City uses creative funding for new Design School building

In two years, Baltimore's next generation of aspiring architects and graphic and fashion designers will join the burgeoning Station North district, thanks to an unusual public-private funding plan that will transform the historic, long-vacant Lebow Brothers Clothing Factory into a school.

City schools CEO Andrés Alonso hopes that the Baltimore Design School's financial model — which includes funds from a developer, tax credits and private bonds — can also be used to fund the multibillion-dollar cost of improving the district's dilapidated infrastructure.

The school board signed on to a $1.7 million annual lease this week for the non-performing arts middle/high school, to occupy the Lebow building beginning in 2013. The building, located in the heart of the city's Station North Arts and Entertainment District, has been vacant for 30 years. The Design School will operate out of a vacant school building in East Baltimore beginning this fall, until the Lebow building is ready.

The project, which will cost $25 million, represents a combination of creative financing that school officials hope can be replicated districtwide.

The Design School's finance plan served as a blueprint for Alonso to pitch a $1.4 million study to assess all school facilities. He told hesitant school board members this week that the study could help attract private financing for renovation and construction.

"We have to give confidence to private funders, because this work has been kicked around for quite some time," Alonso said. "The hundreds of millions of dollars that we need won't come without an external assessment. This is a way to give our kids what they deserve."

The study would offer an extensive checklist based on inspections of all 200-plus school buildings, officials said. The district would then be able to present specific reports to private funders and partners who want to invest in the renovation and construction of school facilities.

The American Civil Liberties Union issued two reports last year. The first concluded that it would cost $2.8 billion to improve city school buildings — and recommended that the school system move with a sense of urgency, as if responding to a natural disaster. A subsequent report urged the city to tap a number of funding pools, including taxes as well as nonprofit and for-profit partners.

Baltimore Mayor Stephanie Rawlings-Blake followed up on the ACLU reports by forming a task force that has been exploring for several months how to finance the $2.8 billion in improvements. That report will be released this month.

But not all city school board members were convinced by what Alonso called an "outside the box" approach. Several members expressed concern about the millions of dollars the school system is spending on a single school and study, instead of using those funds to improve conditions for more students.

"Everybody likes a bright, shiny penny. But what needs to be discussed is how many children will be able to have one. Every summer and winter, we are approving procurement items for students who are too hot and too cold," city school board Commissioner Jerrelle Francois said, referring to schools that do not have working heating or air conditioning.

"Have we looked outside the box to see if we can do things for our other students?" she asked.

Commissioner David Stone pointed out that the cost of the study "is about 10 times the amount of money the school system will spend on my child's education."

But Alonso used the Design School as an example to show that alternative funding — and refurbishing the historic buildings and fabric of neighborhoods in the city — can prove successful.

The Design School is the second school in the district to seek out historic space for expansion and a new identity. Last year, the Baltimore Leadership School for Young Women — the only all-female middle school in the city — moved into the six-story former YWCA building in Mount Vernon after collaborating with the district and private funders to buy it for $1.5 million.

"We carry a burden in our schools that we don't have enough pennies, quarters or nickels to carry," Alonso said. "If the standard becomes that we can't do it until we can do it for every child, we have a problem."

The ACLU reports also refer to innovative funding models employed by other districts across the nation that have successfully helped provide an infusion of cash to get aging schools up to par and to build new ones.

In Georgia, the legislature passed a law allowing counties to hold referendums to let voters decide whether to increase their sales tax by one penny to fund school construction. More than 90 percent of counties voted for the tax.

In South Carolina, the Greenville school district has built or renovated 87 schools in the past five years using $1 billion that was raised by a nonprofit.

ACLU officials praised the new assessment as not "just another study but an action plan" to determine what needs to be done in each school.

"This assessment will give city schools the level of detail needed to prioritize and implement schools projects in a major renovation and construction plan," said Frank Patinella, who is an education advocate for the ACLU.

Patinella also said that the new Baltimore Design School project "is needed to inspire the community and invigorate city and state leaders to move quickly and boldly on a mass-scale school construction plan for city children."

The Baltimore Design School, co-founded by Baltimore state Sen. Catherine Pugh and Fred Lazarus, president of the Maryland Institute College of Art, is designed after the Baltimore School for the Arts and will focus on nonperformance arts like fashion, graphic design and architecture.

The school was approved in January 2010 to operate as a transformation program serving grades six through 12. It will open in the fall with 150 sixth- and seventh-graders at the former Winston Middle School building in East Baltimore and will eventually expand to grade 12, with about 625 students, by 2016.

Looking for a nontraditional space, the school was drawn to the century-old Lebow Brothers plant on Oliver Street. The Lebow building has been on Pugh and Lazarus' radar as the ideal location for creative open space and a catalyst in Baltimore's thriving arts district.

When it starts its 30-year lease of the new building, the school will market itself as a "destination school." It would also be part of a re-emergence of the arts district, which already hosts a Montessori school and new housing developments for area artists.

"It took five years of pushing and begging and asking people to believe that this can be done," said Pugh, whose district includes Station North. "I think it's going to be one of the shining lights in our district, but also a role model in the school system in terms of moving forward and creating new schools in Baltimore."

Lazarus said the process of forming partnerships to secure the school was "a leap of faith."

"Doing these kinds of things is not easy anywhere in the country," Lazarus said. "It's very complicated because these deals only make sense if they can find these ways to work with nonprofits and other entities. A public entity can't do it by themselves."

To obtain the funding for the Lebow building, the school operators used their nonprofit status to obtain $3 million in historic tax credits, in addition to bonds and interest rates that wouldn't be afforded the school system because it is a public entity.

The school system secured the deal by using its hefty borrowing capacity, debt that the school wouldn't have been able to take on because it is a nonprofit and doesn't have assets, Lazarus said. An additional $1 million was fronted by a developer, who will own the building until it is turned over to the school. It ultimately could be bought by the school system.

Lazarus said he agreed with the points raised by school board members about ensuring that the opportunities for new facilities are offered throughout the district. He said he understood the lack of confidence they expressed in a public service being equitable if driven by private interests.

"You're only going to get that confidence by showing people that it works and it's not scary," Lazarus said.

"But these kinds of opportunities are driving people who want to do things in Baltimore City," he added. "If there's anything this process has shown me, it's that there's a tremendous amount of desire in this city of people who want to help."

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