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The San Diego City Council should consider demanding more money from the San Diego Unified School District to lease two floors of the proposed downtown library for a charter high school, according to a report released today by the city’s independent budget analyst.
The IBA’s office is questioning part of a city analysis that found the city was getting a fair deal for the $20 million the school district would provide from a recently passed school facilities bond. Specifically, the IBA is questioning how the city report accounted for “tenant improvements” and parking revenue associated with the project.
The school board is slated to vote tonight on a nonbinding letter of intent to lease the space for 40 years. A City Council committee will take up the topic tomorrow morning.
The city report said school district would pay for “tenant improvements” on the two floors, “saving the City $3.7 million from its construction budget.” School district officials have said it would cost $10 million to outfit the space with interior walls, carpet, flooring and lighting.
But the IBA report notes that the city eliminated those improvements in 2006 through “value engineering” — changes to the library plans made to reduce the building’s price tag. Therefore, the construction budget wouldn’t actually be reduced because it was already assumed the city wouldn’t be paying for improvements on those two floors.
The city analysis also includes revenue from of 30 parking spaces the school district could buy. But the parking spaces aren’t part of the $20 million the district would pay to lease the two floors, so the IBA’s office says it makes no sense to count it as part of the value to the city of the district renting the two floors.
“It’s just apples to oranges,” said Penni Takade, the IBA’s deputy director.
By removing those components, the IBA estimates that the real value to the school district of the space is $24.6 million. From the report:
In other words, the School District is getting $24.6 million in value from the lease, while paying the City $20 million for it.
The report suggests the city should ask for more money from the school district, perhaps from the district’s share of downtown property taxes. Or the city could reduce the terms of the lease. The report says that a term of 29 years instead of 40 would be roughly equivalent to the $20 million.
The IBA report also flags the potential for the city to be on the hook for increased operating expenses from the library. The city’s report says the larger library could be staffed with 82 positions, with volunteers being increasingly used to take over tasks now performed by the library staff.
But the IBA notes that such staffing levels would leave the new central library with fewer employees than other similarly sized facilities, such as the Seattle Central Library and the San Francisco Main Library, which have 104 and 187 positions, respectively.
When the city applied for a state grant in 2003, it described a staffing plan including 148 positions and annual operating costs of $16.1 million, compared to the $10.5 million library officials now say they would need.
The council’s Rules, Open Government and Intergovernmental Relations Committee will hear the issue at 9 a.m. tomorrow at City Hall, 202 C. St., 12th floor.