City manager wants answers on Modesto's Village I school facilties

Modesto's city manager wants an audit by an independent third party of all financial records related to Village I school facilities.

In a letter to superintendents of Modesto City Schools and the Sylvan Union School district, City Manager Greg Nyhoff called for an audit of the so-called Schools Infrastructure Financing Agency.

That agency has collected about $52 million in extra Mello-Roos property taxes from Village I homeowners, and it plans to continue charging extra taxes for an additional 27 years.

School officials who run the agency calculate that Village I homeowners are obligated to pay more than $98 million in extra property taxes to build more schools in northeast Modesto. Four campuses have been built, but spending continues.

For example: Modesto City Schools trustees want to expand Enochs High with funds from Village I, despite declining school enrollments and staff layoffs.

But Village I property owners may have paid more than their fair share for schools.

When the Mello-Roos district was created in 1994, new school facilities were supposed to be capped at $52.7 million, and Village I's taxes were supposed to be reduced if school construction funds were received from the state.

Despite collecting $32 million in state funds for those campuses, school officials determined that they were authorized to keep taxing Village I residents at maximum levels. They spent the state funds in addition to, rather than in place of, Mello-Roos taxes. They cited inflation as justification for increasing taxes.

"The decision to continue collecting tax from property owners in the (community facilities district) for additional construction and whether or not the tax has been over- collected are issues Village I residents have been communicating to (Modesto City Council) members and city staff," Nyhoff wrote in letters dated Oct. 7 to Modesto City Schools Superintendent Arturo Flores and Sylvan Superintendent John Halverson.

Because Monday was a Postal Service holiday, neither superintendent has received those letters yet. The Bee, however, received an e-mailed copy of the letter Monday.

In it, Nyhoff stresses how vital it is for the schools to address the public's concerns "as quickly and thoroughly as possible." He says "transparency and accountability are critically important to ensure our public's trust."

Modesto's city government has a stake in the school matter because it was a party to the mitigation agreement that set up the Village I taxing district.

The city, Modesto City Schools, the Sylvan district and the Building Industry Association of Central California negotiated and signed that deal, including the spending cap and the provision requiring taxes be reduced if state construction funds were received.

School officials, however, have said they are not bound by that four-party agreement.

Modesto City Schools and Sylvan said that rather than following the original mitigation deal, they adhere to a different pact they made with each other. Their understanding gives the schools more latitude in how much they can tax and what they can spend.

Discrepancies between those two deals apparently were not noticed until this summer when The Bee began investigating the Village I taxing agency.

The building association also has pushed the school districts to justify their actions.

"While school district officials have been unfailingly polite about this matter, I don't feel they have taken citizens and the association seriously about our concerns related to the potential over-collection of taxes," said Steve Madison, the building association's executive vice president.

"I know when I'm being blown off, and that certainly is the case related to our very reasonable request to audit the books and to seek legal clarification regarding whether the mitigation agreement is the controlling document," Madison said.

For several months, the building association has called for an independent audit of school construction funds. Madison said he hopes the city's request will convince school officials it is needed.

The issue is expected to be discussed at the Schools Infrastructure Financing Agency's meeting at 6 p.m. Oct. 20 at Sylvan's district office, 605 Sylvan Ave., Modesto.

Bee staff writer J.N. Sbranti can be reached at or 578-2196.