Two residents from 4S Ranch are suing the Poway Unified School District over $27.7 million in Prop. 51 state grant money the district received last year as a partial reimbursement for the cost of building the K-8 Design 39 Campus, which opened in 2014.

Backers of the 2016 statewide school facilities bond touted the money it would bring in to build new facilities, but plenty of the funds have gone toward paying for projects completed years before the proposition passed thanks largely to a backlog of school funding applications.

With the Design 39 Campus already paid for with Mello Roos funding, Poway Unified’s staff last March recommended the district spend nearly $6.3 million of the new state funds from Prop. 51 on Mello Roos bond debt payments, and the bulk – roughly $21.4 million – on high-priority capital projects.

Kim Beatty, the lone school board member who voted against the plan, raised concerns that it didn’t follow state law, according to video of the March 2019 meeting posted on the district’s website.

State law allows school districts to spend state facility bond funds received after the projects are built on three things: repaying old bond debt, paying for other projects listed in a local bond measure or new high-priority capital projects.

At issue is whether state law only allows school districts to spend state money given for a particular project on different high-priority capital projects if they first realize project savings, by coming in under budget.

“We don’t fit within those parameters,” said Beatty. “We didn’t realize savings from efficient and prudent expenditures that would then be allowed for high-priority projects … I just want to make sure we are on solid ground legally before moving forward.”

At the time, the district’s associate superintendent of business, Ron Little, assured Beatty the plan was endorsed by the district’s legal counsel, Best Best & Krieger.

It’s not clear whether any projects have already been completed with the state funds in dispute.

A district spokeswoman declined to comment, but Little told the board last March projects could include improvements to the locker room at Poway High and portables at Rancho Bernardo High, among other things.

“No longer do we need to build schools, but we do have urgent facility needs,” Little said, noting the district had previously used $290 million in state funds to help pay for the construction of several new schools, including Stone Ranch Elementary, Oak Valley Middle School, Monterey Ridge Elementary, Del Sur Elementary, Willow Grove Elementary and Del Norte High School.

In the lawsuit filed Feb. 26, district residents Albert Bates and Bridget E. Denihan allege Poway Unified didn’t save money on the $81.5 million Design 39 new school construction project, so officials must use the money to retire old Mello Roos bond debt still outstanding. They want a court order requiring the district to do so and are also seeking attorney fees and costs.

Mello-Roos is a state law that lets school districts and other governments raise money through a special tax with voter approval. It’s often collected from newer housing developments to pay for new roads or schools.

Bates and Denihan will pay more than $5,100 and nearly $2,900, respectively, in district Mello Roos taxes this fiscal year alone, according to their property tax bills.

Both declined to comment on the case through their attorney, Eric Benink.

“Mello-Roos taxpayers have paid more than their fair share. It’s only right that the District alleviate their burden by paying down the bonds,” Bates said in a press release.

The Prop. 51 lawsuit isn’t the only bond trouble Poway Unified leaders ran into recently.

District voters rejected a new $448 million Measure P local school facility bond measure this week, the first bond measure sought since district leaders made a notorious bond deal in 2011 that sparked outrage and state school bond reform for its high debt costs.

Despite pleas from district leaders the new bond was needed for dilapidated schools, safety and future-focused learning projects, the measure at the latest count received just 47 percent support, shy of the 55 percent needed for approval.

District leaders previously pledged to bring the bond back in November if it failed this month.

“Even though Measure P was not successful, the school district still faces $1.4 billion in facilities needs identified in our facilities master plan, safety and security assessment, and facilities condition assessment,” Poway district spokeswoman Christine Paik said in an email. “And until the state changes the way it funds schools and facilities, a bond measure is our only option. I can’t speak to what the Board of Education will decide to do moving forward yet, but we do know without funds from a bond measure and state matching funds, there will need to be some tough budget decisions as our facilities continue to deteriorate.”