SECTION: NATION/WORLD, Pg. 8

LENGTH: 745 words

HEADLINE: A better idea on school construction;


BODY:


In an effort to help rapidly growing communities keep up with the demand for new schools,  President Clinton offers a typical Washington solution.

School districts already receive a federal subsidy that allows them to borrow their construction  funds at the lower tax-exempt rate. This runs about two-thirds of the taxable rate. But the  president is proposing to lower the rate to zero percent. He would accomplish this by allowing  lenders to receive an annual tax credit for investing in these special federal school loans. His goal is to produce $ 11 billion of such loans in each of the next two years. According to the  U.S. Bureau of the Census, public schools and universities spent $ 34 billion for the purpose in  1999; thus Clinton's program would equal about one-third of all public school construction. And  given the generosity of the terms, it also will certainly encourage school districts to seek the  no-interest loans.

WHILE STATES with burgeoning populations, such as Florida, desperately need more schools, the  need is not universal. But Clinton's program would virtually invite school districts to overbuild.

So the program could easily develop into a major federal commitment. The administration itself  estimates that the plan would result in a $ 2.4 billion revenue loss to the government over five  years.

That might be justified if there were no alternatives. But a good idea is offered by Florida  Sen. Bob Graham. Along with Florida Rep. Clay Shaw, a Republican, Democrat Graham proposes an  economical program that would make it easier for private businesses to build public schools, an  arrangement that could cut costs for taxpayers while also generating profits for builders.

The lawmakers' plan would establish a nationwide pilot program for a limited number of investors  and developers. They would be allowed to use tax-exempt private activity bonds for the construction  and ownership of school facilities.

The private owners in turn would lease the buildings to public school districts, which would  operate the schools. The private investors would have no control or influence on school policies or  curricula.

But, as Heritage Foundation fellow Ronald Utt explains, the arrangement "would enable public  school systems to achieve potentially large savings because of the cost efficiencies in private  development and construction compared to the inefficiencies and delays that often characterize  public construction."

Consider, too, that under Clinton's plan, a school system accepting the no-interest loans would  be required to pay federal prevailing wages, which would be a costly mandate.

Canada, England and Scotland have all experimented with the private owner/public school approach  with good results.

The private owners lease the buildings to the school systems at below-cost rent but make a  profit by also leasing the facilities to other groups - such as trade schools or civic and religious  organizations - during times when school is not in session.

In the Nova Scotia school system, private builders were able to complete schools far faster than  the system could itself. Further, the school system was able to achieve 15 percent savings because  of its advantageous lease arrangement. The school system leases the buildings for 20 years at a  predetermined rent that is lower than the capitalized cost of construction and furnishings.

Yet the private owners were able to turn a profit by renting the building after hours.

Of course, this arrangement may not be possible in all cases. Many schools offer services long  after school hours. But usually those services take up only a portion of the facilities.

In any event, the Graham-Shaw approach would present little risk to taxpayers. Under their plan,  each state could issue as much as $ 10 in private activity school bonds for each resident. That  means Florida could issue about $ 140 million in the IOUs.

IT'S ESTIMATED that the Graham-Shaw approach would result in $ 182 million in revenue loss over  five years. Clinton's plan, by contrast, would cost $ 2.4 billion over the same period.

Clinton's proposal would be costly and entwine school districts further in federal mandates. The  Graham-Shaw measure would be economical and leave school districts in control, free to find their  own innovative solutions to local problems. It should be obvious which approach is superior.

NOTES: EDITORIALS

LOAD-DATE: March 14, 2000