UsingUnderutilizedAssetstoAddressDistrictGoalsandPriorities

PresentationtoBudget,FacilitiesandAuditCommitteeMarch7,2017

Before After

DistrictFacesFinancialChallenges

§ Structuralde/icitinDistrict’soperatingbudgetthreatensitslong-term/inancialviability,makingitdif/iculttosustainmuchneedededucationalprograms

§ Bondfundsmaynotbeusedforadministrativeoroperationalpurposes

§ Districtneedstoreducecostsanddevelopnewsourcesofrevenue

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District’sRealEstateAssets

TheDistrict:§ Has1,200schoolsandcenters

§  Spans710squaremilesofLosAngelesand31adjacentmunicipalities

§ Has21,000buildingsmorethan78Millionsquarefeet§  DowntownLAof/icemarket–68Millionsquarefeet§  DowntownSanFranciscoof/icemarket–76Millionsquarefeet

§ Ownsover6,400acresofland=10squaremiles§  TotalareaofDowntown,WestlakeandKoreatowncombined§  NewhallRanch–6,000acres§  CityofSantaMonica–8.3squaremiles

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TenSquareMilesofLand

AnareaequivalenttoDowntownLA,WestlakeandKoreatown 4

Characteristics of Underutil izedAssets

§ Vacantparcel

§ Excesslandonasite

§ Old,outdatedandclosedfacilities

§  Inef/icientlyplanned

§ Onestoryversusmultistory

§ Poorlylocatedtoserveitsintendedpurposeoroperatinggroup

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TypesofUnderutilizedDistrictAssets

§  Closedschoolsandotherfacilities§  Parkinglots§  Districtfacilitieslocatedonsiteswithahighcommercialvalue

§  Formeragriculturalland

§  Facilitiesnolongerinoptimallocationtosupportmission

§  Sitesthatcouldbeconsolidated

§  Portionsofschoolsiteswithexcessacreage

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MonetizingDistrict Underutil izedAssets

MonetizingsomeoftheDistrict’sunderutilizedassetsisonetoolavailabletoaddressDistrictgoalsandpriorities

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Options for Monetizing Underuti l izedAssets

CAEd.CodeprovidesnumerousmechanismstodealwithDistrictsuseofassets,allhavingveryprescribedstepstoimplement

§  Sell,orLongTermLease(upto99years)§  Declare surplus §  Proceeds must be used for capital outlay, not operating expenses (leasing or

ongoing maintenance), unless it qualifies for an exception §  JointUse

§  Makesvacantclassrooms,otherspaceinoperatingschoolbuildingsandrecreationalspaceavailableforrentorlease.Prioritytoothereducationalorrecreationalusers

§  Exchange§  Exchangerealpropertyforrealpropertyofanotheronsuchtermsandconditionsatthepartiesmayagree

§  JointOccupancy(upto66years)§  AllowsDistrict’stoenterintopublic-privatepartnershipstoleverageunderutilizedassetsforthepurposeofprovidingvaluetotheDistrict

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OptionsAnalysis

OPTIONS OPPORTUNITY CHALLENGES

Sale

Generatecash,disposeoflandandtheirassociatedcostsandliabilities

Districtmustdeclaresurplus,gothroughsurpluspropertyprocedure,offertoothergovernmentalagenciesandlosestheasset,proceedsofsalemustbeusedforcapitaloutlayornon-reoccurring

maintenancecosts

Lease(LongTerm)

Generaterevenue,retainsownershipofland,improvementsrevertto

Districtatendofterm

Districtmustdeclaresurplus,gothroughsurpluspropertyprocedure,accepthighestresponsiblebid,limitedto99yearleaseterm,proceedsofsale

mustbeusedforcapitaloutlayornon-reoccurringmaintenancecosts

JointUse Generaterevenue,shortertermallowsDistricttoretainpropertyforothertypesoftransactionsatendof

term

Limitedtorecreationaloreducationalusers,prioritytoeducationalagencies,limitedto5yeartermunlesscontributionofcapitalimprovementsforparkorrecreationpurposesbypublicentityor

non-pro/its

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OptionsAnalysis

OPTIONS OPPORTUNITY CHALLENGES

Exchange

Acquireparcelbettersuitedforotherfacilityneeds.Possiblyreceivesomecash

considerationsifparcelsreceivedareworthlessthantheparcelDistrictexchanges

Findinganexchangepartner

Joint

Occupancy

Districtreceivesrevenue,selectstheproject

theyprefer,retainpropertyandimprovementsatendofterm,norequirement

todeclaresurplus,entitlementrisktransferredtodeveloper,more/lexibleuseof

proceeds,Districtsharesportionofthedevelopment

MustidentifyaDistrictuseforthesite,limitedto66yearleaseterm,requiresSBEapprovalpriortoexecutionof

agreement(s)

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WhatisJointOccupancy?

CAEd.Code17515–17526§  Districtallowedtoenterintoaleasewithanypersonorentityfor66years

§  Developerconstructsfacilitiesjointlyoccupiedbybothparties

§  Developerretainstitletotheirportionofthebuilding

§  DistrictretainstitletolandandDistrictportionofthebuilding

§  DistrictpaysnorentalfeesforitsportionofthebuildingtotheDeveloper

§  Developermakesgroundleasepayments

§  Districtmayalsoshareinpro/itsoftheproject

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BeneUitsofUsingJointOccupancy§  MaygeneraterevenuetosupportDistrictprograms

§  ProjectcanbuildfacilitiestypicallyrequiringGeneralFunddollars§  Professionaldevelopment,localDistrictof/ices§  M&O,Policesubstations

§  Developprojectsthataddresscriticalneeds,socialservicesandprograms§  WorkforceHousing§  HousingforDistrictfamilieswhoarehomeless§  SEPAPrograms

§  Districtcanbeproactiveregardingfacilityneeds§  Builditwhereitisneeded,versusonlywherewehavespace

§  DistrictretainsownershipoflandandimprovementsreverttoDistrictatendofterm

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SuccessfulJointOccupancyProjects

§ 185UnitsofWorkforcehousing,30–60%ofAreaMedianIncome(AMI)

§  SagePark-90Units(5.7acresofagriculturalland)§  Selma–66Units(0.6acreparkinglot)§  NorwoodLearningVillage–29Units(0.7acreparkinglot)

§  83%ofSageParkandSelmaleased(128units)toDistrictemployees§  $315,000inrevenue,and§  $65,000inannualgroundleasepayments

SelmaCommunityHousing SageParkApartments 13

§ Requiresproactive,forwardplanningandvisioningeffortbyDistrictdepartments,otherthanFacilities,toidentifyneedstobeaddressed

§ Timing–longtermprocess,/irstrevenue5+yearsaway§  Beganworkforcehousingprojectsin2008

§ Notbondfundable–Identifyfundsforprogramstartupandinitialimplementation

§ Requiresaveryintensecommunityengagementeffort

ConsiderationsGoingForward

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§ Concernsaboutthechangeofusebycommunitiesandstakeholders§  Someonewillalwaysbeagainsttheproject

§ PublicperceptionDistrict“gettingintothedevelopmentbusiness”

§ Typicalchallengesofdevelopment

§  Zoning,entitlementandpermitprocess§  City/CountyplancheckalongwithDSAforDistrictportion§  Project/inancing§  Marketrisk§  Communityopposition,potentialCEQAlitigation,ballotmeasures§  Otherstakeholderinputandinterest

ConsiderationsGoingForward

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§  Boardprovidedirectionregardinggoalsandpriorities§  MaximizeRevenuegeneration§  Affordablehousingandsocialprograms§  Charteruse

§  Identifyfundingtosupportinitiative

§  FormacommitteetoresearchandinformBoard

§  MineourassetsforsiteswithopportunitiesthatalignwiththegoalsandprioritiesestablishedbytheBoard

NextStepsShouldBoardDecidetoPursue

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