Charter Blog by Author

 

Share 

Facebook Twitter Linkedin Googleplus Email

Another Big Thing Out Of Texas: Public Charter Schools Are Now Entitled to the Permanent School Fund (PSF) Guarantee!

On July 19, Governor Rick Perry signed into law Senate Bill 1, giving financially-sound public charter schools access to the state’s Permanent School Fund (PSF) bond guarantee. This will help schools construct and renovate school buildings.  PSF is the state’s $25 billion, AAA rated endowment. Bonds with the PSF-guarantee will be rated AAA—the highest possible credit rating—saving charter schools throughout the state millions of dollars in interest costs.  This legislation is an important and symbolic victory for charter schools in Texas and nationwide. The PSF enhancement is significant because charter schools will be able to finance growth at costs that are level with traditional public schools.  Savings from the PSF enhancement will be redirected to instruction and learning costs, putting taxpayer money to more efficient use.  To put these savings into perspective: the estimates of the cost-savings range from 200 to 300 basis points per bond issue.  In order to qualify for the PSF guarantee, charter schools must meet the investment grade credit rating and accreditation standards.  Putting up the state’s endowment to back charter school bonds, the same way it is for traditional public schools, speaks volumes about the direction of the public school choice and public education in Texas. Kudos to the Texas constituency: the bill’s sponsor, Senate Education Committee Chairwoman Florence Shapiro, and supporters Governor Perry, the Legislature, the Texas grassroots base and charter school advocates.  Texas joins the only other state, Colorado, in providing state backing for charter school bonds.  The Colorado state moral obligation backing renders the subject bonds to A credit rating (by Standard and Poor’s).  The rating upgrade from low investment grade to AAA and A in Texas and Colorado, respectively, incites charter school bond issuance at cheaper borrowing rates. The state’s backing of charter school bonds is a step in the right direction and a critical piece of the public charter school facility financing model.  Charter schools throughout the country are way behind their traditional school district counterparts that have taxing power and bonding authority to finance their facility construction projects.  The NAPCS Model Charter School Law has a menu of options for consideration by state policymakers to narrow the facility funding gap between traditional public schools and public charter schools.

Share 

Facebook Twitter Linkedin Googleplus Email

Charter School Bond Deals Are Big News!

Generally speaking, bonds are not the most interesting topic.  So, it’s understandable that charter school bond issues — which are only a small part of the municipal bond market —  might go under the radar. But, that changed this month when editors of The Bond Buyer (a very respected and influential media outlet for those of us working in the bond sector) announced the finalists for the newspaper’s Deal of the Year Awards.  The announcement recognized some of the most innovative municipal bond deals that closed between October 1, 2009 and September 30, 2010.  More than 70 nominations, big and small, from various municipal sectors were considered.  Among the finalists are two charter schools: KIPP Inc. in Houston, one of the two winners in the Southwest region; and High Tech High in Chula Vista, Calif., one of two winners in the Far West region.  All the regional finalists are in the running for the overall Deal of the Year Award. This comes at a time when governments and all other tax-exempt borrowers fund their long-term plans while coping with tough budgetary times and a volatile financial market.  This has been especially difficult for small and generally low-investment grade issuers like charter schools.  In addition to the usual inherent risks of the sector, conventional or commercial credit enhancement providers i.e. bond insurers, are now completely gone resulting in a more challenging financing environment for charter schools. The $70 million KIPP Inc. Houston transaction was structured and partially enhanced by a $9 million guaranty from the KIPP-related foundation, Philo Houston LLC, $1 million cash from Local Initiatives Support Corporation and a $10 million balance sheet guaranty from the Bill & Melinda Gates Foundation.  In the case of High Tech High, the $12 million deal was the first AAA-rated Qualified School Construction Bond.  The credit rating was due to the letter of credit provided by City National Bank, wrapped by AAA-rated Federal Home Loan Bank of San Francisco.  These are indeed first-of-its-kind innovative financing structures.  Both deals were underwritten by RBC Capital Markets. Bringing these types of deals in the capital market is a tremendous accomplishment, and all parties involved deserve much credit.  This is the first time bonds issued by charter schools have received this type of national recognition from the financial press, a significant step towards making charter school financing mainstream.  The outcome should be better acceptance from institutional and other investors, increased market access and eventually, relatively lower cost of capital.  We still have a long way to go, but this is a big step forward.  The Deal of the Year Award will be announced in New York City on December 9th.

Share 

Facebook Twitter Linkedin Googleplus Email

Charter School Bond History: Looking Back and Looking Ahead

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.

Share 

Facebook Twitter Linkedin Googleplus Email

Detroit Public Schools Buildings: Are They a Go or No Go for Public Charter Schools?

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.

Share 

Facebook Twitter Linkedin Googleplus Email

“A Decade of Results: Charter School Loan and Operating Performance,” Lending to Charter Schools Pays Off

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.

Share 

Facebook Twitter Linkedin Googleplus Email

Reward Me for Being Excellent?

While there has been a lot of discussion about the Teacher Incentive Fund (TIF) since its first appropriations in 2006, there hasn’t been any new funding to make new awards.  Late last week, the U.S. Department of Education announced 62 new TIF grantees!  KUDOS to all  the winners, but an ESPECIALLY BIG PAT ON THE BACK to the 13 awardees who use charters in their application: Achievement First, ARISE HIGH School, Center for Educational Innovation (x2), Hogan Preparatory Academy, Indiana Department of Education, Michigan Association of Public School Academies, Mastery Charter High School, National Institute for Excellence in Teaching, New Schools for New Orleans (also an i3 winner), The College-Ready Promise, Uplift Education, and Youth Empowerment Services, Inc. TIF is based on a simple premise, rewarding excellent teachers can incentivize and improve teaching AND increase entrants into the teaching profession. It’s no secret that many of our nation’s teachers are not from the top of their college classes…so the idea is a simple one: To improve the chances of schools getting the best and the brightest in the classroom we need to offer them an incentive.  And certainly in this economy, we are kidding ourselves if we don’t think financial incentives don’t make a difference. And, to help study that out-of-the-box notion, part of this year’s TIF grants go to a research competition too.

Share 

Facebook Twitter Linkedin Googleplus Email

Vote for a Hero

People magazine is in the midst of its Readers’ Choice Hero Campaign. The campaign identifies nine inspirational stories that were featured in People this year, and gives the public a chance to vote for their favorite. If you’ve got a minute, check it out; the campaign ends Friday, Oct. 8. These are some awe-inspiring stories about some pretty amazing folks. Many of their stories  involve helping children and young people, and one even features an outstanding charter school leader…our very own Tim King of Urban Prep Charter Academy in Chicago. Of course, we can’t tell you how to vote (we would NEVER do that at the CharterBlog, since we’re non-partisan!), but we do hope you’ll vote for someone.  Their causes are all very compelling and worthy, and the cash award will help the winner further his or her work.  We’ve got our favorite, and we sure hope he wins.

Share 

Facebook Twitter Linkedin Googleplus Email

Teachers Are Giving ‘Em Something to Talk About

Education reform is on everybody’s lips, and just about everybody has an idea for making schools better.  The discourse is dominated by elected officials (or hopefuls), policy folks, academicians and researchers. And although we’ve heard plenty from the teachers unions, teachers themselves haven’t really much of a platform.  So, I was fascinated to learn about this new project called VIVA (Vision Idea Voice Action).  The project just kicked off last Monday as an incubated initiative of the New York Charter Schools Association. Here’s how it works. There are two moderated online conversations — one for teachers in New York, and one for teachers across the country — and these websites allow classroom teachers to engage directly in education policy.  They are tackling some meaty issues like Race to the Top and Title II, as well as teacher pay, burnout and class size.  Best of all, their ideas will be presented directly to U.S. Secretary of Education, Arne Duncan.  A small group of these teachers will be asked to write a summary of the action plan they are crafting now, and then to come for a private meeting with Arne in Washington, D.C. or New York State Regents Chancellor Merryl Tisch in Albany. Classroom teachers helping to shape education policy…now, that’s a novel idea, eh?  I like it. The conversation will be going on for the next three weeks.  Check it out. COMMENT Submitted by drobinson on Tue, 10/05/2010 – 10:57am. Dear My Foot, We appreciate your comments, and just wanted to make sure you have the facts about charter schools.  Charter schools absolutely do not eliminate teacher unions. In fact, about 12 percent of charter schools are unionized.  It is always the teachers who decide whether or not they’d like to be unionized.  Oddly enough, when given that choice, most of the time charter teachers decide not to.  We at the National Alliance for Public Charter Schools are neither pro-union nor anti-union.  We are pro-child and pro-achievement.  And by the way, we LOVE teachers. Submitted by My Foot on Mon, 10/04/2010 – 9:55pm. Charter Schools eliminate teacher unions and thus lower teacher and staff wages further, increasing the growing gap between the rich and the poor. Want to see teacher benefits vaporize along with weekends off? Charter Schools are union busting! Say NO to charter schools now!

Share 

Facebook Twitter Linkedin Googleplus Email

Let’s Hear it for the LA All Stars!

We think charter schools are among the best public schools in Los Angeles.  Of course, we might be a little biased.  But, guess what?  The California Department of Education (CDE) thinks so, too.  The CharterBlog just learned that five of the seven middle and high schools in Los Angeles invited by the CDE to apply for the 2011 California Distinguished Schools Award are charter schools. In order to be invited to apply for Distinguished School honors, schools must meet a variety of eligibility criteria including designated federal and state accountability measures based on the Elementary and Secondary Education Act (ESEA), Adequate Yearly Progress (AYP), and the Academic Performance Index (API) requirements. Of the 27 middle and high schools within the Los Angeles Unified School District, only seven made the cut.  Of those seven schools, five are charters and the other two are highly selective magnet schools. Congratulations to  Bright Star Secondary Charter Academy, Granada Hills Charter High School, ICEF Vista Middle Academy, KIPP Los Angeles College Preparatory and Port of Los Angeles High.  These outstanding charter schools have done a great job of serving a diverse student population, especially those student groups who statewide have historically underperformed like Hispanic, socioeconomically disadvantaged, English Language Learners and students with disabilities.  Way to go!

Share 

Facebook Twitter Linkedin Googleplus Email

Oprah Gives Millions for Charter Children

Charter schools just got the gift of a lifetime.  Yesterday, Oprah Winfrey  gave out the last Oprah’s Angel Network grants – and the recipients were all charter schools.  How’s that for going out with a bang? The September  20, 2010 episode of “The Oprah Winfrey Show”  was dedicated to the new documentary, “Waiting for Superman,” and featured a special presentation of  $1 million grants by Ms. Winfrey to six high-performing charter school networks.  These organizations were recognized for producing great student outcomes and living out the spirit of  “Waiting for Superman” with the great work they do every day. Congratulations to The Mastery Charter Schools of Philadelphia; Aspire Public Schools in California; Denver School of Science and Technology; LEARN Charter School in Chicago; New Orleans Charter Science and Math Academy; and YES Prep Public Schools in Houston. Ms. Winfrey will continue the conversation on the “Oprah” Show’s LIVE episode on Friday, September 24, 2010.  I’m told it will be a rich dialogue including many more voices with a stake in public education.  Stay tuned…