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Long-term solutions needed for schools.

The problems with the city schools can be solved, say area real estate executives, but it will take a long time and a lot of money that they don't see coming. Some progress is being made to care for around 20,000 new students each year through modular classrooms set up in playyards, expansions and additions, but these are not going to take the place of the construction of new schools, which need to be continuously funded.

Albany got involved in New York City school governance issues last week, and while capital improvement issues were discussed, no bill was passed. The city has made the case that it sends Albany $2.2 billion more than it gets back in aid, and it needs the money to fund other projects.

City Council Speaker Peter Vallone first proposed extending the Safe Streets Safe City add-on to the real estate tax a few months ago in order to fund the school construction programs, but Mayor Rudolph Giuliani was opposed to that idea. Nevertheless, the Mayor also doesn't want to have the money dedicated to a certain number of police officers, preferring some flexibility on how it would be spent.

Last spring, the Council managed to add $1.39 billion to the capital budget which will be dedicated to school funding over the next few years. While $275 million has already been placed into this fiscal year budget, the money has to continue to flow. And one new roadblock is the recognition that the city will probably reach its 2.5 percent debt limit ceiling by the fiscal year beginning July 1, 1998, which would adversely affect capital programs.

"We have had a pretty constant flow of capital money, but it is not sufficient to meet the renovation of existing buildings as well as building new capacity," said Patricia Zedalis, chief executive for the Division of School Facilities for the Board of Education. "The specter of the city reaching the debt limit is horrendous for us to consider. We really hope the Mayor prevails in getting state legislation to change that."

John Signor, a spokesperson for the governor's budget office, said the debt issue was also not addressed during the special session in Albany last week. "It's something the governor said needs to be looked at when the next session begins,' he said. That session will begin in mid-January and the Safe Streets, Safe City issue is also expected to be on the table, along with other infrastructure funding issues.

To fund school construction, Harold O. Levy, who chaired the Mayor's Task Force on School Construction, has proposed increasing real estate taxes, particularly on Class I's one to three-family homes, which don't pay anywhere near their fair share of funding city services.

That also doesn't sit well with the Mayor, who has repeatedly told REW that he doesn't want to increase those taxes, afraid that residents will flee the city, even though property taxes art much higher in surrounding counties.

Real Estate Board of New York President Steven Spinola agrees that businesses and income producing properties are paying more than their fair share of city property taxes. But "to suggest we can raise $4 billion (needed for school construction) with a $75 increase on single-family homes is not realistic when you look at history and politics."

Outside of New York City, property taxes are key funding tools, but that means communities "war" with each other to lure development projects. The chairman of the Regional Plan Association (RPA), H. Claude Shostal, says this is a destructive force and defeats land use planning that should be driven by transportation and infrastructure.

New York City, however, pays for its schools out of the general tax fund, rather than earmarked property taxes.

"Generally, we would share the view that New York City schools are underfunded, but as the Mayor is making a great cause, there is a whole lot of waste there," agreed Shostal.

The RPA suggests looking for ways to even out the discrepancies in funding between urban and suburban schools through the use of income taxes, sales taxes or a state property tax, "understanding that dollars aren't the only answer. A more equitable funding pattern would at least even the playing field a little."

School funding is an issue that needs to be addressed through planning, says Shostal, particularly by assessing "the impact of the present system of land use and how communities handle their ratables."

Last year, Meyer S. "Sandy" Frucher, executive vice president of development at Olympia & York and founding trustee and former chairman of the School Construction Authority, told a Building Owners and Managers Association meeting that the amount of money allotted for the maintenance of the city's 1,000 schools is $75 million.

"That fits into the category of 'give me a break," Frucher said, "and is not an issue that will be solved by reducing the bureaucracy."

Frucher believes the school problem will only be solved when a commitment to fund the infrastructure is commensurate with the need. "The current situation doesn't make the problem go away, but only enhances the problem," he added. "Schools are just as much part of our infrastructure as our highways."

The Real Estate Board has been working with the Board of Education to advise on leasing issues, and several office buildings and portions thereof have been converted to school use.

"If owners were told the city and Board were prepared to negotiate on the reality of the fair market, you would see more owners lease their buildings," said Joseph Strasburg, president of the Rent Stabilization Association, an owners group. "If the Mayor said 'all owners who want to enter into a short-term lease let us know,' and it passes the sniff test, you will have greater willingness on the part of the owners."

According to Zedalis, the industry's leasing proposals have been helpful and they are beginning to implement them. "The real estate industry has been enormously helpful in thinking through some of the issues so we are able to get the best deal and do the kind of due diligence from a business perspective that we should be doing," said Zedalis.

They also want to hire an in-house, experienced real estate consultant to work with the Board and real estate brokers. "We want someone who can manage," she said. "There are many deals going on, as well as acquisition activities."

The salary is negotiable and those interested, she said, can fax a resume to her at (718) 391-6020.

Once the head of the department is hired, the Board will be able to go ahead with negotiations and future planning.

"We've made decisions to do expansions of schools, additional modular units, some transportable units, and new schools to maximize money," she said. "Building new schools is time-consuming, costly, and in many cases, it is hard to find sites in the right place, but we will continue to build where at all possible."

Agrees Richard T. Anderson, president of the city's Building Congress, "They need whole buildings, significant sources of money, and major new procedures." Funding of the schools, he said, is "one of the most critical public infrastructure challenges in the world today."

Anderson is pleased that Martin Raab, a noted architect, has been named as president of the School Construction Authority, as he believes it will help set the SCA in the right direction.

The School Construction Authority, however, is not responsible for planning for overcrowding or prognostication on the numbers of additional students and classrooms needed, which is done by the Board of Education.

Since 1990, the Board has produced 76,000 new seats. "When you think the Boston school system is only 65,000 students, we have produced an incredible number of seats," said Zedalis, who added that the Board has good projections and was very aware it needed 20,000 new seats for last year.

While year round schooling has been suggested as an option, particularly by the Citizen's Budget Commission, Anderson says the Building Congress is concerned about renovation and construction work if school is in session all year round.

"We certainly agreed it should be explored on a project basis," he said, "but our eyes are wide open to the reality that [year round school] takes out the swing time in the summer when so much maintenance is done."

If schools are in session throughout the year, they will have to install air-conditioning, believes Frucher. "Yet more than a third of the schools still have coal-fired boilers," which he estimates would cost $1 million each to replace.

A bond act passed earlier this year will help fund the conversion of some of those burners and the SCA is working out the program now.

Zedalis said the new schools, which are being constructed in the most overcrowded districts, are being built with air-conditioning. If the Board begins a pilot program for year-round schooling, they would use some of those schools for the program.

"The SCA is looking at what ways we can air-condition the other schools," she added. "As you can well imagine, capital items have long lead times, and if a decision is made for full, year-round education, we'll be ready to do it. The SCA has really provided some leadership in this area."
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Title Annotation:New York, New York schools; increased capacity
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Dec 25, 1996
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