Light floods into the first-floor classroom at Walter Payton high school, where a French lesson is in progress. Reaching for a remote control, the teacher activates a projector hanging from the ceiling and words appear on a screen at the front of the class, shifting in response to keyboard commands as the students polish their pronunciation. Everything in the room is new, from the textbooks to the desks - each equipped with a computer dataport.

But the students could be forgiven for letting their attention slip, even in the face of all this technology, given the extraordinary view of the Chicago skyline through the window. The school was built with all its classrooms on the sunniest side, facing downtown, to take advantage of the light. Science labs and music studios went on the other side. It is one of the many small details that have made Walter Payton high, which opened this year at a cost of pound;21 million, a success.

But there is also something incongruous here. Looming over the windowless side of this sparkling school, just across some elevated train tracks, is the dark hulk of Cabrini Green, one of the United States’ most notorious public housing projects, where, until recently, poor families were warehoused in cheap high-rise buildings plagued by gangs. So grim had Cabrini Green become that the city relocated the residents, and has begun to demolish the buildings, in the process flushing out the snipers who used them as a base for terrorising passers-by.

American inner-city neighbourhoods like this seldom get new schools; existing urban schools seem almost universally overcrowded, under-equipped and badly in need of repair. A 1993 investigation of Chicago schools by the Chicago Tribune newspaper depicted buildings in ruins, with leaking roofs, and students crowded into basements. More than half the schools in Chicago are more than 75 years old. And the problem is not confined to the city. Most public school buildings in Philadelphia and New Orleans are around 65 years old. Some schools in New York City are still being heated by coal-fired furnaces. And when the American Society of Civil Engineers rated the nation’s infrastructure - roads, bridges, public buildings - schools received the only failing grade. Nationally, there is an immediate need for around pound;76 billion to fund school construction and repair programmes.

Most cities have been waiting for the federal government to allocate this money. Despite much talk during the recent presidential campaign about improving public schools, only a trickle of money has come on stream. In Chicago, for example, 81 per cent of any new school construction or repairs still has to be paid for out of scarce city funds, and 18 per cent by the state of Illinois, while barely 1 per cent comes from the federal government.

Which is another reason why Walter Payton high is so extraordinary. Four years ago, tired of waiting for Washington to act, Chicago went ahead and launched the largest school construction and renovation programme in US history. In the nation’s third-largest school district, with 601 schools and 431,750 students, the task was daunting. More than 1,000 projects would be under way at one time, from individual window repairs to entire new schools, supervised by 135 managers and 156 architects. So far, 14 schools, 29 additions, and 27 annexes have been constructed, 316 schools have new roofs, 315 have new windows, 70 have new playgrounds, and 14 have new athletic fields. Since 1996, 1,100 classrooms have been added.

Chicago scraped together the money for the projects from its own city treasury, and by issuing bonds. “When a city allows its schools to crumble, it sends out a message that it has little respect for what goes on inside,” says Mayor Richard Daley, who demanded the improvements when he took control of the floundering school system in 1995.

The cost so far is pound;1.9 billion. “And we’re talking basic needs, not frills,” says Tim Martin, the schools’ chief operating officer. “We’re not addressing things you’d see in suburban schools, like nice libraries or new carpets.”

But, he adds: “If I had to wait for the federal government, Chicago wouldn’t be anywhere near where it needs to be. Federal funds for schools? There aren’t any.”

Years of neglect had left some Chicago schools barely usable. “Physically, the schools were terrible - boarded-up windows, heating systems that didn’t work, roofs that were leaking, classrooms closed because of lead or asbestos contamination, the whole gamut,” says Mr Martin. “We were the neighbour on the block that everybody hates to live next to.”

The problem was no secret. “We knew exactly what was wrong with these buildings,” says Gery Chico, an attorney and president of the Chicago Board of Education, which is appointed by the mayor. “There were lights that hadn’t been fixed in years, windows that hadn’t been cleaned. But the financial condition of the school system in the past three decades was so poor that it was viewed as a luxury to take dollars out of payroll or the textbook account and put it into buildings.”

Considerable obstacles remain in Chicago. The ambitious reconstruction programme is in danger of stalling unless another pound;1 billion is found to finish the job. At least 60 more schools need to be built or expanded. About 150 schools still lack kitchens, and many need new paint or have antiquated science labs and old boilers. “We need help,” says Paul Vallas, a former business executive whom Mayor Daley appointed superintendent of schools. “If we’re going to solve all these problems, we’re going to need new finances. We have tapped nearly all our local funding options to the maximum.”

Impatient parents in neighbourhoods that have yet to see improvements are complaining. Others have rushed to enrol their children in the nearest new schools - sometimes lying about where they live - unexpectedly swamping them almost on the day they open. One, Orozco community academy, was oversubscribed within an hour. At another, Sandoval elementary, 1,300 students showed up to claim 1,190 places on the first day. “Nobody was keeping a tally, and all of a sudden they looked around and all the classrooms were jammed,” says Mr Martin. School officials had to go from door to door to verify addresses.

Walter Payton high, which requires an entrance exam for admission, has 4,332 applicants for 196 places in the autumn. “Everybody wants to go to the new school,” says Mr Martin. Of 55 additions and six new schools built since 1996, one in three is already beyond capacity; across Chicago, 38 per cent of elementary and 54 per cent of high school students attend overcrowded schools.

Immigration patterns also make it difficult to predict where classrooms will be needed. “Populations shift almost on a daily basis,” says Mr Martin, who receives city-wide construction updates in his downtown office every day at noon. In some cases, as many as four families, with maybe a dozen children between them, might share a single home.

In this highly politicised blue-collar town, the schools have also had to avoid offending local communities and unions. Though the city usually orders equipment for its new schools in bulk to save money, it is also careful to buy from local merchants. “We made sure that schools in every neighbourhood were getting something - a fence, landscaping, a parking lot - even if they didn’t really need anything,” says Mr Martin. And officials signed an agreement promising that all major construction jobs would pay union wages and benefits in exchange for a no-strike pledge. Last summer, that kept concrete flowing during a strike that shut down jobs all over town.

In some cases, the huge number of schools under construction and repair has resulted in a shortage of workmen, while students have had to be shifted between buildings in term time. At Southside college preparatory academy, students use a plywood passageway with plastic sheeting to walk between two recently finished wings; workmen are now hurrying to renovate the original old centre section to meet a deadline just a month away. The buildings are surrounded by construction trailers in the mud, furniture is stacked in the hallways, teachers are sharing classrooms, and workers in hard hats share the corridors with students.

Most people seem happy to put up with such annoyances for the sake of seeing new inner-city schools for the first time in decades. During a dusty tour at nearly completed Southside prep, principal Linda Layne says it’s like “having your presents unwrapped at Christmas”.

But those presents won’t be gilded. Spending in one area means scrimping in another. Walter Payton high - named after a Chicago Bears American football player who died of cancer in 1999 - has advanced technology, including powerful desktop computers and a miniature planetarium, but has a more modest gymnasium than comparable schools. It’s a necessary trade-off.

The blueprint for Chicago’s new schools looks very much like that used in the 1920s, which turned out to be surprisingly durable and functional.

There are differences, of course. The new schools include small, shared offices, where teaching staff can meet and plan classes. There are college-style lecture halls. The libraries seem to have more computers than books. There is room for social workers and medical clinics to help take care of a contemporary student body that relies on schools for more than just its education. And there is usually air conditioning, an important feature as the city requires students to stay in school during the summer if they fail to win promotion automatically from one grade to the next.

Successful as the design is, it didn’t take officials long to realise they were paying architects to churn out the same basic plan again and again. “The prototype was really perfected back in the Twenties, with a linear building that reflects what we can fit on a standard city block,” says Mr Martin. “What we’re doing is an update of that. My attitude was, ‘we’re building the same school over and over’. We kept pushing them to change things, and they kept coming out the same.” The project’s managing architects, De Stefano and Partners, refused to take a fee cut, so the two sides parted company last year.

Now De Stefano has taken its Chicago model to other cities, including Detroit (which turned it down in favour of a local bidder), and to the United Kingdom; Duane Sohl, managing director of the company’s London office, spent five years on the Chicago project. “Chicago has really dug itself out of a hole, and we would love to be able to do this in other places,” says Sally Draht, De Stefano’s spokeswoman in Chicago. “It has been hailed nationally as a system that produces a large amount of new schools in a short time. Not only did we develop the prototype, but we figured out a way to do it quickly.”

The most significant innovation hasn’t been the architecture, however, but the way the city is paying for the reconstruction programme. About a fifth of the money has come from bonds - funds borrowed via brokers from individuals or pension funds in return for a guaranteed rate of interest. The bonds are agreed and underwritten by the state of Illinois. Tight management of the construction programme has bolstered investor confidence and helped the school department increase its credit rating, lowering the cost of borrowing. Paul Vallas is now drawing up a complicated plan under which the state government would increase its contribution to the teacher pension scheme, freeing up city money to lever another pound;680 million in bonds.

There have been other, novel, ideas. LeMoyne school rents out its parking lot to the neighbouring Chicago Cubs baseball team on match days. North Side prep was built on land owned by the city parks department, which now uses the building at night and on weekends as a senior citizens’ centre. It also split the cost of its athletic fields with a neighbouring university, which will share the soccer pitches. The school department even made pound;31 million by renting out several floors of its high-rise downtown headquarters building, and is considering selling “naming rights” to any corporation that helps to pay for two planned new schools.

“What distinguishes Chicago from other jurisdictions is that we constantly try to find this money, we are aggressive on this,” says Gery Chico. The city has revamped not only Catholic schools, but old, abandoned public schools. When Lennette Coleman, principal of the Ariel community academy, first saw the abandoned 19th-century school the city proposed to renovate for her, she was sceptical. The Victorian-style building, originally called the Shakespeare school, was in such bad condition it was used as a ruin in the movie The Fugitive with Harrison Ford. The basement was flooded, the walls were covered in mildew, and the building was overrun with stray cats.

Now the school is bright and clean, with a library full of new books. The cats have gone, replaced by 440 children, many from a desperately poor surrounding neighbourhood. “When we do a new school or a refit, the whole neighbourhood improves,” says Ray Heitner, affable director of the city-wide construction effort, pointing out homes where owners have begun to apply a fresh coat of paint. As for the staff and students, says Ms Coleman, “it’s a big morale-builder” after years of being housed in temporary classrooms. It has also increased attendance. When the school re-opens for its second year in August it will be “turning them away in droves”, she says.

Officials say new schools give an edge in the battle to recruit teachers. Like most US cities, Chicago faces a huge shortage; it needs to recruit 3,000 new teachers by the autumn. “Nobody wants to go to work every day in a place that’s run-down, dreary and gloomy, with lights that haven’t been fixed in years, windows that haven’t been cleaned,” says Gery Chico.

But the main impact is meant to be on the students. Chicago’s pupils perform poorly in standardised tests. “One of our concerns is the esteem issue,” says Muriel Jackson, spokeswoman for the independent Chicago-based Cross City Campaign for Urban School Reform. “The physical condition of the school communicates a negative message to students about their worth in our cities. When a school is in great condition, that sends a more positive message about their value in society.”

It’s too early to gauge the results in Chicago. But in Union City, New Jersey, a city near New York with a large population of Cuban immigrants, students improved from among the worst in the state to some of the best when their schools were equipped with new technology.

Back at Walter Payton high, dean of admissions Sandrai Stigler watches students rush between classes along the “street”, as they call the wide central hallway. “The kids really see this as being a privilege,” she says. “That’s a word they use - privilege.”