The Next Bond Money Fight: Swimming Pools

Education UNVEILING THE UNSEEN

The Next Bond Money Fight: Swimming Pools

San Diego Unified’s plan to build pools at or near several schools is remarkably similar to its use of bond money to fund new stadium lights – an approach a court has rejected. The taxpayer group that successfully sued over the field lights has put the district on notice that it plans to sue again once a drop of bond money is spent on pools.

San Diego Unified is still in the midst of a court battle over millions of bond dollars spent improperly on stadium lights, but that’s not stopping officials from plunging into a similar endeavor: building swimming pools.

The district is forging ahead with a Pools for Schools initiative that’ll build 10 or more pools on or near school campuses. District officials have floated a $20 million price tag.

But the pools plan is remarkably similar to the district’s use of bond money to fund new stadium lights – an approach the Fourth District Court of Appeal rejected. The taxpayer group that successfully sued over the field lights has put the district on notice that it plans to sue again once a drop of bond money is spent on the pools.

That’s not the only factor that could complicate the initiative: The bonds the district wants to use are tax-exempt and must be used for a public purpose. It could be fine if they jump through the hoops of various tax laws, but renting out the pools too often and putting any of them on private property could call the funding into question.

The district’s in-house counsel, Andra Donovan, did not respond to several inquiries.

The district’s bond counsel, Mary Collins of Orrick, Herrington & Sutcliffe, declined to discuss the pools and referred me to district officials.

“The ‘plan,’ as you call it, is still being developed. No work has been done yet,” Cynthia Reed-Porter, a spokeswoman for the district, said in an email. “The district is working closely with bond counsel to ensure that the plans that are developed meet the requirements for expenditure of bond funds, and that the tax-exempt status is preserved.”

Lee Dulgeroff, chief facilities planning and construction officer for the district, said the pools are still a go.

“Our legal counsel is confident, and that’s our opinion,” Dulgeroff said. “Our goal is to make sure our kids are water-safe.”

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The district announced the Pools for Schools initiative in May 2013, just two months after being told by an appellate court that it could not spend bond money on field lights because they were not sufficiently disclosed to voters who passed Proposition S, a $2.1 billion school bond measure, in 2008.

This time, the district would use funds from another school bond measure, the $2.8 billion Proposition Z, passed in 2012, to build pools throughout the district. The YMCA would maintain and operate the pools as part of a joint-use partnership. Win-win, says the district.

The pools would provide students, YMCA members and paying outside parties the space for competitive swimming, water polo, physical education classes and recreational use.

A presentation made to the school board showed several schools getting a pool on campus, including Mira Mesa, Madison and Patrick Henry high schools, and Roosevelt Middle, while several others would get to use pools built by the district at nearby YMCA sites.

Lincoln High students would use a pool at the Jackie Robinson YMCA, Point Loma High students would use a pool at a future YMCA site at Liberty Station and Scripps Ranch High students would use a pool at a future Scripps Ranch YMCA site.

The district inked a preliminary deal late last year with the YMCA of San Diego County to operate and maintain the pools once they’re built, and again listed YMCA sites among the pool locations, although district officials said exact locations have yet to be finalized.

Officials, though, are relying on near identical ballot language to rationalize the construction of swimming pools that a court said was insufficient to justify the field lights paid for with Proposition S funds.

Just like the field lights, the swimming pools are only explicitly mentioned on the ballot in a section near the bottom that shows “other costs incidental to and necessary for completion of the listed projects.”

For the district to justify the pools, it’ll have to sell the notion the pools are necessary to complete other projects listed on the ballot.

What Proposition Z does have that S didn’t is the district’s plan to pursue projects at all sites that “improve physical education, athletic facilities,” “expand or develop joint-use athletic facilities” and “Develop or improve education, recreation and/or community resource facilities for joint-use to support students and neighborhood families.”

Whether that broad language is enough to defend the pools may be left to another court to decide.

The same taxpayer group that successfully sued the district over the field lights – and is seeking a court order to get the district to repay its bond fund $2.6 million – plans to sue again if the district proceeds with using bond funds for pools.

“Someone needs to challenge this, because this is not what the voters voted on,” said Ron Anderson, president of Taxpayers for Accountable School Bond Spending.

“Why the push for these controversial projects? If there was such a need for them, why weren’t they front and center on the bond measure?” Anderson said. “Nobody is against kids learning how to swim. If there is an intent to build pools, then float a bond and put it squarely in there, stating that the money will be used to build aquatic centers.”

Anderson said he opposes any plans that use public money to improve private property.

“It is too early in the process to comment on the plan and its successful outcome,” said Loni Lewis, spokeswoman for the YMCA of San Diego County.

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There’s also a separate issue that could pose legal obstacles.

Proposition Z bonds are tax-exempt so long as they are used for tax-exempt purposes.

To avoid being reclassified by the Internal Revenue Service, the district will need to make sure it’s using the bonds according to laws that limit the benefits afforded to non-governmental entities, including nonprofits like the YMCA.

“This would have to be done carefully,” said Darien Shanske, a professor who teaches public finance and federal, state and local tax courses at UC Davis School of Law. “There are very detailed regulations about how much non-governmental use is permitted for tax-exempt bonds. I would hope with good advice, they can make this possible.”

Perry Israel, a Sacramento-based municipal finance tax attorney, said the district would need to follow rules for qualified 501(c)(3) bonds if they want to build pools on YMCA property. Such bonds generally require that the “facility must be used 95 percent of the time for governmental use and nonprofit use,” Israel said.

For pools on school sites, Israel said the district has another option and may follow rules for governmental bonds that generally require at least 90 percent government use and meet other requirements in the YMCA management contract.

While the details of the pools deal will be hammered out as site funding becomes available, the memorandum signed with the YMCA in December says the district “desires to have sole and exclusive use during school hours while school is in session” and preferential use at other times.

It also says “The Parties will jointly develop a schedule of proposed uses, programs, hours of operations, and fees to users (such as swim lessons, private practice lane rentals, special competitions, etc.) that generates the maximum potential use of the pool and facilities, minimizes District funding and expenses, and sustains the operation of the facilities.”

How much the pools are rented out, however, is something the district will need to consider and likely restrict.

If the pools are frequently rented out to paying parties, that could interfere with what’s known as the public purpose doctrine, a principle built into state constitutions that generally restricts government resources from benefitting private parties.

Proposition S and Z are general obligation bonds backed by the taxes, and as such “have to satisfy a public purpose,” said Clayton Gillette, a professor of local government law at NYU School of Law.

Still, what constitutes a “public purpose” is an “extraordinarily flexible notion,” interpreted differently by the courts throughout history, he said.

“The more it (the pool) is open to all students the easier it is going to be to satisfy a public purpose requirement,” Gillette said. “The more that members of the YMCA have preferential access with fees, the more it would raise a public purpose question.”

Gillette also said the YMCA’s religious affiliation might raise questions about “an improper mixing of the state and religion,” but since the pools are “for a non-religious purpose, it shouldn’t be a problem.”

Former school board member Scott Barnett, who helped put together the Pools for Schools plan before leaving office last year, touted the partnership as a prudent cost-saver.

“I didn’t want the district to get into the business of operating, maintaining and staffing pools, because that’s not the primary task of the district,” Barnett said. Nor did he want the pool programs to be vulnerable to budget cuts.

He said he recalls some discussion about using a lease-leaseback method to build the pool at the Jackie Robinson YMCA, but he doesn’t recall looking at the field light decision before forging ahead with the Pools for School plan, and strongly objects to any comparisons.

“To in any way equate the language in Prop. Z with the language in Prop. S is absolutely reckless,” Barnett said. “The bond has thousands and thousands of bond expenditures that are not mentioned in the bond language at all. The specific plumbing and drainage of the fields,” for instance.

“Anyone can sue over anything that they aren’t happy with.”

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