The East Side Union High School District in San Jose is banking on a proposed teacher housing project to make staff rent more affordable and to solve the district’s fiscal crisis.
The school board unanimously voted last week to put a $60 million general obligation bond on the March 3 ballot to pay for a 100-unit apartment complex for teachers and staff. It will be built on 4.5 acres of district property at 830 N. Capitol Avenue, adjacent to the district’s main office.
District officials have not officially decided many details of the project, but rents will be about 70 percent of what other apartments in the area cost. Staff will be allowed to stay in their apartments for between five and seven years, said Superintendent Chris D. Funk.
The high cost of housing in the San Jose area is making it difficult for the district to attract and retain teachers, Funk said. While most teachers stay with the district after they hit the seven-year mark, it is more difficult to keep the newer teachers, he said. New teachers generally are paid less and have to live with roommates or commute long distances to afford housing.
“We are trying to find a way to alleviate the stress of paying for student loans while living in a high-cost area, or being able to save for a down payment (on a house),” Funk said.
Because taxpayers will pay the principal and interest on the bond, the district will be able to use revenue from rents to prop up its general fund. The apartment complex will earn about $1.1 million in revenue after expenses each of the first seven years and about $3 million annually after that, Funk said.
This income can help the district — which has lost state funds because of declining student enrollment — through a fiscal crisis that is expected to result in layoffs, Funk said. The 2019-20 district budget projects deficit spending of approximately $18 million and says the district will have to lay off at least 222 full-time positions, including 151 of its 1,159 teachers, beginning in 2020-21 to meet the state requirement to hold 3 percent of the district’s funds in reserve.
In the future, Funk would like to see the apartment complex’s revenues used to help teachers pay for down payments on houses.
The bond would cost homeowners about $2.70 per $100,000 of assessed value of their property annually, or $13.50 for a property valued at $500,000.
East Side Union High School District officials have been discussing building teacher housing for four years, Funk said.
“We’ve been looking for the best financial model that generates funds for the general fund,” he said. “Housing is a big topic and generally the public favors it.”
School districts in the most expensive regions of California, including the Bay Area, have been struggling to pay salaries that keep pace with the high cost of living. An EdSource analysis found that the highest paid teachers in 47 school districts in the Bay Area only earned enough to rent an affordable one-bedroom apartment, using the federal definition of affordable housing as 30 percent or less of household income.
Based on an analysis of 2017-18 teacher salaries and rents by Ed Source, a beginning teacher in the East Side Union High School District, making $55,349, would have to use 54.7 percent of his or her salary to pay for a two-bedroom apartment. The average teacher in the district, making $88,797, would have to spend 34 percent of his or her salary for a two-bedroom apartment.
The East Side Union complex also will house classified employees, like custodians, food service and office staff. These employees are the hardest to find and are paid the least, Funk said. The superintendent said the average classified worker in the school district currently makes $54,000.
Initially, apartments will be allocated based on the percentage of people working in each job classification in the district — 72 percent to teachers, 22 percent to classified employees and 6 percent to managers, Funk said. That can change depending on need, he said.
The general obligation bond requires 55 percent voter approval. The district has passed $1.5 billion in bonds since 1991, usually with about 71 percent voter approval, Funk said.
“Our community sees we have done an amazing job transforming our schools,” he said. “We’ve had clear audits every year, so they know we are using the funds wisely. I think we have been good stewards of the public funds.”
East Side Union will follow in the footsteps of the Jefferson Union High School District in Daly City, which passed a $33 million general obligation bond last year to help build affordable apartments for teachers and staff.
It was also a week behind the Patterson Joint Unified School District, which voted Oct. 7 to put a general obligation bond of up to $32.5 million on the ballot on March 3 to pay for the construction of affordable employee housing on district property. The district estimates that the tax could be as high as $40 per $100,00 of assessed value annually.
The bond is necessary in order to maintain the district’s competitive hiring and to retain quality teachers and staff members, according to the board resolution.
Dale Scott and Company, a San Francisco financial advising firm specializing in schools, has advised Jefferson High, East Side Union High and Patterson Joint Union school districts on their general obligation bonds. He said other California school districts are considering financing employee housing with bonds.
“When we looked at the potential in Jefferson we assumed wrongly that this was a Bay Area problem, because of the high cost of Silicon Valley and the San Francisco Bay Area, but what I discovered is that it is a statewide problem,” said Dale Scott, president of the company.
In some regions of California school districts need affordable housing for school employees, while in other regions, like Patterson, there is a lack of available housing, he said.
Passing bond measure to fund employee housing has become a way for districts to ensure they have a stable workforce, Scott said.