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POLICY (Alternative Financing Methods)

The State should examine and review alternative design, construction, and/or financing methods and offer guidance and assistance to school districts that are desirous of implementing these options.

Although most school construction and capital improvement projects in school districts across the nation follow a design-bid-construction sequence, there are alternatives that have proven successful. Some of these alternative methods have required state legislation to permit their use by a public body. Some of the alternative methods include design-build, construction management at-risk, construction management agency (with multiple prime contractors), performance based contracting, competitive sealed proposals, job order contracting, lease-lease-back, and sale-lease-back. There are a significant number of school districts that have examined and utilized these alternative methods to accomplish capital improvements over the past several years and the number of districts investigating these alternatives is increasing.

In addition to these project delivery and financing alternatives, there are also alternative funding sources that should be considered. Some of these may also require permissive state legislation before school districts can utilize them. These alternative financing methods could include public-private partnerships, public-public partnerships, impact fees, excise taxes, transfer taxes, payments-in-lieu-of taxes, tax incremental financing, private activity bonds, qualified zone academy bonds, alternative energy and energy rebates, and donations and grants.

States should provide information and guidance about these alternative methods. To determine the feasibility of employing these alternative methods, states should gather information from other states and interested parties, determine the existing interest from within their school districts, convene committees or working groups to examine these alternatives more fully as applicable to current projects, and issue or distribute recommendations and possible sequences of events. For alternatives that can be implemented without legislation, states should provide assistance to school districts desirous of moving ahead. Where legislation is required, the state should take a leadership role in obtaining passage of the laws necessary for proceeding with the alternative method(s).

Many of these alternatives are becoming more common and popular. States should encourage policy makers, politicians, administrators, boards, and commissions to carefully examine these options and then make decisions based upon their evaluation and application to their specific circumstances.

A few states or localities have established clear guidelines and/or standards for proceeding with the implementation of one or more of these alternative methods. For example, states could clearly define the procedures for private-public partnerships: project submissions, project characteristics, project and team qualification standards, financing, review process, timeline, and selection criteria.

Additional opportunities for public-public partnerships may exist. Local governmental entities have separate funding sources, time frames, procedures and missions. Cooperating on public building planning, design, construction and financing requires explicit policies and budget instruments. Some public agencies are prohibited from spending funds in cooperation with other public entities even when such cooperation will result in a savings for taxpayers and the resulting facility will be more effective in providing services. It may be possible to resolve this problem if both government entities are interested in a cooperative venture that will benefit the public. In some cases, legislation maybe required.

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