During a Jan. 19 special meeting, the San Benito High School District Board of Trustees took part in a workshop to discuss building a new high school for 1,200 to 1,400 students, with the possibility of being expanded to accommodate 1,600 to 1,800 students. The potential price tag for the school is $123 million. With a 6% inflation rate over a five-year construction period, the price jumps to $165 million, or more.
Meanwhile, there are still a number of outstanding projects under the 2015 Facility Master Plan to be completed on the present campus amounting to $32 to $40 million.
Cathy Dominico, managing partner and strategic consultant at Roseville-based Capital /FPG, led the workshop—there are several planned over the next few years—which used the district’s newest facility master plan to discuss the necessary steps to fund and build another high school. Trustees approved the master plan during a June 23, 2020 regular meeting.
Part of the $123-million cost is $7.6 million for the 36 acres that would be required for the school.
There is a potential savings, though, because the school district already owns a 70-acre parcel of land along Best Road, in the county southeast of Hollister. Theoretically, the new school could be built there, Dominico said, or it could be sold or exchanged for another site.
“The land is an asset, and if we don’t use it for our school site, it’s still an asset that we can financially contribute to the cost of the high school,” Dominico said. “It doesn’t change the cost of the high school, but it’s a resource we can use to fund a portion of the cost.”
At $7.6 million, the report’s value for the future site is set at over $200,000 per acre; not even close to a realistic cost of land along Best Road, according to Karson Klauer, a Hollister real estate agent, who told BenitoLink the property is valued much lower, closer to $22,000 to $25,000 per acre, or $1.5 to $1.7 million in total. This would leave a shortfall of $5.9 to $6.1 million if the new land cost were to actually be $7.6 million.
Klauer said the $200,000 per-acre figure would be more realistic if the property was adjacent to the town of Hollister.
“The high school could save money in terms of land acquisition by building on the site they own, but they’d face some huge costs in terms of utilities,” Klauer said. “Sewer would probably be the most expensive.”
Neither Dominco nor SBHS trustees responded to BenitoLink regarding how the $7.6 million was determined or if there were other sites being considered.
Adding student capacity
Dominico said student enrollment at San Benito High School, which has a current capacity of 3,437 students, is approximately 3,100. The district estimates an increase in high school age students with the completion of nearly 4,700 new homes over the next 10 to 11 years of about 1,600 additional students. According to the master plan, this is about 0.1 to 0.25 students per home. These are in addition to students already attending elementary and middle schools who will be matriculating into high school over the years.
There are two ways for the San Benito High School District to add more capacity: expand the existing campus even more or build a new school to accommodate future students.
The plan anticipates there will be approximately 3,300 students for the 2020-21 school year, based on registration figures. Trustees agreed that expanding the existing school is not a viable solution because it would result in the largest non-charter high school in the state, serving nearly 5,000 students.
According to the master plan, expanding the present campus might be a more cost-effective option, but from an academic perspective, the size would be to the detriment of the students.
More bonds required
There are three primary sources for funding a new high school, according to the master plan: the state, new development fees, and local bonds. Using the lower figure of $123 million for 1,200 to 1,400 students, the district believes that even with more than $13.8 million in developer fees from new construction—and maybe $36 million from the state—there would be a shortfall of $73.2 million, which would have to be paid for with the passage of one or more bonds.
Over the past five years, the district has received approximately $3.4 million in developer fees. In addition to that, voters passed two bonds, Measures G and U, totaling $102.5 million for expansion of the present high school. However, voters struck down Measure L, a $30 million bond, last March. So far, the district has invested approximately $148 million into its capital program since 2014.
In its 2018-19 final annual report to the board of trustees, the Citizens’ Bond Oversight Committee stated that it was “confident the bond projects will be finished, within budget, and in compliance,” even though at the time of the report there were still 18 projects remaining, valued at $40.6 million.
To date, there is no committee report verifying the Oversight Committee’s earlier projection. The committee is required by law to make sure the public funds are spent properly and within budget. With the failure of Measure L, there are a number of projects that were yet to be funded:
- Installation of advanced security features including new gate systems, security cameras, lighting, signage and fencing.
- Construction of a student union and cafeteria to provide students and community members with a gathering space.
- Installing photovoltaic panels to generate clean energy and reduce utility costs.
Under the Mello-Roos Community Facilities Act of 1982, public agencies—in this case, San Benito High School District—may form a special tax district, known as a Community Facilities District (CFD), to fund capital improvements with a useful life of five years or longer. To approve a special tax and issue bonds, a CFD requires two-thirds voter approval, except in developing areas where there are less than 12 registered voters.
This landowner vote provision makes this a useful tool for development mitigation in the county, according to the master plan, which states, “There is a lot of flexibility to a CFD and many of the components can be customized to the district and/or developer utilizing the funding mechanism.”
The most common financing mechanism for non-voter approved debt is tax-exempt leasing, also known as Certificates of Participation (COP). Another common lease financing mechanism is called a lease-revenue bond. They are exempt from the voter approval requirement when structured as a contingent liability, such as a lease.
Essentially, the district pledges its General Fund while intending to utilize developer fees and state funding as the repayment source. However, due to uncertainties regarding the timing of developer fees and state funding, the General Fund is needed to secure the loan. COPs and lease-revenue bonds can be used as a short-term “bridge” financing. In 2019, the district did, in fact, take out a $19-million bridge loan.
Dominico pointed out the $36 million the district is counting on from the state could turn out to be less, and cause an even greater shortfall that would have to be picked up by county property owners in the form of one or more increasingly expensive bonds if the project were delayed.
“Everybody talks about state funding being 50%,” Dominico said. “Well, that doesn’t mean it’s 50% of the cost of the facility. It’s based on eligibility and per-student grants. It’s not the actual construction costs, so it usually ends up being about 30% of the construction costs, or even less for a high school because of the types of facilities you’re constructing, such as labs. They’re very expensive to build and state funding just doesn’t come in at 50%.”
Dominico said a bond is crucial because it will be the primary funding source early in the planning and design phases.
“You may be looking at a 2024 bond or a 2026 bond, which would drive the construction timeframe,” she said.
If the bond or bonds fail to pass, the entire project could be delayed, she said.
Neither the board of trustees nor the consultants responded to requests for further information about the origin of the master plan, whether the new high school would be under the direction of the San Benito High School board or what kind of sports program it would have.
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