Habit 4: Structure Capital Costs Effectively

The fourth habit of fiscally responsible public school districts is effective capital cost management. Capital costs include a host of fixed school resources, including classroom buildings, administrative offices, some durable school equipment, and the land underneath school buildings.

As school districts have aged, so have many of their older structures, leading many to wonder what to do about the many school buildings that are literally crumbling beneath some students’ feet. The National Education Association estimates that Michigan needs some $10 billion in capital improvements, a figure that Michigan state Superintendent Thomas D. Watkins, Jr. believes is low, given that Detroit alone needs an estimated $5 billion and school buildings in several areas of the state are more than 75 years old.[24]

The infrastructure problem has prompted many local school districts to push for increased millage taxes to pay for these increased expenditures. Patrick Anderson of the Lansing–based Anderson Economic Group recently found that since 1994 when voters passed Proposal A, which changed the public education funding system, spending on school infrastructure has increased by a total of $500 million.[25]

School districts have two basic choices in dealing with infrastructure issues:

  1. Purchase new land to construct additional facilities (or, renovate existing facilities).

  2. Lease space from private developers or property owners.

Both strategies have advantages and disadvantages. If school districts opt to purchase buildings themselves and maintain full public control of school property, they need to implement a sound debt/bonding policy. On the other hand, if they want to lease property from private land owners, they need to properly negotiate the terms of the lease.