The district has told the city that it is having second thoughts about giving away the McKean Road property--worth $948,000--for $20 over 20 years, especially as the district is facing a multimillion dollar deficit, closing campuses and considering many other budget cuts.

The legislative path for the sports complex was cleared on Dec. 7 when the San Jose City Council certified the project's environmental impact report and passed a General Plan amendment that would allow construction of the complex in the South Almaden Valley Urban Reserve.

The council also approved a memorandum of understanding (MOU) for the Almaden Youth Association, a private nonprofit, to operate and maintain the complex.

But the city council has not yet approved the actual project itself, nor the lease required between school district and the city. The proposed location of the project is the 35 acres of land along McKean Road known as the Caglia Ranch that is owned by the school district.

The MOU outlining the lease was yanked from the city council agenda for Dec. 7 at the last minute because the city attorney's office and attorneys at Miller, Brown & Dannis--hired to represent the district--were (and are) still quibbling over new conditions the school district wants written into the lease.

The Almaden Resident filed a California Public Records Act request with the school district and received documents spelling out the new terms the district wants written into the lease. The documents showed that an appraiser hired by the district valued the property at $12,500 per acre, adding up to a total value of $948,500, which explains two changes to the proposed lease:

* First, the number of acres available for the lease has shrunk from 35 to no more than 19;

* Second, the length of lease was also cut to five years, with no automatic renewal.

"It gives the district and the city an opportunity to evaluate the project's viability. The district will not withdraw this request," the district's attorneys wrote in a letter to Deputy City Attorney Barbara Jordan last November. "Any financial gain from the Caglia property will be considered by the district if it offers an opportunity to save sixth period or class size reduction for our students. Education must come first. Recreation second."

The original MOU included a 20-year lease that would automatically renew every five years. The new, shorter lease throws a wrench into the AYA's fundraising plans. The first phase of the project--just five acres of fields--is expected to cost $5.2 million.

The city has pumped $2 million into the project. But the youth association will have to pay the remainder of the cost, which raises the question of whether the nonprofit organization can find donors willing to contribute to a sports complex that could potentially have only a five-year life span.

No volunteers

The school district also wants a guarantee that the city will only use licensed contractors hired by the city through a bidding process. The AYA and the city had been planning to use volunteers to build the fields, according to the documents. The district also demands that no outside subcontractor be used and that the city monitor all phases of construction.

"A volunteer AYA construction company raises many concerns," said Sonja Shurr, the district's facilities manager, who explained that the district is worried that volunteer crews or any children accompanying them could get hurt on school property, leaving the district vulnerable to a lawsuit. "The city can't supervise volunteers 24 hours a day. The site is too far away."

Shurr also said that due to the environmental problems cited in the project's environmental impact report--including the danger of drying up neighboring wells--the district wants to make sure any construction is done only by those licensed to do it.

The district's Aug. 25 review of the EIR spells out another snag: That by allowing the AYA to be in charge of construction, the city bypasses construction criteria set forth by its public works department, and also avoids having to pay prevailing wages.

The district contends that any city project that uses tax dollars is in effect a public works project. It also wants a licensed contractor to perform all work, even though it does not explicitly require one.

The AYA was looking at the use of volunteers as a money-saving measure, according to Dan Smyth, the president of the group. He said he remains optimistic despite the school district's requested changes.

"We'll have to see how it plays out as we get closer. I would suspect as long as the volunteer contractors are approved by the city and school district and are paying prevailing wages to their employees, it should be OK. But we'll see. We'll follow whatever agreements are made as part of the MOU," he said.

Costs of education

The school district has also asked the city to reimburse an estimated $50,000 in legal fees related to the project.

"To let the city use our land for $1 per year is one thing, but [the] necessity to contract with an attorney for $50,000 for the use of our property is unreasonable. This is not an educational activity but recreational. The district cannot afford these expenditures," the district's attorneys told the city.

The issue of reimbursement was kicked around as far back as July 2004. The city was dubious that the district had actually spent that much on attorney fees. Scott Reese, the city's deputy director of parks, recreation and neighborhood services, sent an email to department director Sara Hensley and other department employees on July 8, questioning the amount the district had cited.

"It's hard for me to believe that the development of the MOU and draft lease would be that costly to develop in-as-much-as [sic] most of the work was done by the city," Reese wrote. "I think we should make a counteroffer at best."

Albert Balagso, assistant director of parks, recreation and neighborhood services, agreed. "If we reimburse, it opens up Pandora's box. It is an added unanticipated cost that will most likely lead to more," he responded, and asked whether the city or the AYA should bear the cost.

But other questions beg answers: Why did the school district spend so much on attorney fees without a written agreement from the city or AYA regarding reimbursement? Where was the school board while the $50,000 was being spent?

According to memos sent by the district to the city in December, the school district suggested it might accept another piece of property within the urban reserve in lieu of reimbursement.

However, since the school district--along with the city of San Jose and the AYA--was named as a party to a lawsuit filed by two groups opposing the project, those legal fees are just going to climb higher.

Back to the board

After the old MOU expired on Dec. 31 the city asked for an additional 90 days to negotiate a new lease. But the school district is standing firm. District Superintendent Don Iglesias referred to the changes as "essential to district approval of a renewed MOU" in a letter sent in January to the city manager's office.

Even when the memorandum of understanding is drafted, both the city council and the school board will have to approve it. Now that 10 Councilwoman Pat Dando has left office and school board member Gary Rummelhoff has moved on to the county board of education, the project has lost its two key political backers and its future remains uncertain.