meaningfully communicate the purposes and works that will be funded by the taxes.

The new law could also pose compliance challenges for local agencies seeking to place bond measures on the ballot. Unlike a parcel tax measure, for which both the rate and duration of the resulting tax are ascertainable on Election Day, bond issues are subject to market forces that can make this information difficult to predict. While it would be possible to estimate tax rate and duration based on an estimated first series of bonds, because of future market conditions, changes in assessed value, construction costs, time of issuance, and size of issuance, efforts to quantify the rate and duration of a tax to fund anything beyond is extremely challenging. Public agencies will need to work closely with their bond counsel and consultants to address these and other issues raised by AB 195.

Lozano Smith has expertise in public finance matters, serving as bond counsel on more than $1 billion in school district and community college district bond issues. Lozano Smith will be conducting School Bond Workshops across the state, covering topics that include:

  • Elections: Timelines and requirements
  • Bonds: Types, validity and tax treatment
  • Roles and Responsibilities: Committees, consultants, and counsel
  • Disclosure and Record-keeping: Regulations and legal considerations
  • Statewide Bond: Matching and impact

If you have any questions regarding the applicability of AB 195 to your measures, compliance with AB 195, or about navigating a future bond campaign, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Daniel Maruccia

Partner

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

New Laws Enhance Role of Student School Board Members

October 2017
Number 63

On September 25, 2017, Governor Jerry Brown signed two bills aimed at giving a stronger voice to student board members of school district governing boards. Assembly Bill 261 confers voting rights upon all student board members, while Senate Bill 468 enhances a student board member’s access to board materials. Both bills go into effect on January 1, 2018.

Assembly Bill 261: Voting Rights for All Student Governing Board Members

Existing law requires the governing board of a school district with one or more high schools, upon the receipt of a pupil petition for pupil representation, to order the inclusion of at least one student board member. The petitioner may request that the board add either a nonvoting student member or a preferential voting student member. Preferential voting rights give a student board member the right to vote on motions before the other board members vote, but the student’s vote is not considered in determining whether a motion passes. Assembly Bill (AB) 261 amends Education Code section 35012, subdivision (d) to provide all student board members preferential voting rights.

The bill maintains the existing requirement that a student board member’s vote be cast before the official vote of the governing board. Even though the student board member’s vote does not count toward the final numerical outcome of the vote, it must be recorded in the meeting minutes. This procedural order is intended to ensure that student board members’ opinions are taken into account before a board vote.

Senate Bill 468: Students to Receive More Timely Access to Board Materials

Senate Bill (SB) 468 amends Education Code section 35012 to require that school districts provide open meeting materials to student board members at the same time as other school board members. The bill also requires school officials to invite student board members to any staff briefings provided to other board members, or to provide a separate staff briefing to student board members within the same time frame as other board members’ briefings. While the changes will provide student members more timely access to information, the bill’s provisions are limited to open meetings and do not provide student members the right to attend closed sessions or receive information related to closed sessions.

Takeaways

These new bills are intended to enhance the role of student school board members. Any school district that has a student board member will be required to grant him or her preferential voting rights and can no longer have student members who are nonvoting. The student board member’s preferential vote must be cast before the official board vote. Any open meeting materials or briefings that are provided to school district board members must also be provided to the student board member in the same time frame.

For more information on AB 261 or SB 468 or on board governance in general, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Harold H. Freiman

Partner

Mark Murray

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

New Laws Update Nutrition Program Purchasing Rules

October 2017
Number 62

Governor Jerry Brown has signed four bills that update purchasing rules related to school food and nutrition programs and improve access to healthy food. Each of these bills will take effect January 1, 2018.

Senate Bill 544: Bill Offers Clarity on Food Contract Award Rules

Senate Bill (SB) 544 resolves an inconsistency between state and federal law regarding the award of contracts in support of child nutrition programs by clarifying that school districts can consider factors other than price in awarding these contracts. This new law provides school districts with flexibility in purchasing items and services for their child nutrition programs.

Existing state law requires school districts to award any contract involving an expenditure that is over the bid limit (currently $88,300) for the purchase of equipment, materials, supplies or services, other than construction services, to the lowest responsible bidder. As a condition of the receipt of federal funds for child nutrition programs, school districts must also comply with federal regulations that permit the consideration of factors in addition to price. The factors include contractor integrity, compliance with public policy, record of past performance and financial and technical resources. These differences between state and federal requirements have been a source of confusion for many districts.

SB 544 provides some clarity by modifying section 20111, subdivision (c) of the Public Contract Code to expressly allow school districts to follow federal regulations and to consider other factors in addition to price in awarding contracts in support of their federally-funded child nutrition programs. Under the new state law, price must be the primary consideration, but it does not have to be the only determining factor.

Senate Bill 557: Schools Permitted to Donate Uneaten Food

SB 557 will allow local educational agencies to provide “sharing tables” where faculty, staff and students can place prepackaged food items, uncut produce and unopened bags of sliced fruit and cartons of milk to be donated to a food bank or other nonprofit charitable organization. This bill exempts these foods from the current California Retail Food Code regulations, which prohibit food that is unused or returned after being served or sold and in the possession of a consumer, from being offered as food for human consumption. Food placed on sharing tables must first be offered to students during regular meal times before it can be donated. (See Ed. Code, §§ 49580 et seq. and Health & Saf. Code, § 114079.)

Senate Bill 730: State Will Monitor Compliance with “Buy American” Provision

SB 730 will require the California Department of Education to monitor whether school districts receiving a federal subsidy to provide free and reduced price meals are complying with the “Buy American” provision in the federal National School Lunch Act, which requires school food authorities to purchase, to the maximum extent possible, domestic commodities or products. This bill also requires the Department to provide requirements, resources and best practices on its website and to distribute federal guidance and regulations related to the Buy American provision. (See Ed. Code, § 49563.) This bill does not implicate the separate California Buy American Act that was found to be unconstitutional because it is preempted by federal law.

Assembly Bill 836: Schools May Dispense Juice from Vending Machines

Assembly Bill (AB) 836 authorizes the state Department of Public Health (DPH) to modify previous requirements of the California Retail Food Code that prohibit the dispensing of certain bulk foods from vending machines. Specifically, the bill requests that DPH modify this prohibition to permit juice stored in bulk containers to be dispensed from a vending machine under certain conditions. These specialty vending machines are purported to offer healthy food options to customers by making it easy and convenient to access freshly made vegetable and fruit juices. (See Health & Saf. Code, § 113936.)

For more information on these bills or on law governing school nutrition programs in general, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Kelly M. Rem

Partner

Alyse Pacheco

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

Lead-Safe Schools Protection Act: The Continuing Duty to Address Lead

October 2017
Number 61

Schools, colleges and other local and state agencies have a continuing obligation to address lead in the course of new construction, modernization and maintenance projects. Various provisions of California law found in the Lead-Safe Schools Protection Act, the Health and Safety Code and Title 17 of the California Code of Regulations ban the use of materials containing lead in new construction and require that public agencies use properly trained and certified personnel to plan for and address existing materials containing lead that will be disturbed during the course of modernization and maintenance projects.

Voters’ approval of the Proposition 51 state school bond in November 2016 and of more than 200 school and community college district bond measures are contributing to a new wave of public works construction. When undertaking these projects, public agencies should remain vigilant in enforcing the ban on lead in their new construction projects and complying with current regulations to address existing materials containing lead in modernization and maintenance projects.

The Lead-Safe Schools Protection Act

Enacted in 1992, the Lead-Safe Schools Protection Act (the Act) implemented a program of prevention and protection for California public elementary and preschools and related day care facilities. The Act focuses on protecting the youngest students because lead is highly toxic and exposure is particularly dangerous for children ages six or younger.

The Act required the former Department of Health Services (now the Department of Public Health) to conduct a sample survey of California schools to identify risk factors to predict lead contamination. Risk factors included location in relation to high-risk areas, age of facilities and likely use of lead paint, numbers of children enrolled under the age of six and results of lead screening programs. Based on the survey results, which were released in 1998, the Department estimated that nearly 96 percent of schools had some lead paint, more than 18 percent had lead in drinking water at or above the federal action level and six percent had lead levels in soil that exceeded federal standards.

Lead hazards can include lead-based paint or paint presumed to be lead-based (applied before 1978) that is deteriorated or disturbed, lead-contaminated dust or soil or any other nuisance which may result in persistent and quantifiable lead exposure. Lead activities include abatement, hazard evaluation, construction work or any activity which disturbs paint known or presumed to contain lead, or creates a lead hazard.Lead-related construction work means any construction, alteration, painting, demolition, salvage, renovation, repair or maintenance of any public building, including preparation and cleanup, which by using or disturbing materials or soil containing lead may result in significant exposure to adults or children.

Independent of the Act, provisions of the California Health and Safety Code provide that the Department or other local enforcement agency may order a public agency to abate or otherwise correct a lead hazard that exists or is being created on the public agency’s property, and may issue a cease and desist order. Failure to comply with such an order can result in a fine of up to $1,000 for the first violation, and up to $5,000 and imprisonment in county jail for up to six months for each subsequent violation, in addition to other penalties and remedies allowed by law.

Takeaways

To comply with the Act, school districts must not use materials containing lead, including paint, plumbing and solders, in the construction of any new school facility or modernization or renovation of existing school facilities. Districts must also utilize trained and state-certified contractors, inspectors and workers in any abatement action.

For more information on the Lead-Safe School Protection Act or on public agency construction in general, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.
Written by:

Devon B. Lincoln

Partner & Co-Chair

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.