Rebuilding America’s Schools

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Built in the 1920s, Washington’s James F. Oyster Bilingual Elementary School was on its last legs by the early 1990s. The school’s strong academic record stood in contrast to a structural crisis—leaking roofs, building-code violations and accompanying shutdowns, lack of computer hookups, and limited space. Yet the District of Columbia didn’t have the $11 million required to build a new school, nor did it have the borrowing power.

The city had to make a hard decision: shut down the decrepit building and relocate students, or find another way to bring the school up to code.

School districts around the country may soon find themselves in a similar predicament. What is to be done when facilities are falling apart and there isn’t enough money to modernize them?

Like Oyster Elementary, nearly three-fourths of the nation’s schools were constructed before 1970, with nearly half of them built to accommodate the baby boom generation. With the boomers now on the verge of retirement and a technological revolution having altered educational infrastructure needs, we are overdue for an upgrade.

According to the American Society of Civil Engineers’ 2005 report card on the condition of America’s infrastructure, schools earned a solid D—hardly a grade worth bragging about. Estimates for the cost of modernizing our schools range from $127 billion to $320 billion.

The outlook for individual states varies. In Arkansas, a joint task force found that bringing the state’s schools up to code would cost $3 billion and up. In New Jersey, the cost is more than $6 billion. The costs are upward of $9 billion for retrofitting New York’s schools.

The difficulty of finding funds is compounded by demographics, especially the aging population and the rapid increase of Medicaid costs in state budgets. Taxpayers are growing weary of rising property taxes (up an average of 21 percent between 2000 and 2004), rejecting 60 percent of recent referendums in Massachusetts, half in Wisconsin, and 25 percent in New Jersey. In May, Pennsylvania voters overwhelmingly rejected an income-tax increase to finance schools.

Back to the saga of Oyster Elementary. The District of Columbia school system, under significant pressure from parents, but lacking money and borrowing power, decided that shutting Oyster wasn’t an option, so officials got creative. What the city lacked in financial assets, it made up for in physical assets: The school sat on 1.67 acres of prime real estate within walking distance of the National Zoo.

The city converted its underutilized physical assets into a financial asset by dividing the property, half for a new school and half for a new apartment building—designed and built by the private sector. In return for the sale of the land, Washington got its first new public school in 20 years—a state-of-the-art facility with double the space—without spending a single public dollar.

The Oyster story points to an important and growing strategy for meeting school infrastructure needs: partnering with the private sector. Public-private partnerships can be structured in a number of ways to meet the public sector’s infrastructure objectives while addressing the investment needs of business. Private firms typically finance, design, construct, and operate a public school under a contract with the government for a given time period, usually 20 to 30 years. Businesses usually provide noncore services, such as school transport, food services, and cleaning, while the government provides teaching. At the end of the contract, the government owns the building.

Common public-private-partnership models include the sale of development rights on unused property, and sale-leaseback or lease-leaseback arrangements. In these solutions, school districts sell or lease surplus land to a developer who builds a school and leases it back to the district. In 1996, the Houston Independent School District used a lease-leaseback arrangement with a private developer to obtain two new schools, $20 million under budget and a year earlier than originally planned. A public-private-partnership effort in the United Kingdom, the Building Schools for the Future project, entails more than $4 billion in annual investment to bring schools up to 21st-century standards.

Besides solving the financial problem, benefits of increased private-sector participation in public-infrastructure development include faster construction, innovative design, and more time for school administrators to focus on core educational goals, rather than facilities management.

Administrators pursuing such solutions need a clear picture of their schools’ physical conditions, educational suitability, and enrollment projections. By comparing the costs and benefits of innovative public-private-partnership models being used both in the United States and abroad with more traditional approaches, they will be able to make more informed decisions about which model is most suitable for their own infrastructure needs.

School leaders owe it to younger generations to understand the magnitude of their districts’ own infrastructure deficits and the different financing and delivery models available for addressing them. The sooner this happens, the more options they’ll have.

Vol. 27, Issue 05, Page 30

Published in Print: September 26, 2007, as Rebuilding America’s Schools
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