Last December, Prince George’s County in Maryland became the first K-12 school district in the nation to partner with the private sector to bundle and finance a six-school delivery program. The public-private consortium included Fengate Capital Management, Gilbane’s development and building companies, designer and architect Stantec, and maintenance services provider Honeywell. JLL was Prince George’s Public School’s financial advisor.
The new schools will be ready for the 2023-24 school year, and add 8,000 new seats across five middle schools and one K-8 school. The school district is expected to save $174 million in deferred maintenance and construction costs.
Financing the construction and renovation of public schools continues to be a major challenge that, in many states, hinges on voters approving bond issues or taxes. For most of America’s 13,000-plus school districts, the private sector is an untapped source for funding.
“At the moment, there is no common definition of a P3 in the U.S., there is no centralized governing body overseeing P3s, and there is an extremely limited breadth of experience in [the] K-12 sector,” states Braisford & Dunlavey, an education planning, development, and management consultant based in Washington, D.C., which has released a free, 40-page guide to K-12 public-private partnerships (P3s).
The guide notes that the National Council of Public-Private Partnerships identifies 18 different legal and financial P3 structures, and each agreement is sui generis to the partnership, or deal. “In K-12, we expect the range of employed structures to be much smaller. Still, each partnership will be unique.”
SEVERAL MOTIVATIONS CITED
The guide cautions that P3s are complex deal structures, and there is no simple pro/con checklist for school districts considering entering into them.
Possible motivations might include accelerating the schedule for delivery of one or more school projects. (That was the primarily factor driving Prince George’s County’s P3.) Reallocating risk and lowering construction costs are two other reasons why P3s might make sense. But school districts must also realize there’s a cost to shifting risk to the private sector in terms of capital lending, legal and development fees, and other compensation.
“P3s aren’t employed for fun,” cautions the guide. “They’re neither simple nor free, and can face a resistant community. If they’re employed, it means there’s a problem that needs solving and it’s best solved with a P3.”
And because K-12 districts typically lack revenue-generating components, the full range of P3s isn’t available to them. “We expect most large-scale projects in K-12 will resemble availability payment agreements/concessionaire agreements, in which the development team designs, builds, finances, operates, and maintains a building that it ‘makes available’ to the district in exchange for availability payments (paid annually, throughout the life of the agreement),” the guide states.
For a P3 to be a viable funding solution, enabling legislation must be in place, the guide states. And for large-scale projects to “pencil out,” the guide recommends that operations and maintenance be key components to most deals.
IS YOUR DISTRICT A GOOD P3 CANDIDATE?
Braisford & Dunlavey states that certain districts fit the profile for considering P3s:
•A large school district facing financially crippling deferred maintenance. “Good news for these projects: Bigger districts tend to have bigger budgets. That can attract developers and other private partners for a large-scale P3. While a smaller project isn’t doomed, it’s less likely.”
•A large school district facing growing enrollment.
•A school district (small or large) with land it can give up, and whose needs it cannot meet on its own. The guide suggests that this type of revenue model is an “easier” P3, but the district still needs to convince the public that this is the best use of the land.
•A school district with a visionary leader who steps up and says, “Enough is enough.” The guide says that projects need champions to navigate approvals, manage stakeholder engagement, and think strategically.
The attributes of any good engagement, according to Braisford & Dunlavey, start with a clear definition of expected outcomes. These pacts also require sufficient time to hash out the deal’s structure and legal details. Stakeholders need to be “true partners” invested in each other’s success, and always honest.
The school district should define the quality of the project’s design and construction, but also be flexible enough to allow its private-sector partners to achieve those parameters.
Related Stories
K-12 Schools | Jun 5, 2023
How to achieve cost-effective kindergarten classrooms
Educational architect Robin Randall shares realistic advice about the challenges of adding developmentally appropriate, play-based kindergarten classrooms while respecting budget limitations.
K-12 Schools | May 30, 2023
K-12 school sector trends for 2023
Budgeting and political pressures aside, the K-12 school building sector continues to evolve. Security remains a primary objective, as does offering students more varied career options.
K-12 Schools | May 25, 2023
From net zero to net positive in K-12 schools
Perkins Eastman’s pursuit of healthy, net positive schools goes beyond environmental health; it targets all who work, teach, and learn inside them.
K-12 Schools | May 22, 2023
The revival of single-building K-12 schools
Schools that combine grades PK through 12 are suddenly not so uncommon. Education sector experts explain why.
K-12 Schools | May 17, 2023
Designing K-12 schools for students and safety
While bullying, mental health, and other acts of violence are all too common in schools today, designers have shown that smart and subtle preventive steps can make a big difference. Clark Nexsen’s Becky Brady shares how prevention and taking action at the design level can create safe and engaging learning environments.
K-12 Schools | May 12, 2023
In Virginia, a new high school building helps reimagine the experience for 1,600 students
In Virginia, the City of Alexandria recently celebrated the topping out of a new building for Alexandria City High School. When complete in 2025, the high-performance structure will accommodate 1,600 students.
Sustainability | Apr 20, 2023
13 trends, technologies, and strategies to expect in 2023
Biophilic design, microgrids, and decarbonization—these are three of the trends, technologies, and strategies IMEG’s market and service leaders believe are poised to have a growing impact on the built environment.
K-12 Schools | Apr 18, 2023
ASHRAE offers indoor air quality guide for schools
The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) has released a guide for educators, administrators, and school districts on indoor air quality. The guide can be used as a tool to discuss options to improve indoor air quality based on existing HVAC equipment, regional objectives, and available funding.
K-12 Schools | Apr 13, 2023
Creating a sense of place with multipurpose K-12 school buildings
Multipurpose buildings serve multiple program and functional requirements. The issue with many of these spaces is that they tend not to do any one thing well.
Market Data | Apr 11, 2023
Construction crane count reaches all-time high in Q1 2023
Toronto, Seattle, Los Angeles, and Denver top the list of U.S/Canadian cities with the greatest number of fixed cranes on construction sites, according to Rider Levett Bucknall's RLB Crane Index for North America for Q1 2023.
