By Constance Schwindt, Partner
Lindsay Thorson, Senior Associate
and Andreas Chialtas, Partner
Cerritos Office
Existing law requires school districts that have declared property surplus and have passed a resolution of the intent to sell or lease the surplus property to first offer the property to certain entities specified in the Education Code and Government Code, such as cities, counties, recreation departments, special education or child care providers, depending on the type of property. The recent passage of Senate Bill 1016 ("SB 1016") alters the existing law by placing charter schools first in priority for notification and acquisition of surplus real property if certain criteria are met.
This new legislation now gives charter schools first priority over other entities if both of the following circumstances exist: (1) if the subject property was designed to provide direct instruction or instructional support; and (2) the charter school has submitted a written request to a school district to receive notification of surplus property for sale or lease. If these two conditions are met, the school district must offer the property to the charter school before any other entity.
The most significant impact to school districts seeking to sell or lease surplus property is the potential financial impact of selling or leasing the property at a reduced price. The school district can only sell or lease the property to the charter school at a reduced priced based upon the formula set forth in the new Section 17457.5. For a sale, the price is limited to an amount that does not exceed the school district’s cost of acquisition (subject to a cost of living adjustment) plus the cost of any school facilities construction undertaken on the property by the school district since its acquisition of the land (subject to an adjustment based on the statewide cost index for class B construction, as annually determined by the State Allocation Board pursuant to Section 17072.10). However, the price cannot be less than twenty-five percent (25%) of the fair market value of the property or less than the amount necessary to retire the share of local bonded indebtedness plus the amount of the original cost of the approved state aid applications on the property. For a lease, the lease payment is limited to an annual rate of not more than five percent (5%) of the maximum sale price, as described above (subject to a cost of living adjustment).
School districts should keep in mind that any real property that can be characterized as "designed to provide direct instruction or instructional support" will be subject to these additional requirements and will need to be offered to any charter schools that have requested notification of any offering of surplus real property at a reduced price. SB 1016 will apply to real property identified by a school district as surplus property after July 1, 2012 and becomes inoperative on June 30, 2013. The new provisions will be repealed as of January 1, 2014.
