Oakland Unified lacks funds to pay for all capital projects so board halts some

August 23, 2018

Oakland Unified Superintendent Kyla Johnson-Trammell, in white hard hat, visits the district's new central kitchen construction site. The project is $18 million over budget and will require the district to make cuts in other planned projects to complete it.

Already reeling from looming layoffs to close its budget deficit, the Oakland Unified school board decided to halt some construction projects underway because the district can’t afford to complete them.

In a 4-3 vote Wednesday, the board agreed to abruptly stop construction planning on nine projects and divert about $74.5 million from those projects to 40 others already underway. In addition, the board agreed to dip into other capital funds to help pay for those projects.

These projects were funded through the district’s $475 million Measure J school facilities improvement bond approved by city voters in 2012.

Halted projects include school classrooms, labs, kitchens, playgrounds, security cameras and the construction of a $43 million district administration building.

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The move was prompted after the board learned that the projects needed an extra $160 million to cover cost overruns. That’s on top of the $475 million originally borrowed for all of the projects. The overruns were caused by delays, rising construction costs, expanded project scopes and the addition of new projects, said Timothy White, deputy chief of facilities planning and management.

“It’s a Titanic and iceberg meeting,” he said. “ I fear that we are in a crash and burn situation. If we don’t make a decision, money’s being spent on things we know we cannot complete.”

Theresa Harrington/EdSource Today

Oakland school board meets Aug. 22, 2018 to vote on construction spending plan revisions.

Superintendent Kyla Johnson-Trammell said the shortfall with the construction projects is part of the district’s overall budget crisis.

The district faces a budget deficit next year when its spending will overwhelmingly exceed its revenues. The district is gearing up for massive layoffs in 2019-20.

Oakland Unified is still digging its way out of state receivership imposed on it 15 years ago. Despite getting a major infusion of state funds in recent years intended to help educate low-income and other high-needs children through the Local Control Funding Formula, the district has had trouble controlling spending and has been criticized for budget mismanagement by independent and county officials.

It must cut $30 million in ongoing costs next year to avoid a structural deficit .

“What we’re seeing with our capital program is just a microcosm of what we’re seeing with our finances, period,” said Johnson-Trammell, adding that the district is putting policies in place to be more transparent, prioritize fiscal vitality “and [make] better decisions.” She said that the district should explore other options for generating revenues.

“We’re seeing the capital program is in crisis and there are some things we’re going to have to do to get it back to being healthy,” she said.

The new construction spending plan optimistically anticipates that the projects halted could be completed in the future if the district is able to pass another construction bond by 2020. But some board members said they feared they might be losing the trust of voters because projects promised last time will not be built. And this latest fiscal crisis just adds to the district’s already serious financial troubles.

“This is one of many difficult decisions that this board has to make to regain our fiscal vitality,” said board member Jody London, who headed up the facilities committee that recommended that the board take action. 

Board member James Harris, who voted against the plan, said he was “extremely disappointed” about taking money away from improvements planned at Brookfield Elementary in one of the district’s poorest communities. The funds were intended to help mitigate smog and other problems associated with its close proximity to Interstate 880. Brookfield was the only campus the district has designated as an “intensive support school” on the list, he said.

“That school has had all kinds of trouble recruiting and advancing academic gains, and here’s another resource that is now taken away,” he said. “I am quite upset that this is on the list. These students will have to wait first on whether this city trusts us enough to pass another bond and another four years before they could even break ground. That is not intensive support.”

Courtesy of Oakland Unified School District

Oakland Unified school board member Jumoke Hinton Hodge, second from right, and others sign the last beam to be installed in the district’s new Central Kitchen, which is being funded through Measure J, approved by voters in 2012.

Board member Jumoke Hinton Hodge, who also voted against the spending plan, said she was upset about the cuts because she had advocated about four years ago that the district seek a new bond measure, but the rest of the board did not support her. 

“I’m in an ‘I told you so’ mode,” she said. “It was shortsightedness of leadership. We could have been working on a bond that would have covered this deficit. Instead, we are going to be pushing projects to 2021-22. It’s going to be painstaking.”

She was especially concerned about halting plans for a Marcus Foster Education Leadership Complex, planned to house district staff in a facility named for the district’s first superintendent.

“OUSD employees deserve a clean, high quality, beautiful place to work at on behalf of the students and families of Oakland,” she said, adding that the district’s central administration building would have “ancestral” significance because it would be located in “the place where Marcus Foster, our first African-American superintendent, was assassinated.”

“Us building those structures to support those people and work is really, really important,” Hinton Hodge said.

The district should also explore other options for raising money to complete the projects, such as pursuing public-private partnerships and leasing surplus property, she said.

London said the board would hold a Sept. 8 retreat to discuss future facilities plans, including options for raising revenues.

The district leases space at 1000 Broadway for its central office staff, which many residents have criticized, said board member Shanthi Gonzales. When she asked where employees would be located, White said about $10 million has been earmarked for upgrading other sites to house the people currently located in the Broadway building, adding that the district is in “a really thorny” financial “crisis.”

Board member Roseann Torres pointed out that Oakland is not the only district in the state that needs more money for construction. She also said the district should explore other options for raising money for projects.

. said each of the board members has seen projects promised to their districts drop off the construction list over the past six years.

“I know our list for the next bond is growing,” she said, adding that she is committed to building the administration building in the future. “I want to make sure we’re continuing to rebuild trust. It’s a very painful process.”

District resident Mike Hutchinson, who is a graduate of Oakland schools and ran unsuccessfully for school board two years ago, blasted the board for deviating from the original list of projects promised to voters in 2014.

“Please, can we come up with a plan and do what we promised the community we would do?” he said. “This mismanagement has cost us money and cost us functioning, quality schools.”

Several board members also expressed concerns about halting a new wing promised to the Dewey Academy continuation school, which was included in the funding for the educational leadership center to be located on the same site.

The projects delayed include:

Projects going forward that are over-budget or recently added include:

In addition, the district is adding $17.9 million to its program coordination budget, which includes costs for construction management, and $7.5 million for program contingencies, which are set-aside funds to cover potential unanticipated costs.

Editor’s Note: As a special project, EdSource is tracking developments this year in the Oakland Unified and West Contra Costa Unified School Districts as a way to illustrate some of the most urgent challenges facing many urban districts in California. West Contra Costa Unified includes Richmond, El Cerrito and several other East Bay communities. 

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