Box 5, Folder 6, Document 39

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MAY 24 1968


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Brown Guenther Battaglia Galvin, Architects

P.S. 126 AND HIGHBRIDGE HOUSE — This facility, the first in the
Fund's program, combines an elementary school for 1,411 children with 400

apartments for middle-income families in the Bronx.


The Fund is the first agency of its kind in the country authorized to finance
public schools in combined-occupancy structures. Although its purpose Is new,
it is a traditional form of government institution established to finance public

and quasi-public facilities. “

The rapid increase in the number of public benefit corporations in urbanized
states like New York. during the past twenty years has paralleled the need for
increased capital construction at costs exceeding liniitations on public debt.
Similarly, New York City’s fiscal limitations, together with its need for school

construction, generated the creation of the Educational Construction Fund.

The concept was developed by Lloyd K. Garrison while he was President of
the Board of Education. He saw the public benefit corporation as an appropriate
vehicle to serve both the City and the school system. With a grant from the
Taconic Foundation to underwrite research and bill drafting, he initiated the
action that subsequently won the endorsement of Governor Rockefeller and
Mayor Lindsay and the support of the Legislature during the 1966 session.

The Fund is headed by the President of the Board of Education who is des-
ignated by law as Chairman. Four additional members of the Board of Educa-
ticn, appointed by the Presidenr, serve the Fund during their terms of office
on the Board. Four trustees, appointed by the Mayor, serve terms set initially at

two, three, four or five years. Their successors will all serve for five years.

The present trustees bring to the direction of the Fund’s development and
finance operations a combined background in all areas essential to the success
of this new venture—education, housing, labor, commerce and finance.


The Fund is expected to provide a substantial portion of the City’s school

construction program from now on.

Combined-occupancy structures built under this program will be « owned jointly
by the Fund and the developer. The Fund will finance and own the land and
the school. The dev ‘cloper will finance and own the facilities above the school.
The two portions of the combined-occupancy building will be designed and

constructed as a single project.

The Fund's activitics generally start with a site designated by the Board of
Education for a new school. They include developing appropriate concepts
for combined use of these sites, promoting developer interest in undertaking
construction, and coordinating with the Board of Education during the design
and construction of the school. Local School Boards will be consulted, and all
combined-occupancy structures will be approved by the Board of Education
as well as by the Fund, thus assuring that the program directly serves the
school system.

The Fund hopes to attract as sponsors qualified persons and organizations
interested in participating in the program, including community and other
non-profit groups.

School sites already owned or being acquired by the City will be publicly
advertised by the Fund if suitable for the development of combined-occupancy
structures. Proposals for these sites will be invited from potential sponsors and
developers. In addition to information describing the site, the Board of Educa-
tion’s requirements for each school will be made available for the preparation
of a proposal.

Evaluation of the proposals will be based on several criteria, including the
compatibility of the non-school use, the income to be derived therefrom, and

the financial ability and experience of the applicants.

Proposals from potential developers who either own or have a legal interest
in a site may be ‘considered on a negotiated basis. These proposals would have
to mect the same standards of feasibility and developer qualifications as those
received through public invitation. In addition, the Fund may consider, in
rare instances, negotiated proposals from developers who have incurred con-

siderable costs in developing imaginative design or novel use cencepts for a

8 a
combined-occupancy building. In accepting either type of proposal, the Fund

will be governed by the public interest.

Eventually, ownership of the site and the school portion of the combined-

occupancy structure reverts to the City. Air rights to the non-school portion

will be leased or sold to the developer.

The developer will have full responsibility for the construction of the school
as well as the non-schoo! portion of the building. Although the three major
subcontractors (plumbing: heating, ventilating and air conditioning: electric
work) will be selected by public bidding, as required by law, instead of by
the informal negotiation usual in private work, the winning bidders will be
made responsible to the general contractor or developer. The major advantage
of a single construction contract has thus been preserved by establishing a
single responsibility for the timely and satisfactory completion of the work.

The. Fund will sell tax-exempt bonds | and bond anticipation notes to finance

site and construction costs of schools built under its program. The, developer |

will, independently _ finance his. _portion | ‘of the combined: occupancy structure, _
using either conventional or government sources of mortgage, moncy. |

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The Fund’s bonds are expected to be highly marketable at a favorable rate

because of an unusual sccurity feature. In addition to a capital reserve fund
to cover debt service for any succecding year on all outstanding bonds, as is
customary for public benefit corporations, the law authorizes a first lien on
State aid to New York City for the support of the public school system. A
call on State aid would be made only in the improbable event that the capital
reserve fund should at some time be insufficient to meet debt service and the
City did not replenish it to the amount required. However, the provision
assures at all times the solvency of the Fund and the security of its bonds.

Debt service on the Fund's notes and bonds will be paid from income.

There will be three sources:

1. Payments for the sale or lease of air rights
The Fund will receive from the developer an annual payment, based on
fair market value, for the sale or lease of the air rights over the school.

2. Payments in liew of taxes

Instead of paying real estate taxes to the City, the developer will make
equivalent payments to the Fund for a period of time not less than the period
of the serial bonds issued to finance site and construction costs of the school.


3. Rentals for the schools

This payment is expected to be nominal for the majority of schools built in
combined-occupancy structures. Whenever the income from the disposition of
air rights and payments equivalent to real estate taxes are sufficient to cover
debt service and the Fund's administrative costs, there will be no need for
additional income. School rentals will be required only for those structures
that cannot make sufficient payments to cover debt service, such as tax-exempt
public facilities and certain kinds of non-profit housing.

The bonds to be issued by the Fund are limited to 40-year maturities, and
the notes to 5-year maturities. They are legal investments for all organizations
authorized to buy the State’s bonds or other obligations, such as public bodics,

trust and insurance companies, banks and fiduciaries.

5 ’


The major portion of the program is expected to provide new schools at
little or no cost to the City. Most residential and commercial structures are
expected to yield enough income to per mit, a school rental of $1 a year. Some
will even yield a surplus, which can be used for the construction of additional

schools or turned over to the City.

Some combined- “occupancy structures will probably be built to meet the City’s
social needs despite their inability to produce enough income to pay all of
the debt service—those providing moderate-rent housing, for example. In these
instances, school rentals will be no higher than the annual cost of a com-

parable new school.

The Fund has been designed for considerable flexibility in its operations.
Because a wide variety of commercial, public, social and residential uses can
be accommodated in combined-occupancy buildings, many sections of the City
offer appropriate sites. Combined use is adaptable to small structures that
can blend into existing, cohesive communities. Jt is also applicable on a large
scale to major redevelopment areas, including urban renewal and Model Cities
projects. It can become one of tae City’s important planning tools during the
next decade to create economic, social and physical renewal while carrying
out its prime purpose of creating additional schools.

‘Alfred A. Giardino

Aaron Brown
Lloyd K. Garrison
Morris lushewitz

Jason R. Nathan

, oer


Danici Z. Nelson
Executive Director

Sol A. Liebman
General Counsel



Nixon Mudge Rose
Guthrie Alexander & Mitchell
Bond Counsel

Ernst & Ernst

Fergus Reid, II

Philip A. Roth

Clarence Senior

Howard Stein

Grace Bliss
Assistant Director

Andrea Wilson
Consullant on Education

Eastman Dillon,
Union Securities & Co.
Financial Advisor

John H. Muller ~
Real Estate Advisor

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