ALJDEC decisions subject to certification as final

24-001SFD-ADM · Department of Administration · 2025-07-31

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the matter of:

Agua Fria Union High School

(a public school district),

Appellant,

v.

Arizona School Facilities Oversight Board,

Respondent.

No. 24-001SFD-ADM

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: Convened May 29-30, 2025, followed by review of the official record received on June 11, 2025, and review of Closing Arguments and Rebuttal Arguments received on July 02, 2025, and July 17, 2025, respectively.

APPEARANCES: Assistant Attorney Generals Joseph Cada, Esq. and Debra Sterling, Esq. appeared on behalf of the Arizona School Facilities Oversight Board (“Board” and “Respondent”).

John S. Bullock, Esq., Molly Walker, Esq., and Vidula Patki, Esq. of Osborn Maledon, P.A. appeared on behalf of Agua Fria Union High School (“District” and “Appellant”).

COURT REPORTER: Eve Burton (50261).

WITNESSES:

Callie Tyler – Assistant Director of School Facilities Division (“Asst. Dir. Tyler”)

Amber Peterson – Finance Officer (“Ofc. Peterson”)

Thomas Huffman – Deputy Superintendent of Operations (“Dep. Huffman”)

Michael Shepard – Executive Director of Finance (“Dir. Shepard”)

OBSERVERS:

Jeffrey Strathman, Esq.

Eric Cutlum

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: Stipulated Exhibits 1-5, Appellant's Prehearing Statement(s), Appellant’s Exhibits 1-4, 8-17, 20, 23-24, 31-32 and 38, Appellant's Closing Arguments and Rebuttal Arguments, Respondent's Prehearing Statement(s), Closing Arguments and Rebuttal Arguments were substantively admitted into the evidentiary record.

The May 17, 2024, Notice of Hearing, and Minute Entries – Granting Continuance dated August 22, 2024, October 24, 2024, December 11, 2024, February 11, 2025, and April 21, 2025, were also admitted into the record for administrative purposes.

Ms. Burton’s hearing transcripts were also admitted into the record.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Arizona Department of Administration (“Department”).

FINDINGS OF FACT

Background and Procedure

The Department operates as the administrative and business hub for the State of Arizona. It is comprised of a number of supporting subdivisions, including the School Facilities Division (“Division”) which oversees the capital needs of K-12 school districts and administers monies from the new school facilities fund (“Fund”) for building renewal.

The Division was created, in pertinent part, for the purpose of constructing new school buildings to address growing enrollment across the State. Together, the Board and Division are responsible for ensuring the State meets its non-delegable duty to provide a general and uniform public school system and “ensure that all districts maintain their facilities in compliance with the State’s building adequacy standards.” Public school districts are eligible for monies based on annual evaluation and approval of average daily membership (“ADM”) projections and the additional square footage that will be needed to maintain adequacy standards in a district. ADM projections indicate if a school district will need additional space within the next two (2) school years in order to meet the building adequacy standards. If the ADM projections “indicate that additional space will not be needed within the next two school years in order to meet the building adequacy standards prescribed in Ariz. Rev. Stat. § 41-5711, the request for monies from the Fund shall be held for consideration by the [B]oard for possible future funding and the school district shall annually submit an updated plan until the additional space is needed.”

If the Board determines that the ADM projections “indicate that additional space will be needed within the next two school years in order to meet the building adequacy standards prescribed in Ariz. Rev. Stat. § 41-5711, the Board shall provide an amount as follows: (a) determine the number of students requiring additional square footage to meet building adequacy standards. This amount for high schools shall not be less than the number of new students for whom space will be needed in the next four (4) years and shall not exceed the number of new students for whom space will be needed in the next eight (8) years. (b) Multiply the number of students determined by the square footage per student. The square footage per student is one hundred thirty-four square feet for a school district that provides instruction in grades nine through twelve for fewer than one thousand eight hundred students and one hundred twenty-five square feet for a school district that provides instruction in grades nine through twelve for at least one thousand eight hundred students. The total number of students in grades nine through twelve in the district shall determine the square footage factor to use for net new students.

Land costs are funded in addition to formula funding for new construction. The Division and the Board utilize a capital planning process in partnership with public school districts to approve funding for new construction from the New School Facilities Fund (“Fund”).

Under the governing statutes, the Board must determine (1) whether a school district qualifies for an award of new construction monies from the Fund and, if so, (2) the amount of the award. Board policy requires that school districts submit capital plans for the construction of additional square footage by September 1st. Capital plans submitted by a school district are required to include enrollment projections. The Board is required to review and either approve or revise the enrollment projections that the school districts included in its capital plan, and must analyze whether the net new growth of students over the next eight (8) years will require additional square footage that exceeds the building adequacy standards prescribed in Arizona Revised Statute (“Ariz. Rev. Stat.”) § 41-5711. Afterwards, the Division develops a recommendation for the Board to hold for consideration, approve, or deny a district’s request based on calculations performed using the Division’s ADM and student enrollment projections.

The Board is required to establish a “uniform format” for the development and annual updating of capital plans, submitted by the school districts. Board policy requires that school districts submit capital plans to be submitted by September 1st. Capital plans submitted by a school district are required to include enrollment projections. The Board is required to review and either approve or revise the enrollment projections that the school districts included in its capital plan. The Board must then determine “the net new growth of students [over the next eight years] that will require additional square footage that exceeds the building adequacy standards prescribed in [Ariz. Rev. Stat.] § 41-5711.”

Minimum adequacy gross square footage requirements and criteria used for determining if school districts meet these requirements are set forth in statute and vary based on grades taught and number of students in those grades. The Board adopted rules establishing “minimum school facility adequacy guidelines” (“MAG”) which is included within the building adequacy standards set out in Ariz. Rev. Stat. § 41-5711.

In making its determination whether a school district is eligible for monies from the Fund, the Board has discretion to “cure the square footage deficiency” by modifying the statutorily required square footages and/or the amount of monies awarded from the Fund for specified “extraordinary circumstances” or for “particular school districts.” Extraordinary exceptions include the number of students served by the school district, geographic factors, and grade configurations other than those prescribed in [Ariz. Rev. Stat. § 41-5711(C)].”

When measuring the square footage per student for the purposes of Ariz. Rev. Stat. § 41-5711(C), the Board is required to “[c]onsider the total square footage available in all schools”, but also requires the Board to exclude square footage” if the school district demonstrates to the [B]oard’s satisfaction that unusual or excessive busing of students, or unusual attendance boundary changes in schools” would be the result of including such square footage and the students within the school’s boundaries. The Board is then directed to exclude “[s]quare footage used solely for district administration, storage of vehicles, and other non-academic purposes from the net square footage.” The Board must also include all portable or modular buildings, except those built as temporary space pursuant to Ariz. Rev. Stat. § 41-5741(D)(3)(d). The Board is then directed to “[i]nclude in the net square footage new construction funded wholly or partially by the [B]oard based on the new square footage funded by the [B]oard.”

The Board must approve a school district’s request for monies from the Fund for a fiscal year on or before December 15th of the prior fiscal year.

If the Board denies a district’s construction request, no further action is taken.

When the Board holds a project for consideration, it is effectively a denial. A district does not receive any monies. Additionally, the decision does not entitle the district to future funding or subsequent preferential treatment.

If the Board approves a district’s construction request, the Division submits the request to the Legislature for the corresponding appropriation.

Once the project is approved and funded in the next fiscal year, and after it has received invoices from the district for completed work, it distributes monies accordingly. The Board’s New Construction Policy specifically details the procedures that a school district must follow in order to receive monies from the Fund for pre-construction services, including architectural, engineering, and project management. This initial distribution of funds requires a school district to submit signed Terms and Conditions. When a school district determines that it is ready to begin construction, it submits its design development plan. Next, the Board is required to determine if the school district’s plans meet the building adequacy standards, and may review and comment on the school district’s efficiency and effectiveness of the plan in “meeting state square footage and facility standards before directing the distribution of the remainder of the monies.” This review by the Board is referred to as the “2nd ADM review” because the Board may decline to continue to distribute monies to the school district if revised enrollment projections no longer support the school district’s need for all or a portion of the awarded square footage. Additionally, the Board will tabulate an updated new construction calculation, excluding temporary portable or modular buildings, and/or any locally funded construction.

On August 30, 2023, Appellant submitted its capital plan for FY-2024 to the Board whereby it requested 9-12 space for 1,000 students.

On December 15, 2023, the Board voted to hold for consideration Appellant’s request for 9-12 space for 1,000 students.

On January 22, 2024, the Division issued a Notice of Denial for Monies from the Fund, and advised Appellant of its right to appeal pursuant to Ariz. Rev. Stat. § 41-5702(P).

On March 22, 2024, Appellant submitted a Notice of Appeal and Request for Administrative Hearing.

On May 17, 2024, as a result of Appellant’s timely appeal, the Board issued a Notice of Hearing setting the above-captioned matter for adjudication before the Office of Administrative Hearings (“OAH”), an independent state agency, to determine whether Respondent properly or otherwise lawfully denied Appellant’s request for monies from the Fund additional square footage. Specifically, Appellant appealed the Board’s December 15, 2023, determination to hold for consideration its request for additional square footage for high school space (i.e. grades 9-12) for 1,000 students based on the Board’s determination that it did not need additional space until fiscal year 2029 (“FY-2029”) concerning the following:

(A) Whether the Board properly included funded but not yet constructed square footage in assessing Appellant’s total capacity;

(B) Whether the Board had statutory authority to modify a prior award to increase the monies awarded; and

(C) Whether the Board properly included the locally funded extension to an existing school facility in assessing Appellant’s total capacity.

Hearing Evidence

Appellant, located in the West Valley, serves approximately 10,000 students in grades 9-12. In the past twenty (20) years enrollment has nearly doubled due to a significant increase in the area’s population.

Appellant has an internal capital planning process whereby it tracks enrollment and submits daily reports to the Arizona Department of Education (“ADE”), works with a demographer to develop enrollment projections, and submits a capital plan to the Division to request an award for additional square footage when projections indicate it is nearing or expected to exceed its capacity.

In 2018, Appellant opened Canyon View High School (“CVHS”) which was constructed to serve approximately 2,100 9-12 students. CVHS exceeded capacity prior to the graduation of its first freshman class.

In Fall 2023 (FY-2024) Appellant opened a locally-funded addition to CVHS.

In Fall 2021, Appellant submitted its FY-2022 capital plan whereby it noted that it expected to “add some 2,000 additional students to the district requiring the construction of an additional comprehensive high school.”

In Winter 2021, the Division’s FY-2022 analysis recommended that the Board hold for consideration possible future funding for a new school project for 1,800 students. The Division projected that in FY-2030 Appellant would need additional space to accommodate 3,284 students. As a result, the Board approved the Division’s recommendation and held for consideration for possible future funding Appellant’s request for additional space.

In Fall 2022, Appellant submitted its FY-2023 capital plan whereby it requested space for 2,250 9-12 students, and noted that it was serving the fastest growing population in the nation; projecting an excess of 296 students.

In Winter 2022, the Division’s analysis recommended that the Board hold for consideration Appellant’s request for additional space. The Division’s FY-2023 projections indicated that Appellant would need capacity for 727 students in FY-2030, while Appellant’s projections indicated a need for additional capacity to accommodate 3,792 students. After contesting the recommendation directly with the Board, on December 15, 2022, the Board rejected the Division’s recommendation and approved an award for a school with a 1,000 student capacity (“c”). The Board did not share the calculations or data it used or otherwise relied upon to support the size of its award, and Appellant did not appeal the Board’s decision.

Appellant did not take any steps necessary to construct a 1,000 student capacity school, and did not receive any funding from the Board in order to do so.

In Fall 2023, Appellant submitted its capital plan for FY-2024 to the Board. Appellant’s capital plan submission requested 9-12 space for 1,000 students in addition to the 2022 award.

In Winter 2023, the Division recommended space for 1,330 students associated with Project 010N as existing and available capacity starting in FY-2023, despite Appellant’s intent to open the school in August 2025 (FY-2026). The Division’s analysis projected that Appellant would have surplus capacity for 1,415 students through FY-2025, and that additional capacity would not be needed until FY-2029.

No explanation was provided to clarify why the Division counted space associated with Project 010N in FY2023, FY2024, or FY2025 before the Project was funded, constructed, open, or available for student use – as Appellant had not completed the purchase of land, finalized a construction contract, or commenced construction for Project 010N.

On or about August 07, 2024, Appellant received construction funding for Project 010N.

Ofc. Peterson testified that the Division included the 1,330 student capacity in its analysis to give the Board the full picture of what was already been approved for Appellant, and because Project 010N was approved by the Board and was therefore always included in Board-funded square footage – as was standard practice. Per Ofc. Peterson, that fact that no actual construction had taken place for Project 010N was irrelevant and inconsequential to the Division’s capacity calculations.

Ultimately, the Division’s analysis recommended that the Board hold for consideration Appellant’s request for additional space.

At the December 15, 2023, Board meeting, Appellant beseeched the Board to consider alternatives. Dep. Huffman proposed that there were three paths that would allow the Board to approve Appellant’s requested funding: (1) revise and increase the Project 010N award to accommodate Appellant’s current ADM projections; (2) cancel the Project 010N award and approve construction funding for a new school under current ADM projections; or (3) approve a new school construction project instead of holding for consideration. Additionally, Ofc. Peterson noted that including the prior year’s new construction award, the District’s projected ADM showed a need for additional square footage. The Board opined that it did not have the authority to modify or cancel its prior recommendation or the Project 010N award. Consequently, the Board approved the Division’s recommendation to hold for consideration Appellant’s request for additional space.

Additional Evidence

Asst. Dir. Tyler, Ofc. Peterson, Dep. Huffman, and Dir. Shepard all testified that the Board is able to make individualized determinations, and has the authority to adjust or eliminate an award if a district’s projected student enrollment numbers “drop.”

Ofc. Peterson testified that she was aware of past instances where an approved new school construction project was subsequently revised by the Board to increase the funding or square footage amount. For example, at the Board’s January 06, 2005, meeting it approved a request to increase a funding award for a 900-student school to an 1,800-student school; beyond doubling the award amount from $14,044,500.00 to $28,284,750.00.

Closing & Rebuttal Arguments

In closing, Appellant argued that the Board’s refusal to modify its December 2022 award was based on an incorrect interpretation of relevant law, and required overturning. Per Appellant, in order to “right size” the 2022 award, which was designed to accommodate Appellant’s needed growth through FY-2031, Respondent should have awarded space to accommodate for 1,013 students because in its December 2023 analysis, the number of projected students needing new space in FY-2031 and FY-2032 was 1,013 students and 1,215 students, respectively; including the December 2022 award. Regarding the 2023 denial, Appellant argued that Respondent had “artificially inflated” its existing capacity, warranting revision or reversal. Appellant also argued that the Board’s additional refusal to modify the Project 010N award was arbitrary and capricious. Per Appellant, the Board’s refusal to provide funding was tantamount to a dereliction of its non-delegable duty to ensure that public school districts were not overcrowded by providing proper funding.

In closing, Respondent argued that as the State entity administering statute(s) applicable to this matter, it was required to interpret and effectuate its purpose and in doing so adhered to requirements set forth in Ariz. Admin. Code R7-6-501 and R7-6-502. Respondent also argued that the Tribunal had no authority to address Project 010N, a decision made in December 2022, as Appellant had waived its rights by failing to timely appeal or otherwise contest it. Respondent opined, however, that the Tribunal disagree, that the agency lacked authority to revise, modify, or cancel Project 010N. To that end, Respondent further argued that State-funded space required inclusion in the capacity calculation for Appellant’s capital plan in December 2023, and thusly its consideration of CVHS’s capacity was properly identified as available space since its construction was completed in August 2023.

CONCLUSIONS OF LAW

The Department has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 41-5701 to 41-5741. The matter was properly brought before OAH pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

Appellant bears the burden of proof to show that the Department erred when the agency issued its January 22, 2024, denial of its August 30, 2023 (FY-2024) capital plan requesting 9-12 space for 1,000 student in addition to the Project 010N award. The standard of proof on all issues in this matter is that of a preponderance of the evidence.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.”

Statutes should be interpreted to provide a fair and sensible result. “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

An agency’s authority is limited to that which is found in its enabling legislation. Neither legislative intent nor agency interpretation supersede a court’s obligation to say what the law is in an administrative proceeding.

The Tribunal may not expand or extend a statute to include that which is not within its provisions. The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result.

The Legislature enacts laws that “provide for the establishment and maintenance of a general and uniform public school system.”

The State must provide funding to “construct new and adequate facilities for growing districts.”

The State cannot delegate to the districts the responsibility to provide adequate capital facilities; rather the constitutional duty is a State responsibility.

Ariz. Const. art. XI, § 1 mandates that the State provide timely funding to school districts for new facilities to ensure schools meet minimum square footage requirements and avoid overcrowding.

The State must provide adequate funding to ensure that no school in its jurisdiction falls below the minimum adequacy standards.

Ariz. Rev. Stat. § 41-5711(A) provides that the Board shall provide funding to school districts for new construction as the number of pupils in the district fills the existing school facilities and requires more pupil space.

Ariz. Rev. Stat. § 41-5711(B)(1) provides that the Board shall determine whether a school building meets requirements by analyzing the total square footage that is available for each pupil.

Ariz. Rev. Stat. § 41-5711(D)(1) provides, in pertinent part, that the Board may modify the amount of monies awarded to a district to cure an identified square footage deficiency based on extraordinary circumstances, including the number of pupils served or projected to be served by the district.

Ariz. Rev. Stat. § 41-5741(D)(3) provides that if ADM projections indicate additional space will be needed within the next two (2) school years in order to meet the building adequacy standards, the board shall provide an amount.

Ariz. Rev. Stat. § 41-5741(D)(3)(a) provides that if a high school district qualifies for an award of additional space, the award shall not be less than the number of new pupils for whom space will be needed in the next four (4) years and shall not exceed the number of new pupils for whom space will be needed in the next eight (8) years.

Ariz. Rev. Stat. § 41-5741(D)(3)(b) provides that the Board may modify square footage requirements based on factors including the number of pupils served by the district, or to be served by the district, and compliance with statutory minimum adequacy requirements. The statute does not delineate a deadline by which the Board is required to exercise its modification authority.

Ariz. Rev. Stat. § 41-5711(E)(3-4) provides that to determine whether space is needed, the Board must calculate the available capacity by identifying “the total space available in all schools in use in the school district,” and then compute the gross square footage of all buildings by measuring from exterior wall to exterior wall.”

Ariz. Rev. Stat. § 41-5711(E)(5-6) provides that the Board will calculate net square footage by adjusting the available [gross] space to exclude certain categories of space, such as square footage used solely for district administration, storage of vehicles and other nonacademic purposes, and include in the net square footage new construction funded wholly or partially by the board based on the square footage funded by the board.

Analysis

The crux of the issue in the case at bar is whether the Board’s December 2023 (FY-2024) determination to hold for consideration Appellant’s request for monies from the Fund was proper or otherwise lawful.

Here, the record reflects that the Board erred in its decision by including the Project 010N award because that space was not “available for student use” until August 2025 (FY2026) per Ariz. Rev. Stat. § 41-5711(E)(6), and because the award was not funded at the time of the Board’s decision in December 2023. The Board also erred by including CVHS’ locally-funded addition in Appellant’s FY-2024 capacity calculations under Ariz. Rev. Stat. § 41-5741(D)(3)(d).

The record also reflects that the Board had, and still possesses, the authority under each of the provisions and guidance cited above to revise its prior award to increase the amount awarded. Respondent’s opinion that it lacked authority to modify the Project 010N award is refuted in Ariz. Rev. Stat. §§ 41-5711(D)(11) and 41-5741(D)(3)(b), Ariz. Admin. Code R7-7-502(E), and the agency’s historical precedent of modifying awards after an initial award determination has been issued. As such, the Board also erred in its refusal to modify the Project 010N award. Respondent’s contention that its inclusion of the Project 010N award in its 2023 determination was proper because it was “standard practice” fails as a policy consideration because it cannot lawfully override the meaning of Ariz. Rev. Stat. § 41-5711(E)(6) when read plainly.

Because the Board’s updated 2023 projections demonstrate Appellant’s needed capacity for an additional 1,013 students by FY-2031 to accommodate its growth, the Board should have modified the Project 010N award in line with those projections and made an award to accommodate those additional 1,013 students. Although Appellant likely should have appealed the Project 010N award, Respondent’s argument that the district “sat on” or otherwise waived its appeal rights is moot whereby the underlying determination was issued in error and requires reversal.

Based on a thorough review of the relevant and credible evidence of record, the undersigned Administrative Law Judge finds that Appellant sustained its burden of proof in this matter. Therefore, it must be recommended that the underlying appeal be granted.

RECOMMENDED ORDER

In light of the foregoing,

IT IS RECOMMENDED that the January 22, 2024, Notice of Denial for Monies from the Fund be overturned by the Department.

IT IS FURTHER RECOMMENDED that Respondent award 9-12 space to Appellant for no less than an additional 1,013 students.

NOTICE

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Final Order will be forty (40) days from the date of that certification.

Done this day, July 31, 2025.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Elizabeth Alvarado-Thorson, Director

Department of Administration

c/o Kimberly Suciu, Esq., Associate General Counsel

100 N. 15th Ave., Ste. 401

Phoenix, AZ 85007

[email redacted]

Vidula U. Patki, Esq.

John S. Bullock, Esq.

Molly S. Walker, Esq.

Osborn Maledon, P.A., Counsel for Appellant

2929 N. Central Ave., Ste. 2000

Phoenix, Arizona 85012-2793

[email redacted]

[email redacted]

[email redacted]

Jeff Stratman, Esq., In-House Counsel for Appellant

1481 N. Eliseo Felix Jr. Way

Avondale, AZ 85323

[email redacted]

Joseph Cada, Esq., Assistant Attorney General

Debra G. Sterling, Esq., Assistant Attorney General

Office of the Attorney General, Counsel for Respondent

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

[email redacted]

[email redacted]

By: OAH Staff