Report recommends taxes, partnerships to fund city school facilities

The American Civil Liberties Union presented a financial plan Wednesday to fund $2.8 billion in upgrades of dilapidated Baltimore school buildings that suggests imposing local taxes, partnering with an investor and increasing government funding.

The funding proposal follows an ACLU report released in June that found that 70 percent of city schools were in urgent need of upgrades. For years, Baltimore students have attended schools with nonfunctioning heating and air conditioning, broken windows and limited electrical systems, the June report said.

The follow-up report released Wednesday, compiled by the Maryland Budget and Tax Policy Institute, likened the crisis of the city schools to that of a natural disaster and asked that city and state leaders respond as such. The work would need to take place rapidly over 10 years, the report said, rather than the 50 years it would take under the current city school funding structure.

The Tax Policy Institute explored how the city could establish new revenue streams through a 1 percent local sales tax increase and a 1 percent tax on meals and beverages in Baltimore, both of which would require legislative approval.

The proposed sales tax increase is the largest source of suggested revenue, and a conservative estimate shows it would generate about $67 million in 2012. The meals tax, the report said, could generate about $11 million a year. Numerous jurisdictions around the country have tapped these revenue streams for school construction costs, the report said.

Bebe Verdery, education reform director for the ACLU of Maryland, said that while some will quibble with the proposed tax increases, the report is an effort to present the feasibility of a large-scale makeover of school buildings in a reasonable amount of time. The report suggests that construction could begin in 2013 and be completed by 2022.

"It's clear that what we need is the political will to implement this plan on behalf of the students and teachers of Baltimore City," Verdery said.

Local leaders have recently homed in on the problem, with Mayor Stephanie Rawlings-Blake and city schools CEO Andrés Alonso announcing last month that a 10-member task force would begin working on how to obtain the $2.8 billion needed to respond to the ACLU's initial findings.

Alonso said the report "is very much in line with our ambition to provide our kids with the learning settings they deserve now, and not sometime in some unfathomable future."

Ryan O'Doherty, the mayor's spokesman, said the Mayor's Task Force on School Construction will fully examine the institute's recommendations, and that the mayor has committed to some of the suggestions, such as using revenue generated from a city slots facility for property tax relief and school construction as prescribed by state law.

But O'Doherty said the mayor would have to explore ways to mitigate increasing the sales tax in Baltimore when the city is trying to build its tax base and create jobs.

To execute the plan, the report said, the city must develop a partnership with an independent financier that would take on the debt and oversee the projects. It recommends that the partner be a government agency, an independent public authority or a state-chartered nonprofit organization.

The organization would take on what would eventually total $3.4 billion in construction costs after inflation, to be repaid over 30 years — double the life of normal construction bonds. At the end of the repayment period, the facilities and assets would be turned over to the city and school system. State and city governments would need to increase their funding to schools to assist with repayments.

Neil Bergsman, director of the Maryland Budget and Tax Policy Institute, a nonpartisan research organization, said he would encourage the public and leaders to embrace the concept.

"I'm not claiming that this is the only way to raise money for city schools, or even that it's the best way," Bergsman said. "But if you think about what kinds of things we'd do if we had a natural disaster, it would be to borrow over a longer period of time and find revenue sources to pay back that debt."

Leaders should keep in mind that the recommendations in the report released by the ACLU are innovative but not unheard of, Verdery and Bergsman said.

In Georgia, the legislature passed a law so counties could hold referendums that allowed taxpayers to decide whether to raise their sales tax by a penny to fund school construction. More than 90 percent of Georgia's counties voted in favor of the increase, which fueled school renovations.

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

"I just think it is fascinating that states that are otherwise thought to be conservative have figured out how to do this," Verdery said. "This is not uncommon; it is working in other states. If they can do it, why not us?"

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