Working Your Assets Off: A Slick Guide to Effective Asset Management FAC30

1. APRIL 3-6, 2013, LONG BEACH, CA Working Your Assets Off: A Slick Guide to Effective Asset Management FAC30 These materials have been prepared by the CASBO Facilities Professional Council (or CASBO Associate Member). They have not been reviewed by State CASBO for approval, so therefore are not an official statement of CASBO.

2. Your Team: • Leigh Coop, Director of Facilities, Vacaville Unified School District and • Jerry Suich, President, Oxbridge Development, Inc. 2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

3. Presentation Overview • What is Asset Management? • Why Asset Management? • The Asset Management process for disposition of surplus property; • Practical Tips for your 7-11 Committee; • Disposition Alternatives.

4. What is Asset Management? • a business-like approach for dealing with a School District’s real property that is no longer needed for its educational, operational, or administrative needs.

5. Why Asset Management? • Change in demographics & declining enrollments; • Diminishing resources; • Districts have significant real property assets – property rich, revenue poor; • Expense of operation of under-capacity school sites; • Future State facilities funding may be limited.

6. Use of sale versus lease proceeds: General rule: • sale revenues to be used for capital expenditures only; • lease revenues can be used for either capital or General Fund expenditures.

7. Contribution of sale proceeds to General Fund: Current Law allows sale proceeds to be deposited into General Fund Education Code Section 17463.7: • District may use sale proceeds for any one-time General Fund purpose; • Board must certify that District has major deferred maintenance expenses covered by existing capital outlay resources; • legislation currently valid through 2013 but proposed to become permanent.

8. The Asset Management process for disposition of surplus property: • 1. planning documents; • 2. due diligence investigation; • 3. 7-11 Committee process; • 4. Board of Education actions; • 5. agency notifications; • 6. marketing of the surplus property; • 7. sale/lease of the surplus property.

9. 1. planning documents: • Asset Management Planning Study; • Confidential Letter to Board; • 7-11 Committee Handouts; • 7-11 Committee Report to Board.

10. 2. due diligence investigation: • goal is to increase land value by inventorying and clarifying outstanding land-use issues (e.g., title report, existing and future zoning) and articulating marketing strategies.

11. 3. 7-11 Committee Process: • Brown act meetings and hearings; • Site visits; • Evaluation of enrollment and projection data and property information; • Report to Board.

12. Practical Tips and Helpful Hints – What to Watch for: • Forming your 7-11 Committee: • need to be allies – you don’t need to put anyone on the Committee that has a chip on their shoulder; • local real estate expert is invaluable; • teacher at one of the surplused sites (or related) is also invaluable. • Every district has unique circumstances and issues.

13. Transparency of the 7-11 Committee • Let your Committee members know the reason the process is taking place. • Board desire to obtain General Fund revenue; • City desire to get school property for parks. • Let the Committee know the bigger political context – City and parks.

14. 7-11 Committee Meetings • They must comply with Brown Act: -- Do an introduction to the rules of conduct at the first meeting; -- Have your Superintendent do an official welcome and thank-you at the first meeting. • Formal and official – do not “be pals” and assume that they all know the issues. • Respect your volunteer members: -- Start and stop on time; -- Not too few, not too many, meetings.

15. 7-11 Handouts and Binders: • Binder for each member; • Lots of graphics, maps, Google maps; • Tabbed for easy reference; • Agendas and Minutes included.

23. Outcomes of the 7-11 Committee: • Do not assume the outcome, and be open to the Committee’s decision; • Our Committee ended up putting more properties in surplus than our original intention; • Be ready for the unexpected: • Church group wanted to purchase some property; • Make sure your Superintendent and Administration know of any changes.

24. 7-11 Committee Recommendation to the Board: • Recommend to declare surplus; • May have recommendations on sale vs. lease; • The Board may accept or reject or change the recommendations; • The Board may not take any further action, depending on many factors. • Board may discuss real estate in closed session.

25. 4. Board of Education: • appoints 7-11 Committee Members; • receives 7-11 Committee Report; • declares property surplus; • instructs Staff to notify agencies; • approves contract with broker (if any); • sets minimum terms of sale/lease; • oversees public bid opening (unless waived).

26. If you want to go forward with sale or lease • Declaring surplus does not mean you must proceed with sale or lease process. • Get an attorney right now, if you haven’t done so already.

27. 5. agency notifications: • three levels of agency notifications; • plus a notification to charter schools for discounted land for charter schools; • plus a notification to City under Naylor Act for discounted land for park; • all surplus property bought by agencies to be valued as if zoned for private-sector use.

28. Charter School Discount on Surplus Property: New Education Code Section 17457.5 (becomes inoperative June 30, 2013, and is repealed Jan. 1, 2014, unless extended ): • Applies only to properties declared surplus after July 1, 2012 • after written notification to District, charter school can buy surplus property at no less than 25% of fair market value; • the subject surplus property must be “designed to provide direct instruction or instructional support”; • applies only to sale or lease situations, not exchange.

29. Naylor Act:City/County discount on surplus property: Education Code Sections 17485 - 17500: • City or County can buy surplus property at no less than 25% of fair market value; • applies only to former playfields or open space; • must have been used continuously as such for at least the past 8 years; • no other public lands in vicinity of surplus property available to meet community recreational/park needs.

30. 6. marketing of the surplus property: • RFQ for Broker (if desired); • preparation of marketing package; • Board sets minimum price and terms; • marketing of property; • solicitation of offers; • public bid for sale or lease (unless waived).

31. 7. sale or lease of surplus property: • opening of escrow; • parties meet contingencies; • close of escrow.

32. Disposition Alternatives: • Exchange • Can trade land for existing apartment or office buildings with property managers and stable cash flow, plus cash “boot”; • District can float financial instruments (e.g., COP) against cash flow of investment property.

33. EXCHANGE with Fountain Valley USD:Income Property, Office Park, Orange • 2-Story commercial office building; • 43,000 sq. ft.; • $450,000 proforma income per year.

34. Disposition Alternatives: • Sale: • Revenues to be used only for capital expenditures; • One-time exception until January 1, 2014, with limitations; • Escrow likely contingent on city land-use approvals which could take one year.

35. SALE by San Juan USD:Entitled Land, Fair Oaks, Sacramento County: • Sale of a 57- unit subdivision to a home builder; • $2 million sale revenue.

36. Disposition Alternatives: • Lease (for rental over 30 days): • Revenues can be used for General Fund or Capital expenditures; • Often not practical for land.

37. LEASE by Ocean View School District:Commercial Land, Lowes & Wal-Mart, Huntington Beach • Long-term ground leases for commercial use; • $2 million income per year. Property owned by School District

38. Asset Management and the Surplus Process Questions? Comments? Case Studies? Thank you!

39. To Reach Us • Jerry Suich, Oxbridge Development, Inc., jjsuich@gmail.com, (415) 608-1920 • Leigh A. Coop, Director of Facilities, Vacaville USD, leighc@vacavilleusd.org, (707) 453-6138