A photo of Beverly Hills High School, which is resisting plans to build a subway tunnel underneath the school.
No train in vain for Beverly Hills. Damian Dovarganes/AP

Instead of reconstructing aging school facilities, the district is using a voter-backed ballot measure to pay for a legal campaign against a subway extension.

Updated: November 01, 2018

Earlier this month, students, parents, and friends of Beverly Hills High School staged a walkout to protest the Purple Line, a new Metro extension that’s set to travel under the school.

The protest was more like a field trip: The students got permission slips signed by their parents and were ferried on district school buses to the nearby park, where they chanted and displayed pre-printed signs with slogans like Save Our School, Health And Safety First, Trump the Metro. According to one letter to the editor in a local weekly, the PTA served snacks.

This “made-for-TV” rally, to borrow the words of the L.A. Times, was not the school’s first act of resistance against the Purple Line. Since 2012, with four separate lawsuits, Beverly Hills Unified School District has been fighting to stop the $9 billion plan by L.A. County Metro to extend a subway line that runs from downtown to Koreatown nine more miles to Westwood via Beverly Hills. The approved alignment would route the train beneath the high school, which serves the residents of one the most affluent communities in the L.A. region.

The school’s legal battle has largely hinged on claims that air pollution from the construction could endanger the health of students, and that drilling could spark a methane explosion from the oil and gas pockets that sit underground. (Much of mid-city and West L.A. sits on top of an old oil field.)

So far, these arguments have failed to derail the project: Funded by voter-backed sales tax funds and two federal grants, the Metro’s voluminous environmental, engineering, and safety reviews held up in court multiple times. After decades of talk and planning, the construction phase that will eventually reach Beverly began a few miles from campus last Monday.

The back-and-forth between Metro and Beverly Hills in county and federal courts has been well-documented in the local media. Less scrutinized has been how the district, guided by the Board of Education, has been bankrolling its anti-subway legal campaign. At least $13 million in school bond proceeds, fed by a voter-backed ballot measure to reconstruct aging school facilities, have financed the ongoing battle.

That’s according to seven years’ worth of performance audits of Measure E, which authorized the district to issue $334 million in general obligation bonds after Beverly Hills county voters approved it in 2008. Its original purpose was described as such:

Funds received from the sale of the bonds shall be used for the specific purposes set forth in this Measure including modernizing school facilities; making structural seismic repairs; upgrading, repairing and reconstructing classrooms, infrastructure, multi-use, gyms, libraries, science and technology labs, roofing, plumbing, heating, ventilation and electrical systems.

The district badly needed upgrades back in 2008; all of its five Spanish-style campuses date back to the 1920s. To give a sense of what’s still needed, an additional $385 million bond measure to finance capital improvements to school was passed by voters in June 2018, in order to “improve aging Beverly Hills schools, upgrade and replace inefficient heating, cooling, and electrical systems, classrooms, libraries and science labs, deteriorating restrooms and leaky roofs, and provide modern classroom technology and science equipment,” according to the Los Angeles County Registrar.

Some new construction, though not much, has been completed on district campuses since Measure E was passed. One middle-school auditorium has been renovated; some classroom work has been done. Meanwhile, the scope of the projects have widened. The use of bond proceeds for the district’s subway legal battle has equalled, and sometimes exceeded, its spending on these types of projects, according to audits conducted over the years by various firms.

For the financial year that ended in June 2012, for example, “when measured by individual school sites and projects, the largest Measure E expenditure … was approximately $1.7 million for legal and other professional services for matters related to the MTA’s proposal to construct a subway tunnel underneath BHUSD property,” stated the performance audit for that year.

In the financial year ending in June 2014, the district spent $2.3 million on MTA legal fees, which totaled about 15 percent of its overall Measure E spending that year. The following year, the district upped its legal ante to $3.2 million, which totaled 29 percent of the school bond proceeds spent.  

The figures below come from several years of audits available on the school district’s website. Note that the 2010-2011 figure includes fees for a separate lawsuit involving the district.

FY 2010-2011: $2.7 million
FY 2011-2012: $1.7 million
FY 2012-2013: $1.5 million
FY 2013-2014: $2.4 million
FY 2014-2015: $3.2 million
FY 2015-2016: $.5 million
FY 2016-2017: $1.1 million
Estimated total: $13 million

According to multiple bond counsel and public finance experts, it is uncommon for school districts to spend bond proceeds on litigation that may not be related to the scope of the bond’s original purpose. “The further you get from the actual project, the harder it is to make that connection,” said Scott Ferguson, a public finance lawyer at the San Francisco-based firm Jones Hall.

Spending such significant amounts, in particular, “raises red flags, without a question,” said one high-ranking state finance official who asked not to be named.

Leaders of Beverly Hills Unified first sued Metro in county court in 2012, arguing that Metro’s original, $13.8 million impact review had violated various state environmental and procedural laws. Apart from fears of an explosion, the district’s main concern was that tunneling under the school could damage property and impinge on the school’s future construction plans. (As of recently, that includes an underground parking lot.)

But there have been other subway fears aired—and stoked—by local politicos and libertarian-leaning publications, including threats of terrorist attacks and the theory that the project serves Democratic electeds in the pocket of real estate developers. After a judge upheld Metro’s extensive review, the school filed similar claims against the Federal Transit Administration in 2013. Three years later, a district judge ruled that aspects of the review had to be supplemented, but that subway construction could otherwise move forward. Metro complied.

In January 2018, the district filed another lawsuit against the FTA and Metro, seeking an injunction in order to require the agencies to “conduct a proper environmental analysis, evaluate the serious health effects the Project and associated construction next to campus will have on the students, and prohibit the FTA from obligating federal funds to the Project until the agencies have fully complied with federal law,” according to a press release.

Metro spokesperson Dave Sotero has asserted that the project’s reviews are fully sound, legally compliant, and most importantly, indicate that the chosen route is the safest overall. “We will not build an unsafe project that jeopardizes the health and welfare of the public,” he told the Beverly Press last month.

The type of bond used by Beverly Hills was designed “to ensure that the proceeds from the sale of school facilities bonds are used for specified school facilities projects only,” according to the California Constitution and Education Code. This does not necessarily discount the use of proceeds for litigation. But, normally, such expenses would be for lawsuits or legal work that pertain directly to the capital improvements outlined by the project’s purpose and which voters approved, such as settling an environmental dispute or an issue raised by a construction contractor.

“If there are issues that require the services of lawyers to straighten out something that the district is told by the voter to do, then that makes sense,” said Dale Scott, a California financial advisor with expertise in school bonds who said he has never worked with Beverly Hills Unified. “But if it’s not related somehow, it’s hard to see how you get there.”

The district asserts that Metro’s tunneling underground could disrupt its future plans and overall autonomy. “The existence of tunnels and tunnel easements under the campus effect [sic] both short term current construction efforts and the ability to modernize, restructure and construct new buildings at the High School,” Romi Azevedo, the director of communications for the district, told CityLab via email. “Legal expenses for litigation to protect the campus from both the short term and long term effects are proper bond expenditures.”

But Metro has stated that the district’s remodeling plans could be fully accommodated throughout the subway’s construction. Furthermore, multiple performance audits of its use of Measure E funds have raised concerns about the relationship between the two. Different auditing firms have made repeated recommendations to the district to clarify the connection between the subway fight and the rehabilitation and renovation of its campuses.

The Metro Red Line’s Hollywood/Western station in Los Angeles. Disputes over the route of the Purple Line have persisted for several years. (Reed Saxon/AP)

The audit for the 2009-2010 financial year states, “we would caution the District that the amount of legal fees paid be closely monitored so that Measure E funds can be maximized in their direct application toward facilities modernization and construction purposes.”

The audit for the 2011‐12 financial year directs the school board to “include MTA‐related litigation and any other legal and related matters in a District list of authorized projects authorized for Measure E use, including the rationale for the relationship between the legal matter and the construction and modernization projects to be funded by Measure E.”

The most recent audit for the 2016-2017 financial year states, “We also identified legal fees charged to the Bond program where it is unclear whether the scope of work performed was allowable per ballot language.”

Based on a review of public project documents, no list or rationale seems to have been ever publicly produced, according to Beverly Hills Weekly editor Josh Gross. His paper has been publishing quarterly public records requests of the districts’ substantial legal expenses since 2013 (past issues are available online). “I never saw a list like that,” he said. The district did not supply any such document upon request.

The district did solicit and obtain at least two legal opinions from outside counsel authorizing the use of these millions of dollars in bond proceeds for its legal crusade against Metro. These are referenced, though not republished, in the public audits. “According to two legal opinions provided to the District, such expenditures are legitimate Measure E bond expenditures because the construction that is impacted by the subway project is eligible to be funded by Measure E bond funds,” stated the 2012-2013 financial year audit. The most recent firm brought on as bond counsel to the district is San Francisco-based Stradling Yocca Carlson & Rauth.

The school has not discontinued financing its legal battle with bond-backed dollars. According to the latest spending records published by the Weekly, in the first quarter of 2018 alone, the district paid out $363,497.40 to Kasowitz, Benson, Torres LLP, the firm representing the district on their latest MTA lawsuit. That firm may sound familiar, thanks to Marc Kasowitz’s former role as personal lawyer to President Donald Trump.

The Citizens’ Oversight Committee that is meant to oversee and report on the district’s use of the bond money, appointed in accordance with California state law, has also raised several concerns over the money, especially in regards to the subway melée. According to the last annual report regarding financial year 2016-2017, published over the summer, the committee counted $14,227,000, or nearly 9 percent of total bond expenditures, spent on the MTA fight from the start of the bond measure.

The committee members raised concerns over this growing sum, as well as over transparency issues. They noted in their report that its requests for the same legal opinions authorizing the use of Measure E funds for litigation have not been met by the Board of Education. They made the impact of these legal fees plain in the concluding statement of their report:

The District’s MTA litigation was unsuccessful on appeal. As a result, the District filed a Federal law suit in January 29, 2018 asserting that adjustments to the proposed subway tunnel should be made. The District does not have a budget for this litigation. Legal expenditures reduce bond funds available for construction.

The outgoing president of Beverly Hills Unified’s Board of Education, Lisa Korbatov, has often been at the center of publicity around these years of lawsuits. At a community meeting on October 4, Korbatov described appealing in person to President Trump to halt the subway construction. Her last name has come up in connection to the president before: Her husband helped broker the hazy transference of a Beverly Hills mansion to Trump. At the same meeting, Korbatov helped drum up support for the student rally on Friday, and took partial credit for the previously anonymous “Stop the Purple Threat” website, devoted to opposing Purple Line construction. It features a petition, contacts for writing local representatives, and promotional videos that feature such lines as, “Beverly is a family. Metro is a plague.”

Korbatov directed requests for an interview to the school district.

The idea of a subway extension serving the wealthy West Side of L.A. has been around for decades, and has faced resistance at every turn. At this point, many of the Purple Line’s detractors in Beverly Hills insist that they do not oppose the subway itself: They just prefer an alignment along busy Santa Monica Boulevard that avoids the sensitive area of the high school.

“We think expansion is great and it’s good for everyone,” said Sean Toobi, a senior at Beverly Hills High who serves as a student liaison to the Board of Education. However, even though there are subways that travel below schools all over the world (including in L.A.), the risks posed by the Purple Line route to Beverly Hills’ future student body are too great, he believes. “Nothing should come above the students and their health and safety.”

Asked about whether he saw the litigation as a waste of school resources, Toobi said that the lawsuits have produced some good outcomes, despite the losses. But he added that he sees more potential in a class action lawsuit from students and families themselves, rather than more appeals from the district. There’s talk brewing now of such a collective legal effort.

So it seems Beverly Hills is not giving up its subway fight yet. And though the use of bond dollars for it has been reported on by media outlets here and there—and quite consistently by one of the community’s local weeklies—no one has brought a lawsuit against the Board of Education or the District to stop it. That would be the legal remedy, according to David Casnocha, a partner at Stradling Yocca Carlson & Rauth.* His firm served as counsel on the most recent issuance of the bond. “The remedy is not newspaper articles or wringing your hands,” he said. “It’s a legal action asserting that these actions were unlawful and seeking an injunction until a court can decide yes or no.”

It could be telling that there has been no lawsuit over the use of the bond funds in the many years since it was issued, Casnocha continued. And it might be too late for a retroactive lawsuit, since the statute of limitations for actions over local bond expenditures is just 60 days. Indeed, Beverly Hills voters passed another school bond to the tune of $385 million dollars this past June.

“You’d think if the electorate at large was unhappy, they would not have voted for that,” Casnocha said. “Until there is a lawsuit and until advised otherwise, no one has asked me for advice about changing behavior. But only a lawsuit will really press the issue with respect to many of those expenditures. And if you sue, it has to be timely.”

*CORRECTION: An earlier version of this story inaccurately indicated that David Casnocha's law firm issued guidance on the school district's use of bond dollars to fund the Metro litigation. In fact, Mr. Casnocha stated that his firm "d[id] not have an opinion about whether it was right or wrong" to fund the Metro litigation. He further indicated that while his law firm had not permitted bond funds to be used to fund litigation, bond funds could appropriately be used to fund litigation if there is a legal dispute associated with the bond project. We regret the error.

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