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Children over brick and mortar – maximizing facility financing solutions to better serve students

Five Bluum-partner charter schools are saving millions of dollars in facilities costs and pouring those funds into programs for kids, thanks to a 2019 Idaho 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, and the schools often have to go deeply into debt.

Alan Gottlieb

While these schools have been able to mitigate those costs through various means facilitated by Bluum and funded by the J.A. and Kathryn Albertson Family Foundation and Building Hope, the 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 involved. They’ve shown they are doing great academically. So they’re the best schools in the state of Idaho because of what they’ve had to prove and go through.”

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 of this year, 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 each 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, in turn, will make it possible for the school to enroll in the federal subsidized lunch program. For the first time, Alturas’ 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,” said Michelle Ball, Alturas’ executive director and founder. “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 six to 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 after-school clubs without charging students and to pay teachers to staff those clubs, provide after-school tutoring and teach summer school.

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,” Ball 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 snapshots of other Bluum charter schools that 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 of
these transactions.

Each campus has its own story and particular set of circumstances, said network Chief Financial Officer Bryan Fletcher. Nampa was a new build, designed together with Bluum partner Building Hope, a nonprofit that provides facilities, financial, and operational services to charter
schools across the country. The refinancing of the Nampa facility at 3.57% took annual payments down from $631,636 to $510,760, a savings of $$120,876 per year, or 19%.

Gem Prep Meridian North consists of two adjacent buildings. One belonged to Broadview University, a defunct private, four-year college. Gem Prep built a new building adjacent to the Broadview facility.

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% took annual payments down 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, enhance curriculum and 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 the student population across the two campuses by about 225, to a total of just over 1,500. That makes it one of the largest brick-and-mortar charter 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 savings of $212,289.

Collins is a veteran at bond financings 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 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 J.A. and Kathryn Albertson Family Foundation (JKAF) five-year financing program managed by
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 JKAF 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. This refinance 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 PreK to eighth grade 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 in the undersized facility 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 2.68% 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 (STEM).

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%, saving the school $135,000 per year for the next 34 years.

Amanda Cox, Future’s executive director and cofounder, 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. Cox credited Bluum with making the refinance possible. “They just really carried the process forward for us,” she said.

— Alan Gottlieb is a 25-year veteran education journalist and co-founder of Chalkbeat. 

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