Joint Cabrillo College-UCSC student housing project in limbo after changes to state budget
What had been expected to be a $111 million state grant to cover Cabrillo College’s portion of a $181.7 million joint 624-bed development at the Aptos campus became bonds issued by the school with state support. That, the school’s president says, has left Cabrillo leaders in a “very uncomfortable space to move forward [with the project] right now.”
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Cabrillo College leaders say a last-minute change to the state’s budget has cast doubt on the future of a joint 624-bed affordable student housing project with UC Santa Cruz.
Up until the end of June, the state legislature and Gov. Gavin Newsom had approved budget drafts that included a $111 million grant toward the joint Cabrillo-UCSC project, a 271-unit housing complex split between the two schools that is expected to cost a total of $181.7 million and which would be located next to the baseball and softball fields at Cabrillo’s Aptos campus.
The college’s original proposal to the state was that the state would provide a $111 million grant to pay for Cabrillo College’s part of the project as part of the state’s effort to help alleviate the housing affordability crisis. UCSC would finance its portion by issuing about $70 million in bonds.
In early June, state Sen. John Laird said he was “very optimistic” about the funding, which was expected to come from the state’s Higher Education Student Housing Grant Program, designed to support “affordable, low‑cost housing options for students enrolled in public postsecondary education in California.”
That all changed when the legislature released an update to the budget June 27 showing that the money was no longer in the form of a grant; rather, Cabrillo would issue bonds and the state would support the college. The shift also happened to several other community colleges expecting grants for affordable housing projects.
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The state government has not specified how it will support community colleges’ efforts to build affordable student housing. Cabrillo leaders say it remains unclear how much the state would be willing to contribute to its housing project, or what form any state support would take.
The legislature has a Sept. 15 deadline to pass any bills — which could mean the college might not know until then. Cabrillo President Matt Wetstein told Lookout late last month that the housing complex might not be able to be built if the legislature doesn’t change its mind by that deadline. “If that doesn’t get fixed between now and September, I don’t know that we can do the project,” he said June 28.
Wetstein said he’s been feeling let down by the change and continues to seek clarity about what level of support the state will offer. He said Cabrillo’s leaders feel it’s a “very uncomfortable space to move forward [with the project] right now.”
“If that debt burden is entirely on us, it blows up the entire revenue model and expenditure model that we turned in to the state, and that’s what’s so disconcerting,” he told Lookout. “The original intent of the legislation was to provide housing for the most needy at a very, very low cost and that’s going to disappear if they change this in this way.”
H.D. Palmer, deputy director for external affairs with the California Department of Finance, said in an emailed statement Tuesday that “the amount of support provided to each college will become more clear once the applicable colleges move to issue their applicable revenue bond.”
He added that the reason for the change between the May revision of the budget and the final Budget Act passed recently was that the “legislature and the Administration jointly determined that community colleges could issue local revenue bonds to support approved affordable student housing projects with the state providing ongoing support for those projects.” Palmer did not offer more details about what kind of support the state would offer Cabrillo College.
The change comes as the state is facing an estimated $31.5 billion deficit. Wetstein said it’s possible that the shift is a result of the deficit and the state not knowing the full revenue amount from income taxes until this year’s extended deadline in October.
“That’s my guess on what they’re trying to do, is to hedge a little bit, find out what the revenues are going to be,” he said. “But I don’t know.”
Despite the uncertainty, Cabrillo’s board approved a request to allow school administrators to issue the bonds if necessary. The board unanimously approved the resolution to avoid delaying the bond issuance once they receive more clarification from the state. Wetstein and Assistant Superintendent Bradley Olin told the board that getting approval now rather than waiting until September or October helps the college stay on track and avoid hefty inflation costs further affecting costs of the project.
“If that debt burden is entirely on us, it blows up the entire revenue model and expenditure model that we turned in to the state, and that’s what’s so disconcerting. The original intent of the legislation was to provide housing for the most needy at a very, very low cost and that’s going to disappear if they change this in this way.”
— Cabrillo College President Matt Wetstein
In the meantime, Olin said, while the college is able to move forward on the bond application process, leaders from the community colleges are still working on how the state will support the colleges’ projects. For example, he said colleges are hopeful that the state will ultimately agree to issue the bonds itself.
Olin said Cabrillo is still trying to understand how it could even offer affordable housing rates required by the state’s program and be able to pay back the bonds with the revenue of the project. “We’d have to show market-rate rents to be able to satisfy the bond marketplace that we’re actually in full faith to be able to retire that debt,” he said.
He emphasized that because this is the state’s program, the state should issue the bonds.
“This is the state’s affordable-housing program — not individual community colleges’ affordable-housing programs,” he said. “So we’re really trying to push it back on the state to take ownership of their priority and policy objectives.”
Wetstein said he thinks that between now and September, state legislators will be making changes to the funding allocations but he doesn’t know what the end result will be.
“I would not feel confident saying that the project’s a go until there’s an assurance on the grant switcheroo being actually funded by the state,” he told Lookout.
Prior to the change in the funding model, Wetstein estimated that the college could break ground in September 2024. Cabrillo doesn’t currently have student housing and says it urgently needs it to address the region’s high cost of living.