School District Seeks a Role in Real Estate Development

MOORPARK — Hoping to parlay an unused piece of land into a $2-million payoff, the Moorpark Unified School District is stepping into the dicey world of real estate development.

In a venture that California school officials say is “pushing the envelope” in its ambition, the Ventura County district and Braemar Homes of Agoura Hills plan to take a proposal to build 150 houses on 15 district-owned acres to the Moorpark City Council in the next month or so.

“Educators are thought to be conservative, superintendents are thought to be conservative, but I don’t think we can afford to be conservative any more,” Supt. Tom Duffy said. “We have to be entrepreneurial and go out and get money. We can’t wait for people to drive up in an armored car and drop money on our doorstep.”

Although highly unusual in the extent of the school district’s involvement, the Moorpark project is but one example of how public school finance has changed.

Chronically short of cash and struggling with growing enrollments, school districts across the state are cutting deals with developers to raise money.

In Ventura County alone, several districts are eyeing profits from surplus real estate and considering public-private partnerships unheard of a few years ago.

No longer are districts simply selling off excess land. Instead, they are following the model of other government agencies by getting their property rezoned for construction, then selling it to developers at a premium price.

In fast-growing Moorpark, the 6,950-student district has come to the bargaining table as an aggressive partner in pushing city officials to subdivide its surplus land to allow for maximum profit.

Under its contract with Braemar, the district will be paid in installments over the years as phases of the community are completed. As Braemar’s profits go up, so will the district’s, though details of the profit-sharing arrangement are still being negotiated.

“This is a fascinating proposal,” said Ann Evans, director of school facilities planning at the state Department of Education. “I’m not aware of any others like it. . . . It’s a shared risk and return. There is a brave new world of asset management out there.”

The school district in nearby Simi Valley has just submitted a plan to build houses, luxury apartments, a senior citizen village, shops and restaurants--and perhaps a new district headquarters--on 36 acres across from that community’s City Hall.

Trustees hope to make $10 million to $15 million on the deal. In addition, they intend to sell two closed elementary schools and may seek to build stores at the district’s current headquarters as land values soar with the opening of a Wal-Mart nearby.

The Ventura Unified School District similarly is considering building houses on a surplus elementary campus and considering conversion of an aged campus into a suite of offices or a private school. A new district committee is meeting with developers to see what sort of deals can be struck for unused parcels all over the district.

“This is the first time in my 38 years of public education where a superintendent has to get involved with real estate--land swaps and development,” said Ventura Supt. Joseph Spirito. “My role has changed tremendously in just the last five years. It’s more business oriented and getting a little more away from being an educator.”

It is a change welcomed at the state Department of Education, where state bond money for new school construction is limited.

“We love those partnerships at the local level, because it reduces the need for us to create solutions up here in Sacramento that we then push down on them,” said Richard Whitmore, the state chief deputy superintendent of schools.

Yet there is risk in real estate development by schools, he said, so “everybody has to go into it knowing what the downside may be.”

Critics say local school officials ought to steer clear of land development because their districts, by pleading their cases on behalf of schoolchildren, could prompt city councils to make bad decisions.

They cite the Oxnard High School District, which has still to sell off 27 acres of farmland it bought in 1993 when constructing the new Oxnard High School on 53 adjacent acres outside the city.

The district is saddled with a $175,000-a-year tab on the $2.1 million in bonds used to buy the surplus 27 acres. It had hoped to sell the land back to previous owners once it gained a zone change from the county Board of Supervisors. But the supervisors balked at a move they feared would bust open a farming greenbelt for development.

“It’s an awesome responsibility--this role as developer,” said Simi Valley Trustee Carla Kurachi, whose district has struggled to balance its budget for years and needs to raise $100 million to upgrade 26 schools.

“If you don’t get into the right agreement or don’t get with the right developer, you can have problems. . . . You want to maximize the revenues that can be generated, but there are ethical considerations as well. You always need to keep in mind that we have a responsibility to our community and our neighborhoods. But sometimes, when your needs are great, it’s hard to try and balance it all.”

Duffy, the Moorpark Unified superintendent, said he has been careful to limit the district’s risk as he firms up the deal with Braemar, which has experience constructing affordable housing in old downtown areas in Los Angeles County. Although the district’s share of profits depends on the project’s success, Duffy said, officials have put no money up front.

“So what is the risk?” he said. “The property right now is fallow. We haven’t invested money. The work that has been done has been paid for by Braemar. The real risk is in not moving forward to turn that property into cash, because right now it gives us nothing.”

Of course, the project could founder and the district’s land could be tied up in litigation. But given the economic climate, Duffy said, the deal looks like a winner--if the City Council will sign off on it.

That is a big question.

The project does meet a city goal of providing affordable housing in the downtown redevelopment area, but it is also problematic, City Manager Steve Kueny said: There are too many houses, too few access roads, too little drainage for flood control and the site is next to a railroad track.

The city’s blueprint for growth, its general plan, allows a maximum of 80 to 120 dwellings on the 25-acre school district parcel of which the 15-acre, 150-unit Braemar project is a part. “They’re seeking twice the prior maximum density on half the land,” Kueny said.

Another potential trouble: a history of bad feeling between the city and the school district over the Braemar site. Bickering over the land led to a legal fight between the city, which tried to claim it at a discount price for a city park, and the district, which did not want to sell cheaply what it saw as a valuable asset.

Though the state Supreme Court sided with the school district, “it’s my impression there is still some bad faith between the school district and the city, even though people like to say there isn’t,” said Avi Brosh, executive vice president of Braemar Homes. “I’m not sure what’s going to be reality until the final gavel goes down on the final track map.”

Duffy, however, comes to the deal with sterling credentials. He has helped secure $65 million from the state to build or refurbish nine schools since he joined the district as assistant superintendent for business in 1985.

The district has contributed to construction on only two projects--$900,000 to refurbish a middle school and $3 million for a $6-million elementary school planned for the land above the Braemar project.

While Moorpark was growing rapidly--its population quadrupled from 1980 to 1990--state construction funds flowed in. But with the slower growth of the 1990s, the district now must match state construction money dollar for dollar. That has put it in a bind, especially since voters narrowly rejected an $18-million bond issue last month.

The district’s solution is the Braemar deal.

The partnership hopes to build 150 single family homes and townhouses on two levels beneath the new elementary school. At $140,000 to $200,000 a house, the project could gross about $25 million and, by Duffy’s estimates, leave the district with $2 million in profit--or more.

That, in turn, would pay most of the district’s share for the new elementary school.

“I’ll tell you, you’ve got to be creative to make this work,” Brosh said. “And this guy Duffy is creative.”