February 24, 1999

February 24, 1999 | News Releases on Education

Schools Can Be Built for Less Money With Public-Private Ventures

WASHINGTON, FEB. 24, 1999-President Clinton has proposed spending $22 billion to help finance public school construction around the nation, but public-private partnerships being tried both here and abroad offer local school officials an innovative way to build new schools for less money, a new paper by The Heritage Foundation says.

Legislation introduced by Sen. Bob Graham, D-Fla., would encourage such partnerships by giving them access to a limited amount of tax-exempt financing. The Senate Finance Committee is expected to begin holding hearings on the legislation next week.

Public-private partnerships have enabled numerous school districts in the United Kingdom and Canada to build new schools and repair old ones without creating a major drain on government budgets, writes Ronald Utt, Heritage's Grover M. Hermann fellow in federal budgetary affairs.

The partnerships work like a basic leasing arrangement, says Utt, who served as privatization "czar" in the Office of Management and Budget under President Reagan. School officials contract with a qualified local developer to build and own a public school in a particular district, equipping it with everything from desks and telephones to blackboards and computers. The builder then leases the building to the school district-typically for a 20-year term-at a below-cost rent.

So how does the builder make a profit? By leasing the facilities to other groups, such as trade schools and civic or religious organizations, on evenings, weekends and summers, when school is not in session.

The partnerships can bring substantial savings to school districts, Utt says. In Pembroke Pines, Fla., for example, school officials formed a partnership with a developer to build a charter school and saw per-student construction costs fall about 30 percent below the state average for public-school construction-$8,600 per student instead of $11,000 to $13,000.

Such arrangements also allow local districts to build schools more quickly, Utt says. Local officials normally finance school construction by selling bonds to the public, which can entail a lengthy voter approval process that can delay construction for years. With public-private partnerships, officials can move immediately to the bidding process once they decide to build a school.

The partnerships also permit local officials to build schools without borrowing large sums of money to finance the construction. Certain communities unable to borrow because of budgetary restraints should find these partnerships especially attractive, Utt says.

As Nova Scotia's Ministry of Finance has noted, the partnerships give taxpayers "better value for their tax dollars by shifting the responsibility for the operation and/or financing of non-core activities to the private sector."

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