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Schoolhouse Services school generatio and fiscal analysis of January 2012 ENROLLMENT AND FISCAL IMPACT ANALYSIS MAIN STREET CUPERTINO PROJECT Prepared for: Prepared by: SCHOOLHOUSE SERVICES Economists and Planners (650) 373 -7373 www.schoolhouseservices.com January 2011 _____________________________________________________________________________________Schoolhouse Services i January 2012 TABLE OF CONTENTS BRIEF SUMMARY……………………………………………………………………………1 ENROLLMENT IMPACTS…………..…………………………………………………… …2 B ackground Student Generation Rate Analysis Enrollment Impacts Enrollment Capacity of Schools CAPITAL FACILITIES COST AND REVENUE IMPACTS ……………………………….11 Facilities Costs Main Street Cupertino Project Development Impact Fee Revenue Comparison of Capital Facilities Costs and Development Impact Fee Revenues OPERATING REVENUE AND COST IMPACTS ……………………………………1 7 Operat ing Costs Operating Revenues Comparison of Operating Costs and Revenues SUMMARY…………………………………………………………………………………..21 SUPPLEMENT - PROJECT ALTERNATIVE ……………………………………………..23 _____________________________________________________________________________________Schoolhouse Services 1 January 2012 BRIEF SUMMARY The apartments in the Main Street Cupertino project might be expected to generate about 32 students. (There would not be any students generated by the 143 senior units.) They generate a relatively small number of students for the number of housing units provided. While local schools are crowded, this number of students in itself is not a significant problem for the Cupe rtino Union and Fremont Union school districts. The problem is the total number of additional students coming both from all new development and due to increasing enrollment from existing housing. The Cupertino Union School District (elementary and middle schools) and the Fremont Union High School District will need additional facilities to house the increased number of students. The Main Street project will pay development fees to be utilized for this purpose. Because the apartments are only a small par t of the project and because their student generation rate is fairly low, for both districts these one -time fees will exceed the share of the costs of additional school facilities attributable to the Main Street project. The state provides funds to the Cu pertino District to supplement property tax revenues and, given additional students, will provide additional funds to maintain the same amount of annual financial resources per student from property taxes and state funding. Revenues from other sources, pr imarily the parcel tax, which are less than ten percent of the budget, will not increase significantly. The Fremont High District depends primarily on the property tax for funding. Because the apartments are only a modest part of the total project, prope rty tax revenues from the project will substantially exceed the share of the district’s annual operating costs attributable to the Main Street project. _____________________________________________________________________________________Schoolhouse Services 2 January 2012 ENROLLMENT IMPACTS Background The City of Cupertino has contracted with Schoolhouse Services to cond uct an analysis of the enrollment and fiscal impacts of the proposed Main Street Cupertino project on the local school districts. The land -owner and developer, 500 Forbes, LLC, has previously received approval for a multi -use project on the site. It is n ow requesting that the project include 120 apartment units and some additional retail space, with the athletic club no longer being part of the project. The project site consists of 18.4 acres located on the north side of Stevens Creek Boulevard, bounded by Vallco Parkway on the north, Tantau Avenue on the east side, and existing development on the west. The site has already been cleared and the developer is planning on completing most of the project, including occupancy of the apartments, in 2014. The s cope of this report is an analysis of the project revised as the developer is proposing. The land uses include 120 apartments, 143 units of senior housing, a 180 room hotel, 83,200 square feet of retail, 292,000 square feet of office space, and 1,963 park ing stalls. More information about the sizes and character of the uses is included in a later section of the report. The project is located within the school district service areas of Cupertino Union Elementary School District (CUSD or Cupertino Distric t) and Fremont Union High School District (FUHSD or Fremont District). It is within the Eisenhower Elementary attendance area, but on its border with the Sedgwick Elementary attendance area. At the middle school level, also part of CUSD, it is located in the Hyde Middle School attendance area. The project is in the Cupertino High School attendance area, located to the south only a couple of blocks away from the project. This report considers the enrollment impacts on these schools and the fiscal impacts on the two districts. Student Generation Rate Analysis A projection of new student enrollment resulting from the Main Street project is necessary for identification of the potential impact of development on the impacted schools. Student generation rates (SGRs), the average number of students per new housing unit, are the key factor for the projection of enrollment into the future. Multiplying the number of new units by an appropriate SGR results in a projection of students from the units. Different hou sing types generate different SGRs. Single family detached units, houses with a surrounding yard, usually generate the most students, typically approximately two to three times the amount of students generated by most apartment units and condominiums (ind ividually owned units in a multi -unit building, often referred to as single family attached). However, if located in a highly rated school district, relatively large ground floor apartments and condominiums (townhomes), especially if they are in a family -friendly setting and affordable, can generate almost as many students as single family detached units. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 3 January 2012 The majority of condominiums and apartments, however, are usually not targeted toward families. Most of these units are smaller, ranging from studio and loft units to predominantly one and two -bedroom units. They are usually in multi -story buildings and lack private yards. Within the range of apartments and condos, however, student generation can vary significantly, with the sizes and the design and mar keting of the units being major factors; this topic is addressed in more detail below. These student generation comparisons are present in Cupertino. What is different in Cupertino is that student generation in essentially every category is greater than it is in almost all other California districts. The high performance of Cupertino school students and the reputation of the schools make the city an extremely desirable place for families with children to reside. As a result, developments are more likely to design housing to be attractive to young families. The combination of the desire of young families to reside where the children can attend Cupertino schools and the targeting of new housing to these young families results in the high SGRs. It should be noted that, for both single family units and units in multi -family buildings, when the buildings are new, younger families tend to be over -represented and student generation is generally greater at the elementary school level. As the units begin to age , the students present begin to enter the higher grade levels and eventually high school. While some families move and are replaced by younger families, other families become longer term residents and over a number of years the average age increases. Eve ntually a more stabilized SGR evolves as the subdivision ages, with the spreading of students amongst the elementary, middle, and high school being more equally apportioned than in the first decade after the project is constructed. SGRs of Recent Reside ntial Development In Cupertino Enrollment Projection Consultants (EPC) has been the demographer for both the Cupertino District (elementary and middle schools) and the Fremont District (high schools) for many years. As part of its work the firm determines student generation (counts the number of students) for a large number of relatively new housing units of various housing types. The student generation rate (SGR) is the number of students counted divided by the number of units. The SGRs are then multipl ied by the number of projected new units of each housing type to project future enrollment from new housing. The most recent EPC studies available when the first draft of this report was written were completed 12 months ago. Since then the firm has upd ated its student generation survey and prepared forecasts based on the recently completed official enrollment counts for the current school. The findings and forecasts in this year’s studies are fairly consistent with those of last year, with the exceptio n of some modest enrollment increases due to higher SGRs and to this year’s higher than expected kindergarten enrollment. The EPC surveys are the logical place to start to estimate the SGRs for the Main Street project. They cover 590 attached units, incl uding both apartments and condominiums. One and two - Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 4 January 2012 bedroom units dominate on the sample, though it includes some studios and some larger units. Multi -family buildings with generally larger units and/or designed to accommodate families are not included i n this sample; they are grouped in a 329 unit sample with single family projects for the SGR analysis. The survey by Enrollment Projection Consultants found an average SGR for the CUSD (kindergarten through eighth grade) of 0.27 students per multi -family residential unit, a little more than one student in every four homes. The average SGR for the Cupertino District portion of FUHSD, the high school grades, was 0.08 per unit in multi -family buildings. (This is about four times the 0.02 high school SGR in the remainder of the Fremont District.) Tables 1 and 2 summarize the SGR findings for both CUSD and FUHSD for the residential projects analyzed. (The SGRs for single family units are included for comparison.) Table 1 Average SGRs by Housing Type Cupert ino Union School District . Housing Type Average SGR Apartments and Most Condominiums 0.27 Single Family and Some Condominiums 0.64 Source: E n rollment Projection Consultants . Table 2 Average SGRs by Housing Type Fremont Union High School District Housing Type Average SGR Apartments and Most Condominiums 0.08 Single Family and Some Condominiums 0.21 Source: E n rollment Projection Consultants . Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 5 January 2012 Main Street Cupertino SGRs The next step is to choose an appropriate SGR to use in the analysis of the Main Street units. The developer has indicated that they plan to des ign and market the apartments for sophisticated adult living. We know from many studies that certain characteristics are often associated with adult oriented complexes (and hence few students). These include: The units generally are studios or have only one bedroom; The units are small, in particular lacking larger kitchen/family eating areas; Though small, the apartments are expensive; families can usually get more for their money in alternative locations; They tend to be in taller buildings, with a minimal number of the units at ground level; They lack yards with limited access and play structures for pre -school children, and lack lawns in the complex for the play of elementary school -age children; There is only one assigned parking space per uni t; They are marketed for their sophisticated adult life style; To make living at such a high density attractive, they include features such as physical fitness centers, party lounges, business centers, gated entrances, etc., all oriented to adult prefere nces, but adding to the price. The developer has indicated its intention of designing for and marketing to single persons or couples, rather than to family units. It does not plan on any apartments with more than one bedroom; there will probably be a l imited number of studios. Much of the apartment building will be four stories tall and thus there will be a limited number of units at ground level. The number of parking spaces reserved for each unit is unknown. The developer indicates that amenity fea tures in the complex, e.g. a fitness center, will be oriented to the preferences of adults. And, given the high cost of land and of development in this area and the cost of the amenities, the rental rates will be high, often a problem for young families. The name of the project, itself, offers the image of adult -oriented activities – shopping, offices, a hotel, etc. The only outdoor space oriented to the apartments is a small courtyard, unlikely to be designed to accommodate children’s outdoor play. The re are a park and a town square, each less than one acre in size, nearby but separated from the apartments by retail and parking. The average SGR from the survey would appear to be an upper end of the range of possible Main Street student generation if th e units are designed and marketed as adult one -bedroom units. However, if they have a den or other space that could be used as a bedroom and have two usable parking spaces, the SGRs could be at the upper end of the range or possibly even higher. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 6 January 2012 It is alm ost certain that there will be some students residing in the apartment complex. The units may average as large as 1,200 square feet. That provides room for a larger kitchen/eating area and is a size more typical for two -bedroom units. The size could ea sily accommodate a room which a working couple would value as a “den/office,” but which a couple or individual with one or two children would value as a second bedroom. If there are two parking spaces for each unit, that would result in more families. An d, of course, Main Street is located in very desirable school districts. The attraction of the schools is such that some households with children will choose to live there no matter how adult the orientation of the units. In some cases a single separated or divorced person will be living in an apartment and a son or daughter will move in with the parent, either because the parents desire to have the child in Cupertino schools or simply because a son or daughter wants to live with “the other parent.” Th e Montebello development at the corner of Stevens Creek and De Anza Boulevards offers an example of units designed and marketed for adult living in a very urban setting. The development was built in 2003 as apartments oriented to adults, but a strong owne rship market at that time led to the units being sold as condominiums, though a large number of the units are rented. The units are one and two bedrooms, with a relatively few townhouses. They are of modest size for condominiums, typically 850 square fee t for one -bedroom units and 1,100 square feet for two -bedroom units. These unit sizes are below the tentative one -bedroom size of the Main Street units; that suggests the Main Street project could have higher SGRs than the Montebello units. The Montebell o includes a pool, a spa, a fitness center, and an entertainment center. There is a Le Boulanger on the ground floor and a Starbucks across the street. The only out -door space oriented to the development is an interior courtyard entirely filled with tree s and shrubbery, thus providing no play space. The urban orientation is emphasized with the title of the complex of which Montebello is a part, City Center. The 207 Montebello units are not sufficient to be a reliable statistical sample, but sufficient t o serve as a useful indicator. A total of 43 students, 27 elementary school, 10 middle school and six high school students, reside in the 207 units in the project. (This is six more than resided there one year ago.) The SGRs are thus 0.18 and 0.03 for C SUD and FUHSD students respectively. These SGRs can be seen as reasonable estimates of the lower end of the range of reasonable SGRs for the Main Street units, with one adjustment. The project is located only a couple of blocks from Cupertino High School , a very high achieving school; it should be expected that that will result in a higher high school SGRs. In summary, our perspective is that the Main Street SGRs could be as could be as high as the averages of apartments and condominiums units (omitting complexes with larger family oriented units), 0.27 and 0.08 students per unit, and as low as 0.18 and 0.03 (or a little higher) students per unit for CUSD and FUHSD respectively. Given the similarities between the Montebello and Main Street settings, we a re using SGRs closer to the elementary and middle school SGRs for the Montebello units in the calculations in this report, knowing that the SGRs could be higher or lower depending on factors not yet known. The high school SGR used is closer to the average Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 7 January 2012 for units in the CUSD portion of the district. Table 3 below shows these SGRs by grade level for CUSD and FUHSD. Table 3 Main Street Development Projected SGRs Main Street Project Elementary (K -5) SGR 0.15 Middle (6 -8) SGR 0.06 Total CUSD SGR 0.21 High School (FUHSD) SGR 0.06 Source: Schoolhouse Services. Enrollment Impacts With appropriate SGRs we can proceed with the calculation of the enrollment generated from the 120 apartments. (No stu dents will be generated by the 143 senior units.) We can also assess the impact of that development on the current enrollment at the impacted schools, which are expected to be Sedgwick Elementary, Lawson Middle, and Cupertino High. Table 4 shows the calc ulated student enrollment impact resulting from the project. Table 4 Estimated Enrollment Impact* Elementary Middle High Total Apartments 120 120 120 SGR 0.15 0.06 0.06 Students Subtotal 18 7 7 32 * Three to ten years after construc tion of the units. Source: Schoolhouse Services. Given the assumptions described above, the Main Street development is projected to generate approximately 32 students. They will impact the three schools to which they will be assigned. It is anticipated that 18 students will be assigned to Sedgwick Elementary School, seven will attend Lawson Middle School, and five will attend Cupertino High School. It was pointed out earlier that the distribution skewed towards the early grades will be reduced over time. After a decade a more even distribution is to be expected. Overall enrollment could well be at approximately the same level or not too far below. It should be remembered that these estimates are reasonable for the proposed units; h owever, many characteristics of the units are unknown and the actual enrollment generated could vary moderately up or down from these numbers. In any case, the number of students is modest given the number of units and the overall size of the project. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 8 January 2012 Enr ollment Capacity of Schools Elementary Schools A discussion of the capacity of the elementary schools needs to start with a consideration of the pattern of capacity versus enrollment of the district as a whole. Cupertino Union is a rapidly growing school district. Enrollment has increased every year in the last decade, going from 15,571 in the fall of 2001 to 18,645 this fall, an increase of 20% accommodated in the same schools in the District. This increase is overcrowding many of these schools. Most o f the schools are housing more students than their design capacity, primarily by adding modular classrooms. School classroom support facilities - cafeteria/general purpose spaces, administrative offices, support classrooms for music/art or for students with targeted needs, playground space and facilities, etc. - are over -crowded or unavailable. The Enrollment Projection Consultants fall 2011 study projects an increase of 180 elementary students district -wide by next fall. Then, assuming that the rap id addition of young families in the district begins to abate, enrollment will probably begin a significant decline reflecting a downward trend from a level of growth that EPC sees as unlikely to be sustained. However, and most important, the trends over the last few years and as projected to continue for the next few years are different in the three areas of the district. The schools north and northeast of I -280 are experiencing strong growth resulting in very serious capacity shortfalls. Schools in the central tier lying below I -280 are crowded, though not to the extent of the northern schools, and are experiencing increases in enrollment for another year or two. The schools in the southern portion of the district have already passed their peak enrollm ent and have a continued decline projected in the future. Main Street Cupertino is located in the Eisenhower School attendance area, but on the south side of I -280 and on the boundary of the Sedgwick School attendance area. Eisenhower is located north of the freeway and is one of the seriously overcrowded schools. It is therefore to be anticipated that students from Main Street would be assigned to Sedgwick School. This is the case with enrollment from the condominium complex adjacent to and on the west side of the Main Street project. There are advantages to this other than the capacity issue. Sedgwick School is closer to the Main Street project and is on the same side of the freeway. The State of California funds a class size reduction program that subsidizes a portion of the cost of class size reduction in kindergarten through third grade and the Cupertino District participates in this program. The standard built into the program is a maximum of 20 students per homeroom. Under this standard both S edgwick and Eisenhower Schools would be impossibly overcrowded. Due to financial and classroom capacity constraints, however, the district has increased the maximum size in the kindergarten through third grade class size reduction program in this school y ear, raising class sizes in these grades up to a non -to -exceed maximum of 24 students. This increase was possible because the penalties built into the state program are being waived. However, the waiver sunsets after the 2013 -14 school year. This increa se provided a Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 9 January 2012 sufficient increase in capacity for Sedgwick, and Eisenhower, to accommodate their assigned students this year. However, the Cupertino community values education and it is likely the district will make a strong effort to return to smaller cl asses in the lower grades if at all possible. Even with the increased capacity resulting from larger classes, Sedgwick and Eisenhower can accommodate their current enrollment only because many students living in these two attendance areas are attend oth er schools. Sedgwick has 230 more students, a total of 752 students, living in its attendance area than the 522 that attend the school. Eisenhower has 820 students living in its attendance area; its enrollment is 742 students. The relationship between a school’s enrollment and the count of students residing in the school’s attendance area needs to be explained. The Cupertino District has developed programs that are located in schools with available capacity; CLIP, the Chinese Language Immersion Program, is an example. Many students participating in the program are drawn from attendance areas in the northern/northeastern and central tiers of the district, lessening the pressure on these overcrowded schools. Also, Special Day Class (SDC) programs are loc ated in the southern schools, again drawing some students from the more crowded schools. Finally, there are numerous situations in which students are directed to a school in a nearby attendance area, shifting enrollment south and lessening the pressure on the over -crowded schools. All of these practices have some inherent disadvantage, but it is a much more favorable resolution than either having the northern schools even more crowded or having students forced to attend schools distant from where they liv e. Future enrollment at Sedgwick is projected to peak at slightly about 570 students, even if 230 students residing in its attendance area continue to attend other schools. (This count is based on adding the projected increase in students residing in the attendance area to current enrollment.) This enrollment is significantly in excess of current capacity, even if the district continues K -3 class size reduction at the higher level. Possible options to providing additional capacity are addressed in the s ection entitled “Facility Costs” below. Middle Schools The situation of growing enrollment overwhelming capacity in the local schools is even worse in the middle schools. Enrollment Projection Consultants is expecting an increase of about 600 students be tween now and the fall of 2015. Main Street Cupertino is in the Hyde attendance area, though close to the Lawson attendance area, with the two schools approximately equidistant from the project. Each of these schools already has an enrollment over 1,000 students. They are also affected by the overload at Cupertino Middle. That school has an enrollment of 1,293 students and would have an enrollment of well over 1,400 except for students from its attendance area being assigned to other schools, including about 50 to Hyde Middle. Adding the projected increase in students residing in the Hyde and Lawson attendance areas, these schools are projected to have enrollments above 1,100 students by 2015 and Cupertino Middle is projected to have almost 1,700 studen ts. The current facilities at these Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 10 January 2012 schools are overloaded at their current enrollment. They could not accommodate their future projected enrollment. High Schools The Fremont Union High School District currently has an enrollment of 10,469 attending its five comprehensive high schools. The enrollment capacity of these five schools is 9,850 students; enrollment exceeds capacity by 619 students. Per EPC’s latest report in November 2010, District enrollment is expected to grow, moderately in the next two years and then at a faster rate. The projected increase over the next two years, 2011 to 2013, is about 150 students; the increase in the following two years is projected to be about 400 more students, with strong further increases projected over the rema inder of the decade as the larger classes already in the elementary and middle school grades enter in to the high school. Main Street Cupertino is located only a couple of blocks from Cupertino High School. Cupertino High is calculated to have an enrollm ent capacity of 1,767 students. Its fall 2011 enrollment is 1,893 students , 126 above the capacity. The bigger problem, however, is the forecast that in the fall of 2013 the attendance area will have about 200 more students in its attendance area and by 2015 an additional 200 plus students, bringing its enrollment to more than 500 students above the current capacity of its facilities. _____________________________________________________________________________________Schoolhouse Services 11 January 2012 CAPITAL FACILITIES COST AND REVENUE IMPACTS A school district adding a significant number of students usually needs to incur one -time upfront cost s for capital facilities to house the students. California law provides for development fees, usually paid at the time a building permit is issued, as a source of funding for such expenditures. This section addresses the cos t of accommodating students from Main Street and compares the cost with the development fees the project will generate. Facilities Costs Elementary School Costs The analysis of elementary school capacity above shows that neither Eisenhower Elementary, in whose attendance area the project is located, or Sedgwick Elementary, the school to which the students from the Main Street Cupertino project are likely to be assigned because of a more severe shortage of capacity at Eisenhower, will have capacity availabl e in its present facilities in 2014 when enrollment from the project is first expected to attend. Eighteen elementary students, the projected number of students generated by the project, is not, by itself, a large number of students. If these were the on ly students CUSD needed to accommodate, the crowding effect would be minimal. The problem, however, is the total number of students from all new projects and, even more, the increased enrollment from already existing housing. The district’s preferred opt ion for housing the increased enrollment would be a new school in the northern portion of the district. However, there seems to be no possibility of a new school. The primary reasons are the lack of a suitable site and, if one were available, its astrono mical cost. The assumption made here is therefore that the increased enrollment at Sedgwick will be housed by construction of one or more classroom wings at one or more over -crowded schools, along with improvements in the support facilities to allow the c ampus to function with a significantly larger enrollment than the design of the campus anticipated. It will be a challenge to add additional classrooms on the Eisenhower or Sedgwick campuses. They were designed for smaller enrollments and the sites are o nly 9.8 and 8.8 acres in size respectively. The School Facilities Planning Division of the California Department of Education makes available a “Guide to School Site Analysis and Development” which includes recommendations for size of campus for various e nrollments. The guide recommends 13.1 acres for an elementary school of 750 students without a class size reduction program and 13.8 acres with class size reduction. Accommodating about 750 students on a much smaller campus involves placing classrooms on areas the state guide plans for other uses, such as recreation (6 -7 acres recommended). The assumption used here is that the classroom wings would have two stories to minimize the ground area required and that the enlargement of support facilities woul d also be designed to minimize the compromise with recreational space. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 12 January 2012 The State Allocation Board uses a cost of educational facilities for state 50% funding grants for new school facilities. The current grant amount for elementary students is $9,112 per student, based on a total cost of $18,224 (land costs not included). California law directs the State Allocation Board to review school costs annually, with the next review coming at the Board’s meeting in January 2012. The specific Class B cost of cons truction index that the Board uses to adjust for changes in cost is not available, but an Engineering News Record cost of construction index has increased 3.2% in the 12 months ending in September. It could be expected that the SAB is likely to increase t he grant amount about three percent in January, raising the cost basis to about $18,800, which is used here because the existing cost is almost a year out -of -date. It can be noted that a two -story classroom building would be expected to cost about $300,000 per classroom. (An elevator would be required.) Assuming 24 students per room, the classroom cost is $12,500 per student, two -thirds of the State Allocation Board cost. This figure is likely to be an understatement of the costs the Cupertino Distric t would incur in making such improvements. The State Allocation Board cost is estimated assuming a new school and single story construction. Adding space to an existing campus is usually more expensive. Additional students on the campus require enlargin g of some of the support facilities as well, e.g., the cafeteria and multipurpose rooms. A rough rule of thumb is that about 40% of elementary school costs are for support facilities. In this report the state figure of $18,800 per student is used as the cost of adding capacity to the Sedgwick or Eisenhower campuses. Middle School Costs Main Street Cupertino is located in the Hyde Middle School attendance area and there is no reason to anticipate that its students will not attend that school. As noted ab ove, enrollment is already above capacity and is expected to grow in the next few years. The other middle schools in the northern and northeastern part of the district, Lawson and Cupertino, are also projected to have enrollments substantially in excess o f the capacity of their current facilities. The Cupertino District has plans for expansions at all three middle schools. Plans for the Cupertino campus include a two -story 22 room classroom building. Plans for Lawson include two two -story classroom buil dings, one with 16 rooms and the other with eight rooms. Because of the other support and recreational space improvements included, the total cost of the improvements for both campuses is $50 million. The site plan for Hyde shows a single -story four unit classroom addition; the staff has recognized the need for it to be two stories on the same footprint. Again, these plans have not been formally Board reviewed or funded. All three schools have a problem with limited campus space due to their enrollments being above the level for which they were designed. The “Guide to School Site Analysis and Development” published by the Department of Education has a standard of 20.9 acres for a school of 900 students and 23.1 acres for a school of 1,200 students. Hyd e has a current enrollment of 1,005 students and a site size of 14.0 acres; Cupertino has a current enrollment of 1,293 students and Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 13 January 2012 the size of its campus is 20.4 acres; and Lawson’s enrollment is 1,030 and its campus is 13.4 acres in size. The picture i s even more unsatisfactory, if projected future enrollments are considered. These size constraints are a factor contributing to the relatively high costs of the planned improvements. (It should be noted that the CUSD Board of Education has not reviewed o r adopted plans for construction of any of these improvements.) It seems appropriate to again use the state cost figures to calculate the cost impact of the students from Main Street. The state 50% grant amount as of January 1, 2011 is $9,637; increasin g this amount three percent for the expected January 2012 adjustment for inflation brings the cost to $9,926. The full cost rounded is thus $19,900. High School Costs Fremont District enrollment exceeds capacity district -wide and at the Cupertino camp us, where Main Streets students would attend. The district has already approved two projects that will add capacity to Cupertino High School and has plans for two other, as of yet unapproved and unfunded, projects. The first project is construction of a new cafeteria/library/administration building; construction is planned to begin in January of 2013 and be finished for the start of school in 2014. The cost of construction and all related costs is $18.2 million. The second project is the refurbishment o f the vacated support buildings into 11 classrooms; construction is planned to begin in July 2014 and be finished prior to the start of school in 2015. Its budgeted cost is $3.1 million. One of the other projects is the construction of four or six scienc e classrooms near the existing science building. This project would replace four modular classrooms now located there; it is being planned because of the need for additional science classrooms and would add, at most, the capacity for two classrooms worth of students. The last project, still tentative and in the initial planning phase, is the construction of a classroom wing. The location identified as a possibility for the building would accommodate 10 single story classrooms; it is possible that the 20 classrooms that could be accommodated on the site in a two -story building will be needed. At $300,000 per classroom, the cost of the classrooms would be $3.0 and $6.0 million for the 10 room and 20 room buildings respectively. The total cost of the three projects that result in significant additional capacity, including the 20 room alternative for the classroom wing, is $27.3 million. The state funding programs measure capacity assuming 27 students per classroom. Thirty -one classrooms at 27 students per room is capacity for 837 students. The cost per student for these expenditures is thus $32,600 per student. (The cost is perhaps $42,800 if the 10 room classroom building is assumed.) The cost based on the assumptions in the state grant program became $24,520 as of January 1, 2011; increasing this three percent for the coming January adjustment results in a cost of $25,300. In summary, FUHSD anticipates incurring per student costs for the additional capacity at a cost significantly above that assumed i n the state grant program, reflecting the higher cost of adding capacity at an already developed (and crowded) campus. Given the advantages of the new cafeteria, library, administration building, however, the state figure is used in the calculations here , as it is for the elementary and middle school improvements. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 14 January 2012 Table 5 lists the per student cost and the cost of facilities for Main Street students for each of the grade levels. Table 5 Per Student Cost of Additional Capacity Fremont Union High School D istrict Grade Level Per Student Cost Number of Students Grade Level Cost Elementary School $18,800 18 $338,400 Middle School $19,900 7 $139,300 High School $25,300 7 $177,100 Source: Schoolhouse Services. The Main Street Cupertino Project The impact fee revenue, the source of school capital improvements funding, will depend on the nature of the buildings in the Main Street project. Other documents provide much more information about the buildings than is included in this report. However, the projection of development fee revenues and property tax revenues that will accrue to the two school districts requires that some critical assumptions about the project be included in this report. Table 6 lists the v arious types of development in the project with the assumed square footage of each. The number of apartments, senior units and hotel rooms, the square footage of the retail and office space , and the number of parking stalls comes from the description of t he application before the City of Cupertino. The developer and Schoolhouse staff jointly estimated the sizes of the apartments, senior units and hotel rooms; they should be viewed as estimates, rather than specifications of development, at this stage. Sc hoolhouse prepared the estimates of “Other Space” with input from knowledgeable Silicon Valley/Peninsula developers; they should be considered to be simply reasonable scenarios, as the square footage will depend primarily on decisions the developer will ma ke whether or not to include certain types of space. Table 6 Square Feet of Development Number of Units Square Feet per Unit Square Feet Other Space* Total Square Feet Apartments 120 1,200 144,000 20,000 164,000 Senior Units 143 900 128,700 25,000 15 3,700 Hotel Rooms 180 580 104,400 35,000 139,400 Retail Space 83,200 83,200 Office Space 292,000 292,000 Parking Stalls 1,963 Total 377,100 455,200 832,300 * Includes lobby, administration, fitness, storage, general purpose meeting room , hallways, etc. Source: Schoolhouse Services. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 15 January 2012 As discussed above, the apartments are assumed to be targeted towards adult living; the common areas would likely include rooms such as a fitness center. The senior units are presumed to have dining facilitie s and common room space, but not assisted living facilities. The hotel rooms are quite large. This suggests either an upper end facility or an extended stay facility. The other space estimate includes some meeting rooms, but not extensive meeting/confer ence facilities. Development Impact Fee Revenues Both CUSD and FUHSD are eligible to levy Level 1 development impact fees on new residential development and the majority of commercial/industrial development. California law sets forth maximum fee amount s; both districts have documents justifying their need to levy the maximum amounts, as do most California school districts. The maximum Level 1 residential fee that CUSD and FUHSD together are currently allowed to levy is $2.97 per square foot of developm ent. Fees can usually be levied on non -residential development because of the role of employment in causing a need for residences where employees and their children live. The maximum fee for commercial/industrial (non -residential) development is $0.47 pe r square foot. The preceding section where the costs of additional capacity were addressed noted that the State Allocation Board adjusts grant amounts annually in January for changes in the cost of construction. It does the same for development fee amoun ts, but only biennially. The Class B cost of construction index used by the state board rose 4.3% in 2010; adding about three percent for 2011 projects a seven percent increase in January 2012. This will increase the fees to about $3.18 and $0.50 per squ are foot for residential and commercial/industrial development respectively. Since the existing fees are almost two years out -of -date and will soon be adjusted, the increased fee amounts are used here. FUHSD and its elementary feeder districts have an ag reement as to how fee revenues are to be shared. Per this agreement, CUSD will be allowed to collect up to 60% of the maximum fee amount, projected to be $1.91 per square foot of residential development. FUHSD is allowed to collect 40% of the maximum, pr ojected to be $1.27 per square foot of residential development. The maximum fees on commercial/industrial development are projected to be $0.30 and $0.20 per square foot for CUSD and FUHSD respectively. The maximum fees are scheduled to be adjusted again in January 2014. California Government Code section 65995.1(a) stipulates that residential units for senior housing will be charged only the commercial/industrial rate; the 143 Main Street senior units will be charged $0.50 per square foot, with the reve nue being allocated between the districts according to the agreed upon shares. It can be noted that, since the parking facilities will likely involve few employees, that development fees levied on construction of the parking space will be small. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 16 January 2012 The information about the square footage of the various components of the project shown in Table 6 can be multiplied by the development impact fee amounts to calculate the fee revenue that would be generated by the Main Street project, as shown in Table 7. T able 7 Development Impact Fee Revenue Total Square Feet CUSD Fee CUSD Fee Revenue FUHSD Fee FUHSD Fee Revenue Total Revenue Apartments 164,000 $1.91 $313,000 $1.27 $208,000 $521,000 Senior Units 153,700 $0.30 $46,000 $0.20 $31,000 $77,000 Hotel Rooms 139,400 $0.30 $42,000 $0.20 $28,000 $70,000 Retail Space 83,200 $0.30 $25,000 $0.20 $17,000 $42,000 Office Space 292,000 $0.30 $88,000 $0.20 $58,000 $146,000 Total 832,300 $514,000 $342,000 $856,000 Number of Students 25 7 Revenue per St udent $21,000 $49 ,000 Source: Schoolhouse Services. Comparison of Capital Facilities Costs and Development Impact Fee Revenue Table 8 shows the calculation of the difference between the development impact fees likely to be generated by the Main Street projects given the current project proposal and the Construction Cost Index adjusted facilities costs per student for each of the districts. The table shows a modest positive capital cost impact for CUSD and a significantly more sizable positive im pact for FUHSD. If the number of students used were from a decade or more later when the enrollment will be more balanced among the age levels, the cost impact would be more equal among the districts. The positive impacts reflect the preponderance of non -residential components in the Main Street Cupertino project. Table 8 Development Impact Fees Versus Facilities Costs* Fee Revenue Per Student Facilities Cost Per Student Per Student Cost Difference Students Total Facilities Cost Impact CUSD - elem $2 1,000 $18,80 0 $2,200 18 $39,600 CUSD - middle $21,000 $19,900 $1,100 7 $7,700 CUSD - total 25 $47,840 FUHSD $49,000 $25,300 $23,700 7 $165,900 * Both fee revenue and facilities costs are one -time, rather than annual, esti mates. Source: Schoolhouse Services. _____________________________________________________________________________________Schoolhouse Services 17 January 2012 OPERATING REVENUE AND COST IMPACTS Operating Costs Almost all operating costs tend to increase with enrollment if educational standards are to be maintained. Operating costs are annual costs and are match ed with revenues received annually. These costs include personnel costs like salaries and benefits for certificated and classified employees, which generally comprise a large majority of a district’s budget. Therefore, the cost per student estimate is si mply a calculation of the operating expenditures divided by the number of students, as shown in Table 9. Table 9 Operating Costs Operating Budget Number of Students Per Student Cost CUSD $136,474,000 18,645 $7,320 FUHSD $100,843,000 10,346 $9,747 Source s : CUSD and FUHSD 2011 -12 budgets and Schoolhouse Services. Operating Revenues The Main Street Cupertino project will affect the revenues and costs for the two districts in very different ways . CUSD is a “revenue limit” district. L ike other revenue limited districts in the state, its property tax revenues are not sufficient to reach the per student amounts guaranteed under the State of California school funding program. Therefore, the state supplies the additional funds necessary t o fill the gap up to the guaranteed level. The result is that the revenues from property taxes plus the revenue limit program increases proportionately as enrollment increases. Another reality for a revenue limit district is that the increase in property tax revenue from new homes is offset by a comparable reduction in the money from the state; thus higher property taxes do not affect the total of property tax and state revenue limit funding. The “revenue limit” total in CUSD’s 2010 -2011 budget is $87.75 million or $4,706 per student. (The “revenue limit” total five years ago was almost exactly the same; because of the smaller enrollment at that time, the amount per student was $5,300.) The 2011 -2012 state budget is subject to a mid -year adjustment if revenues are lower than assumed in its budget and at least some of the adjustment will take place. However, CUSD’s budget assumes that an adjustment of this magnitude would be necessary. Further reductions are scheduled for the next two years. The annu al reduction is projected at $4.6 million, but only if the measure to increase taxes is passed; if not, the reduction is projected to be $11.4 million. Governments also supply other funding, generally for categorical programs, and these also tend to incr ease as enrollment increases. The operating revenues from these sources total $32.20 million, or $1,727 per student for CUSD for the 2011 -2012 fiscal year. Thus, the revenue impact Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 18 January 2012 coming from sources that will increase approximately proportionate to the addition of new students resulting from the Main Street project is $6,433 per student. Local revenues to CUSD (other than the property taxes) constitute a far smaller source of funds; primarily parcel tax revenues, they total $9.34 million or $501 per student. Parcel taxes flow from two measures approved by the voters. However, there will not be a large number of parcels in the project so its contribution to parcel tax revenue will be negligible. In sum, these local revenues are not likely to increas e with additional enrollment or as a result of the project. FUHSD is one of the relatively few districts in the state that is not a revenue limit district. The District’s per student property tax is moderately above the amount of per student revenue lim it funding guaranteed by the state. Because there is no state supplement to property tax revenues, state revenue does not increase when additional students are enrolled. However, new development generates additional property taxes, increasing the Distric t’s revenues. The property tax revenues will be equal to the District’s share of the property tax rate times the fair market value established by the Santa Clara County Assessor at the time each building is completed. Table 10 shows the calculation of the assumed assessed valuation for the Main Street project as proposed. The assessed values are calculated based on per unit or per square foot market values estimated by Schoolhouse with input from experienced developers. Table 10 Assessed Value Numbe r of Units Square Feet Assessed Value per Unit/Foot Assessed Value Apartments 120 $400,000 $48,000,000 Senior Units 143 $250,000 $35,750,000 Hotel Rooms 180 $200,000 $36,000,000 Retail Space 83,200 $450 $37,440,000 Office Space 292,000 $400 $116,800,000 Total $273,990,000 Assumes assessed value of parking facilities is included with that of the buildings. Source: Schoolhouse Services. The district’s share of the base one percent property in the 13 -003 tax cod e area in which the project is located is 16.71% of the total one percent base tax rate. The property tax generated by the total Main Street Cupertino complex is estimated to be $458,000; if seven high school students reside in the 120 apartments, this am ounts to $65,000 for per student. It should be understood that this large number reflects the fact that residential development is a relatively small part of the total Main street development. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 19 January 2012 Table 11 Property Tax Assessed Valuation Estimated Asses sed Valuation $273,990,000 Property Tax at 1.0% Tax Rate $2,740,000 FUHSD Share of Tax Rate (16.71%) $458,000 FUHSD Share of Tax Rate per FUHSD Student $65 ,000 Source s : Santa Clara County Tax Collector, Co ntroller, and Schoolhouse Services. The voters of b oth CUSD and FUHSD have approved bond issues for campus improvements. Debt service on the bond issues is spread among property tax payers proportional to assessed value. The current tax rate for CUSD is 0.000290 per dollar of assessed value; the revenue thus paid by Main Street property owners for debt service on CUSD bonds is projected to be $79,000. Similarly, the current tax rate for the Fremont District is 0.000415 per dollar of assessed value an d the revenue paid for debt service on the district’s bonds is projected to be $114,000. It should be understood, however, that these revenues do not increase the funds available to the two districts. The bond issues and associated debt service are fixed amounts. The assessed value of new development increases the total assessed value, spreading the debt service among a larger tax base; it does not increase the revenue to the districts. It does decrease by almost $200,000 annually the amount other tax -p ayers in the districts have to pay. Voters in the Fremont Union High School District, like voters in the Cupertino Union School District, have approved a parcel tax. The tax is $98 per parcel and generates about $5.2 million per year, but again the small number of parcels involved will make parcel tax revenue from the project negligible. Other government support to the FUHSD totals $4.7 million, or $455 per student. As with the CUSD, local revenues (other than the property and parcel tax revenues) con stitute a far smaller source of funds and are not likely to increase with additional enrollment. Thus, the per student revenue impact is calculated to be the $6,928 per student received from property taxes plus the $455 per student in other government sup port. Table 12 shows the calculation of the operational revenue anticipated for additional students as a result of the Main Street project. The large Fremont District revenues reflect the substantial property taxes, the majority from the non -residential components of the project. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 20 January 2012 Table 12 Operational Costs Versus Operational Revenues* CUSD FUHSD Projected Enrollment Students 25 7 Per Student Revenues State Revenue Limit Funding $4,706 Other State and Federal Funding $1,727 $45 5 FUHSD Share of Property Tax $65,000 Total per Student Revenues $6,433 $65,455 Total Operational Revenues $160,823 $458,186 Per Student Costs Average Cost per Student $7,320 $9,747 Total Operation Costs $183,000 $68,229 Net Fiscal Impact Per Student Impact ($887) $55,708 Total Impact ($22,177) $389,957 * All costs and revenues shown are annual costs and revenues. Source s: Revenues and costs from the CUSD and FUHSD 20 11 -2012 budgets , Schoolhouse Services . Comparison of Operating Costs and Revenues Table 12 also shows the operational costs anticipated for both districts as a result of the Main Street project, which allows for a comparison with t he revenues resulting from the project. There is a net fiscal deficit of $887 per student for CUSD as a result of the additional students from the Main Street project. This reflects the assumption that state and federal revenues will increase along with the increased enrollment, but revenues from the parcel tax will not. On the cost side, the current operational cost assumption of $7,320 per student is an average cost per pupil for all expenditures. The total deficit is estimated at $22,177. At the est imated assessed valuation of the project, there is a net fiscal surplus of $55,708 per student for FUHSD. After providing services to an additional seven students as a result of the Main Street project, the surplus is projected to be almost $400,000, a su bstantial amount. _____________________________________________________________________________________Schoolhouse Services 21 January 2012 SUMMARY The projected enrollment and fiscal impacts resulting from the development of 120 rental housing units (Main Street Cupertino) have been analyzed. These impacts were analyzed using current financial information for both distri cts and current enrollment information for the affected schools, specifically, Sedgwick Elementary, Hyde Middle, and Cupertino High. All of the dollar amounts in the report should be considered approximations rather than precise amounts. Below is a sum mary of the significant findings contained in this report.  The demand for housing in the CUSD and in the Cupertino High attendance area is very high, to a large extent because of the quality of the schools. The Main Street Cupertino apartments are likel y to have total SGRs between 0.21 and 0.44 students per household depending primarily on whether the size and design of the units allows them to be used as two -bedroom units. SGRs used for the analysis here are 0.21 for CUSD, and 0.06 for FUHSD, a total S GR of 0.27.  Based on the SGRs, an enrollment impact of 32 total students is estimated as a result of the Main Street project: 18 students at Sedgwick Elementary; seven students in the Hyde Middle attendance area, and seven students in the Cupertino High a ttendance area.  The enrollment impacts analyzed in this report describe the expected impact within three to ten years of the Main Street housing completion. The number of students after a couple of decades is unlikely to be higher than the number proje cted in this report; they are likely to be distributed more equally across the grades.  The number of students from the Main Street project is very small; they are not a problem in themselves. The problem is additional students from all new projects and, even more, an increasing number of students from existing homes.  The principal problem at the elementary level is the distribution of students in the District, with schools increasingly overloaded with students in the northern portion of the District and gradually emerging capacity in the southern portion. Hyde Middle School and Cupertino High are already loaded beyond capacity and badly need additional capacity to accommodate future enrollment. Improvements to provide this capacity have been planned, b ut additional funding is needed. Some bond financing is designated for improvements at Cupertino High, but some more will probably eventually be needed. No funding has been designated for improvements at Sedgwick Elementary or Hyde Middle.  For both dist ricts one -time development fee revenue from the Main Street Cupertino project is anticipated to exceed the share of facilities costs attributable to the project. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 22 January 2012 Using costs based on the state grant program, the surplus at CUSD is a little less than $2,0 00 per student, while FUHSD has a projected surplus of over $20,000 per student. The total CUSD surplus is projected at $47,800 while FUHSD enjoys a projected total surplus of $165,900.  The share of CUSD annual operational costs attributable to the Main S treet project are anticipated to exceed operational revenue from the project by a small amount, $887 per student. In contrast, FUHSD operational revenues from the project will exceed operational costs attributable to the project by a large amount, about $55,000 per student. Operational costs are projected to result a deficit of about $22,000 for CUSD, and possibly a surplus of about $400,000 for FUHSD. _____________________________________________________________________________________Schoolhouse Services 23 January 2012 SUPPLEMENT An alternative to the project as analyzed above is now under consideration in the planning process. Copies of Tables 7, 8, 11 and 12 reflecting the components of the alternative project are shown here with the table number followed by “alt”. The components of the alternative project are as follows: 120 market rate apartments (same as in the project as analyzed), no senior housing (compared with 143 units of senior housing as analyzed), 292,000 square feet of office space (unchanged), a 180 room hotel (unchanged), 78,700 square feet of retail (a small decrease from 83,200 square feet), and an athletic club (not incl uded in the project as analyzed; or could instead be another 60,000 square feet of retail). Including the senior units rather than the apartments in the project is also a possibility, but that modification is not shown here. The athletic clu b is treated here as having the same floor area and assessed value as 60,000 square feet of retail. Table 7 - alt Development Impact Fee Revenue Total Square Feet CUSD Fee CUSD Fee Revenue FUHSD Fee FUHSD Fee Revenue Total Revenue Apartments 164,0 00 $1.91 $313,000 $1.27 $208,000 $521,000 Senior Units 0 $0.30 $0 $0.20 $0 $0 Hotel Rooms 139,400 $0.30 $42,000 $0.20 $28,000 $70,000 Retail Space 78,800 $0.30 $24,000 $0.20 $16,000 $40,000 Additional Retail 60,000 $0.30 $18,000 $0.20 $12,000 $30,000 Office Space 292,000 $0.30 $88,000 $0.20 $58,000 $146,000 Total 734,200 $485,000 $322,000 $807,000 Number of Students 25 7 Revenue per Student $19,000 $46,000 Source: Schoolhouse Services. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 24 January 2012 Table 8 - alt Development Impact Fee s Versus Facilities Costs* Fee Revenue Per Student Facilities Cost Per Student Per Student Cost Difference Students Total Facilities Cost Impact CUSD - elem $19,000 $18,800 $200 18 $3,600 CUSD - middle $19,000 $19,900 ($900) 7 ($6,300) CUSD - total 25 ($2,700) FUHSD $46,000 $25,300 $20,700 7 $144,900 * Both fee revenue and facilities costs are one -time, rather than annual, estimates. Source: Schoolhouse Services. Table 11 - alt Property Tax Assessed Valua tion Estimated Assessed Valuation $263,260,000 Property Tax at 1.0% Tax Rate $2,633,000 FUHSD Share of Tax Rate (16.71%) $440,000 FUHSD Share of Tax Rate per FUHSD Student $63,000 Source s : Santa Clara Cou nty Tax Collector, Controller, and Schoolhouse Services. The apartments were the only component generating students; since they are unchanged in the alternative the enrollment impacts are unchanged. This means that one -time facility costs and annual o perating costs are unchanged for both districts. Because the net increase in retail space (including the athletic club if it is part of the project) is less than the square feet lost from not including the senior units, fee revenue is lowered by about six percent , as shown in Table 7 - alt . This brings the impact on the elementary district to an insignificant level and lowers the surplus to the high school district about 13% to about $145,000 ; the calculations are in Table 8 - alt . The substitution of more retail for the senior units reduces the property tax income to FUHSD by about three percent, lowering the district’s surplus about four percent to $376,000 , as shown in Table s 11 – alt and 12 - alt . CUSD is not impacted by changes in the property tax. Main Street Cupertino Enrollment and Fiscal Impact Analysis _____________________________________________________________________________________Schoolhouse Services 25 January 2012 Table 12 - alt Operational Costs Versus Operational Revenues* CUSD FUHSD Projected Enrollmen t Students 25 7 Per Student Revenues State Revenue Limit Funding $4,706 Other State and Federal Funding $1,727 $455 FUHSD Share of Property Tax $63,000 Total per Student Revenues $6,433 $63,455 Total Operational Revenues $16 0,823 $444,186 Per Student Costs Average Cost per Student $7,320 $9,747 Total Operation Costs $183,000 $68,229 Net Fiscal Impact Per Student Impact ($887) $53,708 Total Impact ($22,177) $375,957 * All co sts and revenues shown are annual costs and revenues. Source s: Revenues and costs from the CUSD and FUHSD 2011 -2012 budgets , Schoolhouse Services .