Selected readings on US charter schools
County isn’t on the hook, but official questions backing charters ahead of public schools.
Palm Beach County has pledged to help a nonprofit charter school sell $10.5 million in mostly tax-exempt bonds so it can open a new campus in Juno Beach — a move that has upset County Commissioner Paulette Burdick, who questions whether the county should aid privately run charters that pull students away from the public school district.
Burdick, a former school board member, cast the sole vote against the bond issue. County commissioners voted 6-1 this month to issue the tax-exempt bonds on behalf of Bright Futures Academy, which plans to use the money to consolidate its three schools in northern Palm Beach County into a single campus on U.S. 1 in Juno Beach.
While the county will issue the 30-year bonds, the school will be responsible for paying all associated expenses, including the principal and interest. County administrators stress that taxpayers will never be on the hook, even if the school were to close and default on the bonds.
The benefit to the school of the county issuing the bonds is that the vast majority will be tax-exempt, meaning that investors don’t have to pay federal taxes on the dividends or any capital gains; this makes the schools’ bonds more attractive to investors. A small, yet undetermined portion of the $10.5 million bond issue will be taxable.
Burdick’s concerns about helping the charter school with tax-free bonds, and Bright Futures’ responses to her concerns, illustrate a national debate that has been going on for two decades.
Burdick contends that many of the district-run schools where Bright Futures plans to open in the county’s north end are under capacity. County commissioners should be supporting the school district, she said.
“We should be in partnership with our public schools to do everything that we possibly can to support them,” Burdick said.
Bright Futures’ Chief Executive Officer Kendall Artusi says criticism about the bond issue has more to do with an “anti-charter” sentiment to limit public money to the schools.
“There is a lot of competing interest for money,” she said.
Artusi argues that charter schools are at a disadvantage because they don’t receive as much public money as public schools run by the school district for buying new buildings and making other improvements. The bond issue, she said, will provide Bright Futures with a much-needed revenue stream.
“If these investors decide they want to invest in a charter school, that is their business,” Artusi said. “They are intelligent people. They know what they are doing. I don’t know why (Burdick) thinks that she is a better judge of whether or not someone should invest in our school.”
Charter schools are funded by public money but are run privately as an alternative to traditional public schools. Created in Florida by the Republican-controlled legislature in 1996, although signed into law by Democratic Gov. Lawton Chiles, they have since been pushed mostly by Republicans, including Govs. Jeb Bush and Rick Scott.
Charter school students are subject to the same requirements as those in public schools, including taking the FCAT and passing end of course exams, but they are exempt from a majority of other state laws. They have more flexibility with personnel, including salaries, benefits and rules on hiring and firing. They can change the length of the school day or year, create their own curricula and have less restrictive building requirements and looser limits on class sizes.
In the annual legislative session that begins next week, Scott and Republican legislative leaders are proposing to expand support for charter schools in several ways. One bill (PCB CIS 13-01) would require school districts to let charter schools use buildings not in use or below 50 percent of capacity, and if a charter school exercised that option, require the district to pay to maintain the school.
The state has 579 charter schools, up from the five in 1996-97, according to the Florida Department of Education. Palm Beach County has 40, serving nearly 12,000 students. The school district expects 18 more charters to open in August.
As charter schools grow across the state and nation, they are increasingly turning to the municipal bond market to help them build or buy school buildings. Nationwide 600 tax-exempt bonds, totaling $6.4 billion, have been issued for charter schools. according to a study released in November by the Local Initiatives Support Corporation, a community development organization based in New York.
While the tax-exempt status provides a benefit for investors, it doesn’t provide a guarantee. The study found that 22 charter schools had defaulted on bonds valued at $173 million.
Burdick raised this as another objection to issuing the bonds for Bright Futures. She said she was concerned Bright Futures might not be around long enough to pay back investors who purchase the 30-year bonds. Of the 66 charter schools that have opened in the county since the state allowed them in 1996, 26 have closed.
While Burdick said she understands that county taxpayers aren’t obligated, “I can’t be a bystander and allow investors out there in the world to be in jeopardy.”
Bright Futures Academy has 10 years remaining on its 15-year contract with the school district. Burdick says there is no guarantee that school board members will renew the contract when it expires.
But Artusi said the charter’s contract to operate has been renewed several times since it in 2001.
The school of 688 students will repay the debt by eliminating rental payments on its other campuses, Artusi said. Those payments amount to nearly $500,000 for buildings in North Palm Beach and Palm Beach Gardens.
Artusi said the new campus will also result in savings when other services are consolidated under one roof. “As long as we continue on the path that we are on, we are in good financial standing,” Artusi said.
The county has estimated that Bright Futures’ new campus will result in a $75 million economic boost to the county over the next five years.
Bright Futures has said the bonds will be sold only to institutional buyers, accredited investors and banking institutions. The bonds will not be insured, but the school is working to get them rated, Artusi said. Unrated bonds typically pay higher interest rates because investors consider them to be more risky.
Besides being responsible for paying off the bonds’ principal and interest, which is yet unset, Bright Futures will be required to cover all county expenses associated with the bond issue.
The federal Tax Equity and Fiscal Responsibility Act allows the county to extend its tax-exempt bonding status to charter schools.
Bright Futures is not the first charter school to take advantage of the federal law. Palm Beach County’s G-Star School of the Arts was the first charter school in Florida to use bond financing. In 2005, Palm Beach County commissioners agreed to issue $5 million in bonds so G-Star could purchase property, renovate and buy equipment. Like Bright Futures, G-Star is responsible for paying off its bond holders, not the county.
What is a tax-exempt municipal bond?
A bond issued by a local government to generate revenue or pay for a project. Investors purchase the bonds for a specific amount and are paid interest on their investment. Municipal bonds are typically exempt from federal taxes, making them more attractive to investors.
Who issues the bonds for Bright Futures Academy?
Palm Beach County will issue $10.5 million in bonds on behalf of Bright Futures Academy. The school will use the money to consolidate its three schools into a single campus in Juno Beach. The majority of the bonds issued will be tax exempt. A small portion will be taxable.
Who is responsible for the debt?
Bright Futures is responsible for paying the principal and interest payments on the bonds, as well as all associated expenses. Taxpayers are not on the hook for the debt if the charter school defaults.
Why would the county issue bonds for the school?
County officials estimate Bright Futures’ new campus will result in a $75 million economic boost to the county over the next five years.
Source: The Palm Beach Post – by Jennifer Sorentrue (Staff writer Allison Ross contributed to this story)