AB 2067 Would Extend School District’s Ability to Use the Lease-Leaseback Construction Delivery Method by Five Years

03.16.2026

On February 18, 2026, Assemblymember Darshana Patel (D-San Diego) introduced AB 2067, which, if approved, would extend the July 1, 2027, sunset on the use of the Lease-Leaseback (LLB) construction delivery method to July 1, 2033.

Lease-Leaseback Under Existing Law

Education Code Section 17406(a)(1) governs the LLB delivery method and authorizes the governing board of a school district to lease real property for a minimum rental of one dollar ($1) per year if the lease instrument 1) requires the lessee to construct a building to be used by the school district, and 2) requires the title to the building after construction to vest in the school district at the end of the lease.  Currently, the LLB delivery method expires on July 1, 2027.

Under the LLB delivery method, a financial agreement exists between a property owner (school district) and a contractor, where the property is leased to the contractor. The contractor agrees to develop the property and then leases the property back to the owner for a certain period of time. At the end of the lease period, the property reverts to the owner. This type of agreement allows school districts more flexibility in selecting a contractor, which is based on a competitive solicitation process but does not require selection based on the lowest responsible bid (commonly known as “best-value” competitive selection).

To begin the LLB process, the governing board of a school district must adopt a resolution that declares the district’s intention to enter into a lease agreement that includes required information about the property. The resolution must also schedule a time for the district’s governing board to consider sealed proposals.

What is Best-Value Competitive Selection?

Under existing LLB law, school districts must award the lease through a best-value competitive selection process. Generally, public entities, such as school districts, award public works contracts to the lowest responsive, responsible bidder. By contrast, a best-value competitive selection process allows a school district to award to a contractor using criteria such as technical expertise, past performance, and financial stability. These criteria, as well as the evaluation methodology, are set forth in the school district’s solicitation for sealed proposals and each proposer is given a score based on such criteria.

If passed, AB 2067 would grant school districts an additional five years to utilize the LLB construction delivery method. Please contact your AALRR attorney or the authors of this Alert if you have any questions or would like guidance on engaging the LLB process.

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.

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