No one was waiting for the exercise equipment, and the basketballs were going unused Tuesday morning at the North St. Paul Community Center.

Now the city and school district are pursuing a plan that would see the city shed the fitness-center operation -- which has run at a loss -- and replace it with a special education center for the district, possibly saving the schools nearly $1 million annually.

The North St. Paul-Maplewood-Oakdale district, which serves students in Washington and Ramsey counties, wants to renovate the community center for $2.5 million early next year and then open a special education center there next fall.

A lease agreement between the city and school district won school board approval last month and was to be submitted to the state Department of Education for review. But the two sides since have decided to take a new look at the terms of the deal, district spokeswoman Jennifer McNeil said Wednesday.

The district believes it can save on tuition costs for students who now are being sent elsewhere for special programs. But the proposal is not just about saving money, said Karon Joyer, district director of special services.

She believes students will be better served in a central facility. In addition, parents can take comfort knowing their children are within their home district.

Think, Joyer said, of the frustrations that parents endure hearing that their high school-age students need special help and have to go outside the district to get it.

"Those things are difficult on top of an already difficult situation," she said.

The district also hopes that by keeping students closer to home, they will be less likely to drop out, thereby improving graduation rates.

Joyer said the refurbished building would offer students access to a gymnasium, creative arts spaces and the city's Ramsey County branch library.

The district also hopes to make the gym and an indoor running track available to the public.

The 15-year lease proposed last month would give the city a revenue-generator in a space that now costs it money. The district would pay $208,000 in lease costs during the deal's second year, which would be the first year free of construction. The highest annual payment would be $260,000, which kicks in during the 11th year.

Dale Sundstrom, the district's business services director, said the schools would take on $2.5 million in debt payable over 10 years. The deal would raise taxes on an average-value home by about $5 per year, he said.

But even after debt and lease payments, he said, the district would come out ahead of current expenditures -- to the tune of $943,000 annually.

Special education programs to be housed in the center include:

• Setting IV EBD (emotional behavior disorder), which typically includes 25 to 30 secondary school students, Joyer said. The district now pays for the students to attend programs elsewhere, swelling transportation costs.

• Work-based learning, which assesses high school students with disabilities and then provides vocational training. Joyer said that the new center also would house a related program, Varsity X-Press, a simulated business that allows students to work on arts and technology skills by filling orders from the district for posters, bulletin boards and other materials.

• TEEP (Therapeutic Elementary Education Program), which typically includes 20 to 25 elementary students who have similar needs as older students in the Setting IV EBD program. The program, now being operated at an early childhood and senior center in the district, is designed to help kids "get back on course so they can get back to their regular school environment," Joyer said.

The district had hoped to submit the lease agreement to the state this month for approval by year's end. Those plans now are on hold as the city and district re-examine the deal, McNeil said. The school board is expected to review any changes to the agreement.

Anthony Lonetree • 651-925-5036