Tuesday, March 31, 2015

Ever Wonder How Charters Pay For Those Nice, New Schools?

Posted By on Tue, Mar 31, 2015 at 9:00 AM

Have you ever wondered how, say, BASIS finds the money to build new schools and furnish them without getting millions of dollars from the state for construction? Here's part of the answer. The Phoenix Industrial Development Authority issues bonds to pay for charter school buildings. From 2006 through 2014, the Phoenix IDA floated $431 million in bonds for charter schools. Last week, another $152.4 million was approved. Of that, $95 million goes to BASIS (which also received $62 million in previous years), and the other $57.4 million goes to Freedom Academy, Legacy Traditional School and Villa Montessori.

I admit I'm out of my comfort zone when I get into the area of school bonding and finance, but I think this is important information for people to know even if I can't talk about it with great authority, and I want to raise some issues others may want to weigh in on.

It's important to understand that these are bonds which the schools have to pay back. They're not grants or gifts. Also, the Phoenix IDA is a quasi-public organization, and neither the city nor the state is on the hook if any of the charters fails and can't pay off its loan. Private parties stand to profit or lose from the bonds, depending on how things go.

Hedge funds and others consider lending money to charters for buildings great money-making opportunities, as the Walton and Gates Foundations tried to make clear at a recent all day event in New York, "Bonds and Blackboards: Investing in Charter Schools." The money people know funding for charters comes from the state, which means they'll be able to make payments, and charters, unlike new businesses, don't have a high failure rate.

But they aren't a sure thing. Charters sometimes shut down. Take, for instance, three charter schools backed by the Brighter Choice Foundation in Albany, NY. They haven't done as well academically as promised, and they'll probably be closed. The reason I'm talking about something that's happening on the other side of the country is, the Phoenix IDA floated the $15 million bonds for the schools, and if they close, it stands to lose its investment. Why did Brighter Choice reach across the country for its bonds rather than staying closer to home?
Brighter Choice was forced to turn to the Arizona IDA after the Albany Capital Resource Corporation — a sibling of the city's IDA — refused to provide the schools access to tax-free financing for the construction of the middle school building and to refinance the Albany Leadership Charter High School for Girls, which opened on Hackett Boulevard in 2010.

The Albany Capital Resource Corporation refused to float the bonds because its purpose is supposed to be fostering local economic development, and, with empty classroom space in the city, it didn't see how more classrooms would be add economic value to the city.

Which makes me wonder, if an IDA is supposed to foster local economic development, why would the Phoenix IDA float bonds for schools in Albany, NY? Or, for that matter, why would it float bonds to build BASIS schools in San Antonio, Texas, to the tune of $9.2 million in 2013 and $9.6 million in 2014?

I already mentioned one possible answer. The Billionaire Boys Club loves privatization because they know thar's gold in them thar charters. Also, they're on a mission from Mammon to destroy the public sector and remake the world in their image, so they love the idea of semi-private charter schools. That includes Phoenix IDA executive director Juan Salgado. He was recently elected to the Board of Directors of the Arizona Charter Schools Association.

A final thought. Doug Ducey plans to hold back $24 million from school funds to create a pot of money that can be used as collateral for charter school building projects. He hasn't spelled out the details, but the purpose is to lower interest rates on charter school loans. Unlike with the Phoenix IDA, Arizona taxpayers will be on the hook if any of the charters fail to pay back what they've borrowed.

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