Turning Brick-and-Mortar to Gold

Ohio’s large urban districts are undergoing a painful transition, similar to the one already experienced by many of the state’s big manufacturers, from sprawling organizations with a corner on the market to shrinking systems struggling to compete for fewer and fewer customers.

Like the majority of the cities they serve, the “Big Eight” school districts (Akron, Canton, Cincinnati, Cleveland, Columbus, Dayton, Toledo and Youngstown) are suffering from heavy population losses. The Big Eight districts hemorrhaged over 64,000 students combined from 1995-96 to 2005-06. As a result, some urban districts are treading water just to avoid potentially devastating fiscal crises. Consider a few recent examples: 

  • Dayton Public Schools must pare staff and programs this year to the tune of $9.4 million. And without passage of a new tax levy in May, Dayton Public faces a $24 million deficit in 2007-08 (see here).
  • To avoid forecasted deficits in 07-08, Cleveland Municipal Schools has made $6 million in budget cuts and is scouring district books for any overlooked revenue (see here).
  • Youngstown City Schools racked up a $2 million deficit in 2005-06 and is staring down a $10.7 million deficit this year (see here).
  • And Toledo Public Schools, after purging hundreds of teachers from its payroll and closing a handful of schools over the past few years, must still reckon with a $12.7 million deficit in 2007-08, a predicted $37.8 million in 2008-09, and, if left unaddressed, a potential $110 million deficit by 2011 (see here).

Despite these spiraling deficits and perennial enrollment declines, Ohio’s urban districts have still managed to accumulate an astonishing surplus of wealth in one area: school facilities. Thanks to state and local contributions totaling in the billions of dollars, new school construction has taken off in the Big Eight districts, leaving a trail of empty buildings in its wake and making veritable land (or building) barons out of many urban districts. Columbus Public shuttered 12 buildings last year with four more tentatively set to close this spring; Dayton Public has almost two dozen listed “in transition”; and numerous other buildings in Cincinnati, Toledo and Cleveland are lying fallow with limited or uncertain futures.

These urban districts should waste little time leveraging their considerable facilities holdings for financial and academic gains. House Bill 276, recently signed into law by former Governor Taft, can help them do just that. The bill allows districts leasing facilities to charter schools to combine those charter students’ test scores with district students' scores. Thus Dayton Public Schools, whose students were outperformed in reading and math in grades 4-8, could not only bring in precious revenue from new lease agreements, but more easily secure their Continuous Improvement rating--or raise it--in future years. And Cleveland Municipal, Ohio’s lowest rated district (69 percent of its schools were rated either in Academic Emergency or Academic Watch in 2005-06), could lease much-needed buildings to higher-performing charter schools in return for a way out of chronic academic, and to some extent fiscal, distress. Other cash-strapped districts such as Toledo and Akron would be foolish not to follow suit. Columbus Public Schools is already leading the way with plans to lease a building (or buildings) to the new KIPP school(s)--see here.

Forward-thinking district leaders may want to consider leaving the facilities business altogether--while still racking up the same fiscal and academic benefits. One option would be to create a “Real Estate Trust” (Center for Reinventing Public Education has written extensively about this)--an independent nonprofit entity, perhaps in partnership with local stakeholders, that would plan and oversee new construction; broker the sale or lease of unused property/buildings; research and offer cost-savvy, creative options for districts’ changing facilities needs; and even manage existing buildings and properties. By engaging the expertise of business leaders, real estate brokers, and political officials, a Real Estate Trust could leverage district assets more effectively and get better returns on district facilities (one such trust is operating in Portland, Oregon--see here). And district officials, most of them ill-suited to brokering real estate deals, could turn their full attention to the more pressing task of raising student achievement.

With inauspicious enrollment forecasts, looming deficits, and a finite supply of local and state funding, it's time urban districts practiced a little alchemy--by turning brick-and-mortar to fiscal and academic gold. 

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July 11, 2006
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