On a Tuesday afternoon in December, the scene at Pacific Collegiate School is a typical one. As classes let out at the school's Swift Street campus, just blocks from the beach, the rooms empty, the hallways explode into chaos and the schoolyard fills with seventh graders chasing each other, 10th graders flirting and seniors doing their best to ignore it all.

But PCS is anything but an ordinary school. Today, issues of U.S. News & World Report have hit the stands proclaiming this to be the No. 3 public high school and the No. 1 charter school in the country. Last year's ranking listed it as the No. 2 public high school and the No. 1 charter school.

PCS is gifted in other ways as well. As a charter school, it's entitled to public funding--almost $6,000 per student for grades 7-8 and nearly $7,000 per high school student. The rest of its $9,300-per-student spending average comes from donations from parents, who are asked but not required to contribute $3,000 to their child's education each year. For many parents, that means a lot of money; in the last five years, 45 percent of new PCS enrollees have been granted automatic admission because they had siblings at the school or were the kids of board or staff members. The other 55 percent were admitted by countywide lottery.

Among the parents writing checks to PCS is Netflix CEO Reed Hastings, a former state Board of Education trustee and a major supporter of charter schools. Generous gifts from Hastings and other parents, plus frugality on the school's part, have left this school with its population of 435 students a reserve fund of $1.5 million--about a third of the $4.3 million held in reserve by the Santa Cruz City Schools District, which serves 7,000 students.

In short, it's easy to dismiss PCS as an elitist club--one with 45 percent of membership sewn up in the form of legacy admissions--that enjoys all the benefits of government funding without the burdens of providing an entitlement service. Yet PCS is functioning exactly as charter schools are meant to: as laboratories for innovation. School board president Deepika Shrestha Ross points to the school's policy on Advanced Placement courses--high participation in which won it the U.S. News ranking--as an example. (PCS students are required to take five AP classes before graduation.)

"If you look at our entering seventh graders, I don't think they're academically gifted or inclined, but there are such high expectations from teachers that by the time they're in ninth grade, they're working at a much higher level," she says. "It's the opposite of tracking."

Still, perceptions of elitism at PCS and suspicions within the PCS camp that the district resents its success have complicated a fractious lease negotiation begun last spring between PCS and the school district, which is legally obliged to provide PCS with a facility.

Last week saw a breakthrough as the school district tentatively agreed to an offer by PCS to stay at its current location, site of the old Natural Bridges Elementary School, for another several years (details have not been disclosed). All parties are saying they're eager to leave the unpleasantness behind. But the trouble points to an inherent tension between charter schools and school districts that won't be going away anytime soon.

Home, Sweet Home
This local expression of larger tensions began in early 2008 as both sides geared up to renegotiate the PCS lease of the district-owned Natural Bridges site, which closed in 2003 due to declining enrollment. PCS was in the final year of a five-year lease contract averaging $200,000 a year; due to the stepped formula, it was due to pay $275,000 in this, its final year. Each side, eager to do the best by its students in a tightening economy, wound up and let fly a fastball.

The school consulted its lawyer, a top charter school attorney, and came up with a formula based on what other charter schools pay. The going rate: 80 cents per square foot per year for in-district students, $1 per square foot per month for out-of-district students, for a grand total of $130,000--less than half its current rent.

The district, meanwhile, had decided to investigate market rate for a nine-acre parcel a few blocks from the beach and came up with a figure of more than $400,000--double the previous five years' average.

The school was stunned by the district's high figure. The district was incensed by the school's low offer. So what were the two sides thinking?

Nine months later, both sides defend their initial positions. Asked whether it's appropriate to charge a school market rate, district Superintendent Alan Pagano says absolutely. "I come at that from the perspective that it would be irresponsible for the district not to seek fair market value," he says. "As you can well understand form the current economic climate, it's important to maximize what we have for the district."

As for PCS, Ross answers that the figures PCS used to make its offer simply weren't available five years ago, when property negotiation guidelines for charter schools were still new. "It's not like you're renting an apartment," she adds. "It's about this is what the law says."

The law does indeed require the district to provide the school with a facility, even though PCS' charter is with the county Board of Education (though 56 percent of PCS students come from the school district). But here's the trouble: in addition to having to provide a facility for a school that it didn't even charter, the district also loses $6,000 to $7,000 for every student that heads to PCS--yet it still must maintain its overhead.

"If Santa Cruz High loses 50 students to PCS, that doesn't mean we're going to reduce the principal by that percentage and the assistant principals and custodians by that percentage," says district business chief Dick Moss. "We still have to administer the school and pay the utilities."

In other words, there's not enough to go around. The district has already made $1 million in cuts and is looking at more in a second round of midyear budget talks. As outgoing district board president Cynthia Hawthorne puts it, "The way the legislature has set it up, with the charter schools and comprehensive school districts funding coming out of the same diminishing pot, they have created an adversarial situation by definition. This is not only in Santa Cruz, it's happening everywhere in the state."

Making Nice
After much wangling by both sides, an agreement appears to be on the horizon. PCS made an offer last week "in substantial excess" of its current use fee of $275,000, according to board member Ken Cole.

Cole, who heads the board's facilities committee, says he'd like to see the school in a permanent home, or at least in a long-term lease, and soon. "In the long run, I'd say our chances of holding on to [the Natural Bridges Elementary] site are very slim," he says.

Getting into a new place will be hard for PCS, even with its healthy $1.5 million reserve fund, which includes $800,000 designated for a facility. "If we tried to build or even lease long-term, that would disappear in the first 20 percent of the project," Cole exclaims.

Meanwhile, both sides are showing signs of being ready to move on. "These are my friends; these are my neighbors. This should not be happening to us," says Hawthorne.

In an email, her counterpart at PCS echoes the sentiment. "In my mind, this is old news," Ross writes. "How can public charters and traditional public schools work together as one community?

This is where the exciting dialogue on education is."

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