Your Facilities Financing Journey with Charter School Capital

We are 100% dedicated to the charter school space and measure our success by the number of students we serve.
We’ve created this infographic to show you what a typical facilities funding journey with Charter School Capital looks like. Our team works closely with you to find innovative solutions to your facilities challenges. We pride ourselves on having the ability to be as creative, flexible, and innovative as possible to meet your specific needs so you can focus on your mission — educating students. You can download a PDF of the infographic here!
We are so excited to share this new infographic with you, so let us know what you think!

Proudly Announcing Our New Charter School Energy Program!

We are so proud to announce the official launch of our newest program exclusively for charter schools, Charter School Energy Powered by BioStar Renewables program.
We’re always listening to our school partners to better understand how we can best serve your needs and help you succeed—this new program was designed to do just that. With Charter School Energy Powered by Biostar Renewables, we are now able to offer access to energy efficient and renewable energy solutions for your school building.
These upgrades are designed to not only improve the learning environment for your students but also dramatically reduce your utility and maintenance expenses—positively impacting your bottom line. If you are interested in learning more details about this program, please visit our Charter School Energy page.
Charter School Energy is a full-service energy upgrade program with flexible financing options that enable school leaders to greatly reduce energy costs and enhance student learning environments through improved lighting, HVAC and thermostat upgrades and building controls. Renewable solutions such as solar allow the school to offset some or all of the building’s remaining energy consumption.
As always, we would welcome the opportunity of working with you to find sustainable solutions for your school’s success. Contact our team of dedicated professionals to learn how you can now access energy efficiency and renewable energy solutions for your charter school building.

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Editor’s Note: This post was originally published here on November 28th, by Education Dive. It was written by Linda Jacobson, the senior reporter for Education Dive: K-12 based near Los Angeles, California.
We think it’s vital to keep tabs on the pulse of all things related to charter schools, including informational resources, and how to support charter school growth and the advancement of the charter school movement as a whole. We hope you find this—and any other article we curate—both interesting and valuable.

Study: Funding gaps between district, charter schools widening in big cities

Dive Brief:

Charter schools in 14 U.S. cities receive on average $5,828 less in per-pupil funding than traditional public schools, with funding gaps growing wider since 2003 in Atlanta, Los Angeles, Denver, Washington, D.C. and New York City, according to a report released Wednesday by researchers at the University of Arkansas.
In actual spending, the funding gap between district and charter schools is the largest in Camden, New Jersey, with a more than $14,600 difference. And in terms of percentage, the gap was the widest in Atlanta — a 49% difference in per-pupil funding between $18,276 in traditional public schools and $9,382 in charter schools. The researchers gave Houston an A grade because charter schools there only receive 5% — or $517 — less in funding per student than district schools, the report says.
The team, led by Corey A. DeAngelis of the Cato Institute, a free market-oriented think tank, and Patrick J. Wolf of the university’s Department of Education Reform, also analyzed documents and provided equity grades for schools in Boston; Indianapolis; Little Rock, Arkansas; Memphis, Tennessee; Oakland, California; San Antonio, Texas; and Tulsa, Oklahoma. New Orleans, which mostly has charter schools and has received federal funding to help schools recover from Hurricane Katrina, is a unique case and was excluded from the overall analysis. But the researchers still found some large disparities in funding between traditional and charter schools there.

Dive Insight:

Some experts argue that comparisons between district schools and charters are unfair for a variety of reasons. Traditional public schools operate under some different legal mandates and policies than charters, and charter schools serve families who choose to be there, not the general student population. Others also note that public schools serve a much larger proportion of students with disabilities, but the authors of this study argue that except for Boston, special education expenses shouldn’t be an excuse.
“While [traditional public schools] tend to enroll higher proportions of students with disabilities than charter schools, the additional spending required for students with special needs rarely explains all or even most of the inequities in the funding of public charter schools,” they write, recommending that states adopt weighted student funding formulas “and then funnel 100% of public school funding through that formula, regardless of whether the school the student is attending is a public charter or a traditional public school.”
The study is part of the researchers’ continuing work to compare how charters and district schools receive and use funds — data that can help guide policymakers as they make decisions about school funding, how many charter schools to authorize and perhaps how funding should be allocated. In areas where cooperation between charter schools and districts is more likely, these comparisons can also help school administrators learn from each other.
Last year, the team released a study showing that even with in-kind support, such as access to free facilities, charter schools in New York City receive almost 40% less funding per student than traditional public schools. And in February, the team released a cost-effective and return-on-investment analysis showing that for every $1,000 in per-pupil spending, charter school students earn more points in math and reading on the National Assessment of Educational Progress. Other researchers, however, criticized that study, raising questions over the methodology.

If you are trying to meet operational expenses, expand, acquire or renovate your school building, add an athletic department, enhance school safety/security, or buy new technology, complete the online application below and we’ll contact you to set up a meeting. Our team works with you to determine funding and facilities options based on your school’s unique needs.

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Charter School Financing: Guide to Budget Terminology

Charter school financing can be one very tricky piece of managing your charter school and treating it like a business.
Does budget terminology have you confused? Understanding the complexities of your charter school budget can be a daunting task, whether your school is growing student enrollment, expanding facilities, or implementing new educational programs. But without a fundamental knowledge of at least some financial terminology, understanding the ins and outs can be even trickier. We’ve created this handy budgeting terminology guide to help you navigate through the financial landscape.
We’ve put together this handy guide to help you make sense of it all!

ACCOUNTS PAYABLE

Accounts payable is the money owed to your vendors to pay for
services or products you’ve received.

ACCOUNTS RECEIVABLE

Accounts receivable are those who need to pay you for your
offering, or the services and products you provide.

BACK OFFICE

The administrative tasks associated with running a school, including
accounting, taxes, and payroll. Can be managed by employees,
contractors, or an outsourced back office provider.

BALANCE SHEET

A worksheet with two sides that lists assets and liabilities. The right
side lists the value of what the school owes (liabilities) while the left
side lists the value of what the school owns (assets). When totaled,
the two sides should always be in balance.

BASE SALARY

A fixed amount of money paid to an employee at regular intervals
on an ongoing basis in return for work performed. Base salary
does not include benefits, off-scale awards, or any other potential
compensation from an employer.

BOTTOM LINE

This is your school’s net income. This is one of the first things
outsiders will look at to judge your school’s financial performance.
To improve your bottom line you can work on generating more
revenue, reducing expenses, or both.

BUDGET

A financial plan for the year that doesn’t change. A budget goes
through many layers of executive approval before it goes into effect.
Budgets include both costs and anticipated revenue.

BURN RATE

The burn rate measures outgoing cash flow and is based on the
amount of money your school typically spends each month. So if
you are spending $100,000 each month you’d have a burn rate of
$100,000. This rate is important for forecasting your income. If your
burn rate is larger than your expected income, or if it doesn’t leave
room for upcoming expenses, you know you need to adjust your
monthly spending.

CAPITAL

Anything a school owns that is considered a financial resource.
Everything from materials to machinery, facilities, and more can be
considered capital because they all add value to the school and its
future growth.

CASH FLOW PLANNING

An estimate of the amount of money you expect to flow in and out
of your business and includes all your projected income, expenses
and other non-income statement items that directly affect cash (i.e.
accounts receivable, accounts payable, financing). A forecast usually
covers the next 12 months, broken out either monthly or weekly.

CASH RUNWAY

A time measurement of how long your school could survive if it
stopped making money and continued spending as it is. This is
easily calculated by dividing the amount of money you have readily
available by your burn rate.

DEPRECIATION

Some assets lose value over time due to use, wear and tear, or
changes in the market. This is known as depreciation and must be
accounted for to help understand how the asset helped the school
earn revenue.

EXPENSES

Your expenses are the costs you pay to run your school such as
paying employees, vendors, rent, depreciation, etc.

FORECAST

Updated monthly or quarterly so a school knows how it will end the
year. Like a budget, forecasts also include costs and revenue; unlike
a budget, a forecast is updated throughout the year.

FIXED ASSETS

Your fixed assets are things you purchase and intend to keep for
a long time. Examples could be land or a facility, furniture, office
equipment, and some types of software.

GENERAL LEDGER

Your school’s general ledger is where all transactions get entered
(recorded, tracked, and posted) and is a useful tool for conducting
internal research/reviews, audits, and budget preparation. The
general ledger typically requires double-entry bookkeeping to
provide the most accurate financials and can be used to prepare
financial statements directly from the accounts, and as a means to
identify errors or instances of fraud.

INTEREST

Interest is the additional charge that accumulates on borrowed
money.

KNOWLEDGE CAPITAL

The intangible assets encompassing your employees’ skills,
experience, on-the-job education, and understanding of your school
and their areas of expertise. Because this asset is so specialized and
unique, it can give your school a highly valuable advantage.

LIABILITIES

The debts and obligations your school owes. These are listed on
the right side of your balance sheet including loans and mortgages,
accounts payable, expenses, and any deferred revenue. These may
sound like a bad thing, but liabilities are often essential to financing
expansions, a new facility, and operational costs.

MARGINAL ANALYSIS

As a decision-making tool, marginal analysis is the process of
weighing the benefits of adding an activity or function with the
added costs. Generally speaking, we perform marginal analysis
in our day-to-day lives, but the effects of these decisions become
much larger with an entire school at stake.

NET, NET INCOME & NET MARGIN

Net refers to a total amount after all deductions are applied
(while gross refers to a total amount before deductions). Your Net
Income is your entire income after overhead, interests, taxes, and
other deductions are taken out. Your Net Margin is a percentage
representing how much of your revenue is turned into cash
profit. This can be calculated using this formula: Net Margin (%) =
(Revenue – Operating Expenses – Interest & Taxes)/Revenue

OFF-SCALE REWARD

A fixed amount of compensation paid to an employee at one time or
over a defined interval, in addition to a salary. Examples of off-scale
awards include performance-based bonuses, extra paid time off,
revenue-based profit sharing, and temporary increases. An offscale award may change from year to year and does not affect an
individual’s base salary.

OPERATING COSTS

The expenses that relate to the function of your school such as
devices, resources, equipment, and facilities. This can include
typical ongoing overhead costs as well as variable expenses such as
materials and one-off purchases.

OPPORTUNITY COST

When you make a choice to prioritize one, you are faced with the
opportunity costs of another. For example, the opportunity costs of
a new playground may mean giving up a new auditorium. A marginal
analysis could rationalize this choice by find a greater potential
income with a new playground (which will benefit everyone and
increase curb appeal) than an teacher’s lounge (which will mostly
benefit teachers outside of class).

OVERHEAD

Your overhead consists of the general operating expenses and fees
required to run your school. When ongoing and predictable, these
costs can help you plan for the future and make smart decisions.

PROFIT & LOSS (P&L) STATEMENT

Shows your revenue, cost to operate, and expenses during any
given period of time. This is one of your most important financial
statements (along with your balance sheet and cash flow) and
provides the best view into your bottom line.
Charter School Capital helps charter schools obtain access to financing for growth so they can:

Enrich education programs
Expand and open new schools
Develop new programs
Provide technology in the classroom
Hire and develop staff
Improve transportation options
Access new facilities
Enhance facilities – with labs, gyms, etc.
Seamlessly address budget shortfalls and delays (deferrals,
holdbacks, etc.)
Support increases in enrollment
Finance furniture, fixtures, and equipment

WANT EVEN MORE BUDGETING INFORMATION?

To read more about these terms in their full context, download The Charter School Leader’s Definitive Guide to Budgeting Best Practices.
Charter School Budgeting Best Practices: Don’t Just Survive–Thrive!
Since the opening of Charter School Capital 10 years ago, we’ve reviewed thousands of charter school budgets. Year after year, we see common mistakes many charter schools make when budgeting for their academic year. Hear from charter school finance experts as they give you a breakdown of budgeting best practices to help you have a financially successful academic year. Don’t just survive — thrive!

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Your Funding Journey with Charter School Capital

We are 100% dedicated to the charter school space and measure our success by the number of students we serve.

We’ve created this infographic to show you what a typical funding journey with Charter School Capital looks like. Our team works closely with you to find innovative solutions to your financing challenges. We pride ourselves on having the ability to be as creative, flexible, and innovative as possible to meet your specific needs so you can focus on your mission — educating students. You can download a PDF of the infographic here!

We are so excited to share this new infographic with you, so let us know what you think!

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Charter School Capital Financing Helps New Designs Stay On Track for Success

With so many choices for where go to access financial resources for your school, it’s important to select the right one for you. At Charter School Capital, we believe in the power of charter schools and their leaders to deliver quality education to families across the country. And we’re proud to provide the reliability and stability charter leaders require as they walk their journey to better educate more students today—and in the future.
Please watch and listen as Paul Okaiteye, Chief Executive Director, New Designs Charter School, shares his experience working with Charter School Capital at a very critical time for California schools.
This video was originally published Jul 17, 2014. While we are not currently funding New Designs Schools, we are proud of the way our support helped them meet the needs of their students, parents, and teachers. Our team is dedicated to helping your school become financially stable, successful, and set up for future growth. To learn how other school’s have achieved success by partnering with us, check out our other success stories here and filter by the content type, “School Spotlights”.
Watch the short video to hear Paul’s story and find the transcript below. You can learn more about Charter School Capital here.

New Designs is a charter college preparatory school that is focused on math, science and technology to prepare kids in southern Los Angeles to make sure that by the time students get out of 12th grade at New Designs Charter School, they meet and exceed their requirements for entry into a four year university.
Most of the time when the kids come in, they’re usually two or three grades below where they’re supposed to be. And it takes us to work with them for a year or two—in some cases a little longer to be able to get them to grade level.
We have a fiscal consultant, and he’s the one who first introduced Charter School Capital to us. And it came at a very critical time. It has helped us to stay afloat, to be able to stay in business for our teachers and all the employees to have the confidence that when I go to work I can give my all and know that at the end of the period when I’m supposed to get my check, it will come on time.
So, I would say the Charter School Capital has been a partner to New Designs Charter School. I say that because have gone beyond just giving us money, and to making sure that we can stay in business and they’re also interested in the education aspect of what we do.
Not just in the financial aspect. Anytime I have a question, anything regarding financing with a state or even with any transaction, I’ve had an exceptional response. They’re very professional. They want to get you what you need.
They have been a lifeline because they have come through for us at times when we needed it the most and they have done things that other institutions have not been able to do. And so they have been making sure that the blood keeps flowing through our veins.

Since the company’s inception in 2007, Charter School Capital has been committed to the success of charter schools. We provide growth capital and facilities financing to charter schools nationwide. Our depth of experience working with charter school leaders and our knowledge of how to address charter school financial and operational needs have allowed us to provide over $1.8 billion in support of 600 charter schools that have educated over 1,027,000 students across the country. For more information on how we can support your charter school, contact us. We’d love to work with you!

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A Strong Partnership for Success Between New City Schools and Charter School Capital

Please watch and listen as Sabrina Bow, Executive Director, New City Schools, shares her experience working with Charter School Capital during some very difficult financial times for charter schools in California.

This video was originally published Jul 17, 2014. While we are not currently funding New City Schools, we are proud of the way our support helped them meet the needs of their students, parents, and teachers. Our team is dedicated to helping your school become financially stable, successful, and set up for future growth. To learn how other school’s have achieved success by partnering with us, check out our other success stories here and filter by the content type, “School Spotlights”.
Watch the short video to hear Sabrina’s story and find the transcript below. You can learn more about Charter School Capital here.

Sabrina Bow: Executive Director, New City Public Schools:

“We are a small Charter Management Organization in Long Beach, California. We offer a dual language program in English and Spanish, and our focus is on social justice, collaboration, the natural environment, and technology. Charter schools are increasingly having to find other ways of funding. We’ve made commitments to students, parents, and teachers to provide a high level of education and really an all-inclusive second family, if you will, for students.

We’ve made those long-term commitments to be there, and unfortunately, with the state of the economy and the state of deferrals, we find ourselves having to find different options.

Charter School Capital is a financial partner that comes in, understands the school, understands the school leaders. They take the time to do that.

In my experience, Charter School Capital is a financial partner that comes in, understands the school, understands the school leaders. They take the time to do that. They’re able to sit down with us and create a funding plan and be part of our financial plan, provide the technical expertise to schools, and present it in a straightforward way.

There’s always a cost to finance. Some of the criticism has been Charter School Capital, and other providers who purchase receivables are taking advantage of charter schools. I think that that really diminishes the responsibility that charter school operators have to build not only a solid educational program but also to build a solid business infrastructure that supports that educational program.

It’s never been a doubt for me that Charter School Capital is deeply concerned, deeply interested, in the well-being of schools, and beyond the financial well-being is the ability of schools to continue to provide a solid education for students. I’m happy that Charter School Capital is able to work with schools and work with us to help us so that we can continue to meet the needs of our students, parents, and teachers. I view them as a close partner.”

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Charter School Funding Reaching Schools in 38 States

Editor’s Note: This post on charter school funding originally ran here, on November 6, 2018. It was written by Christy Wolfe, a Senior Policy Advisor for the National Alliance for Public Charter Schools (NAPCS)and was published by The National Alliance for Public Charter Schools. We are always inspired by the outstanding content disseminated by the NAPCS and are proud to share their valuable information.
We think it’s vital to keep tabs on the pulse of all things related to charter schools, including informational resources, and how to support charter school growth and the advancement of the charter school movement as a whole. We hope you find this—and any other article we curate—both interesting and valuable.

FY 2018 PROGRAM UPDATE: CHARTER SCHOOLS PROGRAM FUNDS REACHING SCHOOLS IN 38 STATES

In September, the U.S. Department of Education (ED) awarded grants in four of the six Charter Schools Programs (CSP): State Entities, Developers, Credit Enhancement, and Dissemination.

Congress appropriated a total of $400 million for these awards for FY 2018, including funds for active awards previously awarded. Due to increased funding in recent years, more states than ever have access to start-up funding—31 states have State Entity grants and charter schools in an additional seven states were successful in receiving Developer grants. Many states are also seeing charter school growth through grants to Charter Management Organizations for the Replication and Expansion of High-Quality Charter Schools, but awards were not made for that program during FY 2018.
This year, the program awards are a bit more complicated because, for the first time, two competitions were run under the new requirements in the Every Student Succeeds Act (ESSA). Let’s take a closer look at where the money went:

State Entity Grants: Funds to Open Charter Schools and Build Statewide Sector Quality

The State Entity grant program plays a key role in not only awarding subgrants to schools, but also providing funding for technical assistance and strengthening the quality of authorizers in a state.

Eight states received awards: Arkansas, Arizona, Colorado, Delaware, Idaho, Michigan, North Carolina, New York.
Five states were not successful: Alabama, D.C., Guam, New Hampshire, Puerto Rico.
Two Charter Support Organizations (CSOs) were funded: The new changes in ESSA unlocked CSP funding for non-state educational agency applicants, including CSOs. This year, two funded applicants from Arkansas and Idaho were CSOs.

At the close of this competition, 31 states (including D.C.) have a current CSP grant in their state (14 states with charter school laws are unfunded). Next year, nine states will likely have expired grants, which leaves a potential (although unlikely) pool of 24 applicants. If Guam and Puerto Rico are included, there will be 26 potential applicants.

Charter School Developer Grants: The Safety Net Program

This is the first year the competition has been run since the passage of ESSA. What is new is that there were two sub-competitions: one for replication/expansion grants, and the other for new charter school operators. There were 22 replication/expansion awards and 10 single site applicants. This year there were 32 funded applicants for a total of $30.2 million.
Ideally, this program would be obsolete. It is a safety for charter schools that wish to open in states that do not have a state entity program. If there was enough funding – and state capacity – for every state with a charter school law to have funding, new charter schools could simply apply to their state. Instead, after obtaining their charter contract, schools need to jump through the hoops required by federal grants to access funding. So, until every state has adequate funding for start-ups in their state, this program will continue to play a key role in advancing charter school growth.
BUT—you may have noticed that some developer grants went to states that also got a state-entity award (Idaho, Illinois, Michigan, North Carolina, and New York). The reason for this is, in part, because ED ran the State Entity and Developer competitions at the same time this year, so Developer applicants didn’t know if their state would receive a State Entity grant prior to applying. ED did not deem those applicants ineligible even when their state ended up receiving a State Entity grant. In addition, some developers were awarded a grant for replication and expansion because their state didn’t have a State Entity grant that permits them to make such awards, such as Ohio (NCLB-era grants don’t permit such awards unless a state has an approved waiver).
Of states that don’t have a CSP State Entity grant, seven have schools that received Developer grants: Alabama, Hawaii, Maine, Missouri, New Jersey, Pennsylvania, and Utah have charter schools that received Developer grants. Eight states with charter school laws have neither State Entity nor Developer grants (not including Guam and Puerto Rico).

Current Charter Schools Program Grants: State Entity and Developer Grants

Credit Enhancement: Reducing Facility Costs for Charter Schools

The Credit Enhancement program awards grants to organizations to “enhance” charter school credit so that they can access private-sector and other non-Federal capital in order to acquire, construct, and renovate facilities at a more reasonable cost. This year early $40 million was awarded to four entities.
This is a significant decrease from the $56.2 million in awards for 2017. More funds were awarded last year, in part, due to the large pool of high-quality applicants and the needs of the sector. This year, appropriators restricted ED’s flexibility to fund additional applicants, so they were limited to $40 million. Unlike the other CSP programs, Credit Enhancement funds are a one-time allocation so there aren’t any continuation awards—the amount appropriated is the amount that goes out the door.

Dissemination: Advancing Accountability and Facilities Access

Like the Developer program, this was the first competition year for the new National Dissemination program under ESSA. Previously, this program was known as the National Activities program and had a somewhat broader focus. Under ESSA, the program is focused on the dissemination and development of best practices. This year, 8 grants were awarded to organizations and charter school operators for a total of $16.2 million over the grant period. There were two “buckets” of funding to which applicants could apply: charter school authorizing and charter school facilities. For FY 2019, we anticipate that ED will propose new priorities for this program.
The National Alliance is pleased to be a recipient of a Dissemination grant to establish the National Charter Schools Facilities Center to develop and disseminate best practices and reduce the burden of obtaining and financing charter school facilities.

Grants to Charter Management Organizations for the Replication and Expansion of High- Quality Charter Schools: A Delayed Competition

ED did not run a competition for the CMO Replication and Expansion program because the agency is required to propose and take public comments on new program rules under ESSA. Comments for the new competition closed on August of 2018 and the competition will open later this year or in early 2019. Congress knew that ED would need extra time, so FY2018 funds for this program didn’t expire on September 30—ED has until March 2019 to make awards. ED’s “forecast” indicates that the competition for this program will be announced in late November 2018 and applications will be due around the start of the New Year. $120 million is available, and a little more than half of that amount will likely be available for new awards.

At Charter School Capital, our dedicated team of finance professionals works with you to determine funding and facilities options based on your school’s needs. If you are trying to meet operational expenses, expand, acquire or renovate your school building, add an athletic department, enhance school safety/security, or buy new technology, complete the online application below and we’ll contact you to set up a meeting.

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Charter School Facilities Funding: It’s Time to Fill the Gap

Editor’s Note: This content originated here and was posted by the National Alliance for Public Charter Schools. Across the U.S., facilities are, by far, the greatest challenge faced by charter schools and accessing a school building is often the biggest obstacle in expanding charter school options. And, it’s one of the main reasons we have over one million students sitting on charter school waiting lists. Most charter school leaders have to jump over serious hurdles to cobble together the charter school facilities funding to provide their students with an adequate school building. It’s time to fill the gap in public school funding.

Note: The following content is also from The National Alliance for Public Charter Schools on September 18, 2018, and was originally published here.

Here are the five things we think you need to know about charter school facilities:

Charter schools rarely have access to taxpayer-funded facilities, even when they’re vacant.
Taxpayers own public school buildings and they should be available to all public school students, but that’s not the reality. Unlike district schools, charter schools don’t have an inventory of buildings to choose from. And in many places – like Detroit, Indianapolis, and Minneapolis – districts refuse to allow charter schools to lease or purchase buildings even when they’re vacant. As a result, you can find charter schools operating in shopping malls, office buildings, repurposed factories, or co-located with other schools.
Charter schools on average spend about 10% of per-pupil funding on facility space.
While some charter schools access federal or state programs these initiatives have limited funding and reach. They don’t work for all charter schools. Moreover, many of these programs simply reduce the cost of borrowing money – schools still need to cover the debt which shifts much needed funds from the classroom and to the building.
Charter school facilities often lack amenities like gymnasiums, libraries, or science labs.
Specialized instructional spaces, such as science labs, libraries, and computer labs, are an important part of a comprehensive educational program, but about 40 percent of charter schools do not have the right amenities or specialized classrooms to best implement their educational model.
Access to school buildings is one of the biggest obstacles to expanding charter school options.
Charter school leaders report that lack of access to adequate facilities is one of their primary concerns and one of the biggest barriers to growth. In fact, nearly one in five charter schools had to delay their opening date by a year or more due to facilities related issues. Even celebrities can’t avoid the facilities challenge.
5 million parents want to send their child to a charter school, but don’t have the option.
Based on parent demand, estimates suggest that the potential number of charter school students is 8.5 million – almost three times larger than today’s actual enrollment. Thirty percent of parents surveyed would be interested in sending their child to a charter school, with 10 percent saying that a charter school would be their top choice. Of interested parents with charter schools in their community, over half cited access problems – such as the school is too far away or has a wait list – as the reason their children do not attend a charter school.
Learn more about the facilities challenge many charter schools face and help ensure charter schools can open their doors to students!

The Ultimate Guide to Charter School Facility Financing:
Thinking about a new facility for your charter school or enhancing your current one? This guide shares straightforward and actionable advice on facilities planning, financing options, getting approved, choosing a partner, and much more! Download it here.

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Expert Advice on Accessing and Funding Charter School Facilities

In this CHARTER EDtalk, we sat down with Mike Morely, Founder and Principal at American Charter Development to talk about charter school facilities. Mike shares his years of experience in working with charter schools and supporting charter school success. Learn some insights on how to know when you’re ready for a new facility, what your funding options are, some pitfalls to avoid, and how to set yourself up for success whether building from the ground up or renovating your charter school facility.

Janet Johnson (JJ): Good day. This is Janet Johnson with Charter School Capital at the National Charter School Convention in Austin, Texas, and we’re honored today to be talking with Mike Morely with is ACD, who is a developer of charter schools.
Mike Morely (MM): That’s correct, yes.
JJ: John Dahlberg from Charter School Capital, and we’re going to have a conversation about charter school facilities. Take it away gents.
Jon Dahlberg (JD): Thank you. Hey Mike, thanks for making the time.
MM: My pleasure.

Why Charter Schools?

JD: We’re doing a campaign, We Love Charter Schools, can you share what you love about charter schools in less than 20 minutes.
MM: That may be hard, but I can sure try. You may know, in fact I know you know that we’ve got a large family. I come from 13 kids and have nine children of my own and so we’re into kids, and so we’re into whatever is good for kids. Several years ago I was in the legislature in Utah and was introduced to charter schools, didn’t really know much about them. A wise senator told me, as I was looking at that in terms of policy decision, that if parents can vote with their feet we’re going have a lot less administrative and regulatory needs for schools.
I got into charter schools, started looking at them, seeing that they were doing more with less, and in many cases outperforming schools that were run by districts with seemingly unlimited funds. Not obviously that, it is something that is debatable, but certainly on less funds that are being provided for district schools and being successful. We fell in love with the choice in education. We started a couple charter schools, started doing facilities for charter schools, and they were accepted well and been successful. My children, at least those that were growing up during the years that we were in charters schools and been in them, and we’ve been really pleased with the outcome. We love philosophically the choice option and we also are committed to providing that opportunity for others.

How to Know When You’re Ready for a New Facility

JD: That’s great. Well, so let’s take that to our listeners here. How do you know when a school is ready for a new facility?
MM: Well, we have been in the business of trying to help schools get facilities from the beginning, and we initially started back in the early 2000s trying to figure out how to bring construction and development funds into the charter school. Because obviously, it’s not available through state funding, they get funded based on the kids that they have in the seats. It’s kind of cart before the horse because they don’t have any kids in the seats when they’re starting out. We have funded schools from inception or even before inception and help them get their charters, help them establish a board, help them move through the process and having a school, a brand new school, ready for them to start in the first year.
Not all schools are able to do that, and it may not even be wise for all schools to do that. It really has a lot to do with the demand in the area, what the curriculum is going to be. I mean we’ve helped schools from project-based, sports, STEM and STEAM. We’ve helped classical education schools, and there are schools that are focused on a particular niche that may not be as widely accepted as maybe some other schools.
We look at the experience of a board. We like to see a wide diversity of experience on a board. We like to see the somebody that has accounting experience, marketing experience, legal experience business experience, school experience, but usually, that’s not the problem. Usually, most of them have good education experience, but we like to see a really diversified board with experts in many areas so that they can pull from that. We like to see some experience in the charter school world now. In the beginning not many had it, but now there’s usually good experience to be had on a board from the charter world. If we’ve got that, and we are comfortable with their curriculum, and their focus, and their direction, we may take them on right out of the chute.
If not, we like to see them have a year or two in maybe a rental facility, and it’s hard sometimes to find. But they may have to start out a little small and rent some space from a church, or some other local facility that’s not going to be maybe the best situation for the first year or two, but to build a little bit of a track record to see if they’re going to be successful. It really is ultimately a business and ultimately it’s pretty risky. We’ve had a few of those, as you know, that hasn’t been quite as stellar and so we’re trying to make sure that we don’t repeat those that are not quite as well prepared as others.
JD: Well, I think to the point about the risk, I think that proof of concept starting in any space where you can get your school open and get the kids coming and prove your operation of success and your academic success, that momentum builds and builds and creates opportunity in the future.
MM: It does.

Avoiding Mistakes

JD: When you talk about the business aspect of it, right? The education is not hard. What are some of the avoidable mistakes that a school should be mindful of as they’re building and growing in to their next facility project?
MM: You know, to be honest, most of the mistakes that we have seen have been very preventable and most of them have been friction within the board, within the founding boards. When the schools have the most trouble it’s typically when the board itself gets heavily in two separate directions and end up in a collision course with each other, and end up destroying what they created or trying to change direction from what was originally envisioned. Because of that they lose half the parents, they pick sides, and it becomes a disaster. Cohesiveness on board is really key and to avoid that they need good board training, they need to recognize what a board does, how a board operates and the way that a board should function with regard to the administration, and the product that they’re proving. They’re really providing an education product, and they need to be on board with that and need to understand how a board effectively is to run, so that’s been our biggest problem.
There are mistakes. They get into a building that doesn’t meet their needs, they get into a building that they didn’t really clearly think out what their program was or growth options. They could then be unable to grow in that position in that particular building and then be tied into either a long-term lease, or they purchased the building, and it isn’t suitable for their current needs or expanding needs. It’s really important that you really sit down with somebody that understands and lay out a long-term vision of the school.
Have the board be on board with that decision as well. Make sure that everybody is kind of firing with the same cylinders and moving in the right direction. Recognizing that, “Hey, we want to be a 400-student school forever. We want to grow to a K-12, or we’re going to stay at K-6, or we want to grow to 600.” Come up with what your ultimate vision is because if you’re in a place that can’t be expanded and you’re tapped out at 200 kids and you got a long-term commitment and you want to grow, you’ve contract yourself. Those are some concerns that need some-
JD: I think the advice that you gave to our audience about making sure that your building and your charter are in sync is really, really sound advice here. The building is going to create the culture of your school. We do speak with leaders who are very intentional, and we also speak with leaders who have that aha moment that goes, “Oh, a stem school but I don’t have a science lab.” That’s a good …
MM: A sports school and don’t have a gym or a …
JD: Right.
MM: … or a performing arts school and no place to perform. Yeah, those are a lot of the issues.
JD: If you’ve got a board that’s cast division and everybody’s on board, what are some of the guidelines and guiding principles that schools should pay attention to when they’re thinking about that next facility?
MM: Well, if everybody’s locked stamp, then I think it’s important to maybe look at what’s the most economical and formal way to provide those facilities. It always seems to be the vision of every school to bond. That’s the goal. We just come out of a situation not too long ago where the school was ready to bond, they were so excited about it. They were saying, “Hey the cost of this building is too high, we can’t really bond because we’re going to be paying $106,000 a month for our facility.” I said, “Whoa, what are you paying for it now?” In a lease scenario, they were paying $65,000 and they were expanding with the bond. They were going to add on a gymnasium and some other classroom, but we’d already priced that out, and under the lease scenario they were going to be at $85,000 a month with total expansion taken into account. I said, “Why are you so anxious to bond and pay $20,000 more a month for a facility that you can control and have long-term security for $85,000.” That was the A-ha moment.
“But their interest rate is lower than your PACT rate.” Okay, let’s look at that, what that means. Interest rates are easy to talk, but they were adding on several million dollars in reserves, they had the cost of issuance, they had attorneys fees that were building up this huge amount that they would have to bond and pay interest on. Then it was advertised rather than just an interest only, so by the time you take all that into account the interest rate of the bond had very little to do with the cost of the facility on a monthly basis. Be careful that you’re not misled by some arbitrary interest rate or some lost leader kind of thing, and becoming so consumed with owning the facility.
Ownership is great and there are some times when it is a good decision, but ultimately if you own it you really own it. You’re responsible for all of the future expansions, you’re responsible for whatever taxes or insurance or other things, and you may have those kinds of things in the lease agreement as well, but you’re amortizing the facility and the ultimate goal is to own it, and if it’s a 30-year bond you own it just in time to completely refurbish it and start over. I’m not saying ownership is not a good thing, but it’s not the only way to do it.
JD: What’s in the middle? There’s the bond, which historically meets the need of about 12% of the charter schools since the exception. Then we talk about the lease. You’re in the market, are there other options besides the lease or beside a bond that you’re seeing schools take advantage of right now?
MM: Well, you know, there are organizations like the CSC that have purchased facilities and leveled the lease market and created an option for schools. That we have worked together on a couple of schools where you would’ve been able to purchase the school and put them in a better position than they would’ve been in a bond situation. It’s an interesting dynamic because right now the cost of constructions is going up.
JD: And so is the cost of money.
MM: And so is the cost of money, which is hard. You got the cost of construction, cost of land skyrocketing in this market which is … The fed just raised the rates again last week, and so we’ve got interest rates going up. And they’re indicating that there will probably a couple more bumps, in trying to cool inflation. In a market where cost and money are going up even though we are seeing increases in education funding that are a much lower rate, you may get a two or three percent bump each year, while we’re seeing double digit increases in funding cost and in construction cost. We are in a kind of a paralysis market right now, and it is hard. We’re struggling to try and balance those things and make sure that schools are getting affordable facilities for themselves. It’s a bit of a challenge.
JJ: It’s a dance.
MM: It is.
JD: It’s a dance.
MM: We’re in that dance, and you’re in that dance, and we’re all trying to …
JD: It’s a fun place to be.
MM: It is.
JD: It’s work, because if it was easy they would call it a PTO.
MM: A while back it was kind of easy you know because the cost were fair. Right now, we’ve talked about this multiple times, there is a point where the school can’t pay any more than maybe 20% max of their gross revenue. If the cost of facilities goes beyond that then it really does make it difficult, if not impossible, for them to go for owning. There are places in the country like that.
JJ: But you’re here to help.
MM: We’re here to do what we can.
JJ: Right, yeah. That’s right. That’s great. Well, we’re very grateful for your time today Mike, and John thank you for facilitating this discussion and I know you guys speak a lot on the road so I’m sure that our viewers will see you again soon. Thanks for your time.
MM: You’re welcome. My pleasure, thank you for inviting me.