The financial condition of the Palo Alto Unified School District, like most public agencies, is not very transparent to the average citizen. And that is especially the case when things are flush.
After all, surpluses and growing reserves are an invitation to labor-union negotiators and a possible inhibitor of fundraising. It also is a weak hand in lease-renewal negotiations now underway with the city over the old Cubberley school site.
But the unions are plenty aware of the district's financial condition, and the public is entitled to be as well, particularly as the city is currently in closed-door negotiations with the district, with the latest session scheduled for next week.
In the fiscal year that ended June 30, the school district generated a surplus of revenues over expenses of $6.5 million and currently has reserves totaling $43 million.
This is independent of the $378 million bond-funded Strong Schools building program approved by voters in June 2008. With laudable conservative financial management, the district has weathered the Great Recession in great shape and is responding by adding millions in new expenses.
In short, the school district's financial condition today bears no resemblance to its state back in the late 1980s, when it faced deficits, scary declines in enrollment and school closures, and turned to the city for help.
In 1989 the city responded by entering into a complex agreement that was basically a funding mechanism to transfer city money to the needy school district. The deal had three components: The district agreed not to sell off any more closed school sites, the district provided space for after-school child care at each elementary school site, and the closed Cubberley High School site, including playing fields, was leased to the city.
Today, with built-in escalators, the deal is transferring more than $7 million each year from the city to the school district.
The city has been leasing out space at Cubberley to a variety of nonprofits, private schools, artists and some for-profit businesses, but generates barely enough income to simply pay for the operating expenses, with nothing offsetting the lease payments to the school district. The anchor tenant, Foothill College, will soon be leaving after the school district shunned pursuing an innovative joint-use concept.
With high hopes and hoopla, a big initiative was set in motion in 2011 to come up with a grand plan for Cubberley prior to the end of this year, when the city must give notice about its intentions for when the lease expires at the end of 2014. A lot of hard work went into that planning, but the school district's insistence on maximum flexibility on its possible future use of the site made it impossible to develop the exciting plan everyone had hoped for.
In the meantime, the facility is in terrible condition, gets nothing other than essential upkeep and would probably need to be razed regardless of its future use.
For the school district, the lease agreement is a wonderful cash cow. The district is getting paid big bucks each year for a facility that it has no use for but might need someday in the future, and it has no responsibility for finding tenants, collecting rent, maintenance or anything else.
The city is spending more than $7 million a year, plus a couple of million in expenses, for the ability to operate a "community center" that provides inexpensive space to many valued services and for the use of the playing fields and tennis courts.
Time has passed this construct by, and now is the perfect time to transition to a more logical and fair arrangement for Cubberley. The school district is on solid financial footing with substantial reserves, Foothill College is leaving the site, the city has many other financial needs, the temporary library now located at Cubberley will soon close, and there is no justifiable reason for the city to be paying to be a leasing agent for the school district.
News that the school district is now looking for land elsewhere on which it might build a future fourth middle school makes this picture all the more surreal. Why should Palo Alto taxpayers be paying $7 million a year to rent a run-down facility owned by the school district, for the purpose of being available to meet future school needs, while meanwhile the district is looking for a different site for a new middle school?
Having failed to achieve the goal of an exciting multi-use plan for Cubberley, it's time to let the school district manage its Cubberley property just as it does its other unused school sites. If it desires, it can continue to rent space to current tenants until it has a need for the space. The city can continue to lease the playing fields for an appropriate amount.
The city has no business continuing this arrangement, with all its attendant economic distortions and illogical incentives. Now is the time, when it will do no serious financial harm to the schools, to do away with this out-dated, unfair and now unjustifiable subsidization scheme.