Commentary

Los Angeles Daily News
November 10, 2002

LAUSD Should Let Builders Build Schools
By Lisa Snell

Californians just passed the largest bond measure in state history -- $13.5 billion worth of school bonds that are supposed to help ease the overcrowding problems plaguing our schools by providing funds for the construction of new schools and the money needed to upgrade old ones.

History tells us we may want to watch that money very closely.

Unfortunately, our school districts, particularly Los Angeles Unified School District, have a long history of school construction boondoggles fraught with fraud and mismanagement.

The poster child of school-construction nightmares is the Belmont Learning Center, just west of downtown.

The LAUSD poured more than $150 million into the school and then ceased construction -- with it halfway done -- because of environmental concerns. If the school is ever finished, the price tab will exceed $250 million, and it will go down as the costliest school in state history.

Los Angeles isn't the only city that has trouble keeping tabs on its cash.

Records show San Francisco Unified School District used as much as $100 million of bond and tax money to support a sprawling bureaucracy and to finance ill-conceived construction projects that ran far over budget. Most of that money -- as much as $68 million -- was spent on salaries for nonteaching employees, including several officials who are now the focus of corruption investigations, including one who stole more than $850,000 from the district.

And recently the state was forced to appoint a financial expert to monitor the Oakland school district after accounting discrepancies revealed the district was missing millions.

The sheer dollar volume of the new bonds makes the potential for future fraud and waste enormous.

The LAUSD will receive nearly a quarter of the new bond money -- more than $3 billion dollars (in addition to the $3.35 billion approved by local voters with Measure K). Given the district's sad history when it comes to construction, LAUSD officials should focus their attention on educating our children and allow companies actually in the construction business to handle the new school construction projects.

Perhaps recognizing their failures in this arena, LAUSD officials actually considered the creation of a program that would turn over the financing and construction of schools to private developers. However, the plan was never implemented.

Under the proposal, developers would have financed the construction with bank loans, built the schools, and then sold the completed schools to the district.

The plan is even more feasible now since provisions of the federal Economic Growth and Tax Relief Reconciliation Act of 2001 allow private companies to use the proceeds of tax-exempt bonds to build and repair schools and then lease the facilities to school districts. Nationwide approximately $2.7 billion of these bonds could be sold each year to fund the construction of public schools.

California is also home to a unique law that should be used more frequently. The law allows home builders to provide new schools in lieu of impact fees when new developments are causing overcrowding.

In Corona, Calif., developers used the law to build a 9-acre, $7 million facility in 13 months -- a fraction of the three-plus years that it would have taken the Corona school district to build the same elementary school.

City officials everywhere, particularly in the ever-growing San Fernando Valley, should encourage developers to take advantage of the law and build schools.

Successful examples of public-private partnerships can be found all over the country.

In Niagara Falls, N.Y., Honeywell Inc. built an $83 million school for the city to lease, allowing the city to avoid any tax increases or debt. Honeywell was able to erect the school for $15 million less than it would have cost the school district.

A partnership school in Florida was designed and built in less than nine months, compared with a district average of five years.

And in Houston, the Independent School District formed a partnership with Gilbane Properties to construct two new high schools under a lease-purchase arrangement. The schools were completed a year earlier than would have occurred with the traditional approach and cost $20 million less than the school district's original estimate.

Our kids need new schools -- and fast. The history of California school construction and bond projects is littered with mismanagement and incompetence. Today's elementary school students shouldn't be in high school or college when these school improvements and new schools are completed.

School leaders need to stop treating these bonds like monopoly money, quit worrying about whose name is on the construction signs, and get busy building schools.

Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.