The Morning Report
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As they say in the business: When the money ain’t right, good financiers will find a way. Just kidding, I obviously have no idea what they say in the money business. But for the purposes of this story, my made-up axiom has the scent of universal truth.
Dale Scott is the kind of guy who wears a more expensive watch than you and runs a financial firm that advises school districts throughout California. Back in 2017 he was working with a small district in Daly City, just south of San Francisco, to help the district finance housing for its teachers.
The teachers of Jefferson Union High School District, sandwiched between Silicon Valley and San Francisco, were having a terrible time finding housing they could afford. Jefferson Union officials wanted to help out and create some housing, so they wouldn’t keep losing teachers to more affordable districts. But the numbers just weren’t working.
“We were trying to get the numbers in conventional financing, using lease financing or a conventional loan,” said Scott. “But we couldn’t get the numbers to work without it costing a fair amount out of pocket.”
Scott tried to get the numbers right for months. He knew the problem of housing was not just a school district problem, but also a problem for the entire community. And he wondered if there was a way for the community to pitch in and help create more stable housing for its teacher corps.
As he wrestled with these ideas, a new solution emerged: use an age-old financing tool – school facility bonds – to put a dent in California’s housing crisis. School facility bonds are measures decided by voters. They increase residents’ property taxes in order to provide school districts more money to build or renovate schools. But in this case, Scott wanted to use the money to build houses for teachers – in a way that wouldn’t dip into the district’s already-pinched budget.
Jefferson Union put the question to voters in June 2018. Would they authorize the district to sell $33 million in bonds, funded by a property tax increase, to build 80 units of affordable housing for teachers? The community said “yes” to the new tax. (School bonds need 55 percent support to pass, and Jefferson Union’s skated in with 55.8 percent.)
Jefferson Union broke ground on the project earlier this month.
Now, other districts are catching on. At least four districts across the state, including Chula Vista Elementary School District, will ask voters during Tuesday’s primary election to approve bond measures that include housing for teachers. Chula Vista’s bond proposal is for $300 million – $65 million would go to fund teacher housing, as KPBS reported.
Scott is working with most, if not all, of the districts trying to pass these new bonds. He says another five to 10 school districts, including some in Riverside and Los Angeles counties, are considering putting similar bonds on the November ballot.
As if any claim to helping alleviate the housing crisis isn’t a big enough win, there is actually another incentive to these bonds. By becoming landlords, school districts also get access to extra cash. The bond money to pay for housing does not come out of the district’s general fund. But any profit the district turns by renting to teachers can go back into the general fund.
That means these bonds can ultimately generate funds to hire more teachers or nurses, buy new computers or defray the cost to taxpayers. School districts can use that cash pretty much any way they choose. And since most districts are having their budgets squeezed like Hans Solo in that trash compactor, it’s not a small incentive.
“I think it will be something that continues to grow and there will be numerous other ways the transactions are put together,” said Scott. “I don’t think the need for rental housing that can be afforded by teachers – I don’t see that going away for many years.”
What We’re Writing
- Protests began at Sweetwater Union High School District this week, after we broke the news on Friday that the district is considering laying off 200-plus employees and closing its learning centers. This all comes on the heels of the district’s self-induced financial crisis that has been unraveling for the past 18 months.
- Poway Unified School District officials are skating awfully close to the line when it comes to state rules that say public agencies cannot promote bond measures to voters. Poway voters will decide on a $448 million bond – it is not for teacher housing – on Tuesday.
- And Ashly McGlone broke down everything you need to know about the only statewide measure on Tuesday’s ballot. It’s a $15 billion bond that would benefit pre-k-12 schools and public colleges and universities. One important note: The money can also go to pay off already completed projects.