May 30, 2006

SUBJECT: Preliminary Findings to Explore Neighborhood Options for Purchasing Property at Peterson Middle School Site – Study Issue (06-169)

REPORT IN BRIEF

The Santa Clara Unified School District (SCUSD) had indicated it was considering declaring 8 acres out of a total of 26 acres of open space school property at Peterson Middle School surplus. In addition, the SCUSD is considering retaining 5 other acres of the 26 acre site for future use, but may make them available for lease. (Please refer to Attachment A: Peterson School Site location and Attachment B: Detail of Peterson Middle School Property.)  The Sunnyvale City Council determined it was not interested in pursuing the purchase or operation of this property, but instead, directed staff to study the options available to the neighborhood surrounding the Peterson site should the opportunity for the neighbors to lease or purchase this property become available. Council also requested that staff contact local non-profit organizations, such as local sports organizations, to broker a relationship between the organizations and the District should the organizations have an interest in purchasing or leasing the property for their use. This report is intended to comprise the first part of the 2006 Study Issue to Explore Neighborhood Interest in Purchasing Property at Peterson School, and present preliminary findings for further direction.  (See Attachment C: Study Issue Paper). However, a change in direction may now be in order since on May 11, 2006 the SCUSD Board of Directors gave preliminary direction to school district staff to abandon consideration of declaring a portion of the Peterson property as surplus and instead follow-up on two options: 1) Consider leasing up to 13 acres to local individual or cooperative youth sports organizations to develop and maintain a youth sports complex; and 2) Retain the property and develop a working /educational farm to provide curriculum opportunities for students and fresh fruits and vegetables for school cafeterias.  (See Attachment D; Letter to Director of Parks and Recreation from Business Administrator of School District.)

Since the direction of the SCUSD was determined well after this study issue was underway, staff is presenting this report largely based on earlier direction from Council – to explore options available to the neighborhood to purchase or lease this property. These options are still valid should the SCUSD reverse its decision to not pursue selling any portion of the property, and some of the options may be valid for youth sports groups to pursue. The options described in the report include seeking private funding (such as grants, land trusts, matching and naming opportunities) to purchase or lease the land, and creating a Home Owners Association to spread the costs of purchase and ongoing maintenance among its members. This report also presents options for public funding such as asking the County Park District if it is interested in the property, or proposing a bond issue, requiring support from the City, plus two methods for debt financing – creation of a Community Facilities District and/or establishment of an Assessment District – that would also require ongoing support from the City. While these last options do not meet the spirit of Council’s directive since they require on going support from the City, they are described in the report for Council’s consideration. The neighborhood’s interest in any of these options has yet to be explored pending City Council direction on which of the options warrant further study.

Staff recommends Alternative No. 1: Direct staff to cease continued work on this study now that the Santa Clara Unified School District has determined it will not declare any portion of the property at Peterson Middle School as surplus property. Staff will provide any technical assistance related to the use and maintenance of sports fields as necessary upon the request of the SCUSD.

The Parks and Recreation Commission heard this item during their regular meeting on May 10, 2006, which was prior to the SCUSD’s action on May 11, 2006, to not pursue selling any portion of the property. Therefore, based on the information at hand on May 10, the Parks and Recreation Commission recommended that Council direct staff to cease continued work on this study should the Santa Clara Unified School District determine prior to November 14, 2006, that it will not declare any portion of the property at Peterson Middle School as surplus property. (November 14, 2006 is the date staff is scheduled to return to Council with the final version of this study.) The Commission further recommended that Council direct staff to explore the options related to private funding in greater detail and return to Council with more information regarding the feasibility and requirements of those options.

The May 11^th decision of the SCUSD Board has been shared with the Parks and Recreation Commission and they were given the opportunity to provide a separate recommendation to Council in response to this updated report. The Parks and Recreation Commission chose to not hold a second meeting on this issue and requested that staff inform Council that the Commission took action prior to the May 11, 2006, SCUSD Board meeting. 

BACKGROUND

The Peterson field, a twenty-six acre piece of property associated with Peterson Middle School, has been controversial for several years. Peterson Middle School is part of the Santa Clara Unified School District (SCUSD). The field is used by the school for physical education classes and by a number of other authorized users with permits, including adult soccer leagues and cricket teams, St. Lawrence Academy athletics, Pop Warner football league and local neighbors. It is also heavily used by soccer, football and cricket teams without authorization or use permits. The District has received many complaints from the neighborhood related to noise, mess, traffic, and behavior of the field users, and has received complaints from the users related to the field condition and lack of access and scheduling opportunity. It was largely the result of this negative input which caused the District to begin exploring what else it might do with the property.

For a few years prior to 1994, the City was involved in the scheduling of Peterson field, however, due to the poor condition of the field and complaints from users and the general public, similar to the problems noted above, the City relinquished that role. Despite overtures from the District requesting that the City consider scheduling and maintaining the fields, the City has chosen not to pursue an agreement with the District because of the condition of the fields and costs to restore and operate them. The Peterson fields are not City property, and the City has no jurisdiction over their use. In 1999, a study issue titled “Potential Sports Complex at Peterson/Patrick Henry School Sites” (which would have studied a possible partnership between the City and the District to create a sports complex at this site), was presented to Council. It was ranked eighth out of eight issues for Parks and Recreation and ‘below the line’ for study that year. The following year, the Council dropped the study issue.

The SCUSD is not in the business of maintaining open spaces it does not need, therefore, in 2005 the Peterson Field Advisory Committee to SCUSD was formed to determine if there is any surplus land associated with the Peterson School, and to identify acceptable uses for the surplus land. The Committee considered the use of District property surrounding the school which comprises a total of 48 acres that includes the lands the buildings occupy as well as the 26 acres of open space and playing fields, and concentrated its effort to determine how much open space is needed to support a middle school or a high school if one should ever be needed again at the site. The Advisory Committee concluded that a middle school the size of Peterson requires approximately 18 acres plus 8 to 13 acres of turf, depending on whether the existing football field and track are retained. The Advisory Committee recommended that the District retain a total of forty acres for possible future school use, (including the required open space to support a possible future high school), and surplus eight acres, out of the forty-eight acres at the site. If the District follows the Committee’s recommendation to declare eight acres as surplus, the Committee’s further recommendation was that the District’s first priority should be to find an agency willing to maintain the field as open space or for recreational use. If an appropriate agency could not be found, the Committee recommended disposing the excess land with the provision that the land be developed for single family housing compatible with the current zoning for the neighborhood.

On May 11, 2006, the SCUSD took informal action on the Advisory Committee’s recommendations and decided to abandon the option to declare some of the Peterson Middle School site as surplus. Instead, the School Board decided to direct its staff to follow-up on two options: 1) Consider leasing up to 13 acres to local individual or cooperative youth sports organizations to develop and maintain a youth sports complex; and 2) Retain the property and develop a working /educational farm to provide curriculum opportunities for students and fresh fruits and vegetables for school cafeterias.  (See Attachment D; Letter to Director of Parks and Recreation from Business Administrator of School District.)

Should the SCUSD decide to reverse this decision and declare a portion of the property as surplus, it would trigger a State mandated process for determining who may purchase the property and what price may be charged. The State Education Code section 17485, (“Naylor Act”) allows school districts to recoup their investment in property while making it available to other government agencies to keep for playgrounds, playing fields or other outdoor recreation purposes, if no other available public owned lands in the vicinity of the school site is adequate to meet the existing or foreseeable needs the community. Should that be the case, and a local jurisdiction, i.e. the City of Sunnyvale, considered purchasing the surplus property, it would have the opportunity to purchase 30% of the surplus property at a discounted price that would be no less than 25% of the fair market value of the land, while the remaining 70% of the surplus property would be offered at fair market price. This discount would only apply if the entire amount of surplus property was purchased. Assuming the City meets the State Education Code requirements and the low end land price of $2.5 million an acre, this means that the City could purchase 2.4 acres (30% of the 8 acres) at a minimum price of $625,000 per acre (25% of $2.5 million) which equals $1.5 million, and the remaining 5.6 acres at $2.5 million per acre which equals $14 million, making the total discounted purchase price $15.5 million.    

Separate from the process undertaken by SCUSD, the City of Sunnyvale in 2005 was completing its revision of the Open Space and Recreation Sub-Element, which was subsequently adopted unanimously by Council in January 2006. One of the findings of that document was that the Neighborhood Planning Area containing Peterson Middle School is the best served by parks in the City, with more park acreage per 1000 population than any other part of the City. That same Neighborhood Planning Area is also second best served by existing park and school open space combined. Applying the open space priorities contained within the policy section of the Sub-Element would place a relatively low priority on acquisition of the Peterson acreage.

Because the City has established that there are enough available lands in the vicinity to meet the open space needs of the community and there is no finding of need for the Peterson property contained in the Open Space and Recreation Sub-Element, the City is not eligible for the discounted purchase price were the SCUSD to declare any of the Peterson site surplus. This adds to one of the primary obstacles to considering acquisition, which is the cost of purchase.  Not only is there no finding of need for the Peterson property, the current fiscal climate in which the City continues to address service level reductions and a $433 million unfunded capital projects plan, supports a low priority to purchase and/or assume the on-going maintenance of the Peterson fields.

During its December 15, 2005 Study Issue Workshop, Council again considered a study issue “Potential Open Space Sports Field at Peterson Middle School Site.” Council deferred this study issue and proposed a new study to “Explore Neighborhood Options for Purchasing Property at Peterson Middle School” which was ranked for study in calendar year 2006. In this study, Council directed staff to “restrict its exploration of the Peterson Fields to strategies which would not involve the City financially in either the purchase or the operation of those fields, but rather to focus on strategies which would help broker a relationship between the School District and either the neighborhood or a third party to assume the purchase, renovation and/or maintenance of these fields.”

The study issue approved by Council proposes to explore this in two parts – the first is to provide a discussion of options available to the neighborhood to lease or purchase the property for community open space without cost to the City. During this part, staff would also contact the Santa Clara Unified School District to gauge their willingness to entertain any of the options for the purchase or lease of the property, and contact local sports organizations to alert them to the Districts interest in exploring possible field use partnerships. The second part will be based on Council's response to the findings in this report and subsequent direction to staff.

In all cases, it was made clear that the City's role will be only that of a facilitator, to bring to the attention of the interested parties the available options should they wish to pursue them. However, a preliminary review while conducting the first part of the study suggests limited realistic options are available to the neighborhood that would not require City involvement. Staff did identify options (e.g. bond funding, assessment districts) which would necessitate the City to act as ongoing agent on behalf of the neighborhood and has included those options in this report.

EXISTING POLICY

The following Open Space and Recreation Sub-Element policies were approved by Council January 24, 2006:

A.  Open Space:

A. 9. Refrain from engaging in the development of open space and/or recreational facilities without prior assurance that ongoing maintenance needs will be addressed.

A.11. Support the acquisition of existing open space within the City limits as long as financially feasible.

B.  Programming:

B. 6. Leverage available resources by pursuing co-funded and/or cooperative agreements for provision and maintenance of programs, facilities, and services, in order to maximize benefits to the community. Partners may include, but are not limited to, school districts, non-profit groups, governmental agencies and businesses.

C. Regional Approach: The City embraces a regional approach to providing and preserving open space and providing open space and recreational services, facilities and amenities for the broader community. It is the City’s policy, therefore, to:

1. Support activities and legislation that will provide additional local, county, and regional park acquisition, development, and maintenance and recreational opportunities.

2. Support public and private efforts in and around Sunnyvale to acquire, develop and maintain open space and recreation facilities and services for public use.

3. Encourage School Districts to make available school sites in and around Sunnyvale for community open space and recreation programs.

DISCUSSION

In accordance with Council direction, staff has explored the following options:

• Brokering a relationship between the District and various sports groups which might be interested in assuming maintenance of the site in return for use privileges.
• Several possible funding options, both public and private, for purchase or lease of this land from the SCUSD by entities other than the City.
• Other various options of debt financing where the City would not become financially liable itself, but rather would act as the sponsoring agency and issue the debt instruments for a third party with revenue being earmarked for particular purposes.  Two of these methods were explored in more detail: a Community Facilities District (“CFD”) issued pursuant to the Mello-Roos Community Facilities Act of 1982 and the establishment of an Assessment District.

OPTIONS

Brokering a Relationship between the District and Local Sports Associations

Staff met with a representative from the District who indicated a willingness to work with several local sports associations singly or together regarding the use of the fields. Staff sent letters to local sports associations informing them of the possible availability of this land for lease or purchase. (See Attachment E: Letter to Sports Associations and Attachment F: Follow-up Email to Sports Associations). If interested, associations were directed to contact the school district to work with them directly. During the May 11, 2006 SCUSD’s public hearing on the future use of the property it was readily apparent that several youth sports organizations had already been in contact with the school district and expressed a willingness to work out an agreement for the use of this property.   

Private Funding

Grant Funding – There are grant monies which can be applied for, however it is a very competitive process. Should Council select this option as warranting further study, staff would identify specific grant sources the residents could pursue for purchasing property and for providing its on-going maintenance.

Land Trusts – Land Trusts are local, regional, or statewide nonprofit conservation organizations involved in protecting natural, scenic, recreational, agricultural, historic or cultural property and open space in the communities or regions where they operate. There may be some smaller land trusts that would partner with the City on a city park.  Half Moon Bay did a park with Peninsula Open Space Trust (“POST”).  POST is a land trust that tends to be ambitious, do big deals and probably would not be interested in this acquisition but there may be other land trusts.  <LTA.org> is a reference site. Residents could contact Half Moon Bay to learn more about their experience. The City would most likely need to be involved in a partnership with a land trust.

Matching Opportunities – Neighbors can search out matching fund opportunities from employers or foundations, to match contributions from the community.

Naming Opportunities – The neighborhood or sponsors could identify big employers whose employees live in the area to be served by the site, or the top 10 employers in the area and try to “sell” the naming opportunity in exchange for a donation.

Fund Raising – The sponsors could pursue fund raising from all benefited groups: sports teams, community gardens, corporations, school foundations, neighborhood groups, etc, as well as any benefactors that might have an interest in the area.

Home Owners Association (HOA) – Residents surrounding the site could form a Homeowner’s Association to pay for maintenance of the site if the school district agreed to keep it open based on an agreement with HOA. Each homeowner within the association would need to agree to assess themselves and pay an amount of money to cover ongoing maintenance however there is no real mechanism for enforcement if a homeowner doesn’t pay as planned.

Public Funding

The two options below illustrate avenues the neighborhood may explore to purchase the property. Should the neighborhood choose to explore these options, it would also need to explore one of the options above to address ongoing maintenance and operational issues. 

County Parks – The neighborhood could contact the Santa Clara County Parks

Department since it sometimes partners with public and private entities to do projects. Typically, the County will purchase an open space easement, and then another agency or group purchases the remaining fee interest.  For example, the City could finance the rest of the price with a Mello Roos District. (See discussion below.)  The property must, however, have some County-wide open space benefits and it is questionable that the Peterson property would be able to meet this standard. As noted above, the ongoing maintenance and scheduling requirements would also need to be addressed.

Ballot measure – Depending on the political will, the City could propose a bond measure so that the acquisition and improvements would be financed City wide. Again, as noted above, the ongoing maintenance and scheduling requirements would still need to be addressed.

Debt Financing Options

There are two methods available in which bonds could be issued to purchase public property. However, both of these methods must be done through a local entity such as the City; that is the neighborhood residents could not do this on their own; they require on-going support from the City. Funds from either of these options could be used to provide for the ongoing maintenance of the fields, however, the neighborhood would still need to explore one of the options above to address the ongoing operational and scheduling requirements of the property.

Community Facilities District – One option is to create a Community Facilities District (“CFD”), commonly known as a “Mello-Roos District” pursuant to the Mello-Roos Community Facilities Act of 1982. This may be the most appropriate debt financing mechanism for this type of property acquisition since the applicable statute provides that a CFD can be used both to acquire real property and to maintain parks and open space.  The creation of a CFD would require a 2/3 affirming vote of landowners within the district, and before initiating a CFD, a City must adopt local goals and policies concerning the use of Community Facilities Districts as required by Government Code (Section 533312.7). Therefore the City would need to revise its recently adopted Open Space and Recreation sub-element goals to include this specific park acquisition.  On the positive side, the City could have a good deal of flexibility in designing a Mello Roos District, determining which of the surrounding neighborhoods to include and it would not need to demonstrate a “special benefit” in creating the district boundaries as is required in creating Assessment Districts. (See below.) The properties within the CFD would then be assessed a portion of the cost to purchase and maintain the Peterson fields.

Establish an Assessment District – This second option would identify a specific geographic area or “assessment district” within the City to tax for the purchase and maintenance of the Peterson site. It would require that a special benefit be granted to the jurisdiction within the District that pays the assessment, and an assessment engineering study would need to be completed to confirm that the assessment is equal to the benefit received. This may become more difficult if the site is open to the public since there is an element of general benefit to the broader community, which would preclude the total costs from being collected only from the local landowners within the Assessment District. Most likely, the City would need to make up the difference from other public funds.  The creation of an Assessment District would require a majority affirming vote of landowners within the District.

In a CFD, the tax must be “reasonable” – a broad term that gives considerable flexibility. In an Assessment District, the assessment must be based on special benefit. With respect to differential rates of taxes, in both a CFD and an Assessment District, commercial properties could be taxed or assessed at different rates from residential properties. As one example, an inventory of all properties within a one-half mile radius of Peterson School site show there are approximately 3000 parcels, excluding those within the City of Santa Clara. The cost to purchase 8 acres of open space, should it be declared surplus, is approximately $2.5 million to $3 million per acre; therefore in this example the cost to each parcel within the half mile radius would be approximately $6,660 to $8,000 to purchase the property on a one time basis.  In addition, estimates from the school district place the cost to restore all 26 acres of the playfields at $2 million and the ongoing maintenance costs at $200,000 each year.  Using this estimate applied to 8 acres, it would cost approximately $616,000 to restore the fields and $61,500 annually to maintain them, adding a one time cost of $205 per parcel for the field restoration and on-going maintenance cost of $20.50 per year. These figures are cited to provide a rough idea of the costs to the property owners if all 3,000 parcels of property within this example of a half mile radius were to be included in the CFD or an Assessment District and no differentiation was made between commercial or residential properties.  

Further study would be required to determine the boundaries of each type of district and the boundaries of the community receiving a “special benefit” would need to be addressed before more specific estimates of costs per parcel could be made.

Please refer to the chart “Overview of Community Facilities Districts vs. Assessment Districts” that follows for a comparison of the procedures related to the two types of debt financing techniques. In each case related to the two types of debt financing techniques, the City would still need to address the ongoing maintenance and scheduling requirements of the property.

Overview of Community Facilities Districts vs. Assessment Districts

FISCAL IMPACT

The first part of this study issue is to identify options for third parties such as neighborhood residents and/or local sports associations to consider for obtaining the use of Peterson School open space.  Neither a decision to further explore any of the options or to not explore any of the options in greater detail would obligate the City to any financial expenditure. However, a decision to adopt an option such as creating a Community Facilities District or an Assessment District could have a significant financial impact as those options require on-going City involvement. If directed to continue, this would be explored in the second part of this study issue.

CONCLUSION

This report presents several options available to the neighborhood that may warrant further exploration should the SCUSD reverse its May 11, 2006 decision to abandon the option of declaring a portion of the Peterson School property as surplus. However, since the SCUSD School Board’s decided to NOT declare any of the lands at Peterson Middle School as surplus, there appears little need for staff to continue to research in greater detail any of the options for the neighborhood. Staff would continue to provide any technical assistance related to the use of the property if such assistance was requested by the SCUSD.

PUBLIC CONTACT

Copies of this report and copies of the earlier draft report that went before the Parks and Recreation Commission were provided to the Chairperson of the Save Peterson Field Committee, the president of the Birdland Neighborhood Association and the Santa Clara Unified School District. Notice of Commission and Council meetings regarding this report was also distributed to the “Friends of Parks and Recreation” mailing list (a list of organizations and individuals who have expressed an interest in Parks and Recreation issues).

Public contact was made through posting of the Parks and Recreation Commission and Council agendas on the City’s official notice bulletin board, posting of the agendas and report on the City’s web page, publication of the Council agenda in the San Jose Mercury News, and the availability of the report in the City Clerk’s office, Library, Parks and Recreation Administration, Community Center, and Senior Center.

Public contact was also provided by the Santa Clara Unified School District through the posting of the SCUSD board agenda and subsequent May 11, 2006, public hearing on this item.

ALTERNATIVES

1. Direct staff to cease continued work on this study now that the Santa Clara Unified School District has determined it will not declare any portion of the property at Peterson Middle School as surplus property. Staff will provide any technical assistance related to the use and maintenance of sports fields as necessary upon the request of the District. 

2. Direct staff to delay additional work on any of the options until the Santa Clara Unified School District makes a final determination on the use of the Peterson Middle School property. Staff will then return to Council for further direction.

3. Direct staff to explore one or more of the options presented in this report (pages 6-9) in greater detail and return to Council on November14, 2006 (as originally scheduled) with more information regarding the feasibility and requirements of those options. (Staff seeks Council’s direction regarding the specific options it would like staff to further study between now and November.

4. Other options as determined by Council.

RECOMMENDATION

Staff recommends Alternative No. 1: Direct staff to cease continued work on this study now that the Santa Clara Unified School District has determined it will not declare any portion of the property at Peterson Middle School as surplus property. Staff will provide any technical assistance related to the use and maintenance of sports fields as necessary upon the request of the District.

Now that the SCUSD has given preliminary direction to its staff to abandon the option to declare any portion of the property at Peterson Middle School surplus property, the benefit to explore the options for the neighborhood to purchase or lease this land is moot.  The use of the property is either between the SCUSD and local youth sports organizations for the lease and upkeep of the property for its use as a youth sports complex, or for the SCUSD to determine the feasibility of developing the property as a working farm.  The property will continued to be owned by the SCUSD and it is apparent that the District will continue to maintain the property as open, green space – whether as sports fields or a working farm. Staff will provide any technical assistance related to the use and maintenance of sports fields upon the request of the District.

The Parks and Recreation Commission reviewed this item during their regular meeting on May 10, 2006, which was prior to the SCUSD’s action on May 11 to not pursue selling any portion of the property. Therefore, based on the information at hand on May 10, the Parks and Recreation Commission recommended that Council direct staff to cease continued work on this study should the Santa Clara Unified School District determine prior to November 14, 2006, that it will not declare any portion of the property at Peterson Middle School as surplus property. (November 14, 2006 is the date staff was scheduled to return to Council with the final version of this study.) The Commission further recommended that Council direct staff to explore the options related to private funding in greater detail and return to Council with more information regarding the feasibility and requirements of those options.

The May 11^th decision of the SCUSD Board has been shared with the Parks and Recreation Commission and they were given the opportunity to provide a separate recommendation to Council in response to this updated report. The Parks and Recreation Commission chose to not hold a second meeting on this issue and requested that staff inform Council that the Commission took action prior to the May 11, 2006 SCUSD Board meeting. 

Reviewed by:
David A. Lewis, Director, Parks and Recreation Department
Prepared by: Cathy E. Merrill, Assistant to the Director and
Jenny Shain, Casual Manager

Reviewed by:
Mary J. Bradley, Director, Finance Department

Approved by:
Amy Chan
City Manager

Attachments

A. Peterson Middle School Site Location (.pdf)

B. Detail of Peterson Middle School Property  (.pdf)

C. Explore Neighborhood Interest in Purchasing Property at Peterson Middle School – 2006 Study Issue Paper (.pdf)

D. Letter dated May 12, 2006 from Business Administrator of School District (.pdf)

E. Letter to Sports Associations (.pdf)

F. Follow-Up Email to Sports Associations (.pdf)