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Officials Ditch Claim About ‘Benefits’ of High Property Taxes

Flyers distributed in Capistrano Unified School District schools and the main office promote the district’s upcoming $889 million property tax increase as a benefit to homeowners.

That claim would appear to be a political response to criticism of Measure M, the controversial bond on the South Orange County district’s November 8 ballot. Critics have said Measure M, which will be paid off by increased property taxes, will dampen home values.

Under the headline “Community Benefits,” the flyer distributed in schools and offices asserts that higher taxes will actually be good for home sales. “We believe that improving neighborhood schools will ultimately increase local property values and add to the real estate market value of homes in our community,” the flyer reads.

The district’s claim that higher property taxes will boost home values is not included in the version posted on the CUSD website.

The headline in the online version is also different – just the word “Community,” not “Community Benefits.”

The flyer was produced for the district by a political consulting firm.

In a legal opinion, California Attorney General Kamala Harris said, “State law prohibits school districts from campaigning in support of a bond measure.” Numerous state courts, including the California Supreme Court, have said government bodies may provide information.

District officials did not respond to several requests for comment on the change. But critics say the change is consistent with the district’s practice of promoting Measure M in ways that come close to breaching the legal standard.

“I believe school district officials have been routinely engaging in illegal express advocacy,” said Rancho Santa Margarita Mayor Tony Beall.

Even that statement is likely to elicit a response from district HQ. Beall and his counterpart, Mission Viejo Mayor Frank Ury, made a similar claim in an August 9 letter to Capistrano Unified officials. The district responded to the letter by voting 6-1 to sue Beall, Ury, and their cities.

Beall said no complaint has been filed.

The South Orange County Economic Coalition, an association of business and other institutions, including the Orange County Association of Realtors and Saddleback College, opposes Measure M. Last month, they announced Measure M “will make prospective home buyers think twice before buying in this District.”

Catrin Thorman is a California Policy Center fall Journalism Fellow. She is a graduate of Azusa Pacific University, and a former Teach for America corps member. 

UPDATE: This article was updated on October 24 to reflect a request for clarification from the South Orange County Economic Coalition. Though that organization opposes Measure M, a spokesperson said some of its members (in this instance, Saddleback Community College and the Orange County Association of Realtors) may not necessarily oppose the measure. —Editors

District has Paid Consultants Over $400k to Promote Bond

State law prohibits government officials from using taxpayer dollars in political campaigns. But on June 8, Keith Weaver of Government Financial Strategies stood before the Capistrano Unified school board, coaching trustees on how to pass an $889 bond measure on the November 8 ballot.

“November elections do better,” said Weaver, whose Sacramento-based firm has been paid at least $400,000 to manage what the district calls an outreach campaign. Weaver went on, telling the board that November is “when we have a lot of turnout. I would encourage us to focus on voter registration and focus on getting people to the polls because turnout helps bond measures.”

Under California law, government officials are allowed to provide information to the public for the purposes of voter education. They are prohibited from engaging in direct campaign efforts for tax increases.

But throughout the state, public officials are blurring the line between information and advocacy – often paying firms like GFS to run point on political campaigns, and especially campaigns involving tax hikes like Capistrano’s Measure M.

Capistrano Unified contracted with GFS for the purpose of “community engagement,” according to district documents. On its website, the company says it operates to assist the public sector in generating revenue – what most people call taxation. GFS’s website provides information on how to organize efforts to pass bond measures such as: “centrally organizing publicity efforts, involving students in volunteer activities, and reaching out to the senior citizen population.”

Capistrano USD has also contracted with another public affairs organization, Los Angeles-based Cerrell. That company’s website boasts Cerrell has “financed billions of dollars of public projects” through its “public communication” efforts. The website highlights Cerrells’ April 2015 role in passing Glendale’s Measure O, a two-percent increase of Glendale’s hotel tax: “strategic guidance, messaging, materials development and multilingual communications successfully educated Glendale voters… While voters rejected the other three measures on the city’s municipal ballot by wide margins, Measure O passed with nearly 60% support.” Cerrell credits the victory to its “comprehensive and compelling public education program.”

Since September, the district has paid Edelman some $24,000. At a September 28 meeting of Capistrano trustees, the district claimed Edelman would not be working on Measure M though documents indicate they’re being paid for “community engagement” efforts from October 1 through December 31. One of the nation’s oldest public relations companies, Edelman has managed marketing for such corporate giants as Hewlett-Packard, Microsoft, Johnson & Johnson, and Starbucks. 

Andrew Heritage is a California Policy Center fall Journalism Fellow. He is a doctoral student in political science at the Claremont Graduate University.

School District's Bond Controversy Reveals Rising Concern About 'Pay-to-Play'

Vital force.

CUSD’s Kirsten Vital 

In the space of just a few months, state officials have suddenly turned their attention to a problem in the public-educational shadows: insider dealing among California school district officials and outside vendors.

In a January opinion, state Attorney General Kamala Harris concluded that school officials had become too cozy with companies that stand to benefit from passage of high-ticket school bonds.

“A school or community college district violates California constitutional and statutory prohibitions against using public funds to advocate passage of a bond measure by contracting with a person or entity for services related to a bond election campaign if the pre-election services may be fairly characterized as campaign activity,” Harris wrote.

In July, California Treasurer John Chiang warned districts about the same problem. And in August, Gov. Jerry Brown signed into law AB 2116, creating financial oversight committees for the spending of bond revenue.

Despite the scrutiny, companies looking to do business with the Capistrano Unified School District are major contributors to the district’s massive $889 million bond, Measure M on the November ballot.

Contributors include construction, engineering and architecture firms. Documents first published by Dawn Urbanek, a South County activist, show Tilden-Coil Constructors gave $25,000; $15,000 came from WLC Architects; computer giant Dell gave $4,000 to the effort.

Some of the contributors have already worked for the district. WLC Architects designed the Capistrano Valley High School Performing Arts Center. School officials approved five payments to WCL Architects (total: $43,781.03) during a September 14 meeting.  

At the center of the controversy: CUSD’s top administrator, Superintendent Kirsten Vital.

Vital ran into similar trouble at her job in the Alameda Unified School District. Her highest-profile collision in Alameda involved an Oakland-based political consulting firm with multiple ties to the district. That firm worked for Vital to promote the district’s Measure H Bond in 2008. The next year, the school board appointed the firm’s two partners to a Master Plan Advisory Group that year. That same year, Vital paid the firm $14,000 for “design and programming of AUSD website redesign.” In the same year, Vital created a webmaster position and hired AUSD Board Trustee Mike McMahon’s daughter Rebecca McMahon to fill the position. Her salary, depending on tenure, ranged from $41,000 to $51,000 per year.

At the same time, Vital faced a series of pay cuts in Alameda. She earned $273,908 in 2012; dropped to $262,823 in 2013, and to $214,031 in 2014. In three years her pay dropped 22%.

Interestingly, Joseph M. Farley, her predecessor at CUSD, rode a more dramatic financial downhill. Documents provided by Transparent California show Farley earning $287,073 in 2013. In 2014, he made just $203,773, a one-year drop of 29%.

 

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Vital’s original CUSD 2014-2018 contract gave her an annual salary of $305,000 – a huge bump over her Alameda salary (and Farley’s in CUSD). She also received a $15,000 relocation assistance stipend. That four-year deal was amended after just two years, in 2016. The new contract, extended through 2020, gave her an annual salary of $319,244 and another bonus, this one a $14,244 “discretionary payment.”

Conor McGarry is a graduate of California State University–Dominguez Hills, and a Journalism Fellow at California Policy Center.

 

Controversial ‘Education Center’ Schools Parents in Bond Pitfalls

Capistrano Unified HQ: District staff staff labored in something that looked more like a Four Seasons resort.

Capistrano Unified HQ: More like a Four Seasons resort.

Anyone looking down the barrel of an $889 million school bond should consider what the Capistrano Unified School District did with its last bond, in 2002.

After issuing the bond – called a certificate of participation (COP) – the district began constructing a $35 million administration building in San Juan Capistrano, east of I-5. Opened in 2006, Capistrano USD called it the Education Center.

Critics called it the Taj Mahal. In a recall notice some of them delivered to trustees, they sounded as if they were attended by men in short pants, tri-corner hats and a fife-and-drum corps. “You are are recklessly spending $52,000,000 on an administration building … while our schools are in dire need of repairs and students are crammed into substandard portable classrooms with non-functioning restrooms,” they wrote.

Meanwhile, Superintendent James Fleming’s staff labored in something that looked more like a Four Seasons resort. Controversy was probably inevitable. Fleming didn’t make things better when he went on the offensive, tracking his critics on what some called an enemies list, and either blaming others for the overbuilt Education Center or suggesting it was actually an entrepreneurial marvel – a revenue-generator operated by a government agency.

“In terms of the design of the building, it was put together by a committee of people and built to accommodate tenants that would pay rent,” Fleming told the Orange County Register.

That last piece – that Fleming and other district officials planned to pay off the bond in part through leases paid by non-district tenants – became yet another point of criticism.

But the lease revenue isn’t going toward the debt. In 2008, two years after the ribbon-cutting at the Education Center, the Great Recession hit, and government agencies began their feverish search for new revenue. In 2012, Capistrano Unified determined that revenue from tenants leasing space in the Education Center would better serve the district in the general fund – where it could be used to support the salaries of teachers who had gone on strike following a 10% pay cut in 2010.

A bond intended to improve buildings had, in short, become a way to generate income for operating expenses.

Controversy surrounding the Education Center ignited two recalls of school board trustees, in 2005 and 2010. The first recall failed but exposed the enemies list.

Fleming insists the enemies list was a myth created by his enemies.

“There is not now and never was an ‘enemies’ list,” Fleming told the Orange County Register in 2011.

In December 2010, a California appellate court acknowledged the existence of Fleming’s list, but dismissed the charges against him. The logic: it was within Fleming’s purview as superintendent “to research the nature of the discontent and unrest in the district at the time.”

By then, Fleming had already been retired for four years. He sued Capistrano Unified for severance pay, lost future earnings, and legal expenses. An appellate court ruled against him.

The district Fleming fled is asking voters to approve an $889 million bond on the November ballot. Fleming? He’s retired and living in Florida, collecting a $155,540 annual pension from his time at Capistrano Unified.

Catrin Thorman and Andrew Heritage are California Policy Center Journalism Fellows. She is a graduate of Azusa Pacific University, and a former Teach for America corps member. He is a doctoral student in political science at the Claremont Graduate University.

OC's Measure M Treats Some Homeowners More Equally Than Others

Orange County voters are being asked to approve over $2.4 billion in new school bonds. The largest bond: Capistrano Unified School District (CUSD)’s $889-million Measure M.

The new CUSD bond would be serviced by property owners in most of the school district, but not quite all of it. One community, Rancho Mission Viejo, won’t be voting on Measure M and won’t be paying the new taxes if it passes. CUSD’s Measure M web page says the new community is being excluded on the grounds that it won’t have a school until Fall 2018, when Escenia Elementary will begin serving Rancho Mission Viejo residents. But this ignores the fact that community members can send their children to Tesoro High School, which will receive upgrades from Measure M proceeds.

In reality, district officials removed Rancho Mission Viejo from the Measure M bond district to avoid a political showdown with powerful, sophisticated real estate developers there.

In a June 22 meeting of the district board, Trustee Jim Reardon, a bond opponent, noted that “there are areas of the school district that are large and undeveloped, and privately owned, and we are going to face opposition from the landowners in those areas.”

“Then carve them out,” responded Trustee John Alpay, a Measure M supporter.

Alpay had earlier argued for using a “Swiss-cheese model” to design a district in which well-organized opposition might torpedo the district.

“You need to go through, you need to start with the whole district, and then you need to start cutting out those areas that you know that we could live without in terms of finance,” Alpay said, according to transcripts of that meeting. “They’re not gonna support it. Any rational political person is gonna do that … Get rid of them. Carve them out. There is no reason to have them in there. And I could make the same argument of other parts of the district, and that’s what we should do. I’m not saying it should be, or should be Mello-Roos districts, but this idea of one unitary is wrong. The idea of six is also wrong. It has to be something in between.”

But to exclude Rancho Mission Viejo and other potential opponents, the CUSD board needed to create a special district for the purpose of enacting the bond. In July, with a Rancho Mission Viejo Co. official in the audience, officials approved the bond district – minus the Rancho Mission Viejo Co.

Known as Capistrano Unified School District School Facilities Improvement District No. 2 (SFID No. 2), the new district will be layered atop a hodgepodge of existing special taxing districts within CUSD. The school district already has an SFID – SFID No. 1 – and it also has 10 Community Facilities Districts (CFDs) – also known as Mello-Roos districts.

Creating and administering special districts imposes extra costs. Also, special district bonds may attract lower ratings and be harder to sell to investors than more easily understood and better diversified district-wide general obligations. This should be a concern for CUSD, most of whose SFID No. 1 bonds carry a surprisingly low A+ rating from S&P – four notches below the agency’s maximum AAA rating.

CUSD is unusual in that some homes can be in multiple districts – the existing SFID, the proposed new SFID and a Mello-Roos district. Such is the case for homeowners in Whispering Hills Estates. As the 2015-16 tax bill for one lucky owner shows, total taxes are almost $16,000 on an assessed value of $837,000. About $7250 of the taxes go to servicing two SFID bonds (listed as CAP USD ID1) and the Mello-Roos obligation (CFD 2005-1).

More expensive properties draw even higher tax bills. This second tax statement, for a property assessed at $1,080,000, shows a total of $19,000 in taxes.

And these taxpayers will be paying more in the years ahead – with or without Measure M. The Whispering Hills Mello-Roos district just issued a new bond that will further increase the Mello-Roos tax there. In 2016-2017, the CFD tax alone will range from $6820 on the smallest homes to $9500 on the largest (see page 21 of the bond document).

According to CUSD, Measure M will add $41.81 of new taxes per $100,000 of assessed valuation in the first year after enactment, climbing to $42.99 per $100,000 in fiscal 2032-33. By law it can rise no higher than $60 per $100,000. This may not sound like much – until you consider the impact on a property over the 30-year typical life of a bond program. At $42 per year for 30 years, total taxes are $1260 per $100,000 of assessed value. If your house is worth $1 million – not atypical for the area – the lifetime tax is $12,600. And this is on top of the hefty tax bills CUSD residents already pay.

Finally, it is worth noting that the district is issuing the bond after years of flat to declining enrollment. In the 2011-12 school year, 50,538 students were enrolled in CUSD. In 2015-16, the figure had fallen to 49,120 (as shown on page A-2 of the bond document mentioned above). While new construction may stall this trend, it seems unlikely that the area will be hit by a wave of new students, making one wonder whether it would be possible to get by on something less than $889 million in new construction.

Marc Joffe, a policy analyst with the California Policy Center, was a senior director at Moody’s Analytics. He earned his MBA from New York University and his MPA from San Francisco State University.

 

Capistrano Teacher Union Operative’s Story Hard to Swallow

Deceptive campaign websites point to CUEA front-group leader.

The Capistrano Unified School District (CUSD) in California’s Orange County has seen more than its share of school board battles in recent years. In 2008, parent activists managed to rid themselves of possibly the most corrupt school board in America. Immortalized in Not As Good As You Think, parents endured the horrors of an enemies list, publicly-released home phone numbers and implied threats against their children, but remained determined and ultimately managed to seat a reform-minded, honest, child-friendly board.

The peace that returned to this upscale area was short-lived, however. In January 2010, a recall against two of the board members was launched. The Capistrano United Education Association (a California Teachers Association local) didn’t think much of Mike Winsten’s and Ken Lopez-Maddox’s emphasis on children, their refusal to kowtow to CUEA and their conservative leanings. Leading the charge was the Orwellian-named Children First, a CUEA front group, whose agenda couldn’t find room for kids.

Unfortunately the union’s efforts to recall Winsten and Maddox-Ford were successful. At the same time, three other board members were up for reelection. After the dust had settled on Election Day, 2010, the board consisted of four pro-children and three pro-union members. CUEA seemed pleased, though its spending binge did not secure the union a majority. According to the Orange County Register,

Capistrano Unified’s teachers union has poured $261,863 into the district’s school board election to date (Oct. 30), including $67,040 this week alone, while its chief political rival, the Committee to Reform CUSD, has continued to lag behind, reporting no spending over $1,000 in the past two weeks.

With spending by the union’s ally – the Capistrano Unified Children First group – factored in, overall spending by these groups is outpacing the Reform Committee’s spending by more than a 16 to 1 margin.

And once again, it’s school board election season for CUSD and, not surprisingly, union spending is going gangbusters. For the most part, the reformers are putting their own money into their campaigns, but the union-backed candidates – surprise, surprise – are getting a big financial boost from union front groups. According to local writer Penny Arévalo,

The two biggest money raisers and spenders are the teachers’ union PAC, known as Help Organize for Public Education, and a group that rallies for similar candidates and causes, Capistrano Unified Children First.

Children First has raised $36,537 and spent $32,485. It has a cash balance of $5,816.

HOPE has raised $73,228 this year and spent $26,097. It’s sitting on $67,805.

But it seems that providing its candidates with a huge spending advantage isn’t enough for the union and its acolytes. Apparently, someone closely associated with CUEA set up a series of fraudulent websites. Particularly hard hit was Julie Collier, leader of a group called the Parents Advocate League. Collier has made some enemies because she has the temerity to believe that parents should be informed about educational issues that pertain to their children. Two of the bogus websites targeted her one using her own name and the other using her organization’s name. Furious, Collier immediately retained a lawyer to find the culprit, and on October 17th, Arévalo reported “Deceptive Campaign Websites Tied to Children First Volunteer.”

In a letter sent to attorney Wayne Tate by GoDaddy, which hosted at least six misleading URLS, Chris Korpi was identified as the person who bought www.juliecollier.com and www.parentsadvocateleague.com, which initially redirected visitors to school board President Gary Pritchard’s campaign site and Children First’s website, respectively.

A GoDaddy representative said the company cannot confirm whether the person who supplied all the information to purchase the domain names was indeed Chris Korpi.

Seemingly Korpi, the man behind Children First – the union front group – has been caught with his fingerprints all over the cookie jar, though he adamantly denies the charges.

Korpi blamed the misleading web addresses on political opponents, noting he hasn’t run the business named in the GoDaddy email, Korpi Marketing Services, for eight years, and that all his contact information listed is publicly available for someone to steal his identity.

Grasping at straws, he even had the temerity to blame the dirty tricks on Jennifer Beall, who along with her husband Rancho Santa Margarita Mayor Tony Beall, are long time CUSD reformers. The Bealls and Collier are allies, and to blame Beall for the misdeed is positively loony.

And I guess it’s just a coincidence that, according to Arévalo, Korpi is on the payroll of John Alpay, a union-backed incumbent running for reelection.

One of the misleading URLs went to Alpay’s campaign site. He and (incumbent Gary) Pritchard are both endorsed by Children First.

This would all be humorous – great fodder for The Onion or Saturday Night Live – if it weren’t dealing with real kids, their real parents and their very real problems with education in their school district. Whether the guilty party is Korpi or some other union crony, it is apparent that that CUEA will stop at nothing in its quest for power. And there is nothing at all funny about that.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.