Dick Spotswood: Marin Office of Education steps up for teacher housing bond

The Oak Hill Apartments’ controversy appears to be coming to a resolution. The brouhaha concerns proposed housing on 8.5 acres of surplus state land adjacent to San Quentin Rehabilitation Center in unincorporated Larkspur. The hillside site is delivered without cost to a governmental agency to develop homes for educators, county employees and low-income residents.

The idea is that with Marin’s astronomical residential real estate costs, subsidized workforce homes will aid schools and the county in retaining and recruiting employees. A total of 250 new housing units is envisioned. Their funding and operations are divided between two projects that’ll share site developments and design costs.

A private nonprofit, Eden Housing, is responsible for creating 115 homes for extremely low- and low-income households. There’s no dispute over this aspect of Oak Hill.

The educator-county employee workforce housing is managed by a new government entity, the Marin County Public Financing Authority. Oak Hill is its only project. The authority was created by the Marin County Office of Education and county government. It’s headed by retired Marin County Administrator Matthew Hymel. The authority is working in conjunction with Education Housing Partners, a division of Thompson-Dorfman Partners, Marin residential developers.

Hymel indicates that the budget solely for the educator and county workforce housing component is $124.2 million. Even with free land, it’ll cost $920,000 for each of the 135 apartments. Costs include construction, site remediation, design, construction management fees, interest and principal on $94.5 million in bonds.

The joint-powers authority and Eden Housing will need to clean the site, once San Quentin’s employee shooting range. It’s contaminated by lead from expended bullets. Access to congested Sir Francis Drake Boulevard leading to the Richmond-San Rafael Bridge will also be a cost borne by the JPA and Eden.

Opposition to Oak Hill’s workforce component stems from its initial funding scheme. Wall Street understands developing non-market-rate housing involves a risk that rents will be insufficient to the service bonded debt. Bonds will thus bear a prohibitively high interest rate unless other entities with substantial balance sheets guarantee bond payments.

The now revoked first concept was that Marin’s county government, MCOE, College of Marin and the county’s 17 elementary and high school districts would, on a pro rata basis, share that risk.

If the professional bond industry regards that risk as real, then in the worst case, fiscally strapped school districts, including Novato Unified and San Rafael City Schools, are on the hook to pay the debt.

Led by fiscally prudent Tamalpais Union High School District trustees and savvy elementary school board members, the districts balked.

To save the project, Marin’s County Office of Education has now agreed to assume the bonding risk for all of Marin’s 17 elementary and high school districts. They and the Office of Education will divide 74 of the 135 workforce apartments among their income eligible educators. In return MCOE will guarantee 49% of the risk in the hopefully unlikely event that the bonds default.

Marin’s Office of Education will pledge much of its $54 million cash reserves to cover that risk.

The IJ reports, “With a budget of $70 million and 311 employees, the county education office has $54 million in budget reserves. That represents about 74% of its annual expenses. The percentage is well above the reserves level of many Marin public school districts, some of which are struggling to maintain even the 3% minimum reserves level required by the county and the state.”

That leads to the question, why does the MCOE have a gigantic $54 million cash accumulation? That’s the subject for a future column.

***

With tax time approaching, learn how to apply for exemptions and discounts on Marin add-on property taxes and agency fees. Instructions are found at the Marin Coalition of Sensible Taxpayers website at bit.ly/4sZ65P6

Columnist Dick Spotswood of Mill Valley writes on local issues Sundays and Wednesdays. Email him at spotswood@comcast.net.