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.

This article appears in Mar 26 – Apr 1, 2015.

21 replies on “Ever Wonder How Charters Pay For Those Nice, New Schools?”

  1. Before Ducey holds back any money from schools he needs to take care of paying them the $330+ million the State owes for not adjusting for inflation. That judgement is not going to go away just because he ignores it.

  2. I wish you had done this article on public schools thirty years ago. We may have had some clue just how much was wasted.

    Why has education gotten so expensive?

  3. Ducey should be jailed for crimes against the children and future of this state. It’s a shameful abomination.

  5. Education has gotten so expensive the same way operating a city has gotten expensive,retirement and health costs. You can’t keep giving out generous retirements and medical insurance, without it adding up over the years.

  6. Good luck Jim. I have been trying to get that point across for years on this site. But these folks don’t make/manage money. They just spend others.

  7. So David, when are you going to actually visit a BASIS School and meet with the children and teachers? You were extended an invitation in the past when you printed hearsay from an anonymous comment on a blog.
    What are you afraid of? What did the executives of that school do to you that has caused you to single them out time and time again?
    Why haven’t you investigated any of the other charter schools with the same determination?
    Are you afraid that you would actually have to meet the people you supposedly investigate? Are you afraid that you might just change your mind when you get some facts and actually see the success at BASIS?

  8. Oh Rat. Spewing your garbage does not equate getting “that point across.” For your information, the ASRS is one of the most solvent retirement plans in the country, is not supported by tax dollars (only by employer / employee contributions), and does not cover health care. Teacher’s pay is very meager in this state. (And I’ll bet you’re on social security – spending MY money).

  9. David W. wonders why schools are more expensive than they were 30 years ago. Simple answers. More children, newer textbooks at astronomical prices charged by for-profit textbook businesses, technologies in the classroom and schools which must be updated frequently, building costs, new furniture, teachers expecting living wages so they can support families and pay back education loans, utility costs, more children with educational and behavioral problems, more children requiring special assistance, fewer two person parents for kids, more lawyers to deal with parent lawsuits over simple kid behaviors on playgrounds. Need I go on?

  10. You are all wrong. Sorry I am not on ss. How shameful that you would discredit someone’s opinion because they might be retired. You should apologize to every retiree.

    GCB1 there are fewer kids, (empty schools for sale) textbooks have been photocopied violating copyright laws… Forgot the day pension plans that strangle the tax payers and leave them with unfilled potholes.

    When will you guys get it?

  11. It amazes me that crackpots that know absolutely nothing about school finance and charter-school bond financing can make this stuff up out of thin air and gullible readers believe it like there is one shred of fact in the entire article. Instead of the incredible waste in district public schools (I know, I worked for one for five years), charter schools actually have to manage their money and pay their own bills. District school build high schools that cost upwards of $80 million each and elementary schools at $15 million to $20 million each. Charter schools build functional schools at $10 – $15 million per high school and $5 – 9 million for elementary schools. Charter schools use private investor money, NOT additional tax dollars to build schools. If a school fails, the investors that knew the risk lose, NOT the taxpayers. Industrial Development Authorities are simply conduit (pass though) bond issuers and collect fees from the transactions to reinvest in the local community. Show me any other governmental or quasi-governmental agency that makes money. Wake up and quit believing this dribble.

  12. David W, there are more children in schools in our state than ever before. They move around to other districts sometimes. Whole textbooks in print are never xeroxed as schools are extremely knowledgable about copyright laws. What are day pension plans? I paid into mine for 30 years at 7.5% of my gross income, matched by the state. Pension funds are separate from HURF money and city and county transportation costs. You really don’t know a lot about AZ funding in any area, it appears.

  13. And by the way, schools are not SUPPOSED TO make money. They are there to provide an educated citizenry capable of earning a living and building a better country. And that is an expense we all must and should share as we all derive many benefits from doing so.

  14. The bottom line is that charter schools are actually more efficient and accountable because unlike public schools they have to be or they will fail and go out of business. There are good charter schools and there are bad ones but Basis is one of the good ones. They have proven it year after year. Go and examine their books and their college admissions records. Interview their management and teachers. Interview students’ families. There is a story in there somewhere and it needs to be told but you won’t get that story by sitting at your computer and speculating.

  15. As long as it gives TUSD less funding to waste I can careless. Now I would be interested to find out where student tuition goes at the UofA. A school that gets my tax dollars then charges students again I have a problem with.

  16. Thank you David S. I am going to take this issue to other places and hopefully they can decide the legalities. It sure sounds crooked . I think it is well worth exploring a government that continually yells about lack of transparency and they seem to be anything but transparent. That tactic is common when organizations or governments are doing illegal activities and want attention diverted away from themselves. I think it is worthy of exploring for sure.

  19. As a resident of the City of Albany NY, I can tell you these charter schools are failing BECAUSE they do not address the root problem of POVERTY & INCOME INEQUALITY DUE TO A LACK OF LIVING WAGE JOBS and SEGREGATION. A school can only do so much to overcome the difficult family and neighborhood environments that persistent poverty produces. Until the USA gets serious about dealing with those issues – we will have troubled families, neighborhoods and school systems.

  20. Yeah right. Talk to TUSD about desegregation as a solution to their failing schools. The government can not solve poverty without destroying incentive.

    Greece or France anyone? Now accepting disgruntled Americans.

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