Detroit Public Schools Community District is facing fresh infrastructure funding challenges two years after it was born as part of a $617 million state bailout.

The new school district was established under state legislation as a separate entity to own Detroit's public schools and educate students while the shell of the former district remains intact to repay $1.63 billion of debt.

The Ralph J. Bunche Elementary-Middle School stands in Detroit, Michigan, U.S., on Wednesday, Dec. 11, 2013.
A public school in Detroit, where the district reports that it needs $500 million of facility repairs without the authority to issue bonds. Bloomberg News

The new district is now facing more than $500 million in building repairs for its roughly 100 occupied school buildings with limited options for funding them, according to a report released by the district.

That figure – which includes the costs for replacing roofs, boilers, doors, windows and HVAC systems – will rise to $1.5 billion by 2023 if nothing is done to put a dent in years of deferred maintenance.

The school board met on Monday night to discuss the facility assessment conducted by OHM Advisors and Alfa Facilities Solutions LLC on behalf of the school district. “This is a preliminary executive summary of the report we are still awaiting the final to be release to the district,” said district spokeswoman Chrystal Wilson.

Wilson said that once the report is out it “will lead to a more robust conversation with the board” on what steps to pursue. “We are not there yet in terms of problem-solving; we are still in the stage of identifying the problem,” she said.

What is clear is that, barring legislative intervention, the district won’t be issuing any debt to cover the $500 million in costs.

When the state spent $617 million to create the new Detroit Public Schools Community District in 2016, the new law freed the new district from millions of dollars in debt that had hobbled the old Detroit Public Schools. But it put restrictions on the new district’s ability to borrow money until the district’s legacy debt is paid off in 30 years.

The package included $25 million for building repairs, but board member LaMar Lemmons said it’s not enough.

Lemmons wants the state to pick up the repair tab.

“The state is totally responsible for the condition of the buildings and the financial condition of the district,” Lemmons said.

He said at the board meeting the district should sue the state of Michigan to make it pay for buildings that he said were neglected during seven years of state control.

Lemmons also asked for and got a motion at the meeting for a full accounting of the $2 billion in bond money spent during state oversight and operation over a seven-year period.

“We need to evaluate how the money was used and determine how to move forward,” Lemmons said. “There is no way that $2 billion of repairs and new construction occurred in this district under state oversight. We want the state to be held responsible for their actions on the local district.”

The problem is potentially huge, said Craig Thiel, research director for the Citizens Research Council of Michigan, a not-for-profit public affairs research organization.

“It’s clearly a symbol of the shortsightedness of emergency management over the last 10 years in the district whereby emergency managers have been trying to balance the annual operating budget, deferring maintenance and not addressing the capital stock,” Thiel said. “It is clear to me that can be as important as operating dollars that school districts have.”

Thiel said that for every deferred maintenance project the district faces costs that will go up exponentially if systems fail. “I do believe it is potentially a very serious problem that Detroit and other school districts face,” he said.

Craig Thiel

Thiel said that the district could seek to do a sinking fund millage, which would bring in roughly $20 million annually. “But that money can’t be used as a debt service payment,” he said. “You would amass the funds and either spend it or save it for a larger project down the line.”

The other option would be to get the required action at the state capitol to remove the prohibition on debt. “I don’t know if there is appetite for that now,” Thiel said.

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