SLO County school districts may have misspent developer fees, grand jury finds

Several San Luis Obispo County school districts may have misspent fees paid to them by developers, a civic Grand Jury found, potentially opening the door for legal action.

The Grand Jury found special fees paid by developers that are supposed to fund construction or reconstruction at local schools were being spent on things that don’t fit into that category, such as regular maintenance items, ceiling fans and other materials and supplies, according to a report released Tuesday.

The report stops short, however, of accusing any district of misusing the fees on any specific project, but it does recommended that the county Office of Education get more involved in oversight.

The Grand Jury’s recommendations are not legally binding, but state law requires public agencies to respond in writing to its findings.

The 2018-19 Grand Jury’s report, “School developer fees revisited: Differing Interpretations?” follows an investigation to determine how developer fees are being used by school districts.

The investigation was spurred, the report says, by a complaint it received alleging that people paying school district developer fees were not being given the legally required notice informing them of their right to challenge the cost.

Anyone looking to build or remodel to enlarge residential, commercial or industrial buildings must pay a development fee to the school district that serves the project area. They are to go toward “construction or reconstruction” of school facilities to offset supposed increased enrollment that would result from the development.

But after interviewing administrators of local districts, jurors found that some developer fee expenditures appear to be outside of those allowed by the state.

“We discovered that the accounting required by the districts for the use of the funds is inadequate and not reasonably accessible to the public,” the report reads. “We also discovered that at least one district fails to record the fees in a separate accounting format as required by law, and to separately account for the use of those fees.”

The report states that, beyond the local school board, there is no effective oversight of the use of the funds.

School districts are prohibited from using the fees for “regular maintenance or routine repair” or the “deferred maintenance” of school facilities. Though they are supposed to be used for “construction and reconstruction,” the law does not specifically define the terms, allowing districts to make their own interpretation.

As such, some districts told the jury that their attorneys had advised the uses of the funds were permissible. Though the report does not identify which districts, it says that developer fees were used for such items as:

  • Purchase of a kindergarten playground structure
  • Restroom modernization
  • Remodel and upgrade of rooms
  • An aerial survey
  • Electric work, a walkway and canopy
  • Materials and supplies
  • Purchase and installation of of an auto lift
  • Ceiling fans
  • Water filtration delivery system
  • Classroom painting
  • Facility master plan

Though the jury found that such purchases could open the district to legal liability, no such legal action has been filed against a district alleging improper use of fees.

The Grand Jury also found that San Luis Coastal Unified School District has not been providing legally required notices to developers of their right to protest the imposition of fees — another possible avenue for lawsuits against the districts. The report says the district is now rectifying the situation.

While Lucia Mar does provide the noticing, jurors were unable to verify whether Cayucos, Atascadero and Paso Robles Unified school districts do.

The report concludes with recommendations that all districts immediately provide noticing to developers being charged fees, and that the county Office of Education develop a standardized notice by January 2020.

The jury also was unable to verify whether districts have been maintaining the funds in a separate account, as required, or whether developer fees are co-mingled with other funds. It recommends that fees be maintained in separate district accounts, and that all districts report their developer fees, including annual and five-year reports, on their websites in a clear and accessible manner.

Lastly, the Grand Jury put the onus on the local school boards to ensure developer fees are being used properly.

Lucia Mar, San Luis Coastal, Paso Robles and Atascadero Unified school districts, as well as the county Office of Education, are required to submit responses by Aug. 6.

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