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WASHINGTON, D.C.-A little-noted provision in President Bush's tax cut bill will make it much easier for towns and cities across the nation to build schools and school facilities. Under the Economic Growth and Tax Relief Reconciliation Act of 2001, passed in June, private real estate investors and developers will be able to do what only municipalities were able to do before the law: issue tax-exempt bonds to finance the building of a public school.
This means public school systems can form partnerships with the private sector in which the developer is able to construct the building for far less than it would usually cost. Then the developer leases the building to the school district on a long-term basis at a predetermined rental rate that is far lower than what it would have cost the community to put up the school on its own.
"All this is," according to Matthew Brouillette, education policy director for the Mackinac Center for Public Policy, "is equity in taxation: allowing private developers the chance to issue bonds tax free for building schools, just like municipalities can. The result takes a lot of the financial pressure off the taxpayers for school construction, and spreads the rest out over a prolonged period."
A common cause of the delays in school construction is the cumbersome public-sector construction process, which often takes as long as five years. Under the new tax law, Michigan communities could finish such projects in as little as one.
Editor's Note: For more on Public/Private Partnerships in school construction see, "Partnerships in School Construction," in the summer 1999 edition of MPR (www.mackinac.org/1782).
