independent schools facilities revenue 101

Facilities Revenue 101:Considerations for Generating Non-Tuition Revenue from Your Campus Assets

January 21, 2015

Patrick L. O’NeilPaul E. Alpuche, Jr.

Lerch, Early & Brewer, Chtd.

www.lerchearly.com

© Lerch, Early & Brewer, Chtd. 2014 www.lerchearly.com

Introductions Know Your Use Options and Limitations Facility Space Use/Lease 3rd Party Investments Sale or Long-Term Lease Next Steps

Overview

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Know Your Use Options and Limitations

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Underlying Zoning

Each zone has list of permitted uses Most schools located in residential

zones with special exceptions In Montgomery County, religious

exemption from SE requirements Exemption for government-owned

property Accessory uses

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Lease or Deed Restrictions

Deeds (e.g., closed or surplus school sites)

Easements Covenants

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Special Licensing

Daycare/aftercare Liquor licenses Gambling licenses

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Neighborhood Relations

It pays to be a good neighbor Tree trimming, snow removal,

etc.

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Nonprofit Status and Exempt Function Income

Unrelated Business Taxable Income

Modifications

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Use/Lease of Facility Space

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Mitigating School Exposure

Contractual liability Indemnification Insurance

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Who is Sponsoring?

School-sponsored event (e.g., fundraiser, class, camp, etc.)

Lease to outside party Accommodating parental usage

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What is the Use and Who is Attending?

Classroom space or camps Enrolled students only or open to

outside students School coach camps

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3rd Party Investment in Enhancing Campus Facilities

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3rd Party Investment

3rd party may pay for some/all costs in exchange for exclusive use rights – e.g., tennis bubble, turf field, gymnasium, ropes course, etc.

Use analysis – permitted use vs. accessory use

Understanding partnerships with for-profits

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Sale or Long-Term Lease Options

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Value Proposition

Use analysis Appraisal Ongoing rental income (vs. one-

time windfall) Partnership with developer

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Mechanics and Costsi.e., How easily can portion of campus be sold or leveraged?

ID the available property with particularity (survey)

Obtain approvals for proposed development

Subdivision, stormwater management, forest conservation, traffic

Lease/condo option

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Mechanics con’t

Subtract costs (including development timeframe) from the value proposition

Tip: participate in Master Plan processes to increase investment opportunities

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Next Steps

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Now What?

Review and understand your existing contracts; update as needed

Review and understand your existing insurance coverage; update as needed

Explore new uses Contact us with questions20


Contact Us

Patrick O’Neil is an attorney at Lerch, Early & Brewer who serves as outside general counsel for independent schools throughout Maryland and DC.(301) [email protected]

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Contact Us

Paul Alpuche is a corporate attorney at Lerch, Early & Brewer who provides business counsel, tax planning and tax controversy guidance to businesses, nonprofit organizations and individuals throughout Montgomery County and the Washington metropolitan area. (301) [email protected]

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For more information

Lerch, Early & Brewer, Chtd.3 Bethesda Metro Center, Suite 460

Bethesda, MD 20814(301) 986-1300

www.lerchearly.com

Tha nk y o u fo r y o ur p a rtic ip a tio n

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independent schools facilities revenue 101

Education

early brewer

use options

party investment3rd

exclusive use rights

lease options

campus facilities

campus assetsjanuary

classroom space