A severe budget crisis at the San Francisco Unified School District means that regardless of what happens with the superintendent, a wave of school closures and mergers is likely coming. While reducing costs shores up one side of the balance sheet, generating cash is critical for the other.
As a nonprofit public agency, the district is limited in its ability to raise money outside of government funds (which are tied directly to enrollment) and local taxes and fees (which are sporadic). But one asset the district does have at its disposal is real estate.
In total, SFUSD owns 9.9 million square feet across 155 properties, making it the third largest holder of city-owned property, according to the district’s most recent facilities master plan. Of that portfolio, SFUSD recently identified 13 schools for closure or merger.
In the private sector, companies are incentivized to either sell distressed assets or walk away from underwater loans. Business logic would have the school district do the same, since it claims it can no longer afford to operate or maintain those properties. But in reality, public schools are reluctant to let go of real estate, especially in San Francisco, where the scarce commodity would be difficult to acquire again by a district with limited resources.
SFUSD officials have not said they intend to sell any property, and the district’s master plan makes no mention of doing so. Furthermore, even if sales were to happen, state law restricts SFUSD from spending the proceeds on anything aside from maintaining or upgrading its facilities, meaning teacher salaries or other general operating expenses are off the table.
Rather than pursue sales or redevelopment, SFUSD will focus on “activating” school sites that have been closed, spokesperson Laura Dudnick said in a statement.
At those sites, the district’s priority will be to make use of those spaces to expand programs such as early education centers, serving preschool and transitional kindergarten students.
“If there are vacant sites once all of SFUSD’s needs have been met, we will consider city partnership opportunities,” Dudnick said, adding that the district will continue paying for custodial and security services at those locations.
Dudnick said that starting next fall, playgrounds at certain elementary schools will be shared with local communities on weekends, while unused rooms and outdoor spaces will be made available under the district’s existing rental program, which allows for nonprofit groups, public agencies, and private or commercial users to book spaces for events, subject to school approval.
SFUSD’s analysis of its portfolio shows its buildings are not being efficiently utilized. According to district data, just 20 of 72 elementary schools are more than 90% occupied, while eight of 21 middle schools and five of 17 high schools meet that mark.
Adding to the distress, an internal assessment of the district’s facility conditions estimates that nearly $1.7 billion in repair or renewal costs are needed in the immediate future. Public school advocates are focusing their efforts on Proposition A in the upcoming election, a measure that aims to raise $790 million in bonds for building improvements.
According to district data, SFUSD has 14 other properties that are not being used for educational or administrative purposes and are leased to various entities. These include parking lots and office space for nonprofits and a 75,675-square-foot lot under the San Francisco Centre Mall on Market Street.
SFUSD this year has generated approximately $7.7 million from its leases, the district confirmed.
Meanwhile, SFUSD has two plots of undeveloped land, totaling more than 280,000 square feet. One district-owned site in the Outer Sunset was redeveloped into teacher housing last year; two others have been earmarked for the same.
Private school choice
Whereas public schools are stuck with excess they can’t get rid of, private schools are often hungry for bigger space.
For most of his time leading the Chinese American International School — one of the city’s most sought-after private dual-language immersion schools — Jeff Bissell has had to cobble together small bits of real estate as it has grown.
In 2020, the religious institute Sisters of Mercy closed its all-girls preparatory school. CAIS purchased the 82,000-square-foot property the following year for $40 million.
“It was a once-in-a-lifetime opportunity for us to consolidate,” Bissell said.
Transactions involving San Francisco schools have mostly been made between private groups. In 1999, St. Paul’s School, another Catholic institution, offloaded its property on the corner of Valley and Sanchez Streets in Noe Valley to private developers who transformed the building into condos a decade later. In 2005, Levi Strauss & Co. sold its former factory building at 250 Valencia St. to the San Francisco Friends School for $3.5 million.
After nearly three years of renovations and a fresh coat of paint, the students and faculty at CAIS finally moved into their new campus this fall.
The new location has more room for activities, including a separate arts center and gym. The new location has also opened doors for more students from the peninsula, Bissell said, boosting the private school’s prospects even more.
“Real estate is such a blood sport in this city,” he noted. “It’s expensive, and there is not enough of it. … It’s definitely not for the faint of heart.”