The school district owes the city $1.8 million. The city owes
the school district $6.6 million. And the city wants its money now,
even though it won’t fully pay its debt to the school district
until 2022.
The school district owes the city $1.8 million. The city owes the school district $6.6 million. And the city wants its money now, even though it won’t fully pay its debt to the school district until 2022.
The school district owes $1.8 million in water and sewer impact fees to the city by August, when Christopher High School opens. The school district will owe another $1.8 million in similar fees when the second phase of the school is complete – estimated at 2010. Further complicating the matter are hundreds of thousands of dollars the district will pay in unexpected fees to put various utilities
underground, as required by the city.
Meanwhile, the city owes the school district $6.6 million for its share of the school’s joint-use gymnasium and aquatics center – a debt the city asked the school district to cover until 2012, after which the city will repay in $900,062 installments over 10 years at a 2 percent interest rate. The city cannot make payments before then because of its poor financial situation, City Administrator Tom Haglund said. And trustees are not happy about that.
“It’s ridiculous for the city to feel like they need to get what they want immediately but put off their own payments for a decade or more,” said trustee Denise Apuzzo. “I believe the city is used to getting their way and someone has to stand up and say this is not right. We’re basically providing for the city on the backs of our kids.”
Trustees approved the city’s proposal with the caveat that the district and city solidify a schedule of repayment and renegotiate the proposed interest rate. Riled trustees also grudgingly passed more than $200,000 in contracts with PG&E and Charter Communications and a $683,000 change order with the project’s general contractor to put utilities and cable services for the high school underground – a city requirement due to road configurations.
“When does it end?” trustee Francisco Dominguez asked.
Trustees tossed around the idea of shaving what the district owes the city in fees off the top of what the city owes the district in joint-use funds.
“We’re paying them money up front that they’re going to be paying back over the next 10 years,” Apuzzo said. “How is that fair? We shouldn’t pay them a penny until they start kicking in some of their money.”
She said it wasn’t equitable for the city to take such a hard-line attitude toward collecting on its debts while the school district yields to the city’s requests.
But Haglund said the city already waived $3.1 million in impact fees and negotiated with many of the project’s players on the district’s behalf.
At previous meetings with Haglund and Mayor Al Pinheiro, Superintendent Deborah Flores discussed deducting the $1.8 million in impact fees from the $6.6 million the city owes – a suggestion that didn’t stick, she said. Haglund said the impact fees simply cannot be deferred.
In the meantime, the district will front the $6.6 million to cover the city’s joint-use debt out of its Measure P fund, a $150 school bond voters passed in November to fund the completion of CHS and various improvements at district schools.
“This payment is going to impact which projects we can do and how quickly we can do them,” Flores said, pointing to Rucker, Rod Kelley and Glen View elementary schools as three of the district’s neediest facilities.
Although she understood the city’s dire financial straits, Flores’ number one priority is Gilroy’s students, she said.
“I think they have a legitimate financial crisis,” Flores said. “I know how that feels. We’re doing the best we can with the worst financial circumstances in our history. But I have to advocate for what’s best for the kids of Gilroy.”
Flores will raise the issue again at a meeting with Haglund next week, even though she’s not sure if they’re realistic suggestions, she said.
In a letter to Flores, Haglund attributed the city’s inability to pay to a “steep and relentless” slide in property tax and sales tax revenue. The city anticipated a 15 percent decline in property taxes, which equates to about $1.5 million in lost general fund revenue next fiscal year. The city also expected about $3 million less sales tax revenue than usual. Those factors, in combination with construction in Gilroy coming to a screeching halt, crippled the city, making it “structurally impossible for the city to make these payments as scheduled in the next two fiscal years,” Haglund said.
Despite the city’s financial woes, Haglund said the city is determined to meet its financial obligations and remain partners with the school district.
“The downturn in the economy means we can’t go forward at this point,” Haglund said. “But instead of saying we can’t go forward, we’re saying we want to be partners. I can understand the frustrations of the board. I have very similar frustrations. The first dollar coming in will be going to the Gilroy Unified School District.”
WHO OWES WHAT
-$1.8 million: School district to city for water and sewer impact fees; due in August.
-$1.8 million: School district to city for additional impact fees; due 2010 (estimate)
-$883K: School district to Gilbane, PG&E and Charter Communications to put utilities underground because of city regulations; due immediately
-$6.6 million: City to school district for joint-use of gymnasium and aquatics center; will pay off over the course of 10 years, starting in 2012
