Mt. Diablo Unified School Dist. v. Clayton Valley Charter etc. ( 2021 )

Filed 10/18/21 (unmodified opinion attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
MT. DIABLO UNIFIED SCHOOL
DISTRICT,
Plaintiff and Respondent, A158195
v. (Contra Costa County
CLAYTON VALLEY CHARTER Super. Ct. No. MSC15-00574)
HIGH SCHOOL,
Defendant and Appellant.
CLAYTON VALLEY CHARTER
HIGH SCHOOL, A158202
Plaintiff and Appellant, (Contra Costa County
v. Super. Ct. No. MSN16-1356)
MT. DIABLO UNIFIED SCHOOL
ORDER MODIFYING OPINION
DISTRICT, AND DENYING REHEARING;
Defendant and Respondent. NO CHANGE IN JUDGMENT
THE COURT:
It is ordered that the opinion filed herein on October 1, 2021, be modified as
follows:
On page 18, line 7, after the sentence ending with “per-square-foot charge,”
add as footnote 10 the following footnote, which will require renumbering all
subsequent footnotes:
As set forth at pages 8–9, ante, the charter school in this case
10
paid approximately 99 percent of the ongoing operations and
maintenance costs incurred at its facility in the school years at issue. We
1
do not address and express no opinion on how costs should be
apportioned for a hypothetical charter school that pays only a portion,
less than substantially all, of the ongoing operations and maintenance
costs at its facility.
There is no change in the judgment.
The petition for rehearing is denied.
Dated: October 18, 2021 ___________________________ P. J.
2
Trial Court: Contra Costa County Superior Court
Trial judge: Honorable Steven Austin
Counsel for appellant Clayton YOUNG, MINNEY & CORR, LLP
Valley Charter High School: Paul C. Minney
Kevin M. Troy
Kaela M. Haydu
Counsel for respondent BURKE, WILLIAMS & SORENSEN, LLP
Mt. Diablo Unified School John R. Yeh
District:
FAGEN FRIEDMAN & FULFROST, LLP
Counsel for amicus curiae on Elizabeth B. Mori
behalf of respondent: for Association of California School
Administrators and California School Boards
Association Education Legal Alliance
Julie Ashby Umansky
Phillipa L. Altmann
Michelle Lynch
for California Charter Schools Association
3
Filed 10/1/21 (unmodified opinion)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
MT. DIABLO UNIFIED SCHOOL
DISTRICT,
Plaintiff and Respondent, A158195
v. (Contra Costa County
CLAYTON VALLEY CHARTER Super. Ct. No. MSC15-00574)
HIGH SCHOOL,
Defendant and Appellant.
CLAYTON VALLEY CHARTER
HIGH SCHOOL,
A158202
Plaintiff and Appellant,
v. (Contra Costa County
Super. Ct. No. MSN16-1356)
MT. DIABLO UNIFIED SCHOOL
DISTRICT,
Defendant and Respondent.
Clayton Valley Charter High School (the charter school) appeals from a
judgment resolving a dispute with Mt. Diablo Unified School District (the
district) concerning the “facilities costs” for which the district may properly
charge the charter school. Under regulations adopted by the State Board of
Education (the state board), charter schools are responsible for ongoing
operations and maintenance at facilities they use; school districts are
responsible for major maintenance and capital improvements; and a district
1
may charge a charter school a pro rata share of its “facilities costs.” (Cal. Code
Regs., tit. 5,1 §§ 11969.4, 11969.7.)
The regulations require a district to tabulate certain districtwide
“facilities costs” and derive a per-square-foot amount to charge charter schools
in the district. A district may include in “facilities costs” funds spent on “plant
maintenance and operations” and funds contributed to specified accounts, such
as its ongoing and major maintenance account (OMM account), but may not
include “any costs that are paid by the charter school, including . . . costs
associated with ongoing operations and maintenance.” (§ 11969.7.) The parties
here originally disputed whether the district may include in chargeable
“facilities costs” general fund revenues contributed by the district to its OMM
account and disbursed from that account to pay costs for “maintenance.” For the
first year at issue, the charter school contended that its pro rata share of
facilities costs, excluding maintenance costs paid with funds from the OMM
account, was $27,000; the district’s calculations, including these costs, yielded
a pro rata share of $309,000.2 The difference between these two was the
dispute raised by the pleadings and briefed by the parties; however, the trial
court sua sponte adopted an unprecedented view of the regulation advanced by
neither party. It held that neither the costs of maintenance nor of operations
should be excluded, so that “facilities costs” includes all districtwide costs paid
by a district for plant maintenance and operations, even if the funds did not
pass through the OMM account, and even if a charter school itself pays the
costs of operations and maintenance at its own site. The trial court’s
unprecedented view, now defended by the district and amici curiae, would
1All undesignated section references are to title 5 of the California Code
of Regulations.
2 All dollar amounts in this opinion are rounded to the nearest $1,000.
2
require the charter school in this case to pay all operations and maintenance
costs of its own plus a share of such costs for all schools in the district, which
would raise the charter school’s pro rata share for the first year at issue to
more than $1.1 million.
While the text of the regulations is ambiguous and, in part, self-
contradictory, the regulatory history and the statutory scheme, as well as the
common understanding of all parties prior to the trial court’s unsolicited
ruling, make clear that the state board did not intend such a result. We
conclude that a district must exclude from the facilities costs it charges a
charter school all costs of both operations and ongoing maintenance if the
charter school pays those costs for its own premises. We shall therefore reverse
the judgment.
Factual and Procedural History
1. Statutory and Regulatory History
a. The Governing Statute
“The Legislature adopted the Charter Schools Act of 1992 ([Ed. Code,]
§ 47600 et seq. . . .) to ‘provide opportunities for teachers, parents, pupils, and
community members to establish and maintain schools that operate
independently from the existing school district structure . . . .’ ” (California
School Boards Assn. v. State Bd. of Education (2010) 191 Cal.App.4th 530, 540
(CSBA), quoting Ed. Code, § 47601.) Section 47614, as enacted in 1998,
required a district to “permit a charter school to use, at no charge, [certain
unused] facilities . . . provided the charter school shall be responsible for
reasonable maintenance of those facilities.” (Stats. 1998, ch. 34, § 15.)
In 2000, the voters “changed this limited obligation of a school district”
by adopting Proposition 39, which “expressed the intent ‘that public school
facilities should be shared fairly among all public school pupils, including
3
those in charter schools.’ ” (CSBA, supra, 191 Cal.App.4th at p. 41, quoting
Ed. Code, § 47614, subd. (a).) Section 47614 now requires a district to “make
available, to each charter school operating in the . . . district,” facilities
sufficient to accommodate the school’s students “in conditions reasonably
equivalent to those in . . . other public schools of the district.” (Ed. Code,
§ 47614, subd. (b).) The facilities shall be “furnished, and equipped, and shall
remain the property of the school district.” (Ibid.) The district “may charge the
charter school a pro rata share (based on the ratio of space allocated . . . to the
charter school divided by the total space of the district) of those school district
facilities costs which the school district pays for with unrestricted general fund
revenues”; the school “shall not be otherwise charged for use of the facilities.”
(Id., subd. (b)(1).) The statute directs the Department of Education to propose,
and authorizes the state board to adopt, implementing regulations—including
one to define such terms as “facilities costs.” (Id., subd. (b)(6).)
b. The Original 2002 Regulations
In 2002, the state board adopted implementing regulations. (See former
§§ 11969.1–11969.10.) Section 11969.4, titled “Operations and Maintenance,”
set forth these basic principles in terms that remain in effect: “The ongoing
operations and maintenance of facilities and furnishings and equipment is the
responsibility of the charter school. . . . [T]he replacement of furnishings and
equipment supplied by the school district in accordance with [its] schedules
and practices, shall remain the responsibility of the school district. . . .”
(§ 11969.4.)
Although not explicitly defining “facilities costs,” the original version of
section 11969.7, titled “Charges for Facilities Costs,” specified costs to be
included, and provided: “The pro rata share amount shall not exceed (1) a
per-square-foot amount equal to those school district facilities costs that the
4
school district pays for with unrestricted general fund revenues, as described
[in] the California School Accounting Manual [(accounting manual)], divided
by the total space of the school district times (2) the amount of space allocated
by the school district to the charter school. [¶] (a) For purposes of this section,
facilities costs includes those costs associated with facilities acquisition and
construction and facilities rents and leases, as defined [in the accounting
manual]. For purposes of this section, facilities costs also includes the
contribution from unrestricted general fund revenues to the school district
deferred maintenance fund, costs from unrestricted general fund revenues for
projects eligible for funding but not funded from the deferred maintenance
fund, and costs from unrestricted general fund revenues for replacement of
furnishings and equipment according to school district schedules and
practices.” (Former § 11969.7, italics added.) Another provision, to which we
refer as the “equal-application requirement,” stated that the per-square-foot
charge must be “applied equally by the school district to all charter schools
that receive facilities under this article.” (Id., subd. (e)).
Section 11969.9 created a process for charter schools and districts to
negotiate agreements about the use of and payment for facilities. (Former
§ 11969.9.) That provision also authorized the parties to “negotiate separate
agreements and/or reimbursement arrangements for specific services not
considered part of facilities costs as defined in Section 11969.7. Such services
may include . . . the use of additional space and operations, maintenance, and
security services.” (Former § 11969.9, subd. (j), italics added.) The regulations
thus identified “operations, maintenance, and security services” as “services
not considered part of facilities costs.” (Ibid., italics added.)
The statement of reasons for the new regulations explained that they
allocate costs between charter schools and districts in a manner that parallels
5
the allocation of responsibilities: “This section [11969.4] specifies that the
charter school is responsible for the ongoing operation and maintenance of the
facility and of the furnishings and equipment it uses. The school district is
responsible for items funded through the deferred maintenance program (such
as a new roof) and the replacement of furnishings and equipment supplied by
[it]. The responsibilities outlined in this section are parallel to the definition of
facilities costs in section 11969.[7].[3] Section 11969.[7] defines what is
considered a facilities cost for purposes of developing a charge to be imposed on
the charter school: the items considered part of a school district’s facilities
costs are also the school district[’s] responsibility; the items excluded from
facilities costs are the charter school’s responsibility.”
c. The 2008 Amendments
In 2007, the Department of Education reviewed the regulations “with
the assistance of a workgroup . . . including charter schools, school
administrators, school boards, and teachers.” (CSBA, supra, 191 Cal.App.4th
at p. 542.) The department proposed several amendments, which the state
board adopted in 2008. (Ibid.) The relevant regulations have not been
amended since.
The 2008 amendments altered section 11969.7 and added a definition of
“facilities costs” to section 11969.2.4 That section defines “facilities costs” as
3The statement says, “section 11969.6,” but this is an obvious
typographical error: section 11969.7 addresses facilities costs; section 11969.6
concerns an unrelated topic.
4 The state board also made immaterial changes to section 11969.4 and
to section 11969.9. The change to section 11969.9 deleted the paragraph noting
that districts and schools may negotiate separate agreements regarding
services outside the definition of “facilities costs.” The state board deleted this
provision “because [it was] permissive and unnecessary.” With the inclusion of
operation and maintenance costs in the definition of facilities costs for which a
charter school receiving those services from a district pays a pro rata share, as
6
“activities concerned with keeping the physical plant open, comfortable. and
safe for use and keeping the grounds, buildings, and equipment in working
condition and a satisfactory state of repair. These include the activities of
maintaining safety in buildings, on the grounds, and in the vicinity of schools.
This includes plant maintenance and operations, facilities acquisition and
construction, and facilities rents and leases.” (§ 11969.2, subd. (h), italics
added.)
Section 11969.7, subdivision (a) was amended to read: “For purposes of
this section, facilities costs that the school district pays with unrestricted
general fund revenues includes those costs associated with plant maintenance
and operations, facilities acquisition and construction, and facilities rents and
leases, as defined in section 11969.2(h). For purposes of this section, facilities
costs also includes: [¶] (1) contributions from unrestricted general fund
revenues to the school district’s Ongoing and Major Maintenance Account
[citation], Routine Restricted Maintenance Account [citation], and/or deferred
maintenance fund, [¶] (2) costs paid from unrestricted general fund revenues for
projects eligible for funding but not funded from the deferred maintenance
fund, and [¶] (3) costs paid from unrestricted general fund revenue for
replacement of facilities-related furnishings and equipment, that have not been
included in paragraphs (1) and (2), according to school district schedules and
practices.” And the state board added an entirely new paragraph (the
“exclusion paragraph”) to section 11969.7: “For purposes of this subdivision,
facilities costs do not include any costs that are paid by the charter school,
including, but not limited to, costs associated with ongoing operations and
maintenance and the costs of any tangible items adjusted in keeping with a
explained in text, separate agreements covering those costs became
unnecessary.
7
customary depreciation schedule for each item.” Thus, while the definition of
facilities costs in section 11969.2 was expanded to include the cost of plant
maintenance and operations, those costs were excluded if paid by the charter
school.
2. Case-specific Facts and Proceedings
The charter school in this case was originally a traditional public high
school operated by the district. It became a “conversion” charter school
(Ed. Code, § 47605) in 2012 after teachers signed a petition to that end, which
the district rejected but the county board of education approved.
The accounting manual distinguishes plant maintenance and operations,
for which the charter school in this case pays, with a few exceptions,5 from
deferred or major maintenance, for which the district in this case pays. The
latter includes “major repair or replacement of plumbing, heating,
air-conditioning, electrical, roofing, and floor systems,” (Ed. Code, § 17582)
asbestos or lead remediation (ibid.), and any “capital project that extends the
life and the value of a capital asset,” such as “acquiring land and buildings,
remodeling buildings, constructing buildings and additions to buildings,
initially installing or extending service systems and other built-in equipment,
and improving sites.”
In the school years at issue (2013–2014 through 2016–2017), the charter
school paid on average over $1.6 million a year in ongoing operations and
maintenance costs, while the district performed occasional maintenance at the
5 The district performs maintenance on request in certain specific
situations, such as “the maintenance of the heating, ventilation, and air
conditioning . . . system and boilers pursuant to the district’s request to
maintain these systems, troubleshooting the fire alarm and intercom systems
. . ., answering general systems questions (i.e., which valve or breaker controls
an area), major maintenance (i.e., major leaks, opening walls, etc.), and . . .
rare maintenance emergencies . . . (i.e., a gas leak).”
8
site costing $13,000 to $31,000 per year. For the charter school’s first year of
operation (2012–2013), the parties negotiated an agreement on the dollar
amount but could not agree on a method of calculating the charter school’s
pro rata share of the district’s facilities costs. The agreed amount was
$160,000. For the subsequent four years at issue in the litigation, the district
demanded increasing sums while the charter school paid $160,000 each year
pending resolution of the dispute.
In calculating its demands, the district excluded from facilities costs all
general fund revenues devoted directly to “operations” or “maintenance.” It also
excluded funds disbursed from the OMM account to pay for “operations” but it
included funds disbursed from the OMM account for “maintenance.” The
charter school contended that the exclusion paragraph requires the district to
exclude such funds from facilities costs, but the district insisted that all
expenditures from its OMM account for “maintenance” were for “major
maintenance,” rather than “ongoing/routine maintenance” for which the
charter school is responsible.
Each party eventually filed an action seeking a determination of the
amounts due.6 After the two cases were deemed related, the parties, upon
stipulation, filed a single set of briefs contending, respectively, that
maintenance costs paid from the OMM account should or should not be
6 In 2015, the district filed an action to recover the difference between
the charter school’s $160,000 payments for the 2013–2014 and 2014–2015
school years and the sums the district claimed for those years ($309,000 and
$313,000). In 2016 the charter school filed an action to bar the district from
conditioning its offer of facilities for 2016–2017 on the charter school’s
payment of the sums allegedly due. The district filed a cross-petition to compel
the charter school to pay the difference between the $160,000 that it paid in
2015–2016 and the $391,000 that the district claimed, and to pay $484,000
claimed for the coming 2016–2017 school year.
9
included in facilities costs to properly calculate the pro rata share for which
the charter school was responsible. The court’s tentative ruling, however,
expressed a novel view suggested by neither party: that a district may include
in its facilities costs all districtwide plant maintenance and operations costs,
regardless of whether the charter school paid its own maintenance and
operations costs, whether the costs were for “operations” or “maintenance,” or
whether the funds passed through the district’s OMM account.
The court tentatively ruled that the exclusion paragraph requires only
that the district subtract the amount spent by the charter school on its own
ongoing operations and maintenance from the district’s total facilities costs
used to calculate the charter school’s pro rata share of those costs. After
supplemental briefing, the court issued an order reaching a similar outcome,
but based on a revised reading of the exclusion paragraph. That paragraph, it
now held, does not require any deduction or offset for operations and
maintenance costs paid by a charter school. Instead, it is merely a “poorly
worded warning” to a district not to include in its facilities costs any specific
costs paid by the school.
The court issued a judgment in the district’s favor and the charter school
filed a timely notice of appeal.
Discussion
This court reviews de novo the interpretation of statutes and regulations
and their application to the facts, which in this case are undisputed. (Tanner v.
Public Employees’ Retirement System (2016) 248 Cal.App.4th 743, 753.)
1. Section 11969.7 Requires a District to Exclude Plant Maintenance and
Operations Costs From Its Facilities Costs in Calculating the Pro Rata
Share of a Charter School that Pays for Its Own Operations and
Maintenance.
The fundamental question on appeal turns on the meaning of the
exclusion paragraph added to section 11969.7, subdivision (a) in 2008. As noted
10
above, this paragraph reads: “For purposes of this subdivision, facilities costs
do not include any costs that are paid by the charter school, including, but not
limited to, costs associated with ongoing operations and maintenance and the
costs of any tangible items adjusted in keeping with a customary depreciation
schedule for each item.” The dispositive question is whether this provision
requires a district to exclude from its districtwide facilities costs “any [category
of] costs that are paid by the charter school,” as the charter school contends, or
only “any [specific] costs that are paid by the charter school,” as the court held.
In other words, if a district pays districtwide plant maintenance and operations
costs of $900,000, and a charter school within the district pays $100,000 for its
own ongoing operations and maintenance, does the exclusion paragraph
require the district to exclude the $900,000 from its tally of “facilities costs”
when calculating that school’s pro rata share, or does it merely “warn” the
district not to include in its facilities costs the $100,000 paid by the school
itself?
As the charter school contends, the court should avoid “an interpretation
which renders any language mere surplusage.” (Brewer v. Patel (1993)
20 Cal.App.4th 1017, 1021.) Section 11969.7 has always stated that a school’s
pro rata share is based on “facilities costs that the school district pays for with
unrestricted revenues from [its] general fund.” (Italics added.) The statute also
refers to “facilities costs which the school district pays for.” (Ed. Code, § 47614,
subd. (b)(1).) To treat the exclusion paragraph added in 2008 as merely a
“warning” that “costs that the school district pays for” does not include “costs
that the charter school pays for” is to render the exclusion paragraph
redundant, depriving it of any meaningful function. Only if construed to
require exclusion of any category of costs that are paid by the charter school
does the language add anything to the balance of the regulation.
11
The district never refutes this argument, but it adopts the trial court’s
view that excluding the entire category of costs paid by the charter school would
render meaningless the inclusion of “plant maintenance and operations costs” in
the definition of “facilities costs.” In rejecting the charter school’s approach, the
trial court’s order poses this rhetorical question: “If the regulations mandate
that every charter school has the responsibility for its operations and
maintenance, and [if] the regulations intend for the district to exclude this
category when calculating the pro rata share, why do the regulations define [a]
district’s facilities costs to include plant maintenance and operations?” The
court evidently found this question unanswerable, but the answer is simple
and straightforward. While the regulations make operations and maintenance
the “responsibility” of each charter school, they do not require each charter
school to fulfill that responsibility by directly employing maintenance workers
or contracting with third parties for the performance of those services. A
charter school may fulfill its responsibility for ongoing operations and
maintenance either by paying employees and contractors to provide such
services, as the school in this case does, or by contracting with its district to
provide those services. The charter school in this case offered uncontradicted
evidence—including 28 agreements between charter schools and other school
districts—that many charter schools contract with their district to provide
routine operations and maintenance. The practice is apparently common in
cases of “colocation,” in which a charter school shares a facility with a district-
run school. (See New West Charter Middle School v. Los Angeles Unified
School Dist. (2010) 187 Cal.App.4th 831, 847.)
That is the reason for which operations and maintenance costs are
included in the definition of “facilities costs” in section 11969.2 but excluded
from “facilities costs” by the exclusion paragraph in section 11969.7 for schools
12
that pay that category of costs directly. The state board added “plant
maintenance and operations” costs to the definition of “facilities costs” to
enable a district to obtain compensation for such services by way of a charter
school’s pro rata share in those cases in which the district provides such services
to the school. But the concurrently added exclusion paragraph requires a district
to exclude its districtwide plant maintenance and operations costs from its
“facilities costs” when calculating the pro rata share of a school that pays for
such services itself. Otherwise, the school will pay for the services twice, and
the district will receive reimbursement for services it did not provide—an
outcome inconsistent not only with common sense but with the mandate that
public school facilities be “shared fairly among all public school pupils,
including those in charter schools” (Ed. Code, § 47614, subd. (a)) and with the
statement in the 2008 rulemaking file that the pro rata charge ensures that a
charter school’s use of a facility “is cost-neutral to the school district’s general
fund.”7
The district also contends that the charter school’s interpretation is
inconsistent with the equal-application requirement in section 11769.7,
subdivision (e), which provides that the per-square-foot facilities charge “shall
be applied equally . . . to all charter schools that receive facilities.” (§ 11969.7,
subd. (e)) A school district would violate that provision, the district argues, if it
used one amount of “facilities costs” to calculate the per-square-foot charge
applicable to a charter school that pays its own operations and maintenance
7 Moreover, as illustrated by a hypothetical example in the charter
school’s brief not disputed by the district or its amici, if operation and
maintenance costs were not excluded from facilities costs for charter schools
paying those costs directly, a district would receive a windfall whenever a
charter school opted to hire its own employees or to contract with a third party
to perform those services.
13
costs but used a different amount of “facilities costs” to calculate the per-square-
foot charge applicable to schools that do not pay such costs.
The apparent conflict between the exclusion paragraph and the
equal-application requirement is resolved by reference to the regulatory
history. (See Department of Indus. Relations v. Occupational Safety & Health
Appeals Bd. (2018) 26 Cal.App.5th 93, 101.) Under the initial 2002 regulations
it was clear that districts could not include plant maintenance and operations
costs in “facilities costs.” Section 11969.7, which listed the costs comprised in
“facilities costs,” did not include ongoing operations and maintenance or plant
maintenance and operations. Rather, section 11969.9, which authorized
districts and schools to enter separate reimbursement agreements “for specific
services not considered part of facilities costs as defined in Section 11969.7,”
specified that “such services may include . . . operations, maintenance, and
security services.” (Former § 11969.9, subd. (j).) The statement of reasons
explained that under section 11969.4, a charter school “is responsible for the
ongoing operation and maintenance of the facility and the furnishings and
equipment it uses,” while the district “is responsible for items funded through
the deferred maintenance program (such as a new roof) and the replacement of
furnishings and equipment supplied by [it].” Those responsibilities, it added,
“are parallel to the definition of facilities costs in section 11969.[7].” The
distinction made sense: because a district is not responsible for operations and
maintenance at a charter school that pays such costs itself, such a district
should not allocate to such a school a share of the costs that the district incurs
to operate and maintain other schools. Under the original regulations, if a
district provided maintenance and operations services to a particular charter
school, those parties could negotiate a separate agreement for reimbursement.
(Former § 11969.9, subd. (j).)
14
There is no indication in the extensive rulemaking file or elsewhere that
the state board intended the 2008 amendments to alter the obligation of
charter schools that pay their own operations and maintenance costs. As to the
relevant portion of section 11969.7, the 2008 statement of reasons states only
that “[t]he opening paragraph is technically restructured to eliminate the
permissive phrasing and to provide a lead-in sentence for the subdivisions that
follow”; the “reference to the [accounting manual] is updated, though
substantively it is the same”; and “a paragraph is added concerning the
exclusion of costs paid by the charter school, as well as the value of tangible
items paid for by the charter school (which are to be depreciated).” Charter-
school representatives participated in the workgroup that helped generate the
amendments (CSBA, supra, 191 Cal.App.4th at p. 542), and the rulemaking
file includes public comments from school districts, charter schools, and
several interested organizations. Nonetheless, the file contains no indication
that anyone intended or understood that the amendments to section 11969.7
would substantially increase the pro rata share owed by a charter school that
pays its own operations and maintenance costs,
In its briefing, the district implicitly agreed that the 2008 amendments
were not intended to change the obligation of charter schools that pay their
own operating and maintenance costs. However, the district incorrectly
asserted that “[t]he plain language of the original 200[2]8 regulations allowed
school districts to include ‘plant maintenance and operations’ costs [in] the
determination of districtwide facilities costs,” supporting its contention that
charter schools paying for their own maintenance and operations had always
8The district incorrectly refers to the original regulations as the “2003
regulations,” but the regulations were in fact adopted in 2002, and we refer to
them as such.
15
been obligated to pay a pro rata share of the maintenance and operations costs
paid by the district for other schools. At oral argument, the district conceded
that this was a misstatement, and that in fact the 2002 regulations expressly
excluded operations and maintenance costs from the category of “facilities
costs.” (Former § 11969.9, subd. (j), italics added.) Thus, the recognition that
the 2008 amendments did not change the charter schools’ obligations confirms
that those costs are not included in facilities costs payable by a charter school
that pays for its own maintenance and operations. The district also conceded
that under the trial court’s interpretation the 2008 amendments significantly
increased the financial obligations of charter schools that pay for their own
operations and maintenance, but it was unable to identify anything in the
regulatory history indicating that the amendments were intended to have such
an effect.
The district cites another statement in the 2008 statement of reasons to
support the general proposition that the state board did not intend that a
school district deduct “entire subcategories” of costs from facilities costs when
calculating a charter school’s pro rata share. That statement explained that
“a paragraph is added [to section 11969.7] concerning the exclusion of costs
paid by the charter school, as well as the value of tangible items paid for by
the charter school (which are to be depreciated). For example, if the charter
school were to pay for resurfacing of the play area, the depreciated value of the
resurfacing would be annually deducted from facilities costs.” That
hypothetical example, however, concerns the exclusion paragraph’s reference
to costs of tangible items, not the reference to the costs of ongoing operations
and maintenance, the only matter in dispute.9
9 The district asserts that the “play area” hypothetical reflects that
entire subcategories are not to be deducted from facilities costs because the
hypothetical district would deduct the depreciated value of the play area “after
16
The district also cites a response in the 2002 statement of reasons to a
public comment on the draft regulations: A commenter had “proposed an
amendment stating that charges imposed on charter schools should be applied
equally to all charter schools at a particular site, not to all charter schools
across the school district . . . because district costs can vary among sites,” and
the response stated, “The statute requires the calculation to be performed
school district–wide, and does not refer to a site-by-site determination of facility
costs. Also, the [proposal] would result in unnecessary administrative costs.”
While this response did say that facilities costs must be calculated on a
districtwide basis, the proposal that it rejected would have required a district
to calculate all facilities costs site by site, i.e., to calculate “facilities acquisition
and construction and facilities rents and leases” costs for each site, to estimate
each site’s share of contributions to the deferred maintenance fund, and to tally
the costs incurred at each site to replace furnishings or equipment. (Former
§ 11969.7.) The reference in the statement of reasons to district-wide
calculations was to explain why that approach was unacceptable.
That explanation is not inconsistent with the charter school’s
interpretation of section 11969.7, which entails no such site-by-site calculus.
As the charter school correctly reads section 11969.7, the district must
calculate a single, districtwide per-square-foot charge to apply to all charter
the charter school’s total pro rata share of facilities costs was determined [by]
multiplying the per-square-foot amount by the charter school’s square footage.”
But that is not what the statement says. It says that the depreciated value
“would be annually deducted from facilities costs,” not from the school’s
pro rata share after the district’s tally of facilities costs is used to calculate that
share. In any event, the district clarified at oral argument that it does not
contend that the regulations require a district to deduct the amount spent by a
charter school on its own ongoing operations and maintenance from the
district’s facilities costs, which is the approach the trial court proposed in its
tentative ruling but disavowed in its final order.
17
schools in the district for which it provides operations and maintenance, and a
single, albeit different, districtwide per-square-foot charge for charter schools
for which the district does not provide those services. Each charter school that
does not directly pay for its own operations and maintenance services will pay
the district the same per-square-foot charge, and each school that does directly
pay for such services will pay the district the same lesser per-square-foot
charge.
While this interpretation of the equal-application provision is to some
extent inconsistent with the literal language of the regulation, it nonetheless
retains the principle of equal treatment. The equal-application requirement
still compels a district to apply the same per-square-foot charge to all charter
schools that do not pay for their own operations and maintenance, and to
apply the same modified charge to all schools that do. This interpretation gives
meaning to both the equal-application requirement and the exclusion
paragraph, while the strict, literal reading of the equal-application
requirement advocated by the district would render the exclusionary provision
meaningless: A district could never exclude from its districtwide facilities costs
any costs that are paid by a charter school because doing so would result in the
district applying a different per-square-foot charge to the charter school that
paid such costs.
This construction is also consistent with the rationale set forth in the
2002 statement of reasons: “the items considered part of a school district’s
facilities costs are also the school district[’s] responsibility; the items excluded
from facilities costs are the charter school’s responsibility.” Nothing in the
regulatory history suggests an intent to abandon that rationale by making a
charter school reimburse a district for services the district does not provide.
Indeed, before this litigation, the district excluded plant maintenance and
18
operations costs from its calculation of facilities costs used to determine the
charter school’s pro rata share of facility costs. Before the tentative ruling, the
district did not claim that it may include such costs. And since that ruling,
neither the district nor the amici curiae supporting it has identified any
California school district that has included its districtwide maintenance and
operations costs in its facilities costs when calculating the pro rata share of a
charter school that pays its own operations and maintenance costs.
The opinion in CSBA, supra, 191 Cal.App.4th 530, does not support the
trial court’s interpretation as the district contends. In rejecting one of
numerous challenges to the validity of the amended regulations adopted in
2008, the court made the statement on which the district relies: “The facilities
costs that may be charged against the charter school in section 47614 do not
supplant the charter school’s responsibility for its ongoing maintenance and
operations costs. . . . [A] charter school still has the responsibility for the
ongoing operations and maintenance of the facilities, furnishings, and
equipment provided by the school district. [Citation.] And although certain
subdivisions of section 11969.7 include ‘costs associated with plant
maintenance and operations[,]’ and school district contributions from
unrestricted general fund revenues to various specified district maintenance
accounts, in the facilities costs used for the calculation of the pro rata share
. . . , another provision of section 11969.7 expressly excludes ‘any costs that are
paid by the charter school, including, but not limited to, costs associated with
ongoing operations and maintenance . . . .’ [Citation.] Thus, charter schools
retain the responsibility for ongoing operations and maintenance and the
facilities costs charge is not a substitute for such obligation.” (CSBA, supra, at
p. 561.)
19
The comment that the pro rata charge does not “supplant” a school’s
responsibility for operations and maintenance costs was made to refute the
contention that the charge for facility costs could not be considered as rent for
the purpose of section 47613. That provision increases the supervisorial costs
that may be recouped from a charter school if the facilities provided the school
are “substantially rent free.” A charter school’s pro rata share of a district’s
facilities costs, the court held, can be considered as rent for that purpose, but
the imposition of that charge does not eliminate the charter school’s
responsibility to provide for the ongoing operations and maintenance of its
premises. The CSBA court did not address the question here, whether a
charter school that fulfills its obligation by paying directly the costs of
operating and maintaining its premises can also be charged for a portion of
districtwide plant maintenance and operations costs. As indicated above,
however, the opinion did note that “another provision of section 11969.7
expressly excludes ‘any costs that are paid by the charter school, including, but
not limited to, costs associated with ongoing operations and maintenance
. . . .’ ” (CSBA, supra, at p. 561, quoting § 11969.7, subd. (a).) Thus, if anything,
CSBA supports the conclusion we reach that no such costs may be included in
the facilities costs used to calculate the pro rata share of a charter school that
pays for its own operations and maintenance.10
10 The explanation of the alternative that section 47613 gives to a school
district that is the chartering authority for a charter school (not the situation
here) to charge that school an increased supervisorial fee rather than a
pro rata facilities cost fee brings into focus an argument made by the district’s
supporting amici. The amici defend the trial court’s interpretation of section
11969.7 by arguing that for the first school year in question (2013–2014) such
a district could have charged a supervisorial fee of $396,000, reflecting that
the $309,000 pro rata charge the district originally sought to impose for that
year was neither unfair nor unreasonable. That comparison is essentially
irrelevant, but in all events it fails to illustrate the reasonableness of the
20
2. Section 11969.7 Requires a District to Exclude from Facilities Costs
Any Contributions to its OMM Account that are Ultimately Disbursed to
Pay Costs of a Type Paid by the Charter School.
The trial court’s misreading of section 11969.7 overshadowed the parties’
original dispute about the OMM account. The district created that account
pursuant to section 17070.75 of the Leroy F. Greene School Facilities Act of
1998 (Ed. Code, §§ 17070.10–17079.30) (the 1998 Greene Act), which created
“School Facilities Funds” and authorized disbursements to school districts
from those funds. (Id., § 17070.40.) Subdivision (a) of section 17070.75 directs
the board that allocates such funds to require districts seeking funding to
“make all necessary repairs, renewals, and replacements to ensure that a
project is at all times maintained in good repair, working order, and condition.”
Subdivision (b) states that, “to ensure compliance with subdivision (a) and to
encourage school districts to maintain all buildings under their control, the
board shall require an applicant school district to . . . : [¶] (1) [e]stablish a
restricted account . . . for the exclusive purpose of providing moneys for ongoing
and major maintenance of school buildings, according the highest priority to
funding for the purposes set forth in subdivision (a). . . .”
The original version of section 11969.7 authorized a district to include in
its “facilities costs” only general fund revenues contributed to one restricted
account: the deferred maintenance fund. The 2008 amendments expanded the
definition of “facilities costs” to include contributions to a school district’s OMM
account, routine restricted maintenance account, and/or deferred maintenance
fund. Thus, contributions to the OMM account were added to the list of
pro rata share of facilities costs yielded by the trial court’s interpretation of
section 11969.7, which is $1.1 million.
The charter school’s request for judicial notice of documents designed to
show that in subsequent school years the disparity would be even greater is
denied as irrelevant.
21
includable costs in section 11969.7 at the same time the exclusion paragraph
was added. Because the parties’ original dispute involves only contributions to
the OMM account,11 the dispute parallels the question analyzed above: When
the state board amended section 11969.7 by both including contributions to the
OMM account as facilities costs and adding the exclusion paragraph, did it
limit a district’s ability to include contributions to the OMM account in its
facilities costs? As with plant maintenance and operations costs, we conclude
that it did.
Before this litigation, the district acted partly in accord with that view:
In calculating facilities costs, it excluded funds disbursed from the OMM
account to pay for “operations” but included funds disbursed for “maintenance.”
As the district stated below, “In recognition of the fact that charter schools are
only responsible for ‘ongoing operations and maintenance,’ ” it “deducted from
its calculation of districtwide facilities costs” revenues devoted to the
accounting manual function codes for maintenance (8100) and operations
(8200), and it deducted from its contribution to the OMM account
“expenditures under operations (8200).” But it did not deduct expenditures
under maintenance (8100) from its OMM account contribution. In short, the
district treated funds expended on function 8100 as expenditures for ongoing
maintenance for which the charter school was responsible unless the funds
passed through the OMM account. In that case, the district counted
“maintenance” expenditures as “facilities costs.”
11 Confusingly, district documents and witnesses refer to the OMM
account as an “RRM account” (routine restricted maintenance account), but
this is a nomenclatural holdover. The district’s Director of Fiscal Services
testified that the district never had a routine restricted maintenance account,
and that “ ‘RRM’ is just a shorthand for ‘OMM account.’ ”
22
In its brief below—filed before the court issued its tentative ruling—the
district sought to justify its approach as follows: “The district’s . . . contribution
to [the OMM account],12 as its name implies, is intended to pay for major
maintenance, repair, and replacement require[d] under . . . section
17070.75(b); in other words, to ‘extend the life and value of a capital asset.’ By
contrast, ongoing/routine maintenance under [the accounting manual] function
8100 is intended to ‘keep the physical plant and grounds open, clean,
comfortable, and in working condition and a satisfactory state of repair.’ . . .
[The accounting manual] specifically directs . . . ‘[d]o not use function 8100 for a
capital project that extends the life and the value of a capital asset.’ ” The
district added that, “as required by law, [it] incurs expenditures out of the
[OMM account] contribution ‘to make all necessary repairs, renewals, and
replacements’ required under . . . section 17070.75(a) (i.e., major
maintenance), as opposed to the ongoing maintenance that is the
responsibility of the charter school under [section] 11969.4.”
The exclusion paragraph applies to all costs listed in section 11969.7,
with no basis to differentiate between expenditures from the OMM account for
“operations” and those for “maintenance.” The charter school refuted the
district’s claim that all expenditures from the OMM account were for major
rather than ongoing maintenance by showing that the district labeled
90 percent of such expenditures with function code 8100 (maintenance), rather
than 8500 (facilities acquisition and construction). By the district’s own
account, the charter school pointed out, that label indicates that these
expenditures were for ongoing maintenance, not capital projects.
12 The quoted passage in the district’s brief referred to the district’s
“RRM contribution to Resource 8150,” but as indicated in footnote 11 above,
Resource 8150 is the OMM account, to which district employees habitually
refer as the “RRM Account.”
23
Given its interpretation of the exclusion paragraph, the trial court did not
address this narrower question. As a result, the parties rehash their arguments
below. The district insists that expenditures from its OMM account are by
definition for major maintenance, but without refuting the charter school’s
contrary factual showing below. The district’s unsupported insistence is
unpersuasive. Its reliance on the name of the account proves nothing since the
name is “ongoing and major maintenance account.” The district’s assertion
that any contribution to that account, “as its name implies, was intended to pay
for major maintenance, repair, and replacement” simply ignores half the
name. As the charter school asserts in reply, contributions made to an OMM
account “may be used for either ‘ongoing’ maintenance or ‘major’
maintenance.”
The text of section 17070.75 confirms the broader scope of the account.
Subdivision (a) of section 17070.75 requires a district to “make all necessary
repairs, renewals, and replacements to ensure that a project is at all times
maintained in good repair, working order, and condition.” Subdivision (b)
requires it to create an account “for the exclusive purpose of providing moneys
for ongoing and major maintenance of school buildings.” As the charter school
pointed out below, the mandate that facilities be “maintained in good repair,
working order, and condition” (id., subd. (a)) echoes the accounting manual
definition of function code 8100 (maintenance). That function code covers
expenditures “to keep the [facility] open, clean, comfortable, and in working
condition and a satisfactory state of repair”—a definition the district has
acknowledged to encompass ongoing maintenance.
In sum, the district’s claim that all expenditures from its OMM account
must necessarily have been for major maintenance is unsupported, and the
charter school’s showing that 90 percent of the district’s expenditures from
24
that account were for ongoing maintenance is unrebutted. Since under its view
of the exclusion paragraph the trial court made no findings about the
percentage of funds from the OMM account expended for ongoing maintenance
as distinguished from capital improvements, we cannot resolve the controversy
over which the litigation was instituted, and the matter must be remanded for
further proceedings to resolve that dispute.13
Disposition
The judgment is reversed and the cases are remanded for further
proceedings consistent with this opinion. Clayton Valley Charter High School
shall recover its costs on appeal.
POLLAK, P. J.
WE CONCUR:
STREETER, J.
ROSS, J.*
13The dispute over the OMM account also concerned how the district
should treat funds rolled over in the account from one year to another without
being spent. The trial court did not address that issue nor do the parties’ briefs
on appeal, so it too must be addressed on remand.
*Judge of the Superior Court of California, County of San Francisco,
assigned by the Chief Justice pursuant to article VI, section 6 of the California
Constitution.
25
Trial Court: Contra Costa County Superior Court
Trial judge: Honorable Steven Austin
Counsel for appellant Clayton YOUNG, MINNEY & CORR, LLP
Valley Charter High School: Paul C. Minney
Kevin M. Troy
Kaela M. Haydu
Counsel for respondent BURKE, WILLIAMS & SORENSEN, LLP
Mt. Diablo Unified School John R. Yeh
District:
FAGEN FRIEDMAN & FULFROST, LLP
Counsel for amicus curiae on Elizabeth B. Mori
behalf of respondent: for Association of California School
Administrators and California School Boards
Association Education Legal Alliance
Julie Ashby Umansky
Phillipa L. Altmann
Michelle Lynch
for California Charter Schools Association
26