On October 1, 2025, Governor Gavin Newsom signed Assembly Bill 503 (AB 503) into law as an urgency statute, making its provisions effective immediately. AB 503 restores and makes permanent an expanded definition of “Direct Costs” that California school districts may charge to outside entities for the use of school facilities and grounds under the Civic Center Act (Education Code §§ 38130 et seq.).
Key Changes Under AB 503
In addition to utilities, supplies, janitorial services, and employee services, districts may now charge a proportional share of maintenance, repair, restoration, and refurbishment costs (commonly known as capital costs) for the use of nonclassroom spaces and school grounds such as athletic fields, courts, and outdoor recreation areas.
This expansion does not apply to classroom based afterschool programs that provide instruction, tutoring, or childcare, or to organizations contracted by the district to provide instruction during school hours. Revenue collected for maintenance, repair, restoration, and refurbishment must be deposited into a dedicated account and used only for those purposes.
Why It Matters for School Districts
The expanded “Direct Costs” definition had previously been available under prior legislation but expired on January 1, 2025. Without it, districts could only charge limited operating costs, often leaving districts solely responsible for significant “wear and tear” expenses. With AB 503’s passage, districts now have a clear and permanent mechanism to recover capital costs from outside users under the Civic Center Act.
Next Steps for Districts
Districts should take proactive steps to review and update their facility use fee schedules so that they reflect the restored authority to recover broader direct costs. It will also be important to communicate with community groups about potential changes to avoid confusion or disputes regarding increased fees. Finally, districts must establish or confirm a dedicated fund to ensure that any revenue collected for maintenance, repair, restoration, and refurbishment is deposited and tracked in compliance with AB 503.
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.
