Can Proposition 39 School Construction Bond (SCB) Funds Be Utilized to Pay for Maintenance Costs?

FAQ 31

Can Proposition 39 School Construction Bond (SCB)

Funds Be Utilized to Pay for Maintenance Costs?

No – but the distinction between what can and what cannot be funded through such funding often requires detailed knowledge and a careful reading of the applicable legal requirements.

Proposition 39 has been codified in Article XIII A (“Tax Limitations”) of the California Constitution:


(b) The limitation provided for in subdivision (a) shall not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any of the following:

(3) Bonded indebtedness incurred by a school district, community college district, or county office of education for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities (emphasis added), or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters of the district or county, as appropriate, voting on the proposition on or after the effective date of the measure adding this paragraph.

The allowable categories shown in bold above are, for accounting purposes, referred to as “capital costs,” as opposed to “operating costs,” which include maintenance, servicing, and non-capital repairs.  For determination of which side of what can be a fine line in some cases a specific cost item might fall, the primary applicable control documents are Government Generally Accepted Accounting Principles, promulgated by the Government Accounting Standards Board, and the California School Accounting Manual (“SAM”).  This manual is updated periodically; as of this writing, the 2019 Edition is applicable.  CABOC recommends that CBOC members rely upon the expertise of experts in accounting and law for opinions on what is and is not SCB-funding eligible rather than attempting to develop their own expertise in these fields.

In order to be eligible to be funded by SCB funds, an expenditure must meet all of the following criteria:

  1. It satisfies the general requirements, such as being for a purpose or project specifically referenced in the list of projects presented to the electorate when the SCB was enacted.
  2. It creates an asset, or contributes to the creation of an asset (such as planning and administrative costs of the capital program) that has a useful life of greater than one year.
  3. It has a cost greater than the capitalization threshold established by the district, such as $2,500 (as each district has great freedom to set its own, this will vary).  SAM provides for “group” assets for similar items, such as tables, chairs, laptops and tablets, that have individual item costs less than the threshold, but the group totals exceed it.

For fixes, repairs, and replacements, a key consideration is extension of the useful life.  A cost that allows the asset to reach its useful life, such as the normal servicing and maintenance of a heating/ventilation/air conditioning system such as changing filters, or a repair that does not extend the useful life, is not a capital expenditure and, therefore, cannot be charged to SCB.

There are many expenditures that require a detailed understanding of these requirements.  For example, if a roof, with a 20-year useful life, develops a leak in its 15th year of service, and a patch is applied that will allow the roof to last another five years, that is a repair and cannot be capitalized or charged as a SCB expenditure.  However, if, at the 15th year of service, the entire roof was determined to have failed, and was replaced with a new roof with a 20-year life from date of installation, this will likely be a proper capital expenditure and can be chargeable to a SCB assuming the other requirements are met.

For all expenditures that are proposed for charging to SCB, and particularly for those where there may be some question as to propriety, CABOC recommends that the applicable district facilities, financial, and legal executives certify that such expenditures are eligible.  Some districts have SCB bond counsel to? certify; after this is done for the original proposed expenditures, these prior opinions will generally cover most future proposed expenditures, reducing the requirements for later individual opinions.