School Buildings in New York City

The New York City Department of Education (DoE) is responsible for about 1,200 facilities that serve more than 1 million students. These buildings are often crowded and poorly maintained, and these conditions have persisted for decades. While some progress has been made in recent years, the conditions suggest new practices, such as a PPP, are worth trying.

As shown in Table 4, school buildings are not in good condition. Since fiscal year 2001, the DoE has released data on assessments of its facilities, rated from "poor" to "fair" to "good." Schools in fair condition or worse generally are in need of repairs in one or more features such as windows, heating and ventilation, or the roof. In fiscal year 2007, nearly two-thirds of the schools were in just fair condition and only 3 percent in good condition; this is somewhat better than the 78 percent in fair condition in fiscal year 2001, but still a weak record.

The troublesome condition of the schools is related to a long history of weak maintenance. In a 1998 study, the City Comptroller found that the DoE (then Board of Education) was spending on average 86 cents per square foot for maintenance, about 10 percent of what was estimated to be required to keep the facilities in a state of good repair. At that time, the backlog in needed repair work was estimated to exceed $10 billion.⁵³ This problem persists. In fiscal year 2007 average maintenance expenses were $1.42 per square foot, and at the end of that fiscal year the DoE had a backlog of 14,626 work orders to be processed.⁵⁴

The DoE is not well organized to address lifecycle planning and maintenance. A separate entity, School Construction Authority (SCA), has been responsible for design and building of large projects since 1988, while the DoE itself handles regular maintenance. This separates responsibility for design from the maintenance, minimizing incentives for concern with lifecycle costs, particularly with the SCA being judged primarily on its ability to deliver new schools on time.

The DoE needs not only to repair its existing facilities, but to build new ones to accommodate students in currently crowded buildings. About 38 percent of the high schools, 27 percent of the elementary schools and 13 percent of middle schools have enrollments that exceed capacity, and these schools account for about 59 percent of the high school students and 20 percent of all other students.⁵⁵ Although the SCA has been building schools with new capacity of several thousand students per year, a large number of facilities remain crowded.

The persistent needs of the school system offer a compelling reason to consider a different approach to school construction and maintenance. The DoE created the Education Construction Fund (ECF) in 1967 as an innovative way to combine school design and construction with private residential and commercial development. Private developers build a school as part of a larger project, often in exchange for enhanced development rights and tax-exempt financing through the ECF. Fifteen projects were built, creating 18,000 seats, and the Bloomberg administration recently revived the organization and announced a project in Manhattan to create 1,630 seats, as well as residential and commercial space on existing school sites.⁵⁶ All the projects are "turn-key" with the DoE responsible for maintenance once the school facility is completed; thus, the ECF projects do not capture the potential life-cycle cost efficiencies of a complete PPP.

Funding increases in recent years, particularly from the State, have provided the DoE with significant resources. The City's ten-year capital program allocates to the DoE $28.2 billon for fiscal years 2008-2017, with $21.6 billion to achieve and maintain a state of good repair and $6.7 billion for system expansion.⁵⁷ A part of these resources could be made available to support an experiment with a PPP.

PPPs have been employed successfully for school construction in the United Kingdom, Canada, and Germany. In particular, the U.K. model of strategic partnerships for smaller-sized projects would work well. Sufficient scale can be achieved by bundling several school projects, including renovations and new school construction, and working together with one private partner. Facilities can be constructed under DBM agreements under which DoE would pay the private developer an availability payment for use of the asset that covers the cost of capital and maintenance. These agreements would span the life cycle of the asset and impose a life-cycle approach to planning that is currently missing from management of school facilities. For new school construction in particular, employing a life-cycle perspective can move cost focus beyond project delivery to the oft-neglected costs of maintaining the school and generate long-term savings.

Perhaps the greatest uncertainty about applying the PPP approach to public school buildings is the capacity of the DoE to monitor the project effectively. The agency does not have a good record of establishing and enforcing maintenance standards internally, yet this would be a key element of any PPP. A new unit within the DoE might be needed to design and monitor the PPP, and it would have to work closely with the principals managing the schools involved. However, there likely would be spillover benefits for internal operations from the standards and practices developed and for the SCA from the design elements incorporated in new PPP projects.

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53 City of New York Office of the Comptroller. Dilemma in the Millenium: Capital Needs of the World's Capital City. Volume II. August 1998

54 City of New York. Mayor's Office of Operations. Mayor's Management Report, Fiscal Year 2007, Supplementary Indicator Tables. September 2007

55 City of New York. Mayor's Office of Operations. Mayor's Management Report, Fiscal Year 2007, Supplementary Indicator Tables. September 2007

56 New York City Department of Education. "Chancellor Klein Unveils Design of Two New Midtown Schools To Be Built With Private Investment." Press Release. October 23, 2008.

57 Planned as of April 2007. See New York City Office of Management and Budget. Ten-Year Capital Strategy, Fiscal Year 2008-2017.