With battles raging over masks, books, and curriculums in the nation’s public schools, at least this week brought good news about the actual buildings those battles are raging in.
The White House announced a new plan to modernize public school buildings and reduce their climate footprint, including $500 million in grants for upgrades to heating, ventilation, and other systems.
This, combined with $1.2 trillion in new federal infrastructure money trickling down to state and local governments, will help fill the estimated $38 billion annual funding gap for the nation’s school buildings. And it will make kids, teachers, and staff safer.
Now, here’s the bad news—unfortunately, there always seems to be bad news these days. Multinational construction firms, private equity investors, and hedge funds are also eyeing this new money.
Last year, a team of investors inked a deal with Maryland’s Prince George’s County to build six new K-12 public schools. The thing is, they aren’t just building them. The investors—including a Canadian private equity firm—are also fronting the cash to fund the construction, while also managing the buildings for 30 years after they’re built.
We’ve seen these sorts of deals—called “public-private partnerships”—being signed for highways, water systems, and other types of infrastructure. But it appears that Prince George’s County was the first state or local government in the U.S. to do it for a K-12 public school.
Private investors worldwide are now salivating over K-12 public schools, the second largest sector of public infrastructure spending in the U.S., after highways.
“With municipal budgets bearing the burden of the pandemic nationwide,” an executive with a multinational real estate firm said last year, “[public-private partnerships] can offer a real solution to ensure that schools can be built and maintained while providing budget certainty.”
“Local governments have recently expressed new interest in public-private partnerships for projects like school construction,” a managing director of public-private partnerships at a large construction firm told the New York Times. “Most of the conversations have been around K-12.”
Reason, the libertarian magazine, wrote, “Prince George’s County’s public-private partnership is something that other school districts should explore.”
Here are the reasons this is worrying (which we outline in a new guide on public-private partnerships for school facilities):
Public-private partnership contracts often contain clauses that guarantee profits for the investors by limiting the government’s ability to make policy and planning decisions. For example, in 2007, the Canadian province of Alberta signed a public-private partnership to build 18 schools. Not only did costs eventually triple from the original estimated budget, but the contract also strictly limited access to the new school facilities. Community groups couldn’t use the schools after hours for activities like child care and sports leagues.
Private capital is expensive. In 2013, a state courthouse in California became the first major public building constructed in the U.S. using a public-private partnership and proved to be very pricey, costing Californians an estimated $160 million more than it would have building it the traditional way using public debt.
Private contractors have incentives to cut corners. For example, school administrators in Edmonton, Canada, experienced problems with the private investors in a public-private partnership not responding to maintenance requests in a timely manner, forcing school district employees to perform the work.
Public-private partnerships are bad for workers. Public jobs, like janitorial and building maintenance positions, change into private sector positions with lower wages and less health and retirement benefits than their public sector counterparts.
Many public-private partnerships come with complex financial risks. Last year, Maryland was forced to rebid a public-private partnership for a transit line after the investors pulled out citing delays and rising costs, adding $250 million to the overall cost and four years to the project timeline.
Many public-private partnership have little transparency and little to no opportunities for public input. Can you imagine a school community having little to no stay in what their school building is like, who has access to the school, and other important decisions?
Odds are your local public schools need some modernizing. And odds are your school district will do it the right way, under public control, with input from your school community.
But there’s a chance private investors will come around promising the moon if they can add some private capital to the mix and manage the school for decades.
Photo by Phil Roeder.