Downtown School for Seattle Schools - Some New Twists

(This is going to be an excerpt from the Audit&Finance Committee meeting held on Tuesday.  I note that this information is likely to be again discussed at today's Operations Committee meeting from 4:30-6:30 pm.  Also at the Operations Ctm meeting, there will be a bell times analysis update, a
Facilities Condition Assessment and Study and Survey by the group, MENG, 2015-2016 proposed growth boundaries adjustments and Title IX update.

I also know that many of you are waiting for updates on MAP and other testing and I promise to get that up in the next day or so. It's been a very busy week to cover.)

There were two rather extraordinary presentations (and a couple of just plain "huh" ones that I will also get to later) at the Audit&Finance committee meeting on Tuesday.  One was about Title IX and sexual harassment which I just covered in the Garfield field trip rape update thread posted today.

The other was the discussion lead by Flip Herndon, the head of Facilities, about the downtown school idea for the old Federal Reserve building.

The topic was "Downtown School Financing Options."  The district's outside financial adviser, Mark Prussing from Public Financial Management, Inc., had created a memo on possible ways to finance the renovations needed should the district acquire the old Federal Reserve Building.  This financing assessment was needed as the Feds require the district to explain how they would afford to renovate the building.   The renovations HAVE to be done within three years and the building would have to be ready for use by that time.

(The DOE also sent a resolution template for the district to fill in with explicit instructions to NOT add or delete anything.  What was worrying about this resolution is that it says that if the district takes the building and it is NOT ready to be used within three years, the district has to pay the Feds, "the sum of 1/360th of the then current fair market value of the property for each month of nonuse."

The three years start when the district acquires the building.


Yes, kind of takes your breath away.)

I had read this memo about financing and, in my head, basically said no to all of them.  Director Carr, serving as head of this committee, carefully went thru all of them.

Funding Sources

The following funding options are available to the District for the downtown school, with the financing plan likely being a combination of one or more of these options:

1) Use of existing funds 

2) Internal borrowing 

3) Issuance of debt 

    a. Non-voted bonds 

   b. Voted bonds
4) Future capital projects levy receipts 

5) Public-private partnership 

 

Use of existing funds would likely mean taking from BEX IV or, as Director Carr put it, "voting someone off the island."  That was a no.

Internal borrowing?  From what pot of money?  (And they can't borrow against the General Fund.) That's a no.

Non-voted bonds?  This one was hilarious as everyone looked around the room, knowing that the building that they sat in was bought via "non-voted bonds" and is costing all of us a pretty penny.  Another one like it?  No thanks all around. 

Voted bonds?  Maybe but it would have to be voted on by Feb. 2015 AND a bond requires a 60% voter approval. Very quick-turnaround AND high voter approval.  

Director Carr pointed out for both 3b and 4, it's asking voters - again - for more money (just as they want to pass the BTA IV in a couple of years).  For her it was too much "tin cup."  

Herndon said that the DOE liked 1 or 3 and Director Carr groaned.  Ken Gotsch reported that one unnamed vendor said they could buy the building, fix it and lease it back to the district.  (I'm not even sure under the terms of the DOE/GSA, that this could be done without going out to a general sale.)

Director Peters said she did not know what the voter response would be to #4 as there are so many other buildings with needs.

There was very little discussion - at the meeting - about public-private partnerships but it is my contention that if downtown business wants a downtown school, they need to be good civic partners.
(I have spoken with a couple of staff/Directors about this issue.  I think the Board/district should send letters to major businesses like the Gates Foundation, Amazon, and Vulcan and directly ask for their help.  Let's see what the answer would be.  They may be just waiting to be asked.)

Then it got interesting as Herndon said perhaps it would be better to let it go to general sale.  (He noted that there is still a pending lawsuit from the homeless group that had first crack at the building and their application failed.)  Director Martin-Morris asked how much market value would be.

Herndon said before it was landmarked, a developer had bought it for $18M.  But now that it is landmarked, especially because of the roof being landmarked, it is nowhere near desirable to developers (that and it has asbestos to be cleared out).  (The roof means that the building can go no higher and that's the end of the story for the majority of developers.)

Director Carr suggested doing this and offering the $5M that the district has in BEX IV.  There was some laughter but Herndon said the DOE, barring any other real offers, might be willing to negotiate with the district for a decent offer.  BUT, the DOE will not talk sale until the district finishes its application for a strict takeover of the building. 

The advantage to buying it outright is that then the district has time to raise the funds without a hard deadline.

He said the district was looking getting data and analysis on whether it would make more fiscal sense to expand Lowell and/or Bailey-Gatzert OR create a downtown school in the Federal Reserve building.  So that is to come as well. 

He also then said that the district could have several options for usage of the Federal Reserve building, should they acquire it through any means.  I thought that a compelling statement.  (Frankly, I think the World School should be in that building, leaving TT Minor a neighborhood school that is quite close to downtown.)