LAUSD Agrees to Pay Fees, Ending a Tussle With BIDs
By ANDY FIXMER
For the Los Angeles Unified School District, beset by a budget crunch, overcrowded classrooms and mediocre test scores, it was a principled stand.
A handful of its properties located in business improvement districts were being hit with bills for extra services like street cleaning and beautification.
But the LAUSD balked, figuring it deserved an exemption because its facilities serve no business purpose, consist mainly of open space, have limited hours and are closed on weekends.
After three years, the District’s stand over bills amounting to less than $350,000 met its match when faced with the possibility of having its ambitious building program stalled.
In a settlement negotiated with two BIDs, the district will now pay a lower assessment whenever a property falls within a BID zone.
“We had stonewalled and weren’t doing anything about the assessments, and that didn’t seem right because in some cases we were getting some benefits from the BIDs,” said Tim Buresh, LAUSD’s chief operating officer.
“It was sort of a gray area,” said Andrew Glazier, chief of staff to school board member Marlene Canter, who helped broker the deal. “Our general counsel thought we didn’t have to pay and they thought we did.”
The district had fallen in arrears on $323,000 in assessments for two schools and a warehouse facility in the Hollywood Entertainment District, Figueroa Corridor and Fashion District BIDs and finally came to the conclusion that under terms of Proposition 218 it had little choice but to pay.
Prop 218, requiring a two-thirds vote on all fees and assessments enacted by local governments, passed in 1996 and took effect the next year. The initiative mandated that all property owners including local, state and federal governments pay assessments to ensure governments were subject to the same burden as property owners.
By continuing to stonewall, the LAUSD faced the possibility of even more expensive litigation.
“Over time, that would have been the result,” said Kerry Morrison, executive director of the Hollywood Entertainment District BID. “It was becoming apparent that somebody, whether it was the city or some other agency, was going to seek judicial clarification as to whether the school district was bound by the terms of Prop 218.”
The issue came to a head about a year ago, when the LAUSD selected a site for a new high school in a proposed business improvement district along Sunset Boulevard between the Hollywood (101) Freeway and Cahuenga Boulevard.
To get support for the school, LAUSD officials were forced to confront the issue of paying assessments on its property, according to Canter, whose district contains the proposed high school.
“That’s when it really became an issue,” she said. “That’s when it became clear the district as a whole had a lot more to gain by settling this issue.”
Or, as Glaizer, her chief of staff, put it, “Rather than getting into a lawsuit over it, we thought this was a relatively small amount of money for what we were getting.”
Glazier joined with Morrison and Fashion District BID Executive Director Kent Smith, City Councilman Eric Garcetti and representatives of Mayor James Hahn’s office in convincing Buresh that the district had a responsibility to pay.
“Many of the BIDs do result in tangible benefits to the schools and we have to acknowledge that. We can’t take things for free,” Buresh said.
With 1,100 properties scattered across the county, making it one of the L.A.’s largest landowners, the LAUSD has thus far only fallen within the bounds of a BID three times. Of the 34 BIDs in the county, 25 are property-based, where property owners, rather than merchants, pay annual dues for extra maintenance and security.
Despite the relative infrequency of the overlap, BID operators argued the schools received a share of the services, benefited from cleaner and safer neighborhoods and therefore should be treated no differently than any other landowner.
But for the LAUSD, which is in the middle of spending $3.6 billion to build 80 schools, 60 additions and 19 playgrounds during the next two years, the effect of the policy change could be far-reaching.
Due to the lack and high cost of real estate in residential neighborhoods, many of the new schools will be located in or near commercial districts. Plagued with a looming $400 million to $600 million deficit this fiscal year, the district now faces the prospect that a growing number of its new schools could be required to pay the annual assessments.
“Yes, it’s a tough budget year, but this is probably going to keep us out of a costly litigation dispute,” Canter said. “Instead of paying lawyers, the money can go toward the schools and we end up getting a lot more for what we pay.”
LAUSD officials haven’t determined how many new schools are being built in existing and proposed business improvement districts, according to Buresh.
“It’s something we will watch carefully,” he said. “We are building schools everywhere and it’s more than likely something that’s going to continue to happen.”
Better for business
The new formula created as part of the compromise calls for school payments to be discounted from those paid by landlords with comparably sized properties. The district’s rate will be cut by 60 percent for elementary schools, 50 percent for middle schools and 40 percent for high schools. There will be no payments due in merchant BIDs.
“This links communities to the local areas they are in at a very highly discounted rate,” said Garcetti, whose 13th district includes Hollywood. “It’s more about the inclusion of these learning communities than milking them.”
Buresh said the district is convinced it does benefit from the BIDs and because of that it must contribute.
“One of big concerns for me is safety,” Buresh said. “The reality is most incidents involving our students happen outside our schools and in the neighborhoods. One of the things BIDs do is clean up the neighborhoods and make it safer for all our children, and in that sense we support BIDs.”
And while the policy will cost the district, it also allows it leverage when BIDs are formed.
“We can now say, ‘This is the district’s policy on this’ and if everybody is willing to accept that, then they have our support,” said Glazier, Canter’s chief of staff. “If they don’t approve, we’ll vote against (the BID). And as a large property owner, we have a big say.”