Idaho Charters Leverage State Borrowing Law to Save Millions on Building Costs
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Five Idaho charter schools are saving millions of dollars in facilities costs and pouring those funds into programs for students thanks to a 2019 state law that allows public charter schools to use the state’s creditworthiness to borrow money at discounted interest rates.
Charter schools in Idaho and across the country typically find themselves in a financial hole before they open their doors because the cost of borrowing money to refurbish or build facilities is prohibitive, meaning the schools often have to go deeply into debt.
The five schools have been able to mitigate those costs through various means facilitated by Bluum, a Boise nonprofit that partners with charter schools to offer support and expertise, and funded by Idaho’s J.A. and Kathryn Albertson Family Foundation and Building Hope, a D.C.-based national nonprofit that offers loans and financial services to charter schools.
But Idaho’s 2019 Public Charter Schools Facilities Program, which provides “credit enhancement” to charters, is arguably the most powerful tool available for long-term financing of facilities.
“Under the program, the state basically guarantees that if things should go totally wrong, the state would step in and protect the bondholders,” said Keith Donahue, Bluum’s director of school strategy and operations. “This ups schools’ credit rating on bond deals, allowing charters to go from unrated to just a tick or two below a traditional school district, and that results in a lower interest rate for the school.”
To qualify, a school must demonstrate to the Idaho Finance and Housing Association that it is in good standing both financially and academically. “The fact that they have gotten over this bar means they are outstanding schools,” said Bluum CEO Terry Ryan. “They’ve had to go through an underwriting process. They’ve had Moody’s [credit rating] involved.”
And, school leaders say, the beauty of the program is that the savings are real, immediate, and help schools serve their students better. Because the low interest rates are locked in, those savings will continue through the 35-year term of the loans.
Alturas International Academy, a K-5 charter school in Idaho Falls, provides a good example. Alturas purchased the 93-year-old O.E. Bell school building in 2016. The school had been sold by the district the previous decade and converted to offices. Alturas converted it back, but couldn’t afford either to add a kitchen or upgrade the building’s heating and cooling systems.
In February, Alturas closed on a refinance, using the state charter facilities program to reduce its interest rate to 3.79%. The $8.2 million loan included an additional $1 million in cash for improvements. Even with that extra debt, the school is saving $42,000 a year on its mortgage payments.
The refinance will directly benefit the school’s neediest students because it will allow Alturas to build a kitchen and cafeteria. This will make it possible for the school to enroll in the federally subsidized lunch program. For the first time, Alturas’s low-income students will receive free, hot meals at school.
“We tried hard for years to get the free and reduced lunch program here, but without a cafeteria it’s impossible,” Alturas’s executive director and founder Michelle Ball said. “It feels really good that we will be able to put that program in place.”
The kitchen will also serve Alturas International Academy’s sister school, the grades 6-12 Alturas Prep.
The new cash will also allow the school to make much-needed upgrades to the old building’s heating and cooling systems. And with the $42,000 in savings, Ball said, Alturas will be able to purchase curricular upgrades, launch more afterschool clubs without charging students and to pay teachers to staff those clubs, provide afterschool tutoring and summer school instruction.
The savings made all the paperwork involved more than worth it, Ball said, adding that Bluum was a huge help in that regard.
“We are a school that believes so strongly in community and people working together,” she said the day after Alturas closed on its new loan. “When I saw all these different communities working to support us, I just paused and thought, ‘Oh my word.’”
Here are the ways other Bluum-partner charter schools have benefited from the Idaho charter facilities program.
Gem Prep Charter schools; Nampa, Meridian North, Pocatello
The growing Gem Prep network of charter schools closed on the refinance of three of its campuses in early February: Gem Prep Nampa, Gem Prep Meridian North and Gem Prep Pocatello. The network is saving a total of $248,000 per year on its payments as a result.
Each campus has its own story and particular set of circumstances, said network Chief Financial Officer Bryan Fletcher. Nampa was new construction, designed by Bluum and Building Hope. Refinancing the Nampa facility at 3.57% took annual payments down from $631,636 to $510,760, an annual savings of $120,876, or 19%.
Gem Prep Meridian North encompasses two adjacent buildings. One belonged to Broadview University, a defunct private, four-year college, and the other is a new building Gem Prep built next door.
The network also runs a large online school, housing its online staff in the Broadview building, as well as administrative staff and its Meridian secondary school. The new building, completed two years ago, is home to the elementary school. The Meridian North refinancing at 3.49% led to a 6% reduction in payments, from $547,944 per year to $514,974.
In Pocatello, Gem Prep took over an old Sears department store in the Pine Ridge Mall. “As malls have fallen out of favor due to the retail apocalypse, the Sears building became available and we bought it,” Fletcher said. “It’s got high ceilings and a lot of open space. It’s a nice facility.”
The network undertook an extensive remodeling and opened a K-12 school there. Parts of the mall still operate, but Gem Prep has a separate entrance for the school. Refinancing the loan at 3.54% reduced annual payments from $462,019 to $367,656, a 20% decrease.
Fletcher said Gem Prep will use the savings realized across the three deals to hire additional teachers and paraprofessionals, strengthen curriculum and purchase more and better classroom supplies.
“There are a number of ways we might deploy these funds in a way that enhances what we’re able to provide for our students,” he said. Some money will also be used to establish a reserve, or rainy day, fund.
Idaho Arts Charter School, Nampa
Idaho Arts is a well-established, 16-year-old charter school serving students in grades K-12, on two campuses — elementary and secondary — that are about a mile apart. “We just keep expanding,” Executive Director Jackie Collins said with a laugh.
The latest expansion, adding a wing onto the elementary school, was completed on time for the start of the current school year. It has increased enrollment across the two campuses by about 225 students, to a total of just over 1,500, making it one of the largest brick-and-mortar schools in Idaho.
Because Idaho Arts borrowed almost $2.5 million in new money to fund the expansion, there is no before-and-after savings comparison. But at 3.05%, the loan was at below-market rates. And, Collins said, the school also took the opportunity to refinance some 2012 bonds using the state credit enhancement, for a $212,289 savings.
Collins is a veteran at financing bonds for Idaho Arts. The school opened in the former Lakeview Elementary School, the oldest school building in Nampa.
“We remodeled that building, then we built an additional wing, and then another wing,” Collins said. “Then we built the elementary campus a mile away and bonded for that. Then we just bonded again and built the [newer] wing. So we’ve been through four fundings, and at least one refinancing as well.”
Sage International School, Boise
Sage International is a K-12 International Baccalaureate school established in 2010. In 2015, Sage became the first school to purchase its facility, the former Parkcenter Mall, using a five-year financing program through Building Hope.
Sage borrowed $12.5 million to purchase and convert the mall into a school. Previously, the school had been split between two locations; a portion of the mall and a building two-and-a-half miles away.
Payments on the Building Hope loan saved the school $360,000 per year compared to what it would have owed in rent.
Then, in 2020, Sage achieved another first: It became the first school to refinance its debt using the Idaho charter facilities program. That move allowed Sage to release $400,000 it held in a reserve account for lease payments, as well as saving the school an additional $115,000 per year.
“We’ve gotten ourselves to a place where we’re now financially really strong,” said Sage Chief Financial Officer Emily Downey.
The annual savings will allow Sage to add staff and lower student-teacher ratios. “We’ve been able to take that additional cash and really utilize it instead of having to spend it on our debt,” Downey said. “We’re able to put it directly towards our mission of serving kids. Adding paraprofessionals and educational assistants helps us to pull kids out who may need some remedial work because of learning loss from the pandemic.”
Anser Charter School, Garden City
Anser, a pre-K-8 school opened in 1999, is one of the oldest charter schools in Idaho. During its first decade, it moved to three different locations. It settled into its current facility in 2009, but as the school added classes, space became extremely tight.
In April 2021, Anser closed on a $11.4 million loan through the charter facilities program, at a credit-enhanced interest rate of 2.68%. A significant addition is under construction and is slated to be completed in time for the start of the 2022-23 school year.
Anser’s interest rate is the lowest rate a school has received under the program, according to Bluum’s Donahue.
Future Public School, Garden City
Future Public School opened in 2018 as an elementary and middle school with a focus on science, technology, engineering and math.
Future did not qualify for the Idaho charter facilities program, but was able to refinance its $9.4 million building debt in February with Bluum’s technical assistance, reducing its interest rate to 4.16% and saving the school $135,000 a year for the next 34 years.
Amanda Cox, Future’s executive director and co-founder, said the additional funds will allow the school to “keep doing what we’re doing in a sustainable way.” Cox said a key part of the school model, serving a lower-income student population, is to provide students with intensive academic interventions, as well as arts, movement and computer science.
“This refinance certainly gives us a little bit of breathing room,” she said.
Correction: Sage International used a five-year financing program through Building Hope to buy the former Parkcenter Mall. An earlier version of this story misidentified the funding source.
Disclosure: Walton Family Foundation provides financial support to Building Hope and to The 74.
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