By Al Fan
Minneapolis, MN. 12.4.09. The Star Tribune’s Sunday (11.29.09) top-of-the-fold ‘investigative’ piece “Charter Program is Out of Control” was a misleading article based on mistaken premises, misquotes, and much innuendo. Let’s review.
To be clear, we at Charter School Partners are the strongest supporters of tough fiscal accountability for charter schools, particularly the management of school facilities and the appropriate use of public funds for lease aid. We also welcome a thoughtful discussion about alternatives to the present system and tightening up any loopholes for possible abuse. Yet, punishing successful charter schools for working within existing law is simply unfair and wrong.
First, the repeated use of the term Junk Bonds (used 16 times, included in the headline) by reporter Tony Kennedy is a mean-spirited, pejorative description of a very traditional and highly utilized financing tool for senior housing, non-profit hospitals, nursing homes and schools. Since the state approved and made available this financing mechanism for charter schools in 1998 to address the issue of inadequate and unsafe charter buildings, 18 charters in Minnesota have utilized non-profit revenue bonds to build school facilities. Nationally, hundreds of schools have used this finance mechanism.
To receive a non-profit revenue bond, funded by private investors (not taxpayers), the school must have a solid history of being financially successful with a several year positive cash-flow history, have strong financial reserves, and have a very strong potential for continued success. In other words, it must be a highly successful school.
The Star Trib’s statement that “to lure the investors they need for new buildings, some educators are abandoning the intimate campuses their founders envisioned…that some families are fleeing” is just plain misleading. Two of the schools mentioned that have built schools - St. Croix Prep in Stillwater and Math and Science in Woodbury (recent winner of the National Blue Ribbon Award) are two of the state’s highest performing schools - charter, district or private. They have huge waiting lists. They are great schools. Families are not fleeing them, they are flocking to them. That is why they were able to get a revenue bond which private investors would risk investing in. Because of their success, they quickly outgrew their facilities.
St. Croix Prep for instance was in four different locations renting space before it built its building. The local school district was not open to utilize any of its facilities, and the school had been looking for over four years for possible sites in the St. Croix Valley and one simply did not exist. It had little choice but to build it’s own building, utilizing the existing state financing tools to do so.
With the non-profit revenue bond, the state or public does not have any financial risk if the school closes down nor are taxes raised to build the building. Private individuals and institutions invest in the tax-exempt bonds and assume the financial risk.
Reporter Kennedy argued that this was not correct by pointing to the Minnesota Business Academy charter school, housed in the old Science Museum in Saint Paul, which closed in 2006. In fact, his analysis proves the point that taxpayers are not at risk in case of a default. The private investor (American Express) took a $4 million loss on the defaulted non-profit revenue bond. Separately, the City had extended $1 million in a community development loan (different from the tax-exempt revenue bond) and was only paid back about half of that at the end of the day. However, the charter school had purchased the building from the City for $3.5 million several years earlier, so Saint Paul actually did very well on that transaction.
Based on our review of the documents submitted to reporter Kennedy by the parties quoted and added to the misrepresentations outlined above, one wonders which part of what Kennedy presents is accurate? For instance, consultant Mark Beltz’ comments in the Star Trib article were less than complete, using only the part that suited Kennedy’s thesis. Beltz did say “we could save a ton of money here if we could issue bonds the same way the district schools do”. At the same time, data submitted to Kennedy from Beltz outlines several schools where the non-profit revenue bond route was actually much more cost effective than the current lease. This was not printed.
We found that other quotes by architects and school leaders turned out to be 180 degrees different than that which was printed.
To address some of the more direct accusations, we do get St. Croix Prep’s facility board’s intent to save between $100,000.00-$425,000.00 in construction costs by going with a less expensive ‘project manager’ (a requirement of the underwriter, bondholder and bond) and that the school board itself (not through the bond offering) chose to increase the salary of two leaders for the hundred of hours put in above and beyond the running of a school as part of their yearly salary based on an annual compensation analysis where positions and salaries were compared with other charter schools.
But from a ‘perception’ perspective — which public figures clearly must be sensitive to — this direction was ill-advised and could have been done or presented differently, despite the fact that these actions were cleared and signed off by attorneys, bond counsel and others. But again, no school, charter or district, should be punished for adhering to the law it was given to operate in. While the current law might not be ideal in aligning the interest of all Minnesota schools, charter and district, it is still the law of the land as far as charter facilities goes.
Here is a link to St. Croix Prep’s home page which has an extensive response to the Star Trib article.
This continues to be a developing story. This morning’s Star Trib editorial made several suggestions to address the current facilities issue. Here, we actually agree with the recommendations of the editorial, which include:
• Rethink prohibiting charters from directly owning property. That would eliminate the need to create affiliate groups as landlords. Methods to give charters access to lower-cost or state-backed borrowing should also be explored to put an end to junk bond financing.
• Allow charters fair access to existing school buildings. Declining enrollment, shifts to alternative programs and new building have created a glut of school facilities statewide. In the metro area alone, at least 64 school buildings have been vacated since 2000.
* Adopt clear rules about charter school ownership and responsibility. When charters purchase or build using state funds, should the state have an interest in those facilities? Who should benefit or take the loss when a property purchased with tax dollars is sold?
Charter school founders and leaders are visionaries and educators. The last thing they’ve wanted to do was to be in real estate development. Charter schools are public schools and the state should not be treating charter schools as separate entities from the public school system. Other states such as Colorado and Louisiana are doing a better job in this area and we should further research their efforts in this week’s Senate Hearing. A good beginning would be for the state to require abandoned public school buildings to be utilized by successful charter schools. We believe that students of MN will be best served by the collaboration of districts and charters to solve the facilities crisis charters are facing.
High quality charters play a vital role in the education of the state’s children- if they are doing a good job and delivering high proficiency scores, or closing the achievement gap where it exists, the state, and the state’s district schools, should be allied in finding them places to do their good work.
So let’s have the thoughtful public policy discussion on charter school facilities and try to keep the hyperbole and sensationalism of a media trying to figure out how to survive to a minimum so that reasonable people can have reasonable discussions about how charter schools can play the role the state desperately needs to them play: providers of high-quality educations to our children, the state’s most precious resource.
