Property Management rant - rerun
Long time readers of this blog will be familiar with two recurring rants of mine.
One is all about the need for an extended, intensive, and enriched program designed to accelerate the education of students working below grade level, quickly bring them up to grade level, and then return them to their general education classroom.
The other is about a scheme by which the City of Seattle takes over the property management duties and expenses for the District.
An article in today's Seattle Times reminds me of the latter. It also raises the possibility of a private interest doing the same job. I'm not as interested in the private option as the public one, but it does demonstrate a new potential benefit - a cash infusion.
One is all about the need for an extended, intensive, and enriched program designed to accelerate the education of students working below grade level, quickly bring them up to grade level, and then return them to their general education classroom.
The other is about a scheme by which the City of Seattle takes over the property management duties and expenses for the District.
An article in today's Seattle Times reminds me of the latter. It also raises the possibility of a private interest doing the same job. I'm not as interested in the private option as the public one, but it does demonstrate a new potential benefit - a cash infusion.
Comments
The scheme goes like this:
First, the District leases all of its property to the City for $1 a year. The District retains ownership of the property and reserved the right to withdraw any or all of property from the lease agreement at any time.
The lease from the District to the City does not come with any services of any kind - no maintenance, no utilities, no repairs. The City gets the properties strictly "as is".
The City then leases the properties back to the District for $1 a year. But the lease from the City to the District comes with cleaning, maintenance, utilities - and all property management services including the management of capital projects.
This arrangement would have two net results:
1) It would shift all of the property management work from the District to the City. The District is a perfectly dreadful property manager. The City, on the other hand, does a pretty good job of it. Believe me, if the City's properties were as poorly managed as the District's, you would hear about it. This not only improves the quality of property management for the schools, it also allows the District to focus on their primary mission: education. Did you know that about 40% of all Board votes are property related? Despite having a real estate portfolio worth hundreds of millions of dollars, is there anyone who would want Seattle Public Schools to manage their real estate for them? I don't think so.
2) It would shift about $34 million per year from the District's expenses to the City's expenses. Not only would this free up $34 million for the District, but it would free up $34 million in discretionary funds - money that the District could spend as they liked without any requirement that they spend it on something specific. This is the "greenest" money in the budget. The City could either take on the $34 million expense as their contribution to the quality of our schools, or the City could raise a special tax for it.
Next time a mayoral candidate or a City Council candidate asks what they can do for the schools, you tell them: take over the property management.
This shift would mean that some District employees would become City employees, but I can't believe that would be a bad thing for them. It would also mean some efficiencies: the guy mowing the park would just keep going and mow the adjacent school playground as well. The same people you call to reserve a softball diamond at a park would be the folks to call to reserve one at a school.
It would be good for the students because the District's focus would be off the buildings and onto the classrooms and there would be $34 million more investment in the classrooms.
Right now I cant see any advantages for the City in the proposition you put forward... maybe the Mayor would bid for control of school districts????
VW = cretyin... maybe we'd be cretins to try to do business with the city this way, because we'd lose more than we would gain?
What more could they want? A profit?
What does the City ever want other than a more smoothly operating and productive metropolis?
From the article,
"The charter public schools offer lenders/leaseholders a dependable revenue stream backed by a government payer. It's a very desirable equation."
But oh, yeah: If you check out Imagine's website, you find that the differences are enormous: Probably non-union (they recruit and control their own staff), and with some huge differences in how they assess (using "value-added" metrics with each student, instead of building averages...a good thing. Tell me why, again, publics can't do this? Oh yeah, publics are held to school averages because...it makes them look bad so charters can come in with value-added?
The Imagine website also mentions that they have an agreement with some OTHER property owner/manager,
"Schoolhouse Finance LLC, part of the Imagine Schools family, provides long-term real estate financing for many of the school buildings that are home to Imagine’s public charter schools across the country. Well designed, affordable, and conveniently located school facilities are a crucial component needed to create and sustain successful public charter schools. School buildings represent one of the most significant long-term costs of school operations in an era of ever-increasing real estate costs."
Wonder why they changed real-estate companies, if the one named above is a division of Imagine?
Guess the there IS a profit to be had by siphoning tax dollars through the education straw: tax dollars are paid to charters, who use some of it to rent buildings from either in-house or external property owners. Sweet!
And they pay their employees less, use direct instruction...
ach du lieber
One of the VPs also comes from AES.
Ah, it's good to see corporate leadership being all altruistic and everything!
The Family and Education Levy is a special tax the City raises for children's issues, including the schools. It doesn't cost the City any of their budget, just a bit of their taxing authority. This would be the same.
I have every confidence that the people of Seattle would support such a tiny yet vital tax levy.
BTW, Real Estate Investment Trusts (REITs) are very common and totally legit. They are like mutual funds for real estate. Many of them have themes, such as the one mentioned in the article. It's not so much a case of someone making money off charters as it is a case of people making money off real estate.
I'm not following.
Still seems to me like public money drained into private pockets.
I know that maybe the public isn't doing it right, but there's a loss eaither way: say the public mismanaged to the tune of ten percent a year. Isn't a private contractor, realtor, whatever, going to expect a nice return, maybe ten percent, anyway? Economically, it's a wash, yet it leaves a nasty taste in ones mouth to pay some company to do what's the public's business.
Maybe we can hope for public management to strive to improve!
And yes, the District would be paying rent, but they would have the upfront cash they received from the real estate investors.
Although I proposed doing this with a public entity, the City, here's how it could work with a private entity. I am NOT recommending this, just describing how it could work.
The District grants a long-term lease to the REIT - say 10-20 years with some provisions that would allow either side to break it. In exchange for this lease, the REIT pays the District a large sum of money. The REIT then leases all of the properties that the District wants to use back to the District in exchange for rent. The REIT also rents out the surplus properties.
The District pays rent, but they shed all of the annual costs of operating the properties and they have that big slug of money that they got from the long-term lease at the start. Obviously the investors are in it for profit, but the question for the District would be whether or not it is worth to them to outsource the work.
"The District pays rent, but they shed all of the annual costs of operating the properties and they have that big slug of money that they got from the long-term lease at the start. Obviously the investors are in it for profit"
The "costs of operating the properties" would be reflected back to the district in whatever rent it pays - the investor, to maximize profit, will of course fold that cost into the monthly rent...plus some for profit.
Unless...the rent from the other properties makes a profit...no, there's still the cost of upkeep on THOSE properties...
Unless the investor is more efficent at renting surplus properties?
And where's the incentive for the investor to maintain buildings it will have to give back in twenty years? Will they do long-term, expensive remediation and updates?
The one advantage of the REIT would be the opportunity to shift income and expenses between the capital and operating budgets. Tempting, but I still wouldn't touch it.
If the New Mayor (whoever he turns out to be) is so fired up about supporting and improving the schools, then taking over the property management - the work and the expenses - would be all he would have to do. I am EXTREMELY confident that the people of Seattle would approve a tax to underwrite that cost, so it wouldn't cost him any of his budget, just some of his taxing authority.
but...the idea that the buildings become part of the community resourece pool is VERY attractive. If the city fully utilized these assets, one can conjure all sorts of pretty pictures of the buildings being lit and active into the wee hours, adult ed, arts, sports, theater, community meetings, pie-eating contests (YES!) and all sorts of smiling happy people that would make Melissa's dear warm heart just bubble over with joy.
WV would defend a teacher's stuff with bare nockles.
I'm not sure I follow the logic of Charlie's idea...
As a landlord, I maintained my properties well for three reasons:
1: I was protecting my investment and keeping up with routine maintenance was cheaper in the long term than allowing the building/land to fall into disrepair (unless I had a plan to eventually pull the building down and rebuild, or the land was worth more than the building and at some point I was looking to sell/redevelop)
2: I wanted to attract a 'better' tenant - someone who wouldnt be as likely to trash the place
3: I was able to charge marginally more than the average rent for the location/market
I made my money by having the rent pay the mortgage, there were tax advantages in being a landlord and there was a slow, steady gain in the value of my assets through an increase in capital value...
Unless the property was unemcumbered by mortgages, there was rarely a lot of upfront profit in being a landlord...Does the District own these buildings free of mortgages, loans etc?
As a tenant, I didnt have the worry of maintenance - lovely to be able to call the landlord/property manager at midnight to get the burst water heater taken care of - but if I wanted to live in something other than a dive, I had to be prepared to pay for the privilege...
So, on balance, I am not sure that there is anything to gain (apart from that initial, one-off influx of money) from shifting the burden of responsibility from the District to the City.... and what does the City get out of this, apart from leverage to wrest control of the District/education away from the public? Yes, it would be lovely to use these buildings out of school hours for community activities, but do we need more of those facilities, and isnt the City already having trouble keeping them open because of budgetary concerns - eg libraries being closed for a week at a time, parks being closed?
What I think needs to happen is that the District needs to get with the programme about effective, efficient, professional property management.... its the same as with the top heavy administrative services division... too many people doing a relatively poor job of carrying out their responsibilities...
The District could, it seems, utilize the buildings for the same variety of "extra-curricular" enhancements (adult ed, arts, etc) just as easily as the cityu could...and it would make the focus on the broad sweep of education and what it can offer rather than the broad sweep of municipal government: It would place the honor of this sort of thing on the Public School rather than on the city.