A More Enterprising Approach: How Public Trusts Can Help Address School Facility Challenges

A More Enterprising Approach: How Public Trusts Can Help Address School Facility Challenges

Travis Pillow and Sean Gill, Center on Reinventing Public Education

Executive Summary

The Challenge
In school systems across America, enrollment is declining, shifting from one part of a metropolitan area to another, or growing so quickly that districts are struggling to afford construction that can keep up.

In these places, the cost of maintaining existing facilities that house existing schools, financing new schools in high-growth areas, and paying down long-term bonds that may have financed school construction decades earlier poses a substantial fiscal challenge. These problems are even more complicated in dynamic systems of schools, where school system leaders close low-performing schools or replace their operators, and new schools open in their place.

Many charter schools only open one grade level at a time, which means they need more space as their schools mature. But they could find they are paying for space they don’t need in the schools’ early stages of development. Some charter schools, or novel institutional configurations such as microschools, may benefit from colocation with other public schools, either on a temporary basis while they grow, or in a long-term symbiotic relationship.

Other organizations adjacent to the K–12 system also face facilities challenges, but collaboration among all groups could be mutually beneficial. Many neighborhoods are underresourced. The lack of affordable housing in many communities may exacerbate teacher shortages. The lack of available facilities presents a significant obstacle to expanding high-quality preschool opportunities. Half of the estimated 7.7 million children in the United States with treatable mental health disorders don’t receive professional treatment. A coordinated strategy to locate mental health and other medical services close to students who need them can help address these challenges while making productive use of unoccupied school space.

Efforts to make existing school buildings more readily available to other providers have historically faced obstacles. School districts often appear reluctant to identify “surplus” buildings that can be sold or rented to other organizations. Districts may not have the resources to determine how best to utilize their existing square footage when enrollment declines or as school models evolve, or the ability to forge connections with partners that might make use of that square footage.

School facilities—particularly as they are currently designed—are often difficult to sell on the commercial real estate market. This might be true even if buyers only care about the land underneath them.

But that need not remain the case forever. The very definition of “school” is starting to change as educators and parents aim to personalize learning for their students. New approaches to school may require different kinds of spaces than traditional “egg crate” school buildings.

Dynamic school systems may require solutions that allow schools to add space as they grow, share space with other organizations that serve the same families they do, make the highest and best possible use of scarce facilities revenue, occupy only the facilities they need to deliver their instructional program, and ensure that revenue pays for buildings that can remain community assets and serve public purposes.

In Washington, D.C., nonprofit groups and city leaders have developed a partial solution to these interlocking challenges, at least for new and growing charter schools in the city: a facilities incubator known as Building Pathways.

The incubator studies new and anticipated charter schools in the city, forecasts their need for space, purchases or leases facilities to meet those needs, and offers those facilities to schools.

Multiple schools may share a space, which helps small schools achieve economies of scale. Facilities incubators eliminate a major source of headache for school leaders. They also eliminate a major barrier to charter school expansion.

They also offer a model that could help address a challenge that has arisen with charter school governance in some jurisdictions. Some charter management organizations have come under fire for entering improper relationships with affiliated real estate companies, leading to related-party transactions that have come under public scrutiny and stranding investment in facilities when schools close due to mismanagement, underenrollment, or poor performance, but their buildings remain in private hands.

The D.C. charter school incubator shows how a third-party real estate manager can help schools fulfill their promise while safeguarding the public interest. In this proposal, we argue local governments should extend similar principles to all public school buildings within their jurisdiction by creating independent real estate trusts charged with managing all education-related facilities in a school district or metropolitan area.

These facilities authorities would:

• Ensure existing and future school buildings funded by taxpayer dollars are put to their most effective use by maximizing the occupancy of available space, facilitating renovation, and ensuring facilities are controlled by a single transparent, publicly accountable organization.
• Eliminate barriers to new school creation by offering space to startups on a temporary basis, or to public microschools (which may need their own buildings given their smaller size), or to test their educational model in locations with other providers who can share food, transportation, and recreation facilities.
• Identify other opportunities for productive colocation, sharing of space, or pooling of resources between public schools and other, related community providers: preschools, childcare centers, mental health and other social service providers, recreation and out-of school learning organizations, and more.
• Coordinate with planning, zoning, and housing officials to leverage school construction projects to enable broader community redevelopment and affordable housing efforts.
• Simplify the process of planning for, securing, and maintaining facilities for leaders of both charter and district-run schools.

Policymakers looking to achieve these benefits must determine:

• How would the real estate trust be constituted?
• How would it be funded?
• What level of independence would it have from other government entities, such as school boards?
• Would it gain control of all school buildings in an area, or a subset—such as those thatleverage private capital or just those that are underoccupied?

These considerations are formidable; however, creating flexible, unified, independent oversight of school facilities could supply a crucial missing ingredient to cities hoping to create innovative and adaptable systems of schools. It could help large urban school districts confront challenges like declining enrollment effectively while helping to forge productive new collaborations between school systems and the communities they serve.

The Solution in Brief

A city, a state, or a school district could charter a facilities authority. The structure of that authority would vary depending on particular state and local governing arrangements. It might be constituted as an independent or dependent special governing district, a subsidiary of a municipal government, or an independent nonprofit, like the D.C. facilities incubator, with local government representation on its board.

The facilities authority would assume control of existing public revenue streams that fund K–12 school facilities within its jurisdiction, as well as ownership of existing publicly owned school buildings. Its charge would be to make the highest and best use of that revenue and those assets.

To meet that charge, it would:

• Manage and maintain existing buildings with an eye toward maximizing utilization, costeffectiveness, revenue, health and safety, and equal educational opportunity.
• Fulfill a strategic mandate to develop an innovative plan for school facilities that would accommodate startups, innovative school models, and new partnerships between schools and other community organizations—including mental health providers, housing authorities, afterschool providers, preschools, and colleges.
• Maintain a publicly accessible inventory of educational facilities and their levels of
  occupancy and utilization.
• Coordinate with other government and nongovernmental providers to identify
  opportunities for productive collaboration, including but not limited to housing authorities, early learning providers, and social service agencies.
• Make unused space in existing buildings available to other entities, such as nonprofit organizations that serve families.
• Coordinate the sale of high-value properties that are not being used, or for which full occupancy cannot be achieved for educational purposes. The proceeds could then fund improvements at other facilities.

The facilities authority would look to maximize the value of existing real estate holdings by selling or leasing underused or vacant property, and leasing parts of occupied school buildings to other community providers. It would also issue requests for proposals to develop new facilities tailored to community needs, and fill current buildings with new district-operated or charter schools, or other community providers that might help meet the educational needs of its community.

This proposal is flexible and can be easily adapted for local contexts: local policymakers would have choices about the authority’s level of independence from the school district, its taxing and bond-issuing authority, the composition of its board, the mandatory or optional nature of participation by existing schools, and whether all schools would pay rent or if funding would flow directly to the authority.