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Irvine has long prided itself on great schools, but Irvine Unified School District officials have been grumbling lately that schools are being shortchanged in plans for new neighborhoods slated for the area surrounding the Great Park.
Money that should be set aside for new schools as the neighborhoods are developed over the next decade are instead being allocated to park services and infrastructure, the officials contend.
“The bottom line is the city is so anxious to have the money go to the Great Park,” said district board member Carolyn Mclnerny. “We [the school district] are the last guy on the bus.”
Although the developer, formerly Lennar Corp. but now FivePoint Communities, is obligated by state law to pay school mitigation impact fees, revenue from such fees rarely covers the entire cost of new schools, which district officials say will be sorely needed due to city growth.
The district is projecting enrollment increases of as much as 11,982 new students over the next 10 years. Many of these students are projected to come from new Irvine Co. developments, Irvine Business Complex developments and the Great Park neighborhoods, known as Heritage Fields.
But a source close to FivePoint Communities says the school district is exaggerating the need for new schools. This source, who requested anonymity because of the sensitivity of the issue, says the district’s projection, which amounts to a 44 percent enrollment increase, is based on faulty assumptions on future development.
City Council members, meanwhile, contend that it is still too early to take a position on new school financing and that they’ve had little if any discussion with the school district. Mayor Sukhee Kang says he hopes a recently formed ad-hoc committee with the district to discuss city growth will resolve the issue.
At the root of this looming battle between the district and the developer is the Mello-Roos tax, which allows cities, school districts and other legislative bodies to levy a special property tax to pay for services, including roads, police protection and new schools in new neighborhoods.
Mello-Roos taxes are possible because of a state law named after the legislators who sponsored it. The law was passed to supplement possible funding shortages on local infrastructure after Proposition 13, the state law limiting property tax assessments, was passed in 1978.
The district has been the beneficiary of eight Mello-Roos districts in Irvine, and has used the money to build top-notch schools. Recent state testing on academic performance showed the district having 11 of the top 25 scoring schools in the county.
In the case of the Heritage Fields neighborhoods, however, Mello-Roos financing is being used to pay for joint backbone infrastructure for the Great Park neighborhoods, including the main access roads, and, eventually, operations and maintenance at the park.
A development agreement between the city and the developer has the tax pre-committed. There is no room for the school district to form its own Mello-Roos district to finance new school construction.
The agreement caught school district board members by surprise, and they say they were left out when the agreement on the Mello-Roos tax was hammered out.
“It would have been helpful if the persons who were at that negotiating table were upfront about changing the game plan with the school district, because traditionally we have always been a high priority for the developer,” said school district board member Gavin Huntley-Fenner.
Fenner added that schools “seem like priority No. 1, and whoever was at the negotiating table obviously didn’t have that perspective.”
The source close to the developer calls the focus on the Mello-Roos tax a “red herring,” saying that the source of funds is not as important as the amount. Haggling over how much the developer will contribute has been a start-stop process since 2005.
The source also says that the district might be gaming the system and manipulating not just projections on student enrollment but also actual facility needs.
Although board members mostly deny that such manipulation occurs, board member Mike Parham said if it is occurring, it’s to protect future students.
“If we’re ginning up the numbers — it’s only because we want to have schools that are compatible with the rest of the city,” Parham said.
At a recent school district public study session meeting on school facilities, staffers put the maximum number of housing units at Heritage Fields at 7,033 units. They also said the Irvine Business Complex would see 4,538 new residential units and new Irvine Co. developments would total about 20,000 units.
The figures on the Irvine Business Complex and at Heritage Fields are speculative and significantly inflated, according to the source close to the developer. Any estimate beyond 4,894 units at Heritage Fields is speculative, and about 800 of those units will be dedicated to senior housing, the source said.
Because the Irvine Business Complex is zoned between Irvine, Santa Ana and Tustin school districts, only a portion of new students generated there will be attending Irvine schools. Only a few hundred permits have been pulled to begin building in the new Irvine school district zone.
If redevelopment in the area goes as planned, other financing mechanisms to fund school construction will be available, like the developer fees and property tax increment from the Redevelopment Authority zone at the Heritage Fields neighborhoods, which will yield millions.
The property tax increment is “an extraordinary amount of money,” City Councilwoman Beth Krom said. “They [the school district] didn’t have to do anything to get that money.”
But district officials say they are going to use property tax increment revenue for other purposes, like new pools and remodeling at some schools.
Lisa Howell, assistant superintendent of business services, defended the use of property tax increment revenue to remodel other schools, saying the school district has the discretion to use that revenue as it pleases.
“That’s what makes an Irvine quality education — all the bells and whistles,” Howell said.
The developer is also mandated under state law to pay impact mitigation fees to the school district, but the revenue from these fees would not be nearly enough to build a new school, Howell said.
To illustrate the shortfall in relying on developer fees, Howell pointed to the Columbus Grove area of the city. Howell said development around that area generated 475 new students but only yielded $8 million in developer fees, as stipulated by state law. The cost for a small elementary school ranges from between $40 million to $70 million.
“Doing that [relying on developer fees], we would have nowhere near the money to build any of the schools,” Howell said.