Time to Exit the Building Business?

Every year, public school districts float billions of dollars in bond proposals in the hopes of securing needed revenue to build new facilities and repair existing buildings. Either they are successful — often resulting in higher taxes for the community; or they aren't — leaving already overcrowded conditions and inadequate facilities to worsen.

But what if schools could get the funding they need for capital expenditures at no cost to taxpayers? Consider these recent examples:

  • Last month in Corning, N.Y., voters approved a plan to allow the city's largest employer to pay $60 million toward the construction of a new high school, conversion of two existing high schools into middle schools, and renovation of district elementary schools. The corporate-backed school building plan eliminates the need for the district to issue bonds — and raise taxes — to pay for the needed construction.

  • In Niagara Falls, N.Y., a public high school was built with private funds and leased back to the district. A private entity holds the property, but after 30 years ownership will revert to the school district.

  • The D.C. public school system will open in September its first new school building in 20 years — and it didn't cost taxpayers a dime. School officials teamed with a private real-estate-development firm to build James F. Oyster Bilingual Elementary School. Construction was financed through a city-issued $11 million tax-exempt bond that will be repaid by the developer with revenue from a new apartment building it was allowed to build adjacent to the school.

  • In Milwaukee, the Police Athletic League (PAL) recently proposed teaming with the district as part of Milwaukee Public Schools' neighborhood schools initiative to build a middle school within PAL's planned recreation center. PAL raised $3.5 million to build the center on a site currently used as a baseball field.

  • Schools in Kansas, Maryland, Missouri and other states also have formed partnerships with private and community entities on construction projects.

In addition, when President Bush last month signed legislation reducing federal taxes by $1.35 trillion over 10 years, the package included a couple of modest measures for school construction. One measure targets public/private partnerships to build schools. Under the new legislation, a provision in the law allows issuance of tax-free bonds to finance construction of schools that would be owned by a private entity and leased to a public school district.

Is this the start of a trend toward private participation — even ownership — of public school buildings? And if so, can public schools accomplish their educational mission functioning as “long-term tenants” in buildings owned by private parties?

While colleges and universities have been collaborating on public/private construction projects for a number of years, the practice still is a novel concept for public school districts. But as the cost to address school construction needs continues to escalate, and taxpayers grow more disillusioned with rapidly rising taxes for facilities, more communities will find themselves asking the question: “Is it time to get out of the building business, turn over construction to someone else, and focus our energies on the ‘business of education’?”

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