Shift Burden of Financing Schools to Private Sector

The recent agreement between the Albuquerque Public Schools and the Home Builders Association of Central New Mexico was a real head-scratcher for several reasons.

After all, who gave the home builders and the school district the power to tax? Even if this action is found to be legal, a questionable proposition at best, $2,000 per new home seems rather arbitrary (the number will rise to $3,000 in the third year). What exactly are the home-buyers who will ultimately pay this new tax getting out of the deal?

Some would argue that forcing new homeowners to pay for new schools is similar to a “user fee” because new homeowners demand additional services. But, this is not the case because buyers of new homes pay the same taxes as everyone else. It is simply not fair to charge retirees (or anyone else without kids in public schools) yet another tax, simply for the “privilege” of purchasing a newly-constructed home.

Nearly as important as the fairness question is whether the schools really need the money they say they do. APS claims it needs an astounding $1.7 billion for two new high schools on the West Side and renovations to existing school buildings. Rather than simply raising taxes though, with a little creativity, APS could avoid this tax increase and transform schools into thriving community centers that can be used on weekends and during summers.

The key is to put an incentive structure in place that creates maximum benefits at a minimal cost. This can most effectively be done by shifting the burden of financing new schools to the private sector. It works like this:

# School districts ask private developers to bid on a contract to construct (or renovate) a school from start to finish.

# The district converts the cost of the project into a 20-year lease with annual rent payments equal to 85 percent of the cost of the project (based on the winning bid).

# The developer completes the school with furnishings (such as desks and chalkboards), computers, administrative offices, landscaping, and athletic facilities.

# The district effectively gains use of a school building for 15 percent less than it would cost to construct on the district’s own accord.

Private developers receive an additional bonus: They get control of the buildings and classrooms when they are not in use by the school. During evenings, weekends, and (possibly) summers, the developer may lease classrooms to for-profit trade schools and approved civic, political, or religious groups.

Projects like this have been undertaken in Florida, Nova Scotia, and Britain. APS should consider similar financing efforts both for constructing new schools and renovating existing schools.

An additional way to cut school construction costs is to exempt public school construction projects from New Mexico’s Davis-Bacon “prevailing wage” law. If the Legislature were to approve such a measure, taxpayers and school districts would likely save an additional 15 percent on school construction.

A 1995 study by the National School Boards Association demonstrated that over 60 percent of school boards found that federal or state Davis-Bacon laws had increased the cost of a recent construction project, and over half had increased as much as 20 percent.

Lastly, Albuquerque must work in concert with the governor and Legislature to better rationalize its school funding system. If East Side taxpayers refuse to pay for new schools on the West Side, perhaps the district should be split in two. And, rather than pouring taxpayer money into the construction of additional schools, perhaps money should be given to parents themselves so they can decide whether charter, private or traditional public schools are best for their child.

Throwing more money at Albuquerque’s troubled school system is not a recipe for success. Instead of abdicating their taxing authority to APS, our elected officials need to come up with innovative ways to save money.

The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.