This project delivery method is attractive for school districts because it allows them to finance the construction over time, alleviating budgetary constraints.
Overview
Several states utilize a unique statutory mechanism to allow school districts to finance the construction of public-school facilities. This arrangement (known as a “lease-leaseback agreement”) allows a school district to lease property to a contractor/developer, who then constructs or renovates a school facility on the property. Once the work is completed, the contractor/developer leases the school building back to the school district. The school district then makes lease payments over time, often many years, which can be structured in various ways to spread out the cost of construction. The arrangement typically requires a site lease for the land leased to the contractor/developer, a facilities lease for the lease-back of the school building to the school district and a traditional construction agreement. In some ways, the arrangement resembles a Public-Private Partnership (PPP) whereby a public entity collaborates with a private entity for the purpose of financing and delivering a project traditionally provided solely by the public sector.
Reprinted courtesy of David G. Jordan, Saxe Doernberger & Vita, P.C. and Jeffrey J. Vita, Saxe Doernberger & Vita, P.C.
Mr. Jordan may be contacted at DJordan@sdvlaw.com
Mr. Vita may be contacted at JVita@sdvlaw.com