Nutter buys in: Schools to raise $61 million by selling buildings

The old William Penn High School on Broad Street in North Philadelphia is among the buildings that have drawn interest from prospective buyers, Council President Darrell L. Clarke said.
The old William Penn High School on Broad Street in North Philadelphia is among the buildings that have drawn interest from prospective buyers, Council President Darrell L. Clarke said. (DAVID MAIALETTI / Staff Photographer)
Posted: November 01, 2013

Mayor Nutter agreed Wednesday to a Philadelphia school funding plan that hinges on selling millions of dollars worth of empty school buildings, despite having expressed skepticism about the idea for months.

The School District plans to post its inventory of more than 30 shuttered buildings on its website next week and start seeking bids on the properties, Nutter said.

The district would have to sell $61 million worth of buildings by the end of the fiscal year in June. That would cover the $50 million the city promised the district at the beginning of the school year, as well as $11 million that the district had already budgeted from building sales.

In the meantime, the city plans to give the district $60 million that normally would have been sent in May or June from tax collections earmarked for the schools.

Nutter's announcement ends a long standoff with City Council over the best way to fund the $50 million the city promised the schools, part of an effort to dig the district out of a $304 million deficit. Gov. Corbett recently released a $45 million state portion of that rescue package.

The mayor was joined at the lectern Wednesday by 10 members of Council, including President Darrell L. Clarke, whom he thanked "for his presence, for our conversations, all of which have been very, very helpful."

"Things have evolved over time," the mayor said. "We've come together with a better understanding of what each is trying to accomplish, and we're now working in partnership."

Nutter had wanted to follow the outlines of a state plan to borrow the $50 million against future collections of the city's extra 1 percent sales tax. But no Council member would introduce legislation necessary for the borrowing.

Instead, Clarke proposed transferring $50 million in exchange for empty buildings that could be sold to pay the city back.

Council passed a bill to authorize that transfer this month. Nutter signed that bill Wednesday, but the money would be spent only if the district failed to sell enough buildings in the next eight months.

Nutter and Clarke have been at odds for months over how to raise city money for the schools and over the actual worth of - and buyer interest in - the district's aging properties.

Administration officials cited previous sales of public and Catholic schools to say the buildings would not move quickly enough.

Not so, Clarke argued. He said Council members had fielded nine inquiries about seven school properties, the most prominent of which are University City High School, near Drexel University's campus, and William Penn High School near Temple University.

As The Inquirer reported Saturday, Clarke also delivered an offer to the district from a Washington real estate investment firm that proposed to buy the entire portfolio for $100 million.

Clarke said Wednesday that two more entities had come forward with interest in buying all the properties. Sources called one a well-known development firm in Philadelphia.

"I must say the level of interest has actually surprised me," Clarke said. "It puts us in a very enviable position. . . . I'm pretty excited about the possibilities."

The district will maintain ownership of the buildings. Clarke's original plan called for the city or the Philadelphia Authority for Industrial Development to take title.

Nutter had objected to the city's being made responsible for upkeep of the shuttered buildings.

The deal described Wednesday has the district controlling the sale process, with help from the city's Commerce Department and the Philadelphia Industrial Development Corp.

School officials have maintained they are "agnostic" about how the city comes up with the $50 million it had promised. Still, district spokesman Fernando Gallard called the Nutter and Clarke announcement "great news."

He said the sales would move quickly, but go through a full vetting.

"There will be public input and outreach in the sale of these properties," Gallard said. "We believe a public process is necessary."

PIDC president John Grady called the buyer interest in the school buildings "encouraging," but said that without evaluating the offers or the sites, it would be premature to judge whether $61 million worth could be sold by June 30.

Two recent sales could serve as barometers for the higher-profile properties: West Philadelphia High School, which fetched $6 million last year, and John Wanamaker Middle School, which sold for $10.75 million in 2008.

University City High, which sits on an enormous plot along with another shuttered school, Charles R. Drew Elementary, could be in a class by itself.

Allan Domb, president of the Greater Philadelphia Association of Realtors, has surveyed the empty schools and said eight could be sold to the highest bidder.

He said the University City site and William Penn could bring more than $50 million combined.

Nutter, notwithstanding his earlier doubts, told reporters Wednesday he thought the district should be able to achieve its $61 million goal given the amount of interest in the buildings.

As for his long tussle with Council over how to raise school funds, he said he was not concerned about the "sausage-making," only "what's on the plate, the end result."

"There's always with big ideas and big issues a lot of twists and turns," he said. "We're here at this moment, and this is the best possible thing that we could be doing."


tgraham@phillynews.com

215-854-2730 @troyjgraham

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