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The Charter Blog
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Wednesday, November 09, 2011
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Detroit Public Schools Buildings: Are They a Go or No Go for Public Charter Schools?
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Providing high quality educational options so that every child has an opportunity to learn is a core mission for the public charter school sector. In cities like Detroit, the need for quality educational options is urgent. For many years, state, local and community leaders have been sounding the alarm that public education in Motor City is in dire need of change. Finally, this year, changes are occurring. City leaders are turning the situation around by inviting national public charter school models to open schools in 2012 and beyond.
To assist this transformation, the National Alliance for Public Charter Schools and the Michigan Association of Public School Academies have partnered in an assessment study of the 50+ school buildings that Detroit Public Schools (DPS) have listed for sale or for lease. Both parties believe that this study can be a catalyst for moving forward, since securing adequate and affordable facilities is a major challenge, and often, an impediment to the growth and success of the charter school movement.
Detroit Public Schools: Available Facilities Report is a high level viability study of the 54 available school buildings in DPS. It is a resource for all public charter schools seeking facilities: those that are already operating in Detroit and national models looking to replicate in Detroit. The report includes a profile of each building as well as a viability ranking on a scale of 1 to 10 (10 being most viable). If a public charter school is interested in particular building, it can engage a more in-depth analysis of the building to determine the investment necessary to make it operational.
Ideally, state laws should require school districts to share unused buildings with public charter schools at minimal or low cost. And, in the absence of such laws, school districts should provide public charter schools access to unused buildings. To learn about the innovative school districts that have affirmative policies and practices in sharing available public facilities to public charter schools, click here.
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Posted by:
Maria C. Sazon, Senior Director for Facilities Initiatives
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6:00 AM
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Tuesday, October 18, 2011
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Charter School Bond History: Looking Back and Looking Ahead
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The Charter School Bond Issuance: A Complete History, published by the Local Initiatives Support Corporation (LISC), provides a comprehensive analysis of the more than $5 billion in tax-exempt bond transactions undertaken by roughly 400 public charter schools, from the first bond offering in 1998 through 2010.
The report conveys transparency about the charter school sector of the municipal bond market and the current two-tiered system of public school financing—one for school districts, which frequently access the tax-exempt bond market at favorable rates, and another for public charter schools, which have limited access to the market and pay higher rates. The report finds that charter schools have paid an average interest premium of two percentage points more than triple-A rated municipal borrowers. According to the authors, these higher interest rates translate to an additional $90 million in interest payments annually for charter schools.
Charters school bonds’ low credit ratings are generally attributable to the newness of the sector, the absence of taxing authority and the lack of per pupil funding specifically for facilities to secure the bonds. And because low rated bonds carry higher interest rates, facilities become a heavy burden to school operators. If the interest premium could be marginally reduced from the estimated of $90 million per year for the entire charter school sector, it would free up funds that could be used to support instruction rather than to pay interest.
The report contains many other findings about charter school bonds including the upward trajectory of bond issuance that peaked in 2007, the number of schools that received credit enhancement, default rates, and the void left by the collapse of the municipal bond insurers. To request a hard copy of this report, please contact the EFFC at effc@lisc.org.
Now is the time for the public sector to address the two-tiered public school finance system. As stated in the report, short of publicly financing charter school facilities with tax-backed structures, the expansion of state, municipal or federal credit enhancement programs that guarantee charter school debt without any up-front appropriation of monies would be a practical and efficient use of superior government credit in today’s tight fiscal environment. If charter schools could access the capital market with the ease and the lower interest rates of school districts (if not all charters, at least those with demonstrated academic, financial and operational success), the resulting savings would redirect taxpayer dollars to the classroom, while reducing public outlays for public school facilities.
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Posted by:
Maria C. Sazon, Senior Director, Facilities Initiatives
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6:00 AM
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Monday, June 20, 2011
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“A Decade of Results: Charter School Loan and Operating Performance,” Lending to Charter Schools Pays Off
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A Decade of Results: Charter School Loan and Operating Performance is an industry-wide study of 430 charter school loans, both outstanding and paid off, from 2000-2009. The study, conducted by Ernst & Young LLP and funded by the Bank of America Charitable Foundation, examined loans that totaled $1.2 billion and were made by 15 lenders to 336 schools. The lenders are mostly community development financial institutions (CDFIs) , which are non-profit organizations that provide financing for charter school facilities as part of community development or charter support missions. (In fact, three CDFIs -- the Low Income Investment Fund, The Raza Development Fund and The Reinvestment Fund -- commissioned the study).
The finding that charter schools are good borrowers did not surprise those of us who are closely involved with charter schools. This study, the first and only industry-wide research of charter school loans, is important because it proves that a vast majority of charter school operators manage their finances well and are responsible borrowers despite their relatively small enrollments, limited operating history and limited financial resources. To date, only a handful of lenders and bond investors are invested in charter schools due to the perceived credit risks and newness of the sector. We hope that this research serves as a tool to improve other parties’ understanding of the sector. Private capital investments by banks and investors are critical in the growth of charter schools.
Some of the key findings of the report are:
• Five loans totaling $12 million (or 1 percent) of the total loan amount made during the period ended in foreclosure;
• Approximately $2 million (or 1 percent) of the foreclosed loans, net of recoveries, were written off as of June 30, 2009 (this figure excludes potential subsequent write-offs of foreclosed properties still held by lenders)
• 3.6 percent of outstanding loans had been delinquent at some point over the 10-year study period for at least 60 days;
• Strong academic performance is associated with better loan performance; and
• In determining loan performance, occupancy costs seem to matter more to lenders than per pupil revenue, a message that controlling costs is important.
Sometimes, it is hard to separate noise from facts. When it comes to capital financing, existing and potential lenders and investors, and other charter schools stakeholders, now have this report, which showed that the majority of loans made to charter schools over a ten year period yielded positive results, as a resource when making their decisions.
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Posted by:
Maria Sazon, Senior Director, Facilities Initiatives
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6:00 AM
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Friday, March 11, 2011
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Money can’t buy success. Or explain failure.
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I recently suggested to a group of education researchers they should
develop some kind of algorithm to inflate charter school test scores
according to each state’s gap in public funding between charters and
district-run schools. I was kidding, but trying to acknowledge an
elephant in the room. Whatever charter schools are accomplishing,
they’re doing it on far less than district schools. Yet, because we
believe all public school students should be funded equitably, we don’t
argue that “we can do more for less” and we avoid blaming chronic underfunding for performance problems.
Not so in the other sector, it seems. For a new Fordham/NSBA study,
Rick Hess and Olivia Meeks surveyed school board members and found
this: “More than two-thirds of boards report that the budget and funding
situation is extremely urgent, and nearly 90 percent think it is
extremely or very urgent…By far, board members in this study report that
the most significant barrier to improving student achievement is a lack
of funding. Over 74 percent indicate that finance/funding is at least a
strong barrier to improvement, with 30.2 percent going so far as to
label it a total barrier.”
Wow. How long do you think the charter movement would last if nearly a
third of our leaders just said nope, no can do, not without more money?
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Posted by:
Nelson Smith, Senior Advisor, National Alliance for Public Charter Schools
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6:00 AM
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