The San Benito High School (SBHS) District Board of Trustees and Superintendent Shawn Tennenbaum gave a presentation to the Hollister City Council during a special meeting April 4 in an effort to come up with a plan of collaboration to pay for a new high school.
The bottom line, though, is that the combined funds from developers and the state’s contribution will leave a $73 million shortfall toward paying for a new high school, and all that is left is a Hail Mary to try to convince developers it’s in their best interest to pay even more in mitigation fees.
Superintendent Shawn Tennenbaum, John Corrigan, president of trustees, and Jeffery Small, district financial advisor, presented the current situation for funding to the council. They painted a bleak picture in that the district cannot issue any more bonds and that the $73 million shortfall is simply too large to expect mitigation fees to fill the gap.
Councilman Tim Burns came away from the meeting puzzled.
“I didn’t leave the meeting with a whole lot of hope for the district,” he told BenitoLink. “There’s always an opportunity for conversation and maybe some collaboration. I don’t know how we get there unless we impose some sort of self tax, but the school can’t do it because they’re bonded out.”
During the sparsely attended Saturday morning meeting Tennenbaum told the council the district wants to work with the city and county to ensure there is adequate funding for the new school. He said there is a capacity issue at the high school. Enrollment now stands at 3,423 students as of October 2021, with a projected growth reaching 3,500 students by the fall, and 237 more students over the next two years from existing developments. He said based on “unofficial numbers” it is the second-largest high school in Northern California.
He told the council he was there to gain support in a partnership between the district and the city to come up with a solution that could involve building a new school either within the city or in the county.
Small told the council because there is only one high school in the city there is little flexibility when it comes to accommodating new students. Because the school has reached its building capacity there is no room for further expansion.
He said in 2020 the district was considering building a new high school in phases. Through a facilities master plan, the first phase would be an “inexpensive, basic high school” to provide a minimum number of classrooms and administrative support that would cost approximately $123 million in 2020 dollars. Because of inflation, he said the plan is being updated and is expected to increase to $165 million but will undoubtedly increase again once construction begins.
He explained the district has only two funding sources: developer fees and the state. The amount of fees the district can collect from developers is limited by law. Currently, when a developer receives a building permit, it pays a fee that is capped by the state at $1.75 per square foot for each unit, which is a mitigation fee for the impact on the school by their developments.
Small said when the state devised the mitigation fee structure the fees were supposed to pay for 50% of the cost of a school facility, whereas he said it covers only 11% of the cost. He said over the last four years over 2,000 permits were granted that equaled just $8.6 million.
“At the rate permits are being pulled we simply cannot keep up,” he said.
Small said even state funding is uncertain. He said the district anticipates the state will pay $36 million, which isn’t paid up front, but seven years after the state approves the plans. He said in addition to the $73 million shortfall, which the district would be responsible for finding, there is a need to come up with funds to begin construction.
He explained funding for high schools is different than for other projects. Property tax dollars cannot be used for facilities. According to Melinda Casillas, county treasurer/tax collector/public administrator, the high school district receives $17 million annually from property taxes, which is “back funded by state” money for each student attending the school, according to Small.
Tennenbaum said that because of COVID, which allowed many parents and students to work from home, projecting the actual number of students who will come on campus has been a challenge.
He said the district has been aggressive in the past to secure state money along with the two voter-approved general obligation bonds—Measure G in 2014 and Measure U in 2016—that raised $102.5 million to modernize and reconstruct the existing high school. A third bond, Measure L for $30 million, was defeated.
“Because general obligation bonds are approved by voters the district’s primary objective is to meet the promises made to taxpayers,” Small said. “Those bonds are issued based on the assessed value of the school district. There is a limitation on the amount of bonds the district can issue. We are currently at our bonding capacity, which is about $100 million. We are close to that in bonds outstanding.”
He said without getting a waiver from the state the district cannot issue more bonds. Tennenbaum wanted to make it clear to residents that the district does not have five bonds, as some believe, but only the two that voters approved. Casillas said the mistake is understandable because property tax bills show several bonds, which are actually refinanced portions of the original bonds to obtain better interest rates.
Small said there may be a third source of funds to help pay for the start-up cost for the new school: “a voluntary mitigation agreement the district would like to enter into with developers. We will need the support of all of the developers because it’s a very large issue to fund this shortfall.”
He said the mitigation agreements would put a special tax on the developers’ new homes to help offset their impact on the high school district. He said developers could pay the special tax up front or possibly roll it into a special taxing district or Community Facilities District (CFD), similar to those used by cities and counties to pay for infrastructure, fire and police.
“It’s a fairness thing,” he said, adding that the new homeowners would also benefit because they would be buying into the existing high school as well as a new school. “That helps the value of housing.”
If residents vote to pass a bond, should there be one to at least get a bare-bones campus off the ground, it will be the third one for the high school district on top of two bonds for the Hollister School District, two for Gavilan College, and one for Hazel Hawkins Hospital, and a water bond. Currently, the existing bonds add an estimated additional $400 per $100,000 value of a home. Then there are also minimal charges for mosquito abatement, and advanced life support.
The median priced home in the county today is $830,000, according to REDFIN. With a property tax rate of 1% of assessed value, this means the owner of a median priced home pays approximately $10,000 in property taxes and bonds each year with the existing bonds. Then some homeowners pay additional CFD fees, Mello-Roos, landscaping and lighting fees.
According to the Hollister Planning Department, there are at least 29 projects, dating back to 2005, which amount to over 2,300 homes and apartments. An estimated 4,700 new units will be built over the next 10 years (an average of 470 units per year), according to the school district. In 2002 Hollister capped the number of new homes at 244 a year. The state, though, disallowed any caps because of a need for more housing and the California Department of Housing and Community Development denied the city’s attempt to ignore state law.
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