If California voters reject the $10.4 billion education bond on the November
ballot, the state’s builders and developers will be on the hook for the full
cost of every new school built in the state, starting at the end of 2007.
The specter of having to cough up thousands of additional dollars in fees
per home has California’s builders and developers dumping millions of
dollars into the education bond campaign.
Two separate committees, funded largely by builders, developers, architects
and engineers, already have contributed more than $1 million to help pass
Proposition 1D, the school-bond measure.
The powerful California Building Industry Association (CBIA) has contributed
another $1 million to the umbrella campaign for the five-piece
infrastructure-bond package, which includes the education bond.
“If the state runs out of funds and there is no money in the bank, then the
builders are responsible for 100 percent of new construction,” said Tim
Coyle, senior vice president for governmental affairs for the CBIA. “If all
the costs fall on the new homebuilder, chances are they will be passed on to
the new homebuyer.”
In California, the financing of new public schools relies on three revenue
sources: state bond money, local bond money and developer fees as three
Whenever there is available state bond money, the funding for new
construction is split evenly between the state and local governments, with
developers chipping in to fund a portion of the local-government half of the
But if there is no local bond money available, then developer fees cover all
of local government’s half of construction costs.
And if there is neither state funds nor local funds, then developers must
pay for the full cost of new school construction. It is this last
scenario–where development fees could literally double overnight–that
builders fear most. It is also what would happen if the education bond were
to fail in November, according to both government and industry estimates.
So, it’s always in developer’s interests to have money in the bank. But that
bank account is dwindling.
“The state will run out of bond money to allocate for new construction by
the middle of the 2007-08 fiscal year,” say Department of Finance spokesman
H.D. Palmer. At the same time, says Palmer, the administration is projecting
that 50,000 new students over next five years and another 250,000 in 10
That shrinking bond treasury–combined with a softening housing market–has
made developer fears even more acute.
“If the market is good