New agency will take over public school construction in Hawaii

A new state agency to build and renovate public schools is about to be created to take over the job from the Department of Education at a time when most students are learning at home.

A broad coalition of legislators and business interests pushed for the independent School Facilities Agency, saying it will expedite school projects and generate revenue for education through public-private ventures to redevelop valuable campus lands.

But questions remain about how the agency will work, possible duplication of duties with the DOE, transparency, oversight and who will call the shots on school construction priorities. Senate Bill 3103, which creates the agency, will become law by Sept. 15 with or without Gov. David Ige’s signature.

“We will just have to see how this will play out,” said Catherine Payne, who chairs the Board of Education, which had various reservations about the bill. “The bottom line for me is I hope this will help generate better facilities for our students and teachers, but that remains to be seen.”

The bill, part of a joint legislative package, initially sparked alarm because the agency would have been exempt from a host of legal safeguards in the interest of efficiency. Those included exemptions from all county ordinances other than building codes, as well as state laws on historic preservation, environmental protection, civil service, ethics, open meetings and procurement.

In response to public outcry, most of those controversial provisions were ultimately removed. But there is still a partial waiver of the Sunshine Law that was opposed by open-­government advocates.

The School Facilities Agency will be led by an executive director appointed by the governor, with a board also appointed by the governor. The board’s only duty is to provide policy advice and evaluate the executive director. The agency will serve as its own procurement officer.

It will have wide powers to develop, plan, construct and renovate schools; acquire, condemn, lease or sell property; accept gifts and grants; and work with the private sector — with no oversight by the Board of Education, which sets statewide education policy.

Instead the agency is simply required to issue an annual report on its activities to the governor, BOE and the Legislature. It is authorized to create seven new noncivil service positions and transfer an unspecified number of jobs from the DOE.

Sen. Michelle Kidani, who chairs the Education Committee, has high hopes for the new agency.

“I think first and foremost is to be fair in how we go about doing new facilities or renovating old facilities, to make sure we get community input and school input and not have it dragged out for years and years,” she said. “Being dragged out also means much more money has to be pumped into it.”

School redevelopment

Historically in Hawaii, planning, design and construction of public schools was shared between the DOE and the Department of Accounting and General Services. In 2005, those functions were consolidated in the DOE in the interest of accountability and efficiency. Now the reverse is underway.

The idea for a separate School Facilities Agency evolved from efforts by legislators dating back to 2013 with the passage of Act 155, a pilot program to redevelop urban school lands in public-private projects to generate revenue for education. So far that idea has not yet come to fruition.

The most recent proposal, to redevelop Queen Kaahumanu School property on Kinau Street in the heart of town, was nixed by the Board of Education in January. The plan called for moving the elementary school, which has 500 children, onto the campus of McKinley High to make way for housing or commercial development. But the school community opposed it and so did board members.

Other properties still being considered for redevelopment include Kaimuki High School’s sprawling campus and the former site of Queen Liliuokalani School, at 3633 Waialae Ave. in Kaimuki, which houses the DOE’s data center and staff handling support services, facilities, security and emergency preparedness.

Lawmakers have expressed frustration over delays on those proposals as well as various school construction projects over the years. They strongly object when projects they funded are deferred in favor of others the DOE considers a higher priority. The new agency, they believe, would be more responsive.

They also are eyeing the revenue potential from various urban school sites, especially as tax revenues plummet due to the COVID-19 pandemic.

The bill was backed by the Hui for Excellence in Education (He‘e Coalition), Hawaii Institute for Public Affairs, Chamber of Commerce Hawaii, Pacific Resource Partnership and Hawaiian Electric Co., among others.

“The new agency has the potential to expedite much-needed projects to provide the best schools possible,” Peter Ho, president of Bank of Hawaii, testified.

Pacific Resources Partnership said the new agency “will have the power, authority and expertise to modernize Hawaii’s educational facilities in a focused and expedited manner, allowing HIDOE to concentrate its resources on the most important task of educating our children and youth.”

Transparency concerns

The bill passed with near unanimous support at the Legislature, with just one dissenting vote in the House, from Rep. Amy Perruso, (D, Wahiawa-Whitmore Village), a veteran public school teacher.

“This is just one more effort to privatize the public sphere,” Perruso said Wednesday. “I feel like we have gutted public agencies, defunded them since 2008 or even earlier, and then we’re surprised when they can’t do their jobs.”

Advocates for transparency fear the agency will escape scrutiny in making decisions. Although the law says it should adopt rules “pursuant to” the state open-meetings law, subcommittees and work groups of its board can sidestep it. That provision was opposed by the Office of Information Practices and other watchdogs.

“As a practical matter, all policy work of the School Facilities Board will occur in secret if working-group discussions occur outside the Sunshine Law,” testified Brian Black, executive director of the Civil Beat Center for Law in the Public Interest.

Kidani, however, believes that streamlining is needed and that aspects of the Sunshine Law hobble the BOE.

“There are so many things, I’m not going to say we could be doing better but we could be doing more quickly,” Kidani said. “Not more than two members of the Board of Education can be together to discuss issues including this pandemic and how schools are going to function. I think that’s really cut into how the community can be involved, if they can’t have all the board members there so everyone can hear.”

The transition to a new agency may be a challenge. Payne testified the legislation doesn’t clearly delineate the powers, duties and responsibilities of the new agency vis-a-vis those of the DOE or BOE as they relate to public school land and facilities.

“The lack of clear roles concerning school facilities would likely result in unnecessary redundancies between the agency and department, at a minimum, and potentially an outright inefficient use of state funds for the administration of two similar programs,” she testified.

Before the 2021 legislative session starts in January, the new agency is supposed to collaborate with the DOE to identify positions associated with school development and capital improvement projects that should be transferred to the School Facilities Agency.

Kidani said the DOE’s Office of Facilities and Operations would still be responsible for minor repairs and maintenance at schools, such as painting, reroofing and fixing plumbing. Bigger jobs, from replacing locker rooms to building new schools, would go to the agency. But those specifics are not spelled out in the legislation.

The agency will get an infusion of cash from the State Educational Facilities Improvement Special Fund, which the bill repeals and transfers to the new School Facilities Special Fund. As of June 30, 2019, the most recent report, the older fund had a balance of $21 million. The agency can also receive legislative appropriations, grants and donations.

Questions remain

As late as June 29, the bill’s final hearing, state Budget and Finance Director Craig Hirai continued to raise numerous questions about how the agency would function.

“How will SFA ensure compliance with Internal Revenue Service regulations related to private activity to maintain the tax-exempt status for school facilities that were funded by general obligation bonds?” he asked.

Hirai also questioned whether the new special fund met various state criteria, including whether it would be self-sustaining. And he asked about coordination between DOE and the agency.

“Who determines what projects are needed?” he asked. “Who sets project priorities in implementation? Educational program requirements drive school facility needs, but this bill is silent on this critical issue.”