State: Springfield, Nixa schools spending too much to lease buildings

Of the $1.9 million Missouri spends annually to reimburse school districts to lease certain buildings across the state, 85 percent — or just over $1.6 million — goes to Springfield and Nixa.

That, the state now says, is out of whack.

The Missouri Department of Elementary and Secondary Education wants to rein in costs by capping the reimbursement rate for such leases.

"It got my attention," said Deputy Education Commissioner Ron Lankford, who has proposed placing a limit on the annual amount. "I did not view this as a sustainable model. It is a lot of money."

In the early 1990s, the state mandated districts provide early childhood special education to eligible children, ages 3 and 4. But, as the result of a lawsuit, the state was required to fully reimburse districts for that cost.

Districts could also seek state reimbursement to buy or build facilities for the program and the amount was based on a formula that took into consideration the number of children served and the square footage. However, when assistance was sought to lease space for the program, there was no funding cap in place.

"I became concerned that there weren't really similar parameters on what was paid," Lankford said. "It was more 'Send the bill and we'll pay it.'"

Nearly two dozen districts currently receive reimbursement to lease space for the program, and those annual amounts — if you take out Nixa and Springfield — range from $7,000 in Fair Play to $106,000 in Columbia. Most leases are less than $25,000.

Annually, Nixa is reimbursed $875,000 for a new building located behind the Faught Administration Center and Springfield is reimbursed a total of nearly $830,000 for two buildings.

Springfield's leases include $687,729 for the Shining Stars Early Childhood Center, a renovated grocery store at 2525 W. College St., and $150,000 for the Bright Stars Early Childhood Center, a renovated church at 3447 W. Farm Road 168 in southwest Springfield.

"They are the outliers," Lankford said.

Springfield was the trailblazer. In late 2010, the district worked with Wheeler Enterprises, Inc., a company owned by developer Curtis Jared, to find a space that could serve as the headquarters for its early childhood special education program. It touted the ability to bring a wide range of resources and staff — previously scattered around the city — under one roof.

A couple of years ago, Springfield entered the second lease with Wheeler Enterprises, Inc. At roughly the same time, Nixa was working with the same developer to build a new facility on school property.

Springfield and Nixa school officials contacted by the News-Leader stressed that each of the three leases went through an extensive vetting process at the state level and were ultimately approved.

"There were no red lights along the way whatsoever," said Nixa Superintendent Stephen Kleinsmith, who gave the News-Leader copies of Nixa's correspondence with the state regarding the lease. "At no point were there words of caution."

Officials in both districts expressed frustration that changes are now being suggested — long after the leasing deals were made — that are expected to dramatically reduce the state's reimbursement amounts and force districts to make difficult decisions.

State education officials, led by Lankford, crafted a proposed "rule" to reimburse districts for "a reasonable amount" to lease space for the early childhood special education programs.

So what is a reasonable amount? Just over $11 per square foot, Lankford said.

If that change is approved, annual reimbursement would drop to $62,000 for Nixa and a total of $170,000, to cover both leases, for Springfield.

So what will happen to those leases?

"That is all a local decision," Lankford said, acknowledging that districts are facing quite a dilemma. "Each district will have to determine how they are going to react."

Carol Embree, Springfield's chief financial and operations officer, said at this point all options are on the table. The district could break its leases, try to renegotiate lease amounts, come up with local dollars to cover the leases or attempt to buy the buildings.

"One option would be that we'd explore a purchase proposal," she said.

Nixa has an extra complication because the early childhood special education center it leases was constructed on school property. The building, paid for by the company, is leased back to the district.

Kleinsmith said providing services to these children will continue, one way or another. He remains hopeful the state-approved lease for the Nixa facility will be grandfathered in, even if the reimbursement rate changes for the rest of the state.

"I have no problem with (the state) making the rule change, but I have a problem with them bringing us down in the process," he said.

Any proposed state "rule" is required to go through a lengthy public comment period before it can be submitted to the state Board of Education for approval. The proposal is now being revised, based on those comments, and is expected to go to the state board as early as May.

But, even if a change is approved soon, it isn't expected to take effect until July 1, 2016.

"It gives us a little bit of time," Embree said "I'm not in panic mode about that. I appreciate that we have time."

Developer Curtis Jared, president and CEO of Jared Enterprises, Inc. and Wheeler Enterprises, Inc., said he is watching closely to see how the state revises the rule and will work with both districts to explore options based on the outcome.

"We will have well over a year before we do anything," said Jared, confirming the districts have the option of breaking the leases.

He said the work the company put into preparing or building the centers is "something we have done to benefit early childhood special education programs and the children in them."

"It's one of those tough situations," he said.