What Happened?
In an effort to eliminate a $304 million budget deficit, a school district in Philadelphia is launching one of the nation’s largest school closing programs by selling 27 school buildings to private buyers. Along with putting more than 3.7 million square feet of school property on the market, the school district also laid off 3,800 workers to break even in 2013.
The Goal
The Philadelphia school district is looking for buyers and developers to purchase the closed school buildings and reuse the properties in a way to benefit the community. While a few buyers such as Municipal Acquisitions has offered to purchase the entire portfolio of properties for around $100 million, the district is still entertaining offers from several other interested parties looking at affordable spaces in low-income areas of Philadelphia, The New York Times reported.
At the end of the of 2012-2013 academic year, the school district was forced to close 24 schools making up 12 percent of its total properties when student population numbers dropped and resources to support the infrastructure dwindled. Municipal Acquisitions and other interested parties will participate in a bidding process to obtain the properties and repurpose them for other uses such as housing public agencies or for higher education purposes. While it is a priority of the school district to ensure the properties are transformed into useful components of society as quickly as possible, the main goal of the sales is to replenish much-needed revenue streams.
The total value of all 27 properties up for sale has been the topic of some debate. The Philadelphia Office of Property Assessment estimates the portfolio to be worth $200 million, while the University of Pennsylvania places the total closer to $152 million. Each building offers different value to potential buyers, with some presenting minimal potential use and others priced around $35 million.
While selling the underused infrastructure will provide the school district with essential funding, school officials estimate there are $4 billion in repairs and upgrades needed across the district to improve the value of the portfolio. Many properties are located in impoverished neighborhoods, while others are historical and need extensive maintenance work.
No Passing Fad
According to a Pew Study on struggling school districts nationwide, many communities are lacking sufficient funds to maintain existing infrastructure and are looking to sell properties for immediate access to cash. Since 2005, 12 school districts have sold or leased 267 properties while 301 units have yet to be purchased. Factors such as the local real estate market strength, length of time buildings were left vacant and local laws and policies affecting property sales have impacted the efficacy success of the school district selling programs. Findings from the study included:
- Most school building sale prices were well below initial projections due to building condition, less than ideal layouts and locations in impoverished neighborhoods
- More than 40 percent of sold or leased properties turned into charter schools
- Other property sales were turned into housing options for areas in need
The longer districts have unused properties on the market, the faster their values fall.
Making Schools Profitable
Gov1 has monitored ways communities hope to profit from local schools such as consolidating operations for reduced costs and revamping energy plans to drive efficiency.