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Reason Foundation

Rebuilding After a Disaster

Innovations for Public Buildings and Schools

Lisa Snell
November 30, 1999

Mississippi should focus on creating new schools. Chester Finn from the Fordham Foundation has proposed using chartering and contracting, to help the state quickly build new schools. The governor could put out a bid for proposals to new school leaders. Over the past decade and a half, the charter school movement has been developing expertise in building schools from scratch. Existing school networks—such as KIPP, Aspire Public Schools, Achievement First, Edison, etc. could quickly set up autonomous school networks.
PPPs for School Construction

Public-private partnerships offer a proven mechanism to speed up new school projects and manage their costs. During recovery from Katrina, PPPs can help get schools back on line.

Useful resources on school construction PPPs include:

According to the Heritage Foundation's Ron Utt, "Section 422 of the Economic Growth and Tax Relief Reconciliation Act of 2001, give towns and cities throughout the country the opportunity to build public school facilities faster, better, and at lower cost by forming public-private partnerships with qualified real estate investors and developers. Under this approach—pioneered in England, Scotland, and Nova Scotia, as well as in the states of Florida and Texas—public school systems can now form partnerships with private-sector investors who fund the construction of public school buildings and lease the facilities to public school systems at annual costs that are below the costs that communities would incur if they built the schools on their own."

To the utmost extent schools should be built with public-private partnerships. Perhaps one of the best and brightest examples of the potential to be harnessed through private enterprise comes from the District of Columbia Public Schools (DCPS). In December 1999, DCPS entered into a unique partnership with LCOR, a firm specializing in developing and managing facilities, to rebuild the James F. Oyster School. The new school will replace the deteriorating 73-year-old school in the Woodley Park neighborhood of Northwest Washington. LCOR will build the new school in exchange for excess land on which a new privately owned 211-unit apartment building, named the Henry Adams House, will be located.

The new school is the first new public school built in the District in 20 years. The current school has a leaky roof, does not have a cafeteria or gym, and cannot be wired for computers. The new school will be twice the size of the old one and will have a gym, kitchen, cafeteria, and common space.

A creative financing structure, made possible through the partnership, helped make the new school possible while realizing the value of an undervalued asset, the school's excess land. The new school is being financed by an $11 million, 35-year tax-exempt bond issue underwritten by Paine Webber. The bonds will be retired by means of PILOT (Payment in Lieu of Taxes) payments made by the private owners of the Henry Adams House project. Under the unique PILOT program, the apartment building owners will make these payments in place of real-estate taxes.

The partnership has brought a much-needed new school, as well as housing, to the D.C. area. Most importantly, the unique financing structure has brought these projects to fruition with little or no cost to the taxpayers—truly a win-win situation.

D.C. school officials started out skeptical but eventually got behind the project when the benefits became obvious. Mary Filardo, former head of the Oyster PTA, said after she helped arrange the deal: "It is important for other communities to do what we have done."

Lisa Snell is director of education and child welfare at Reason Foundation.


Lisa Snell is Director of Education


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