The Private Lives of Public Schools

After months of acrimonious debate, in September 2018, the New York City Council approved the rezoning required to make the project known as 80 Flatbush a reality. The multi-use development will occupy a triangular city block in Downtown Brooklyn where Boerum Hill’s brownstones meet the highrises around the Atlantic Terminal transit hub. To its proponents, the project is a promising new venture. Income from two residential and commercial towers, among the tallest in the recent boom in the area, will enable the construction of new facilities for two public schools, renovate an existing historic building for community use, and provide 200 permanently affordable apartments, all at no direct cost to the public. But to opponents, 80 Flatbush is yet another example of private-developer greed made possible by the complicity of elected officials. Critics mainly focused on the height of its two towers, which they argued would cast shadows on public spaces, increase traffic congestion, and render the area not only unrecognizable but unaffordable to many long-time residents. As approved, the project was redesigned to address some of the criticism: Both towers were shortened without losing any of the public amenities. Yet this also underscored the lack of transparency of the tradeoffs between private and public interests. The fate of 80 Flatbush — proposal, rejection, redesign, approval — seemed to be but an iteration of the apparently inevitable dance between local residents, elected officials, and developers to generate public benefits like schools and below-market rate housing by way of private real estate deals.

80 Flatbush, however, wasn’t entirely a private development deal, because it was initiated by the New York City Educational Construction Fund (ECF). The mission of the ECF, as a public-benefit corporation, is to build public schools. The ECF acts as a “boost” to the School Construction Authority (SCA), the primary entity charged with building and maintaining the city’s public school facilities. While the SCA is funded through direct allocations in the city’s budget, the ECF partners with private developers. In exchange for the construction of a new school on publicly-owned land, the ECF leases the developer unused development rights, often referred to as air rights, to build residential or commercial space above or adjacent to the school. The ECF issues bonds to finance the school’s construction — one of its key advantages is that the ECF operates outside of the city’s debt limit — which are paid off through rental income as well as tax equivalency payments, which the developer pays to the ECF in place of real estate taxes to the city. The bonds can also be serviced through rent that the City of New York pays to the ECF for use of the school once completed. To state that the ECF model generates new schools (as well as other public benefits) at no cost to the public is thus only partially true.

80 Flatbush is part of a new generation of ECF projects that have come online following nearly three decades of dormancy. In 2016, the ECF issued a Request for Expressions of Interest (RFEI) to developers for the part of a triangular block occupied by the Khalil Gibran International Academy, which urgently needed new facilities. When the ECF selected Alloy as project partner, it was in part because the Brooklyn-based developer-architect already owned the remainder of the block, making possible a larger development with more public benefits. But as details and renderings of the proposed project for Flatbush Avenue became public, members of Brooklyn’s Community Board 2 began to ask: Was it really beneficial to generate new public schools via market-rate development? Wouldn’t the children living in the new apartments take up the majority of the new school seats created, leaving only a small net gain? Was the deal a fair trade of government control and private dividends in exchange for public benefits?^[1]

These questions are as old as the ECF itself. Looking at the origins and history of this little-known entity allows us to move beyond the particular controversies of 80 Flatbush to gain perspective on the public-private partnerships that seem so ordinary today. But the ECF is also not so ordinary; in its early years, it embraced a proactive, irreverent, and experimental spirit. Developments dating to the corporation’s heyday between 1969 and 1974 boast architecture best characterized, in the words of a former ECF director of development, as “bold, urban form.” The scale of 80 Flatbush stands in the lineage of these high-rise insertions in low-rise neighborhoods. What distinguishes 80 Flatbush from its predecessors, however, is that the grand scale of earlier ECF projects was generally seen as a vehicle for local residents’ interests, and not a detriment to them.

There is a second key difference between the ECF then and now. The creators of the ECF were acutely aware of the model’s limits — namely, that cross-subsidization of public benefits could work only in high-priced locations, places like Downtown Brooklyn today. To create such benefits in low-market locations, which tend to be those in greater need of both new schools and affordable housing, the model would require whatever additional federal, state, or municipal financing was available. The ECF’s originators actively sought out subsidies like the low-interest mortgages for low- and middle-income housing provided by the federal Section 236 program and the city and state’s Mitchell-Lama program, and cross-subsidized across multiple projects to spread the benefits of the public-private collaboration more equitably across the city. But even in its earliest publications, the ECF acknowledged that while the building itself might come “for free” because it would be built at no cost to the city’s capital budget, in developments where the rental income wasn’t sufficient to cover the debt service, the overall numbers would only work if the city would pay to lease the new facilities. The ECF downplayed this fact by stating that this rent would be “no higher than the annual cost of a comparable new school.”^[2] In short, the ECF has always positioned itself as a creative answer to a pragmatic problem: how to pay for a capital-intensive public service like education. But it has always also been dogged by a core dilemma: the financing model is only self-sufficient in areas with high land values. In a geographically-determined realm like education, this can amount to public investment that exacerbates, rather than reduces, inequality. In its early years, the ECF had strategies to correct this. But what about now?

The ECF: Then

The progressive spirit of the ECF in the 1960s was connected to the embrace of unusually large-scale projects as a way not only to provide schools but also public goods like housing across the city. The city urgently needed new schools but often found itself hampered by a lack of vacant sites, cumbersome budgetary approval processes (including a ceiling on bond issuance for school construction projects), and a development process overseen by the Board of Education that observers decried as corrupt and inefficient. Meanwhile, new federal, state, and municipal policies demanded the racial integration of schools and the expansion of educational opportunities for all students, in part through new pedagogical approaches. Furthermore, many marginalized communities were increasingly demanding local control over schools. The ECF’s promise was therefore three-fold: to address the limits in available land, to circumvent the constraints of conventional school financing, and to build schools designed to further progressive educational goals through local partnerships. Expectations were high. By the time the New York State legislature formally chartered the ECF in June 1966, the city expected that the corporation would meet between one-third and one-half of its school construction needs.^[3] This was a bold promise that would impact other public services as well: school construction at the time consumed 20 to 30 percent of the city’s capital budget.

Making the ECF a reality required financial, legal, and architectural innovation. On one level, the ECF built on the practice of creating public-benefit corporations that could independently issue bonds, drawing on funding sources outside of legislative approval processes for specific purposes. The Tennessee Valley Authority (TVA), incorporated in 1933 to improve rural living standards, is one of the best known. Closer to home, New York and New Jersey set up the Port Authority in the late 1920s to plan, build, and operate the tunnels and bridges connecting the two states. Beginning in 1959, Governor Nelson Rockefeller established a total of 230 public-benefit corporations to develop dormitories, hospitals, and housing in New York State. Common to all was the ability to sell tax-exempt bonds to raise the capital for land acquisition, predevelopment, and construction costs.^[4] Rather than securing its bonds with revenue created through its own services (like tolls on bridges or fees for electricity), the ECF would pay back its bond holders with the rents generated by residential or commercial development built above its actual service: public schools.^[5]

“Mixed-use” projects are now standard fare in urban design, but they weren’t 50 years ago. Building an apartment building on top of a school required some adjustments to the recently passed 1961 Zoning Resolution, which codified a strict separation of land uses. To develop what was then called “dual occupancy” or “dual use” structures, the ECF successfully lobbied for inserting the specially created Section 74-75 into the code, which allowed the combination of educational with residential or commercial uses. Section 74-75 gave mixed-use educational sites special advantages — expanding buildable floor area and the total number of dwelling units allowable on zoning lots — while relaxing certain dimensional constraints. School roofs qualified as open space for the apartment residents, and the overall open space required was reduced. The buildings themselves were allowed more flexibility in terms of height, setback, and lot coverage limits. The strictest requirement of Section 74-75 was that school and residences or offices be built simultaneously, but organized to guarantee independent access and building services. These rules still govern the ECF’s projects today.

Reconciling the differing structural and operational demands of educational and residential or commercial uses was not easy. The challenges of mixed-occupancy gave rise to new architectural solutions, but the search for new design models was also driven by shifting pedagogical philosophies. In the 1950s, nongovernmental organizations, including the Ford Foundation’s Educational Facilities Laboratories (EFL), studied the educational impacts of school design and construction. The EFL condemned schools built in the immediate postwar period as “egg crate” structures containing repetitive, separated classrooms conceived for a single type of student. Beginning in 1968, against the backdrop of urban unrest and suburbanization, the foundation repeatedly allocated grants to the ECF for feasibility studies of potential sites and new design models, including open-plan schools and schools with movable partitions that easily adapt rooms to changing needs.^[6] To translate these ambitions into realized projects, the ECF took the lead in the development process. It identified the site and, after feasibility studies, issued a request for proposals to developers. While the developer was officially part of the architect selection process, according to former development director Samuel Kaplan, the ECF at the time held a lot of sway in that regard and thus retained a high level of design control. Developers, meanwhile, traded some control over program and architecture for savings on acquisition and predevelopment costs and received a near-guarantee of project approval.^[7] Overall, the developer/contractor secured the construction financing for the residential and commercial buildings and held the mortgage, and therefore carried the financial risk.

The ECF depended on contacts in local communities to identify needs and potential development sites. Yet viable sites and community support, needed to ensure project approval, were slow to materialize in the early years. To address its empty pipeline, the ECF recruited 32-year-old Samuel Kaplan as its director of development in May 1968. Kaplan got the job thanks to his “street smarts” and “local knowledge,” honed in his work as a New York Times police and housing court reporter, activist, researcher, and member of an East Harlem community board.^[8] Kaplan revelled in this role and by 1972, the ECF had significant progress to show. Its pilot project in the Bronx, funded initially by short-term notes, was occupied, and in April of that year, the ECF issued a first round of long-term serial bonds, which ultimately financed seven schools.^[9] It had 23 projects in planning, which would together create 25,000 school seats along with 8,250 units of housing and 1,250,000 square feet of commercial development.^[10]

One of the most striking ECF buildings illustrates how community advocacy once supported monuments to scale, rather than opposing them. Confucius Plaza in Manhattan’s Chinatown, a curved brick wall rising from 19 to 44 stories in height, contains 762 middle-income cooperative apartments over a three-story elementary school for 1,200 students. Designed by New York architects Horowitz and Chun, Confucius Plaza originated in a 1965 idea for new housing promoted by the Chinese Chamber of Commerce of New York and the Association of Chinatown Housing. Its cosponsors still hail it as “a phenomenal success and the pride of the Chinese Community.” Kaplan used the project to extoll the virtues and necessity of working with a local community group, advancing a new notion of education, and embracing inventive architectural expression, all in partnership with the private sector. In a 1972 article for a national educational journal, he wrote: “What makes the project unique is not its scale, but the way in which it integrates education and a variety of community services and blends them into the cityscape.… By integrating facilities in a bold, urban form, the diverse needs of communities are better served.”^[11] Kaplan was not in the least apologetic about scale, given the pressing need for housing. He saw the integration of schools with other functions of society, whether business or housing, as essential to improving the quality and relevance of education, and scale as a key component of the “cityscape,” uniting the needs of various residents in a single structure.

While not always well received, many of the ECF’s other large-scale designs were still understood to serve a public purpose. Just north of the Brooklyn Bridge as it descends into Manhattan, 375 Pearl Street is a 32-story tower, square in plan. Seemingly windowless, its white stone cladding was in fact striated by narrow vertical openings. Built as a telephone switching facility, it was realized in conjunction with the triangular-in-plan Murry Bergtraum High School for Business Careers. In early 1971, Rose, Beaton & Rose’s design for the switching station prompted New York Times architecture critic Ada Louise Huxtable to disparage the ECF’s projects as the result of a “tradeoff.” As she put it, the tradeoff “is subtler and more complex than the giveaway … The illusion is that one has sold one’s soul, or bits and pieces of it, for a worthwhile purpose. It is the giveaway with conscience balm.” Asking how this “colossal” and “brutal” project, which would “plunge the adjoining residential community into deep shadow” could possibly have been approved, Huxtable found that business interests dictated decision making: Downtown Manhattan, including Wall Street, desperately needed new telephone service to keep business rolling. Here, the public benefit was defined as serving the infrastructural needs of one of the city’s major industries.

The ECF justified this deal in other terms, however. Working with New York Telephone proved particularly lucrative for the ECF: As reported by Huxtable, it received about $4 million (nearly $25 million in today’s dollars) as well as payments in lieu of taxes from the company. The ECF used this money not only to build the adjacent high school, but to finance construction of other schools across the city. Thus, a single project in downtown Manhattan allowed the ECF to cross-subsidize across its citywide portfolio, enabling new schools to be built in areas where these kinds of deals didn’t pencil out. From the point of view of the ECF, the resulting “monolith” — Paul Goldberger’s 1975 assessment of the completed project — was likely a reasonable price to pay in order to be able to bring new public schools to neighborhoods across the city.

The influence of Wall Street in the 375 Pearl project illustrates another key point. Operational independence and an emphasis on design innovation in large-scale projects could not resolve the ECF’s key financial dilemma: Its model of cross-subsidization worked only in high-rent areas. On Manhattan’s Upper East Side, with its commanding market rents, a single project could generate enough revenue to support the school’s construction while covering the ongoing bond payments to investors. This was the case with the Robert F. Kennedy School for special needs children on East 87^th Street, completed in 1973, where rents from the Carnegie Towers apartments above covered the cost of construction and provided the revenue for the ECF to pay back its bonds. At other developments, like the combined PS 205 and 16-, 18-, and 28-story towers of Keith Plaza and Kelly Tower in the Bronx, completed in 1975, market-rate rents would have been too low to cover development costs. Either these projects were partially cross-subsidized across the ECF portfolio or they required subsidies — in the form of low-interest mortgages and rent supplements — to bridge the gap. In many cases then, just like other developers of low- and moderate-income housing, the ECF and its partners relied on federal and state financing programs to make the numbers work. And yet the ECF model was still considered attractive since the municipal funds used came not from the city’s capital budget but its operational funds, and the development process was believed to be quicker. To claim that the new schools would be generated at no cost to the city’s capital budget may, strictly speaking, have been true. However, the money required to make the overall model work was certainly traceable to other budgets either as direct outlays or foregone tax revenue.

Finally, many of the deals that the ECF engaged in to generate low- and moderate-income housing in the late 1960s and early ‘70s were time-limited from the start. The income and price restrictions on housing units financed through federal, state, and city programs generally had expiration dates. 3333 Broadway, completed in 1975 by emerging architect Richard Dattner in partnership with Max Wechsler and Henri LeGendre, serves as a prime example of how these limits have played out. Best visible from the West Side Highway, the brick slabs of 3333 Broadway rise from ten to 35 stories in height from a partial-octagon plan. Its 1,200 rental apartments sit atop an intermediate school for 1,800 children. The owner paid off the Mitchell-Lama mortgage in 2004 and, as allowed by law, converted the apartments to market rents. The development, with over 4,000 residents, has been sold twice since. Tenant advocates now cite “Riverside Park Community” as a key example of how predatory equity works. The ECF, still co-owner of the land, has retained little control over or interest in the long-term stewardship of the residential or commercial space attached to the school. In other cases, when the affordability provisions on the housing component of an ECF project have been extended, a round of new subsidies have been required. At Keith Plaza and Kelly Tower in 2017, these took the form of Low-Income Housing Tax Credits, more rental vouchers, and an extension of property tax exemptions — once again demonstrating that public benefits, even if purportedly created at no cost to the public sector, are never for free.

Given this history, what was the basis of the political support for the creation of an entity like the ECF if it was rarely, if ever, financially self-supporting as claimed? First, there was ideology: In the mid-1960s, it was generally assumed that social programs needed to be expanded, not shrunk. Liberals, not conservatives, argued that government needed to tap into “the genius of private enterprise,” which they saw as better equipped to provide not only schools, but housing and social services, to the public. This explains the proliferation of federal, state, and city funding programs for new low- to middle-income housing that relied heavily on the private sector as the mode of delivery.^[12] Second, there was pragmatism: The ECF’s mission was to build new public schools. It needed land and money to do so, and both were hard to come by through extant political processes. If they were more readily attainable by coupling them with new housing or commercial development, financed outside of traditional budget cycles and ostensibly at no cost to the public sector, wonderful. For a short time, then, ideology and pragmatism converged to create a series of developments that still mark New York City from the central Bronx down to Lower Manhattan through their bold, urban form.

Ultimately, however, counting on federal, state, and city housing programs to back its bonds meant the near-downfall of ECF itself. In January 1973, the Nixon administration issued a moratorium on all federal housing programs. This abrupt end to federal funding and a broader economic slowdown compounded both New York City and State’s financial problems. The new federal housing policy signed into law in August 1974 largely did away with the federal mortgage subsidies that had so often enabled the ECF’s projects. Without those subsidies, by September 1975, the ECF was unable to deliver on $81 million of maturing bonds. New York City intervened on behalf of the corporation to save it from default, but the ECF went into hibernation. It initiated no new projects for the following three decades.

The ECF: Now

Seeking to draw upon all available instruments to build new schools for a city that was once again growing rapidly, Mayor Michael Bloomberg reactivated the ECF in 2006. The city had changed the way in which it builds schools in the interim. In order to consolidate and expedite the renovation and new construction of city’s public school facilities, New York State established the NYC School Construction Authority (SCA) in 1988. Today, the SCA’s portfolio encompasses approximately 1,400 buildings. In contrast, with only three permanent staff members and 17 developments completed since its founding, the ECF is a tiny entity that largely flies under the radar. In the dozen years since its re-launch, the ECF has completed only three projects, all in Manhattan and all pairing mostly market-rate housing with new schools.

Like 80 Flatbush, other recent ECF proposals have been hotly contested. Of three sites put forward in 2013, two on the Upper West Side were shelved following opposition by parents and neighbors. The third, for a full city block in East Harlem containing Coop Tech high school, was approved by the City Council in late 2017. Planned in partnership with AvalonBay Communities and designed by Perkins Eastman, the 68-story residential component of the project would be the tallest structure north of 60th Street. At least 300 of its 1,100 apartments would be permanently rented at below-market rents. The Council’s approval, however, has not quelled the opposition. In January 2018, opponents launched a lawsuit centered on the inclusion of an existing park in the real estate transaction. The ECF is thus at the center of a fraught battle over how to define “public benefit,” and its large-scale towers, rather than being seen as “bold, urban form,” simply come across as “luxury condo towers.” Given the growing opposition to ECF developments in recent years: What would it take for the ECF to recast itself not as an enabler of private development, but as an entity truly acting as an advocate for the public benefits written into its mandate? The question has particular poignancy given the centrality of innovation — whether financial, administrative, pedagogical or architectural — to its founding conceit.

Many things have changed in the past 50 years. The idea of providing public goods by way of private development is, by now, so well established it can seem nearly inevitable, and has expanded to the construction of public institutions including libraries. In the case of public schools, the ECF is no longer innovative or unique as a catalyst for public-private partnerships and its reach is more circumscribed. Public schools are routinely built as part of new private developments; even the SCA engages in the practice. A prime example is PS 397, occupying the first five floors of 8 Spruce Street in Lower Manhattan, aka New York by Gehry, whose cost to taxpayers has been well documented.^[13] In the case of low- and moderate-income housing, this deal-making proliferates, in part, because we no longer have large-scale federal, state, or city programs that provide direct financing. Housing subsidies today are indirect, provided through various forms of tax credits, property tax abatements, zoning incentives, and tax-exempt bonds. This indirect subsidization is generally considered politically safe since the foregone tax revenue is, just like the public cost of the ECF, not visible as line items in annual budgets. However, in the long run, the below-market housing generated by projects like 80 Flatbush may be more financially sustainable than the housing funded in the late 1960s. Deeded as income- and price-restricted in perpetuity, it is subsidized at Alloy’s risk and does not rely on programs that can expire or be curtailed at the mercy of changing federal administrations.

Despite the changed political and economic landscape, the ECF could again be more relevant. It could redefine the terms of public-private partnerships and model a new approach like it did in the 1960s. To this end, the ECF should revisit its own history as an experimental entity making unconventional architectural choices with impacts across the city. It could return to its roots to work more closely not only with development partners but with different stakeholders, whether local organizations or business groups, to articulate the overall development program before issuing a call for proposals to developers. And perhaps most importantly — given its public mission — the ECF should stop flying under the radar to transparently and proactively explain what it does, and at what price, in order to advance the notion of bold, urban form for the benefit of a broadly-defined public.