On September 18, 2026, Governor Newsom signed Assembly Bill 2067 (Patel), which extends the existing authorization for California TK-12 school districts to use the lease-leaseback project delivery method through a competitive best value solicitation process for school construction projects under Education Code section 17406 for an additional five years. The current version of Education Code section 17406 was set to become inoperative on July 1, 2027, but will now remain in effect through June 30, 2032, and become inoperative on July 1, 2032.

In a lease-leaseback arrangement, a school district leases district-owned land to a contractor for a minimum rent of one dollar per year; the contractor must build, or arrange for the building of, one or more buildings on the land for the district’s use during the lease term, and title to the buildings must vest in the district when the lease ends. (Educ. Code, § 17406, subd. (a)(1).)

Since January 1, 2017, districts have been required to select their lease-leaseback contractor through a competitive “best value” process. (Stats. 2016, ch. 521 [AB 2316]; Educ. Code, § 17406, subd. (a)(2).) The Education Code defines “best value” as “a competitive procurement process whereby the selected proposer is selected on the basis of objective criteria for evaluating the qualifications of proposers with the resulting selection representing the best combination of price and qualifications.” (Educ. Code, § 17400, subd. (b)(1).)

What Stays the Same

AB 2067 extends only the existing authorization under Education Code section 17406 for school districts to use the lease-leaseback project delivery method through a competitive best value

solicitation process for school construction projects through June 30, 2032. Importantly, existing requirements still apply, including, but not limited to:

• The governing board must adopt and publish mandatory procedures for evaluating proposers that ensure the best value selections by the school district are conducted in a “fair and impartial manner.” (Educ. Code, § 17406, subd. (a)(2).)
  
• Proposers, and any electrical, mechanical, and plumbing subcontractors, must be prequalified in accordance with Section 20111.6 of the Public Contract Code, and these prequalification requirements must be included in any lease-leaseback agreement. (Educ. Code, § 17406, subd. (a)(2)(C).)
  
• The request for proposals must state each evaluation criterion and how it will be scored. The governing board’s best value determination must be made in writing, and the district must publicly announce the award with a statement of its basis. That statement and the contract file must provide sufficient information to satisfy an external audit. (Educ. Code, § 17406, subds. (a)(2)(D), (a)(2)(E), (a)(2)(F)(iii), (a)(2)(F)(v).)
  
• Following the award, if the price proposal is not a lump sum (a single fixed price), the contractor must provide objectively verifiable cost information. Once any preconstruction services are complete, subcontractors are selected, and any required Division of the State Architect approval of the plans is obtained, the contractor must provide a written rationale for the final price, and the district must approve or reject that price at a public meeting before any further work proceeds. The contract file must document the basis for the final price. (Educ. Code, § 17406, subd. (a)(3).)
  
• Separately, Education Code section 17407.5 generally bars a district from entering into a lease-leaseback agreement unless the contractor commits that it and its subcontractors at every tier will use a “skilled and trained workforce,” made up of registered apprentices and skilled journeypersons. Limited exceptions apply when a project labor agreement is in place. (Educ. Code, § 17407.5.)

What Districts Should Do

• Continue to plan and award lease-leaseback projects under the current rules through June 30, 2032.
• Confirm that board-adopted procedures, prequalification materials, and solicitation and contract documents track section 17406 and existing law.
• Structure each project with counsel.

A note for our community college districts, the lease-leaseback statute under Education Code section 81335 does not contain a sunset provision and currently does not expire.

F3 Law is available to consult with its client school districts in California to discuss policy updates, training, and continuing obligations under these laws. Please contact the authors listed below or the F3 attorney with whom you normally consult for more information.