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Private Firm Brokers Deal for Building School

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The Niagara Falls, N.Y., school district has an innovative plan for replacing a 75-year-old high school.

Instead of floating municipal bonds to cover its portion of building a new school, the district will become the first in New York, and one of the few in the nation, to turn to a private company to lead an unusual financing and construction arrangement.

Honeywell Inc., the giant Minneapolis-based company that specializes in controls for building systems such as heating and electricity, will oversee the construction of the new high school. The district will then lease the building for at least 30 years.

"This gets the school district out of the business of building buildings," said Robert DiFrancesco, a principal in the 9,100-student Niagara Falls district who has been assigned to work on the project.

"Banks don't own their banks," he added. "A Target store doesn't usually own its building. Everybody leases their stores so they can focus on their main business. Well, our main business is education."

Niagara Falls High School is in need of extensive repairs to its boilers, electrical system, and other areas, Mr. DiFrancesco said. Officials decided that building a new facility would be better than renovating the old building.

In New York, the state covers about 80 percent of the cost of new schools, with the local district responsible for the rest. Last year, Niagara Falls district officials came up with the idea of looking for a private partner to help build and run a new high school.

The district first had to get the state legislature to adopt a waiver to a state law that requires separate heating, electrical, and plumbing contracts for public projects. With that in hand, the district solicited requests for proposals for the high school and considered five serious bids.

Last month, the school board picked Honeywell, with which it was already doing business.

"We're kind of excited it is Honeywell because they are a Fortune 500 company and we have had a very favorable relationship with them," Mr. DiFrancesco said.

Energy Savings Expected

Patrick Sexton, a spokesman for Honeywell, said the project will build on the kind of work the company already has done in some 1,200 schools across the country.

The company offers to take over building controls in schools and cut energy bills. Honeywell guarantees that districts will pay no more for than they currently do for several years, while the company reduces costs and pockets the difference.

After a few years, the districts realize all of the savings, Mr. Sexton said.

Under the Niagara Falls proposal, Honeywell will pick a general contractor for the new high school and arrange the financing for the school district's 20 percent share of the costs. The building will incorporate Honeywell controls, and the district's share will eventually be covered by energy savings, Mr. Sexton said.

The company will not own the building itself, he added. The district will lease it from whoever puts up the money for the district's share, which could be banks or corporations, Mr. Sexton said.

"We're helping broker the deal," he said.

The project could cost anywhere from $20 million to $60 million, officials said. That is because the district also might use the new building to replace its other high school, Lasalle Senior High. Lasalle, built in 1955, serves 1,300 students. Niagara Falls High serves about 1,200.

Mr. Sexton said Honeywell will study the Niagara Falls project closely before deciding whether to try it in other school districts.

"This is a first for us," he said. "But I think we are going to get a chance to make a big difference in Niagara Falls."

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