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Calif. Town Declares Itself Slum in Quest For State School Aid

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Ask the Hemet, Calif., chamber of commerce to portray the community, and you will get a glowing tribute to a quiet town of about 50,000 located in the heart of a fertile valley. It is the home of the annual Ramona Pageant, a springtime play reviving romantic visions of Old California. Once a retirement community, it is being redefined by an influx of younger residents.

That description is a far cry, though, from the label assigned late last year by the city council. By a majority vote, the panel declared that Hemet is a blight zone--in blunter terms, a citywide slum.

While that characterization of Hemet has raised the hackles of local boosters, some Southern California school administrators say it is nothing to complain about.

Instead, educators describe the step as just one result of a growing search for wrinkles and loopholes in the state tax code set off by the combined pressures of state budget cuts, an underfunded state school-building authority, and one of the nation's strictest tax-limitation laws.

By assuming blighted status, the city council cleared the way to declare Hemet a redevelopment zone, thus freeing local school taxes for badly needed school construction.

The attraction of the strategy is that, under California law, the state will then be required to make up a considerable portion of the funds for regular school operations that were shifted to construction.

Despite its sophisticated fiscal legerdemain, the plan has become political dynamite in Hemet. Residents have petitioned the city council to rescind its decision, which it is now reconsidering.

Searching for Strategies

Amid the backlash, local school administrators have expressed growing frustration after latching onto the redevelopment-zone scheme as their last alternative for realizing their building plans.

The Hemet controversy points up the desperation of many school districts seeking avenues for construction funding as well as the arcane options offered by a state whose own building program is unable to keep pace with local demand.

Tight education budgets nationwide have alerted tax-watchdog groups to the potential that local school districts may begin to look more creatively at ways of raising new property-tax funds, state and national groups say. But observers agree that California leads the way.

Hemet's experience with its redevelopment-zone plan may prove a crucial test for one of several strategies for generating local school construction funds.

Because the plan requires only a majority vote by the city council, it is easier to accomplish than a local bond referendum. Under Proposition 13, California's landmark 1978 tax-limitation measure, local bends must win two-thirds voter approval.

School-Construction 'Godsend'

The pioneer in using a redevelopment zone to get around that supermajority barrier to conventional school-construction financing is Coronado, an affluent community located on an island in San Diego Bay.

Since 1985, Coronado's plan has delivered an elementary school and city improvements to the waterfront area, with a middle school, elementary school addition, and new gymnasium on the drawing board. So far, say city and school officials, residents have not complained about being the technical victims of blight.

"We have one of the only schools where basketball games are sometimes called on account of rain," said David Blumenthal, the superintendent of the Coronado Unified School District, where the redevelopment plan brought $1.6 million to the schools last year. "It has been a godsend. We hadn't built a new building in over 30 years, but we are seeing our way out of it with this device."

Under the Coronado plan, the city council designated the town a blight area in order to establish a redevelopment agency. But unlike more conventional redevelopment projects, the Coronado plan then collects only local school taxes. The state's rules require 20 percent of the funds to be designated for affordable new housing. Of the remaining 80 percent, the city retains one-third and the school district receives the rest.

Rather than losing the funds that are channeled to the redevelopment agency, however, California's school finance law guarantees that the state will replace local funds to maintain a minimum spending level.

To Mr. Blumenthal, the plan is a smart solution to an otherwise frustrating situation.

"A two-thirds vote is unlikely, and if we waited for the state it would probably take years and years before we would get it, and even then it might not suit our needs," he said, adding that the state has encouraged such efforts. "One of their specific suggestions has been redevelopment zones. it's not like this hasn't been thought of before."

Developers Targeted

In fact, the redevelopment-zone plan is one of a handful of options districts have discovered to help pay for their construction plans. Its revival in Hemet is a sign of schools' growing interest in exploring new funding ground, observers say.

"They are becoming more creative," said Joel Fox, the president of the Howard Jarvis Taxpayers Association. "We have seen that bureaucracies are spending a lot of time being creative in trying to reach deeper into taxpayers' pockets."

Public-finance consultants and tax opponents alike can quickly tick off some of the more popular alternative-financing schemes.

The leader, they say, is the MelloRoos Act of 1982, which allows California communities to poll neighborhoods on whether they are willing to pay higher property taxes. While the law requires a two-thirds margin for approval of a tax rise, it also contains a provision allowing a developer planning to build new units in an area with few current residents to accept a higher rate.

Many school districts have made pacts with developers, who pass the tax increase to home buyers.

In the Capistrano Unified School District, the Mello-Roos Act had led to bend issues worth more than $93 million by last July. A new elementary school was opened last fall, half funded by the program, and groundbreaking was scheduled last week for a new high school.

"This helps us to be a little more pro-active, even though we're always playing catch up," said Jacqueline Pries, the director of community relations for the Capistrano district.

Along with the Mello-Roos projects, the district also charges developers to finance portable classrooms.

Stronger Negotiating Hand

Municipal-finance consultants also expect school officials to take advantage of recent court decisions in California that allow districts to move to deny zoning changes unless developers agree to pay impact fees.

Previously, landowners would pay a set developer's fee before building. Now, however, school officials will have a much stronger hand in negotiating a payment from a developer for projects where zoning must win approval.

School officials' new clout could yield substantial results, suggested Dante Gumucio, vice president of David Taussig & Associates, a Newport Beach financial-consulting firm. "The advantage to this is that you can get a whole school," he said.

School officials are also continuing to seek funding under the state's Landscape and Lighting Act, which was written in 1972 to give one town taxing power to buy gas streetlights.

Several Orange County districts sought last year to use the law to pay for grounds-improvement projects. Tax-watchdog groups successfully pressured most to drop the idea, but litigation continues against some districts, and others are planning projects under the statute.

In the Whittier City School District, the law is generating about $400,000 annually for new playground equipment and improving the school lawn, officials said.

To "maintain the school grounds in a park-like atmosphere," residents of the K-8 district are charged an annual fee of $22.50.

Stretched Too Far?

In Hemet, meanwhile, critics say creative financing has gone too far. "The city of Hemet is not blighted," argued Thomas D. Byler, a retired resident of the town and secretary-treasurer of a local group called Citizens for Fair Government that has filed the protest petition. If the city does not rescind the plan, the issue will be put on the ballot.

"The original intent was to come into the slum of a city, take it over and condemn it, and then redevelop it. This is stretching redevelopment further than you can stretch a rubber band to declare a whole city," Mr. Byler said. "We've got 12,000 homes that are declared blighted before they are even built." Mayor Gaila Jennings, an elementary-school fine-arts teacher, noted that Hemet leaders have been surprised by residents' opposition.

"I would think they would favor local control," she said. "The school district is really struggling."

"One of the issues the opposition has brought up is that this is not what redevelopment was designed for, and I would agree, but when you have very few tools at your disposal, you use what's available," she added.

"If I had to drive a nail and didn't have a hammer, then I'd probably use my shoe," she said. "If you are interested in the community, you have to find a way to help the school district, and this is our way of responding."

Marvin L. Feir, the Hemet district's assistant superintendent for facilities planning, said local criticism and signs of disapproval from state officials are frustrating to local administrators, who see no other option.

"Since the mid-1980's, the state has given us a very clear message that districts should start relying more on local means to raise funds, and one of those was redevelopment," Mr. Feir said.

The district took action after studying the other options. Developer fees and the Mello-Roos law are less attractive since the construction and real-estate markets have fallen on hard times, he said.

With 43 percent of its students in portable classrooms and without new construction funding, the district is helpless, Mr. Feir argued.

Opponents, though, find little reason for sympathy.

"I think it's an issue of the city stealing from the schools and the schools stealing from the state," said Mr. Byler. "We've taken a stand on the moral issue, saying that doing this just teaches the children here to bypass the law and find loopholes."

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