During the past decade, many parents, teachers and public
officials have argued that public school buildings are overcrowded, obsolete or
unsafe. This concern has produced a surge in spending on school infrastructure —
a cost to taxpayers that could be reduced through public-private partnerships.
According to U.S. Census data, spending on primary/secondary
facilities has increased 213 percent over the past 10 years, and is growing
almost twice as fast as spending on new residential construction, which itself
has experienced one of the biggest booms in recent memory. In 2004, school
districts spent more than $29 billion nationwide on new schools, additions and
modernizations. This is a record, according to American School and University
In Michigan, school construction spending is up dramatically.
According to the Anderson Economic Group, between 1994 and 2004 property taxes
dedicated to school debt activity — such as school construction spending —
increased 217 percent. This greatly outstripped inflation, which rose by less
than 21 percent during the same time period. It also outstripped enrollment,
which increased less than 12 percent, according to the U.S. Department of
Education. A February 2004 report from the Michigan Land Use Institute found:
"(A)nnual expenditures in the U.S. for school construction doubled since 1992.
In Michigan they tripled."
Indeed, from 2003 to 2004, applications to the Michigan
School Bond Loan Program, a state Treasury plan that indirectly subsidizes the
cost of school borrowing for new construction projects, jumped from 24 to 40.
The overall value of Michigan public school projects (including technology,
furnishings, site acquisition and other expenses) increased by a surprising 65
percent between 2003 and 2004.
What mechanisms might be employed to save districts — and
thus taxpayers — money in school construction? A number of innovative solutions
have emerged in the United States, Canada and the United Kingdom, and many
involve partnerships with private developers, builders and nonprofit agencies.
In the United Kingdom and Nova Scotia, a private developer
will often finance 100 percent of the construction of a new school in exchange
for long-term lease payments from the school system. This lease may run for 20
or 30 years and cover only normal business hours. After hours, the developer is
free to lease the building to compatible educational organizations such as trade
schools, refresher programs, colleges and universities.
Much of the developer’s increased revenues under this
arrangement are effectively passed on to schools in the form of lower rent. When
builders know they can make more money by leasing their facility at night, they
adjust their bids accordingly when they vie for the right to build the school.
In many cases, school systems also have the option to buy the
building at a predetermined price. Contracts may even call for the owner of the
building to refurbish the kitchen or other aspects of the building.
The United Kingdom has the world’s most extensive
public-private partnerships for schools. Since 1997, such partnerships have
driven the new construction or renovation of 256 school buildings. Currently,
work is underway on another 291 schools, and an additional 222 schools are in
various stages of the procurement process for renovation or new construction
through public-private partnerships. Clearly, the approach has appeal.
Consider the money that could be saved if a frugal public
school district partnered with an organization like the Bouma Corporation of
Grand Rapids (this example is not meant to suggest Bouma’s interest in such a
partnership). The Bouma Corporation designs and builds charter schools for as
little as $65 per square foot, or about $100 per square foot when land
acquisition and furniture costs are included. By contrast, new conventional
public schools, such as the Cass Technical High School and Detroit High School
for the Fine, Performing & Communication Arts, cost about $262 and $391 per
square foot, respectively. Furthermore, Bouma’s buildings are built in one-fifth
the time of similarly sized school buildings.
Combining such private-sector cost advantages with a
partnership in which a private firm can rent out a building after normal school
hours could dramatically reduce school districts’ costs for developing
educational infrastructure. The savings could matter greatly in fast-growing
suburbs, deteriorating cities, and places that are experiencing a demographic
boom of school-age children. Although there are many reasons why some
communities are struggling with school infrastructure, a common cause of the
shortfalls is the cumbersome public-sector design and construction process.
As has been demonstrated in the United States, Canada and
especially the United Kingdom, public-private partnerships offer the prospect of
serving more community needs for less cost and in less time. Michigan school
officials may wish to pursue public-private construction partnerships in order
to save money and reduce the need for higher property taxes.
Note: Portions of this article were excerpted from the Ron
Utt study, "Public/Private Partnerships Offer Innovative Opportunities for
School Facilities," a publication of the Maryland Public Policy Institute.
Ronald D. Utt, Ph.D. is the Herbert and Joyce Morgan
Senior Research Fellow of the Thomas A. Rowe Institute for Economic Policy
Studies at the Heritage Foundation in Washington D.C. Michael D. LaFaive is
director of fiscal policy for the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy.