City goes full speed ahead on creative financing plan for school construction
Published: October 29, 2012
An enormously innovative and controversial school-building plan is fast-tracking its way through the city bureaucracy—ahead of a state plan that’s supposed to assess its feasibility.
Called Transform Baltimore (not to be confused with TransForm Baltimore, the new zoning code), the plan would leverage about $32 million in annual school-construction funds from the state into a one-time, half-billion dollar school-rebuilding effort lasting 10 years.
On Monday, Oct. 22 the Baltimore City Board of Finance approved, without debate or discussion, the Baltimore City Public School System’s proposed 2014-2019 capital budget of $544 million, which was scheduled for Board of Estimates approval on Oct. 31.
The Interagency Committee on School Construction’s final report, which was set up last March to assess the leveraging proposal, is not due until Dec. 1.
City schools are dilapidated. A 2010 report by the American Civil Liberties Union said the fixes would cost $2.8 billion. The Transform Baltimore effort, led by the ACLU and other school building activists, has lobbied the state legislature to hand over $32 million in capital funding as a block grant instead of on a project-by-project basis. The block grant, plus an equal amount of city money from the bottle tax, general fund, and gambling, would be used to pay interest on $1 billion, borrowed in big chunks of $250 million each.
“In 2010 we put out a report called Building for Academic Excellence . . . that kind of launched the campaign in a way,” says Frank Patinella of the ACLU of Maryland, one of the spokespeople for the effort. “We had been working with various grass root partners to start the Transform Baltimore campaign.”
The Transform Baltimore web site (transformbaltimore.org) is mainly filled with evangelization for the idea, which is based on what Greenville, S.C., did last decade to build its school system to a capacity of 70,000 students.
“They used $60 million to leverage $1 billion up-front, and then use the money to purchase back the buildings and pay off that $1 billion debt over 25 years,” Patinella says.
Baltimore’s build-out “would be financed over 30 years and the money borrowed over 10 years,” he says. “We believe we could rely on about $67 million per year” to service the debt.
Greenville is almost the opposite of Baltimore, in many ways. It is a fast-growing, mostly white, mainly rural county where new factories have recently located. The school plan in Greenville was designed to keep up with explosive growth in a place where the average household is wealthier than the state average. Baltimore City’s household income is about half the state average. The city is shrinking and apparently is aiming to jump-start growth with the school-building program.
But the demographic differences are not important, Patinella says: “It has to do with the financing structure.
“So it doesn’t work in exactly the same way as Greenville, because . . . Greenville had their power to tax. The city school system is dependent on the city or state.”
Having the state float the bond directly, Patinella says, might cause a political backlash because it would amount to a quarter of the state’s bonding authority for this one city project. The city, of course, doesn’t have the means to float that big of a bond.
Transform Baltimore would create a nonprofit corporation with the power to bond.
“So it’s like the Stadium Authority,” Patinella explains. “It doesn’t require voter approval. It doesn’t count against the debt limit.”
And the big up-front cost can deliver savings later, as furnaces and chillers, windows, bricks, steel, and asphalt are bought in huge volume and installed with precision by well-managed brigades of workers.
Of course, management of city schools—funding, construction, repairs, and maintenance has lately (as ever) been called into question by state auditors. The question of who would oversee and direct the unprecedented construction project in Baltimore is still up for debate, Patinella says. “The [Interagency Committee on School Construction] report will address it,” he says. “One of the questions is, ‘How will this program be managed?’”
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