Checklist for Sale or Lease ofSchool District Surplus Property

(Revised February 2016)

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The following is an executivesummary of the process andstatutory time requirementsthroughout the process; a moredetailed discussion follows.

Summary

• First identify the surplus real property and convene acommittee to develop a District wide policy on the use ofsurplus real property. (Ed. Code §§ 17387, et seq.)

• Declare intent to sell or lease the property to generalpublic: To place the property on the market, the Boardmust consider the committee’s recommendation that theproperty be declared surplus and declare its intent todispose of the property in a resolution. (Ed. Code § 17466.)

• Offer to sell or lease real property to any charter schoolthat has submitted a written request to the school districtto be notified of surplus property offered for sale or leaseby the school district and that meets certain other criteria.The District must allow such charter schools sixty days torespond to the offer. (Ed. Code §§ 17457.5 and 17464(a) (aschool district selling or leasing surplus property is onlyrequired to offer that property to a charter school untilJune 30, 2016).)

• Offers required by the Naylor Act (Ed. Code § 17485, etseq.): The Naylor Act only applies to real property that hasbeen used entirely or partially for school playgrounds,playing fields, or other outdoor recreational uses and open-space land particularly suited for recreational purposes. Ifthe Naylor Act does apply, the District must offer tonegotiate to sell or lease the property to certain entities,usually for a below-market rate. The District may seek awaiver of the Naylor Act. (Ed. Code § 33050.) The Districtmust allow Naylor Act entities sixty days to respond to theoffer. (Ed. Code § 17489(c).)

• Selling or leasing with option to purchase (Ed. Code § 17464and Gov. Code § 54220):

• The property must be offered to a first group ofdesignated entities for park and recreationalpurposes pursuant to Government Code sections54220, et seq. (Ed. Code § 17464(b).) These entitiesmust be allowed sixty days after receiving notice torespond and are also entitled to a negotiationperiod of ninety days after giving notice to theDistrict of their interest in the property. This

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requirement cannot be waived.

• The property must be offered to a second group ofdesignated public entities. This group must also benotified that it has sixty days to make offers, but isnot entitled to an additional negotiation period.

• Lease (with no option to purchase): No additional notices,beyond the requisite offers to charter schools and NaylorAct entities, are expressly required. The District mayproceed to lease the property to the highest responsiblebidder pursuant to Education Code sections 17466, et seq.(Note: More conservatively, and in recognition of limitedlegal precedent, the additional notices may still be sent.)

• Leasing vacant classrooms (Ed. Code § 17465): The Districtmust offer the classrooms to other school districts in theDistrict’s SELPA or the County Office of Education (“COE”)for use for special education programs. The school districtsor the County Office of Education are entitled to anegotiation period of sixty days from receipt of the offer.

• All property sales (Govt. Code § 65402(c)): The Districtmust notify the local city or county planning agency, if suchcity or county has adopted a general plan which affects orincludes the area where the property is located.

• Competitive bidding (Ed. Code §§ 17466, et seq.): TheDistrict may ultimately sell or lease the property to thehighest responsible bidder. Bids may not be opened until atleast three weeks after the Board adopts its resolution ofintent to sell or lease the property. Districts may seekwaivers of the competitive bidding process from the StateBoard of Education; in recent years, waivers from thebidding process have been granted, but districts have stillbeen required to provide mandatory notices and engage incertain public procedures.

• The Education Code also contains a provision indicating thatfailure to comply with the Education Code’s surplusproperty provisions will not invalidate a conveyance ofproperty that has already occurred. (Ed. Code § 17483.)

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I. Determination of SurplusStatus

Detailed Checklist

q The District may wish to adopt an initial resolution tocommence the process of whether to declare Districtproperty as surplus, but no such resolution is required.

q The School Board must appoint a committee of betweenseven and eleven members (“7-11 Committee”, or “AdvisoryCommittee”), who are representative of each of the following(Ed. Code § 17388-17389):

o The ethnic, age group, and socioeconomiccomposition of the District.

o The business community, such as store owners,managers, or supervisors.

o Landowners or renters, with preference to be given torepresentatives of neighborhood associations.

o Teachers.

o Administrators.

o Parents of Students.

o Persons with expertise in environmental impact, legalcontracts, building codes, and land use planning,including, but not limited to, knowledge of the zoningand other land use restrictions of the cities andcounties in which surplus space and real property islocated.

q The 7-11 Committee must do all of the following (Ed. Code§ 17390):

o Review the projected school enrollment and otherdata provided by the District to determine the amountof surplus real property.

o Establish a priority list of use of surplus space and realproperty that will be acceptable to the community.

o Cause to have circulated throughout the attendancearea a priority list of surplus space and real propertyand provide for hearings of community input to thecommunity on acceptable uses of space and real

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II. Consider Physical andPolitical Aspects of Site

property, including the sale or lease of surplus realproperty for child care development purposes.

o Make a final determination of limits of tolerance ofuse of space and real property.

o Forward to the Board a report recommending uses ofsurplus space and real property.

o The 7-11 Committee’s recommendation is advisoryonly, and need not be implemented by the Board.

q Optional: Clarify Site’s Physical Development Constraints,both for the District’s purposes and for the information ofprospective buyers and developers.

o Ensure title is free and clear of tax lien liabilities,restrictive covenants, conditions and restrictions,restrictive easements, and any additional constraints.

o Obtain a boundary/survey map to verify acreage andland area and a legal description.

o Determine current zoning and general planrestrictions on the property as well as the likelihoodand time line for changes to a more favorabledesignation. This review should also reveal otherrestrictions and costs such as Coastal Commissionapproval, Corps of Engineers approval, availability ofwater and sewer connections, off-site costs such astraffic mitigation, park dedication fees, fees forspecial districts, etc.

o Obtain a soils or geological study, if potentialproblems are identified (e.g. liquefaction risks, slopeproblems, etc.).

o Consider having the site inspected to determinewhether it contains any toxic or hazardousmaterials.

o Obtain an asbestos study and removal cost estimatefor existing buildings.

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III. Board Action DeclaringProperty Surplus

IV. Required Offers

A. Offers to InterestedCharter Schools

q Optional: Clarify Political and Policy Issues.

o Although an appraisal is not required, it is often wiseto obtain at least one appraisal to obtain minimumand target values, whether the district elects toshare the appraisal or keep it confidential.

o Meet with key political players in City or Countyhaving jurisdiction to ensure that highest and bestuse recommendations have potential for obtainingdevelopment approvals.

o If possible, obtain information from City or Countywhich outlines its approval process (e.g., allowabledensities and land uses, fees, exactions).

o Meet with key homeowners’ associations andcommunity leaders concerning recommendeddevelopment plan.

q Optional: The Board may wish expressly to declare certainproperty surplus. This is an action preliminary to the laterresolution of intent to lease or sell the property, and can beused to trigger the offer of the property to other publicagencies. To do so, the Board can adopt a resolution takingeach of the following actions:

o Consider the 7-11 Committee’s recommendations.(Ed. Code § 17388.)

o Describe the property to be declared surplus.

o Declare the property surplus.

o Authorize offers to other public agencies.

q At least until June 30, 2016, the governing board of a schooldistrict seeking to sell or lease surplus real propertydesigned to provide direct instruction or instructionalsupport must first offer that property for sale or lease toany charter school that (1) has submitted a written requestto the school district to be notified of surplus propertyoffered for sale or lease by the school district, and (2) hasprojections at the time of the offer of at least 80 in-district

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students for the following fiscal year. The offer must bemade pursuant to the following conditions:

o The charter school must use the real propertyexclusively to provide direct instruction orinstructional support. (Ed. Code§ 17457.5(a)(1).)

o If the charter school is interested in purchasing orleasing the property, it must so notify the Districtwithin 60 days of the District’s written solicitation.If more than one charter school notifies the Districtof its intent to purchase or lease the property, theDistrict may determine to which charter school itwill sell or lease. (Ed. Code § 17457.5(b).)

o The price at which the property is sold to aninterested charter cannot exceed the District’s costof acquisition, adjusted by increases or decreases inthe cost of living, plus the cost of any schoolfacilities construction undertaken by the District,adjusted by the statewide cost index for class Bconstruction as annually determined by the StateAllocation Board, from the year the improvement iscompleted to the year in which the sale is made. If astatewide cost index is not available, the schooldistrict must use a factor equal to the averagestatewide cost index for class B construction for thepreceding 10 years. In no event can the price be lessthan 25 percent of the fair market value of theproperty or less than the amount necessary to retirethe share of local bonded indebtedness plus theamount of the original cost of the approved stateaid applications on the property. (Ed. Code§ 17457.5(c).)

o Land that is leased to an interested charter must beleased at an annual rate of not more than fivepercent of the maximum sales price allowable underthe above provision, adjusted annually by increasesor decreases in the cost of living. (Ed. Code§ 17457.5(d).)

o Offers to interested charter schools are onlyrequired for real property identified by a schooldistrict as surplus property after July 1, 2012. (Ed.

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B. Offers Required by theNaylor Act

Code § 17457.5(f).) From the statutory language, itis not clear what constitutes “identifying” propertyas surplus for purposes of this requirement.

o A school district selling or leasing surplus property isonly required to offer that property to a charterschool until June 30, 2016. (Ed. Code § 17457.5(f).)

q Determine whether the Naylor Act (Ed. Code §§ 17485, etseq.) applies. The Naylor Act applies when all of thefollowing conditions are present (Ed. Code § 17486):

o All or a portion of the property is used for schoolplayground, playing field, or other outdoorrecreational purposes and open-space landparticularly suited for recreational purposes.

o The land has been used for such purposes for atleast eight years immediately preceding the Board’sdecision to sell or lease the property.

o No other available publicly owned land in thevicinity is adequate to meet the existing andforeseeable needs of the community for playground,playing field, or other outdoor recreational andopen-space purposes, as determined by thegoverning body of the agency which proposes topurchase or lease land from the District.

q The District may exempt two surplus properties from theNaylor Act for each planned school site acquisition if theDistrict has an immediate need for an additional school siteand is actively seeking to acquire an additional site, andmay exempt one surplus property from the Naylor Act if theDistrict is seeking immediate expansion if the classroomcapacity of an existing school by 50% or more. (Ed. Code§ 17497.)

q No more than 30% of the total surplus school acreage(inclusive of both developed and undeveloped property)owned by a school district may be purchased or leased bypublic agencies through the Naylor Act. (Ed. Code§ 17499(a).)

q If the Naylor Act applies and the property is not exempted,

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the District must first make a written offer to sell or leasethe property to the following agencies for use as outdoorrecreational space, in order of priority (Ed. Code § 17489):

o First, to any city within which the land is situated.

o Second, to any park or recreation district withinwhich the land is situated.

o Third, to any regional park authority havingjurisdiction within the area in which the land issituated.

o Fourth, to any county within which the land issituated.

q If any of the above entities wishes to purchase or lease theproperty, the entity must notify the District in writing within60 days after receiving written notification from the Districtof its offer to sell or lease the property. (Ed. Code § 17489.)

q In the event the Naylor Act applies, the District may seek awaiver of Naylor Act requirements from the CaliforniaDepartment of Education. (Ed. Code § 33050.) To request awaiver, the District must do the following:

o Enable the employees’ unions to participate in thedevelopment of the waiver. (Ed. Code § 33050 (d).)

o Hold a public hearing on the issue. (Ed. Code§ 33050 (a).)

o Submit an application to the State Board ofEducation.

o The State Board of Education must provide 30 dayswritten notice of the hearing on the waiver to eachpublic agency to which an offer of sale or lease mustbe made under the Naylor Act. (Ed. Code§ 33051.5.)

q If the Naylor Act applies, the price of the land shall notexceed the school district’s cost of the original acquisition,with adjustments made for any percentage increase or

decrease in the CPI from the original date of purchase tothe year in which the offer of sale is made, plus the cost of

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C. Offers to Sell or Lease withOption to Purchase

any improvement to the land made by the school districtsince the original acquisition. However, the final sale priceshall not be less than 25 percent of the fair market value ofthe land or less than the amount necessary to retire theshare of local bonded indebtedness plus the amount of theoriginal cost of the approved state aid applications on theproperty. (Ed. Code § 17491(a).).

q If public entities decline a school district’s offer to sell orlease school property under the Naylor Act, the propertymay be sold, leased and/or developed to the same extentas is permitted on adjacent property. The process of zoningnecessary for such development is to be expedited by thelocal city or county. (Gov. Code § 65852.9.)

q The District must first make written solicitations to thefollowing government agencies: any park or recreationdepartment of any city or county within which the land issituated, any regional park authority having jurisdictionwithin the area in which the land is situated, and the StateResources Agency. Such agencies must use the property forpark and recreational purposes if they purchase or lease theproperty under Government Code section 54222. (Ed. Code§ 17464(b); Gov. Code § 54222(b).)

q Government Code section 54222 also requires writtensolicitations to additional government agencies, however,they are not expressly required by Education Code section17464, which lists the offers a school district must make,and the order in which it must make them. There is no caselaw clarifying whether the additional Government Codeoffers must be made by a school district. BecauseEducation Code section 17464 references only the park andrecreation components of Government Code section 54222,there is an argument that a school district’s obligations toprovide written solicitation under section 54222 are limitedto park and recreation agencies. If a district nevertheless

elects to take a more conservative approach by makingthese additional offers, the offers would be to the followingentities:

o Any local public agency as defined in Health andSafety Code section 50079 for the purpose ofdeveloping low- and moderate-income housing.

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o Housing sponsors (defined by Health and SafetyCode § 50074) that have provided the District with awritten request, and that will use the property forthe purpose of developing low- and moderate-income housing, and meet certain other statutoryrequirements.

o Any other school district in which the property issituated, if the school district will use the propertyfor school facility construction or open-spacepurposes.

o If the property is in any area designated as anenterprise zone, an offer must be sent to thenonprofit neighborhood enterprise associationcorporation in the zone for enterprise zonepurposes.

o Any county, city, city and county, communityredevelopment agency, public transportationagency, or housing authority within whosejurisdiction the surplus land is located, for thepurpose of developing property located within aninfill opportunity zone designated pursuant toGovernment Code section 65088.4, or within anarea covered by a transit village plan adoptedpursuant to Government Code sections 65460, etseq.

q If any of the above entities is interested in obtaining theproperty, it must so notify the District within 60 days of theDistrict’s written solicitation. (Gov. Code § 54222(f).)

q In the event of such notification, the District must enterinto good faith negotiations to determine a mutuallysatisfactory price. If the price cannot be agreed upon aftera good faith negotiation period of at least 90 days, theDistrict’s obligations under Government Code section54222 are discharged. (Gov. Code § 54223.)

q If the District does not agree to price and terms of saleduring the 90-day period described above, the District canproceed to the next step in the process. However, ifnegotiations are unsuccessful and the District ultimatelydisposes of the property to an entity that uses the propertyfor development of 10 or more residential units, that entity

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or a successor entity must provide not less than 15 percentof the total number of units developed at affordablehousing cost, or affordable rent, to lower incomehouseholds. This is a new requirement effective on January1, 2015. Rental units must remain affordable for at least 55years, the initial occupants of ownership units must be lowincome households, and these requirements must be setforth in a deed restriction attached to the property. (Gov.Code, § 54233.) Again, unless the District takes the moreconservative approach of offering the property to all of theentities designated in Government Code sections 54220, etseq., these requirements will only apply to offers todesignated entities for use of property for park andrecreational purposes.

q If none of the above government agencies purchases orleases the property with an option to purchase under theforegoing procedures, the property must be offered at fairmarket value to the following additional entities (Ed. Code§ 17464(c)):

o In writing to the Director of General Services,Regents of the University of California, the Trusteesof the California State University, the county andcity in which the property is situated, and any publichousing authority in the county in which theproperty is situated, and to any entity referenced inthe paragraph immediately below (regarding Ed.Code § 17464(c)(2)) that has submitted a writtenrequest to the District to be directly notified of theoffer for sale or lease with an option to purchase thereal property by the District. (Ed. Code§ 17464(c)(1).) This notice must be mailed no laterthan the date of the second publication described inthe paragraph immediately below.

o By public notice, published once per week for threesuccessive weeks (with at least five days betweeneach publication, not counting the actual publicationdates) in a newspaper of general circulation withinthe district, specifying that the property is beingmade available to any public district, publicauthority, public agency, and other politicalsubdivision or public corporation in the state or ofthe federal government, and to other nonprofitcharitable or nonprofit public benefit corporations.

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D. Offers to Lease with NoOption to Purchase

E. Additional Offers if LeasingVacant Classrooms

(Ed. Code § 17464(c)(2).)

§ If any of the above entities is interested inpurchasing the property, it must so notifythe District within 60 days of the thirdpublication of the District’s notice of intentto sell or lease. If the parties do not agreeupon a mutually satisfactory price within this60 day period, the property may be sold orleased by competitive bidding.

q The District may choose to notify all of the samegovernment agencies and other entities identified above,although doing so does not appear to be required expresslyby the Education Code. If the District elects not to do so, itcan proceed to Step VI, below, “Board Action DeclaringIntention to Sell or Lease the Property”.

q Note: There is no express statutory guidance or case lawclarifying whether additional notices are required. A moreconservative approach would be to follow the same processas applicable to sales or leases with options to purchase,although that does not strictly appear to be mandatory.

q The District must offer to lease the classrooms for specialeducation programs that are provided by either otherschool districts that comprise part of the District’s SELPA, orby the COE (and that serve the District’s students, in wholeor in part). (Ed. Code § 17465(b).)

q Upon adoption of the resolution of intent to lease realproperty (further described below), the District must notifyin writing the other districts or the COE, as applicable, of itsintent to lease vacant classrooms. (Ed. Code § 17465(c).)

o The notice shall describe the vacant classrooms,specify that the lease shall not exceed a 99-year

term, specify that the lease payment and otherlease terms are subject to negotiation, and statethat the offer is valid for no more than 60 days afterreceipt thereof. (Ed. Code § 17465(c).)

q The school district/COE shall inform the Board in writing ofits intent to lease or not lease the classrooms within 60days from the receipt of the notification. (Ed. Code

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V. Notification of Local City orCounty Planning Agency Priorto Sale

§ 17465(e).)

q The District may include in its resolution of intent a time fora regular Board meeting at which sealed proposals to leasewill be received and considered, and may post copies of theresolution and publish notice of the adoption of theresolution. However, the Board shall not act on anyproposal prior to the first of the following conditionsoccurring (Ed. Code § 17465(d)):

o Receipt from the public education agency or thecounty superintendent, as appropriate, of its intentto lease the classrooms or of its intent not to do so.

o Expiration of the 60-day period.

q The lease terms shall be negotiated by the entity desiring tolease the vacant classrooms and the Board (the terms maybe negotiated prior to availability of the classrooms). (Ed.Code § 17465(f)(1).)

o The lease payments shall not exceed the District’sactual costs for maintenance, operation, andcustodial services for the leased classrooms. (Ed.Code § 17465(f)(2).) If more than one school districtoffers to lease classrooms, the leasing district mayelect to negotiate either individually or jointly withthe interested districts. (Ed. Code § 17465(f)(3).)

q If the parties are unable to arrive at a mutually satisfactorylease within the 60-day period, the District may offer theproperty to other parties. (Ed. Code § 17465(g).)

q If the local city or county planning agency has adopted ageneral plan or part thereof which affects or includes thearea where the property is located, the District must notifythe agency in writing before the District may sell theproperty. The notification must identify the property’slocation, and the purpose and extent of the proposed sale.(Govt. Code §65402(a), (c).)

q The local planning agency must report back to the Districtwithin 40 days, indicating whether the proposed sale is inconformity with the general plan. If the agency fails torespond within 40 days, it is conclusively deemed a finding

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VI. Board Action DeclaringIntention to Sell or Leasethe Property

that the proposed sale is in conformity with the generalplan or part thereof. (Govt. Code § 65402(c).)

q Even if the planning agency disapproves of the location,purpose or extent of the property sale, the District mayoverrule such disapproval. (Govt. Code § 65402(c).)

q If the property remains unsold or unleased after theforegoing steps, the Board must declare its intention in aregular meeting to sell or lease the property prior to puttingthe property up to competitive bid. To do so, it shouldadopt a resolution taking each of the following actions:

o Consider the 7-11 Committee’s recommendations.(Ed. Code § 17387, et seq.)

o Describe the property proposed to be sold or leasedin such a manner as to identify it. (Ed. Code§ 17466.)

o Specify the minimum price and the terms uponwhich the property will be sold or leased. (Ed. Code§ 17466.)

o State the commission or rate, if any, which theboard will pay to a broker out of the minimum price.(Ed. Code § 17466.)

o Specify a date at least three weeks later for a publicBoard meeting at which proposals to purchase orlease will be received and considered. (Ed. Code§ 17466.)

q The resolution must be adopted by a two-thirds vote of theBoard. (Ed. Code § 17466.)

q The District must give public notice of the adoption of theresolution by posting copies of the resolution signed by theBoard in three public places in the District at least 15 daysbefore the meeting where the bids are opened, and bypublishing the notice at least once per week for threesuccessive weeks before the meeting where the bids areopened in a newspaper of general circulation within thecounty in which the District is located. (Ed. Code § 17469.)

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VII. Competitive Bidding

q The governing board of a District that intends to sell surplusreal property must also make efforts to notify the formerowner from whom the District acquired the property 60days in advance of the meeting at which the resolution willbe considered. (Ed. Code § 17470.) Also, special rules mayapply to property that was acquired by eminent domain,including that the former owner may have to be offered aright of first refusal in certain circumstances. (Civ. Proc.Code § 1245.245.)

q Optional: Although not required by law, the District maywish to obtain a preliminary title report to determine ifthere are any exceptions in the report which would affectthe bid process. Also, the preliminary title report should bemade available to prospective bidders who may require thereport as part of their due diligence process beforesubmitting a bid.

q CEQA Compliance: The District should give consideration tothe application of the California Environmental Quality Act(“CEQA”). Generally, a sale or lease of property is exemptfrom detailed CEQA review if it can be said with certaintythat there is no possibility that the sale or lease will have asignificant environmental effect. (Cal. Code Regs., tit. 14,§ 15061(b)(3).) The District may adopt a Notice ofExemption at the same time it adopts the resolutiondescribed above. (Id., § 15062.)

q At the public Board meeting where the bids are opened (inopen session), the Board must do the following (Ed. Code§§ 17472, 17473):

o Open, examine, and declare all sealed proposalswhich have been received by the Board.

o Call for oral bids.

o Either accept the highest responsible bid (afterdeducting the commission, if any) which conformsto all terms and conditions specified in theresolution of intention to sell or lease the property,or reject all bids.

o If an oral bid is the highest bid, it does not need tobe accepted unless it exceeds the written bids by at

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VIII. Exceptions

least 5%.

o The bid may be accepted at an adjourned meetingof the Board within ten days of the bid opening.(Ed. Code § 17475.)

q The District may seek a waiver of the competitive biddingrequirements from the State Board of Education. (Ed. Code§ 33050.) In recent years, the State Board has beengranting some waivers of the competitive biddingrequirement, particularly where a district intends to sellproperty to a developer, including when the sale iscontingent on the developer’s obtaining entitlements tobuild on the property. In such circumstances, the districtmay prefer the buyer most qualified to seek and obtainthose entitlements, rather than the highest bidder in allinstances. Such waivers have not, however, exempteddistricts from the various notice requirements set forthabove, and certain public process is still required, includinguse of a request for proposal and a waiting period for publicinput after proposals are received.

To request a waiver, the District must do the following:

o Enable the employees’ unions to participate in thedevelopment of the waiver. (Ed. Code § 33050 (d).)

o Hold a public hearing on the issue. (Ed. Code§ 33050 (a).)

o Submit an application to the State Board ofEducation.

q The District may bypass the above described notificationand bidding procedures in several situations, including thefollowing:

o Child Care and Development Services (Ed. Code§ 17458): The District may sell or lease any surplusreal property to any contracting agency exclusivelyfor the delivery of child care and developmentservices (as defined in Ed. Code § 8208), for not lessthan five years. However, this exception onlyapplies if a charter school has not accepted an offerto purchase or lease the property pursuant toEducation Code section 17457.5, therefore, the

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IX. Use of Proceeds of Sale orLease with Option toPurchase

District is still required to comply with that section.

o 30 Days (Ed. Code § 17480): The District may leaseany property for a period not exceeding 30 separateor consecutive calendar days in each fiscal year.

o Residences (Ed. Code § 17481): The Board, by atwo-thirds vote of its members, may lease schooldistrict property with a residence which cannot bedeveloped for District purposes because of theunavailability of funds for a term not exceedingthree months.

o Historic Buildings (Ed. Code § 17482): The Boardmay sell or lease a building that has an historicvalue, and the site upon which the building islocated, for fair market value to certain non-profit orcivic organizations, if the county board ofsupervisors finds that various conditions exist.

o Land Exchanges (Ed. Code § 17536): The exchangeof real property is exempt from the surplus propertyprocedures described herein. An exchange ofproperties with a private person or entity may beaccomplished by a resolution adopted by a two-thirds majority of the Board. Due to an apparenterror made when the Education Code wasreorganized, exchanges with public agencies are nolonger as clearly addressed in the Education Code;legal counsel should be consulted regarding thoserequirements.

q Statutory limitations on the use of the proceeds of the saleof surplus property apply to (1) sales and (2) leases with theoption to purchase. They do not apply to leases with nooption to purchase.

q The proceeds of the sale of surplus property generally mustbe used for capital outlay or non-recurring maintenancecosts. The proceeds of a lease with option to purchase maybe deposited in a restricted fund for routine repairs for upto a 5-year period. The proceeds must be used for one-time expenditures, and may not be used for ongoingexpenditures, such as general operating expenses. (Ed.

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Code § 17462(a).)

q With concurrence of the State Allocation Board that theDistrict has no anticipated need for additional sites orconstruction in the next ten years or major deferredmaintenance requirements, the District may surrender itsstate facility funding eligibility for those ten years and placethe proceeds unto its general fund, again for one-timeexpenditures. (Ed. Code § 17462(a).)

q Subject to certain conditions and State Allocation Boardconcurrence, a school district having an average dailyattendance of less than 10,001 in any fiscal year maydeposit interest earned on the funds from a sale of surplusproperty in that fiscal year into the general fund for anygeneral fund purpose, while surrendering state facilitiesfunding for ten years. (Ed. Code § 17463.)

q Under 2009 budget legislation, as revised in 2011, schooldistricts were authorized to deposit the proceeds of thesale of surplus property that was purchased entirely withlocal funds into the general fund for one-time expendituresif certain conditions were met. However, this legislationexpired on January 1, 2016. (Former Ed. Code § 17463.7.)

q Although it has not yet done so, as of October 2, 2013, theState Allocation Board is authorized to establish a programthat would require school districts to return state schoolfacilities funding to the State if the school district sellssurplus property that was purchased, modernized, orimproved using that funding, and the following conditionsare met:

o The property is not being sold to a charter school,another school district, a county office of education,or any agency that will use the property exclusivelyfor the delivery of child care and developmentservices.

o The proceeds from the sale will not be used forcapital outlay.

o The property was purchased, or the improvementswere constructed or modernized, within 10 yearsbefore the property is sold. (Ed. Code, §17462.3.)

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X. Use of Proceeds of Leasewith No Option toPurchase

q There are no statutory limitations on the use of proceedsfrom a lease of surplus property if the lease does notinclude an option to purchase.

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