ORIGINAL LETTER DATE NOVEMBER 1, 2015
Dear Council and Trustee members:
As you know the City of Dublin (the “City”) and the Dublin Unified School District (the “District”) are entering into a Ground Lease Agreement (“GLA”) for the Jordan Ranch joint-use park and school site. The City and the District are also entering into a similar GLA for a joint-use park and school site in the Dublin Crossings development. The intent of the GLAs was to provide a $60 million costs savings to the district, however the GLAs are having the unintended consequence of reducing the amount of Level 2 developer impact fees from $12.46 per square foot for all new residential development to $6.89.I will briefly explain why below.
As a point of reference, the City of Pleasanton’s most recent Level 2 developer impact fee is $12.41 per square foot. The reason why DUSD’s developer impact fees of $6.89 is so much lower than Pleasanton’s is directly related to the GLAs. Each year DUSD prepares a School Facility Needs Analysis (the “Needs Analysis”) to establish the amount of Level 2 developer fees allowed for new residential construction, pursuant to Chapter 407/98 of Senate Bill 50. As shown in Figure 9 of the most recent Needs Analysis prepared by the District’s demographer, SCI Consulting Group, dated August 2015, the land acquisition costs per acre for K-8 and high school was $50,000 and $3,619,000, respectively. The statutory minimum of $50,000 was used for K-8 because District was not purchasing the land for the two sites. . If $3,000,000 or $3,619,000 per acre were used for K-8 land acquisition costs, DUSD’s Level 2 developer impact fees would increase substantially from $6.89 per square foot to $12.46 or $13.48, respectively. Conservatively, $12.46 seems reasonable especially when compared to Pleasanton’s rate of $12.41.
Based upon my reading of Chapter 407/98 of Senate Bill 50 and the related implementation regulations discussed in Section 1859, I believe that fair market value of the land as established with reference to the Amador land acquisition can be used in the Needs Analysis and that using the statutory minimum of $50,000 is unnecessary and contrary to the intent of the City. Even if this approach were not permitted, there are alternative ways to structure the arrangement between the City and the District that achieves the intended cost savings of $60 million while avoiding the unintended consequence of significantly reducing the Level 2 fees. One example – I am sure there are others – is the City could sell to DUSD the two 10 acre park sites for $60 million but spread the payments over 30 years. DUSD could use incremental proceeds from the higher developer fees to pay for the land.
I also speculate that the GLAs as structured may also preclude DUSD from receiving money from the state related to the land if a state bond is ultimately approved.
Between the incremental developer impact fees and state bonds, my calculations show that there is at least $60 million of additional funding. If the district revised the Level 2 calculations to incorporate the stated fair value of the land this incremental $60 million in funding would be available to DUSD. Alternatively if DUSD used the funding to buy the two sites for $60 million from the City, the City would have $60 million. This $60 million could be used by the City for projects such as completing Fallon Sports and Sean Diamond parks and expanding library hours and other services. Both scenarios are much better outcomes to the community versus providing the developer with discounted fees and foregoing state bond money.
Accordingly, I request that the district revaluate the August 2015 calculation including consulting with a new demographer to get a fresh perspective and in parallel that the City and the District restructure the arrangement to achieve the intended costs savings for the community.
Dublin Resident since 2003
1st/3rd Tuesday Every Month
100 Civic Plaza
7471 Larkdale Dublin
A Dublin Senior's Perspective
Dubliners for Change Member's Letters to DUSD
Dear Council and Trustee members:
I wanted to thank the Board of Trustees for further evaluating whether we can avoid missing out on $60 to $80 million plus in incremental developer school impact fees and state bond matching funds. I also wanted to thank the Council and Trustee members who reached out to me directly. I believe that there is a real opportunity to have a win-win-win-win for the City, the District, the community and the developers too, but your active engagement is required to make this happen. This is not just a District or City issue, but rather it is a community-wide issue.
The following are some things for the Board of Trustees to consider at the school board meeting on Tuesday, November 10, 2015 as part of this topic:
* Level 2 developer fees were designed to provide approximately 50% of the cost of new school.
* While State funding for the other 50% is currently not available, the November 2016 state ballot initiative may restore this funding.
* The key drivers of Level 2 developer fees are (1) land acquisition and site development costs, and (2) the projected incremental facilities required that are directly related to new residential developments.
* In DUSD’s latest calculation of Level 2 fees prepared in August 2015, the land acquisition costs per acre for elementary and middle school was based upon the statutory minimum of $50,000 because as stated the “school sites are likely to be leased by the District from the City.”
* The City intends to have District buy the land when funding is available and expects to have the lease agreement include options to buy the land.
* Based upon my reading of SAB Regulation 1859.74, the options to buy allows the fair market value of the land to be factored into the calculation of Level 2 fees. The regulations allow for significant flexibility in determining land acquisition costs.
* Inclusion of the fair value of the land, directly increases the fees from $6.89 to $12.46 per square foot.
* While this level of fees is in line with other California communities, it is higher than many because of our substantially higher land acquisition costs.
* Based upon the calculation below, this increases the developer impact fees collected by approximately $65 million, most of which will collected over next 5 years.
Incremental developer fees directly caused by the approach of excluding land value - $12.46 less $6.89 $5.57
Potential number of residential units based on March 5, 2015 staff report – Appendix A 8,787
Estimated average square feet per residential unit 2,200
Estimated incremental developer impact fees $107,675,898
Conservatively reduce to 60%1 $65,000,000
* While these fees do not achieve the targeted 50% of the fully mitigated costs, they move us a lot further toward fair contributions from developers.
* The incremental developer fees would provide the District with sufficient funds to exercise the options to buy both sites from the City.
* Additionally by factoring in the value of land, DUSD may be eligible to receive matching funds from the state related to November 2016 bond initiative.
While this only partially addresses our school-overcrowding situation, it is a big step forward. It will allow the District to own the land, and provide the City with up to $65 million of additional funding which could be used for things such as follows:
* Joint-use facilities with the District such as gymnasiums or a high school pool,
* Completing Fallon Sports and Sean Diamond parks
* Expanding library hours and programs with schools.
I am confident that with your patience and perseverance, we can realize the intended cost savings to the District while avoiding the unintended consequence of missing out on tens of millions of dollars in incremental developer fees and state bond matching funds.
Dublin Resident since 2003
Dubliners for Change
Dubliners for Change is a diverse group of resident volunteers working together to ensure that our city is governed in an ethical, constituent-driven manner. We are dedicated to the preservation of open space and the environment, quality education free from school overcrowding, sufficient infrastructure to support our city, and the development of a premier pedestrian friendly downtown.
2nd/4th Tuesday Every Month
100 Civic Plaza Dublin