Public Charter Schools - Second Edition

Introduction

The public charter school movement has evolved for two decades, yet the challenge of securing affordable facilities continues to confront nearly every charter school. The landscape of solutions now includes government-sponsored, private sector, and collaborative programs that provide facilities or facilities financing. Borrowing through the issuance of tax-exempt bonds has emerged as an effective option to obtain low-cost facilities financing.

Nonprofit corporations have borrowed money using tax-exempt bonds for decades. As the tax-exempt bond market has experienced a substantial expansion in the types of nonprofits using such financing (previously dominated by hospitals and universities), individual public charter schools and groups of commonly managed public charter schools are borrowing on a tax-exempt basis. Since 1998, over 400 public charter schools have borrowed over $5 billion using tax-exempt bonds. Bond market access has been spurred by increasing demand for facilities, better understanding of the benefits of tax-exempt financing, and greater market acceptance of public charter school credits. Not only large, established public charter school management organizations (CMOs) with substantial financial resources need apply, but also relatively small, even start-up, public charter schools with limited credit history may be financeable under certain circumstances.

The purpose of this booklet is two-fold: first, to provide public charter schools that might not have previously considered or fully understood tax exempt financing with relevant information about the benefits of, their eligibility for, and the procedures associated with, such financing; and second, to offer public charter schools guidance and best practices to follow so that they are well positioned to access the bond market if desired.