The Land Swap

By Kenneth E. Jones

The Land Swap is an excellent deal for CUSD. The "Land Swap" includes developer fees of $8700 per home(indexed for inflation)that are twice what the District would otherwise receive. It reduces the District's exposure to real estate that it already owns and gives the District a potential $4.6 Million more dollars. I have also included the recommendations of the Grand Jury which found no substantial issue concerning this transaction. Here are the facts:

A few loud voices in our community have criticized the acquisition of the new middle school site. Even after 13 public hearings and numerous public and private explanations they still claim the transaction is flawed. The San Mateo County Grand Jury reviewed the transaction and found none of the problems claimed. The Grand Jury's Recommendations were:

Recommendations:

The San Mateo County 1999 Grand Jury recommends that the Cabrillo Unified School District Board of Trustees attempt to remedy the contractual deficiencies noted in this report by adopting addenda to resolve potential problems and protect both contractual parties from unnecessary delays and legal fees.

Comment:

The deficiencies were small items such as which consumer price index to use. When the contract is signed these areas will be reviewed with the District's legal counsel.

Recommendation:

The San Mateo County 1999 Grand Jury recommends that in future land transactions that in performing their fiduciary duties properly the Cabrillo Unified School District Board of Trustees and other school districts in San Mateo County shall engage outside experts, such as appraisers, to advise Board members in writing of the reasonableness of the valuations used before transacting the purchase and sale of real property.

Comment:

The Board did engage appraisers but recieved verbal reports through the Districts legal counsel. The Board did not want written reports in order to ensure confidentiality. It would not be a good negotiating position if the other side knew what the appraised values received by the Board. See appraised values below.

These "loud voices" will be distributing more mis-information during this election campaign. Here's the truth about the "Land Swap"and how it is so beneficial to our District. The actual contract is a public document and is available at the Cabrillo Unified School District office. The minutes of the many public meetings referred to below are also available at the District Office.

The Cabrillo Unified School District (CUSD) owns approximately 20 acres in El Granada just off Sonora Avenue. CUSD pays $38,557 per year to the state of California in "unused site fees" on this parcel (matter of public record, please see www.vote-ken-ruth.org). State law prohibits building schools within 2 miles of an airport so it can not be used for a new school. The property is sub-divided but does not have sewer, water or other permits necessary for building homes. An appraisal indicates that if all necessary permits were available it would be valued at $4.0 million. Another appraisal valued the site, as is, (without permits) at $1.7 million.

The CUSD Governing Board appointed a School Site Selection Committee, consisting of 16 independent citizens of the community. After a series of public meetings, the committee recommended the Board chose one of four sites for the new middle school. The Board chose one of those sites, the 25 acre Wavecrest Village site. The primary factors considered were safety, demographics, traffic and costs. The runner-up site was just west of Half Moon Bay High School. It was eliminated because of its higher cost, concerns of safety from younger students and the increased traffic load on the Main Street Highway 1 intersection.

The owners of the selected site valued the site at $2.7 million. After months of negotiation, we agreed to purchase the 25-acre site for $1.0 million. Thus saving $1.7 million. The District would transfer the El Granada site to the owners of the Wavecrest Village site. If the new owners were able to obtain permits necessary to sell the entire site, they would receive the first $1.7 million plus up to $352,000 in expenses if they are incurred in the process. Proceeds above $1.7 million (plus expenses) would go 75% to the District and 25% to the new owners. If the new owners were unable to get permits or unable to sell the site there is no further liability to the District. Here are three examples of how CUSD will benefit by this transaction:

Sample El Granada Property Sales Price -$0- $4,000,000 $6,000,000

Distribution to New Owners First $1.7 million -0- $ 1,700,000 $ 1,700,000

Maximum Expenses -0- $352,000 $352,000

Share of Profits (25%) -0- $487,000 $987,000

Total -0- $2,539,000 $3,039,000

Distribution to School District Share of Profits (75%) -0- $1,461,000 $2,961,000

Savings on New School Site $1,700,000 $1,700,000 $1,700,000

Total Gain for CUSD $1,700,000 $3,161,000 $4,661,000

In its simplest form, the District has purchased the 25 acre Wavecrest Property (valued at $2.7M) with $1.0 Million in cash and the El Granada Property (appraised at $1.7million) and retained 75% of the potential profits in the El Granada property.

There are certain provisions in the contract to ensure the new owner performs in a timely manner and offsets for the interest earned by the District on the cash retained by it and not paid out for the Wavecrest parcel. Other provisions of the agreement with the Wavecrest site owners provide that they will share in the cost of sewer, power and water to the new middle school site. These savings will amount to approximately $2.0 million over a "go it alone" site. The Wavecrest site owners also agreed to pay school fees on any new homes that are twice what is currently allowed. This will contribute an extra $1.0 million to the District's construction fund over the next decade.

The benefits of the "Land Swap" are very clear. Those opposed to the transaction accuse the Board of "speculating in real estate". This is not true. The District already owns the El Granada property and is reducing its real estate exposure by selling the property and participating in the profits.

Some persons have criticized the Board for not donating the El Granada property to a worthy cause or turning it into a park. It is the duty of the Trustees to maximize the value of the District's assets and employ them for the educational benefit of the children in the District. That is what the Trustees have done.