An unusual arrangement between the Chicago Public Schools (CPS) and a non-profit community development organization has helped several of Chicago’s charter schools buy furniture and equipment, complete minor renovations and acquire space, but charter school advocates say a more comprehensive facilities funding program is needed.
“We have to address this,” says John Ayers, executive director of the business-backed advocacy organization Leadership for Quality Education (LQE). Ayers was part of a group that engineered the arrangement between CPS and the Illinois Facilities Fund (IFF) as Chicago’s first charter recipients were preparing to open their doors in September 1996.
As public schools, charters receive public funding for operations but no funds for furniture and equipment, and bricks and mortar. Ayers and others knew Chicago’s charters desperately needed some capital funding and proposed establishing a revolving loan fund for them. The plan called for the School Board to provide the capital and the IFF to provide the management. Katie Kelly, a management consultant working with LQE, proposed the idea to Ben Reyes, then chief operating officer for CPS. Reyes took it to School Board President Gery Chico, and the board appropriated $2 million.
Few other states have charter loan funds, and in most of those states, private institutions have built the funds.
For CPS, the decision to put up its own money was simply a matter of practicality, says Greg Richmond, director of charter schools for CPS. “We didn’t have anyone who knew the first thing about smaller-sized non-profits like the charters. We deal in huge-system finances.” Besides, Richmond says, no school district should be in the banking business.
The IFF was founded in 1988. Since 1990 it has helped more than 110 agencies, including child-care centers, youth shelters and community health clinics, improve or purchase their facilities. The non-profit IFF’s core function is providing low-interest (usually 5 percent) loans to other non-profits. Its work with the charter schools is unusual because the IFF rarely works with start-up organizations. Handling a loan fund from an agency such as the Chicago Public Schools is not new territory, however. Investors and funders of the IFF have included local and national foundations, corporations, banks and government agencies.
The IFF also offers financial and facilities management advice. In the case of the charter schools, it has operated as both lender and counselor, says Joe Neri, director of the IFF’s Childrens’ Capital Fund. Previously, Neri was the IFF’s director of real estate services; in that role, he played a key role in the early stages of the agency’s charter school efforts.
Part of those early efforts was strengthening the charter application process. Initially, an applicant could win a charter without a clear, long-term facility plan. That’s no longer the case, says Neri. “No facility, no charter,” he says. “Or at least the school must identify ahead of time how a facility will happen.”
The goal is to force charters to think extensively about facilities and equipment as well as curriculum, Neri says.
It was a lesson learned the hard way. One of the initial charters, the Chicago Preparatory High School, was closed shortly after borrowing more than $100,000 from the IFF fund. Trouble finding a permanent location was one of the factors, says Neri, adding that the IFF took a loss on that loan.
Currently, six charters have IFF loans, with balances ranging from $32,000 to $600,000. All of the original $2 million has been loaned out, and as of Sept. 30 nearly $700,000 has been paid back. Most charters use money from their operating budgets, an amalgam of tax dollars and private contributions, to repay the IFF loans.
Overall, Chicago’s charter schools have been ideal borrowers. Of the six schools with IFF loans, all are current with their payments, says Neri. The IFF closely monitors the finances of each school and is in constant communication with the School Board’s charter division. When financial or management problems do arise, the IFF is usually the first to know, says Neri.
Most charter schools, in turn, believe the fund and the IFF’s assistance are essential.
“We wouldn’t exist without the IFF,” says Sarah Howard, a teacher and co-director of the Academy of Communications and Technology Charter School (ACT). With the IFF’s help, ACT was able to purchase a building at 4319 W. Washington. The school borrowed $545,055 to buy the building, $100,000 for building improvements and $82,000 for furniture and equipment. The school is IFF’s largest charter borrower, but it still needs$1.5 million to replace a roof and refurbish space to meet its enrollment goal.
Others say the IFF fund is not enough. William Campillo, director of Nuestra America (Our America) Charter School, formerly ACORN Charter School, calls the fund a “Band-Aid.” His school received a small start-up loan from the IFF but is now in need of a $1 million facilities upgrade, he says. The school has saved $250,000 to use as seed money for the project, and Campillo intends to go to a bank, rather than the IFF, for a loan. “If we need millions of dollars, we have no other choice.”
Several states, including Minnesota and Florida, provide direct, per-pupil capital funding for charters, and some of Chicago’s charter schools support that approach. However, Ayers and other key advocates say bonds are the answer. “We’ve got to figure out a way to give charters access to tax-free bonds,” Ayers says.
Public entities, such as the City of Chicago and the School Board, can issue tax-free bonds. Non-profits with good credit ratings can too. For example, the Northwestern University Settlement House, which holds the charter for Noble Street Charter High School, issued tax-free bonds to build facilities for its school.
But most charters don’t have that luxury. A more likely scenario, says attorney Rod Joslin, is a bond offering backed by the city. Joslin is chairman of the board of directors for Perspectives Charter School. Perspectives borrowed more than $300,000 from the IFF, in part to renovate space that it currently leases. However, the school’s lease is ending, and it is searching for a new home. Joslin says the school needs $3 million to buy property close to its current South Loop location. A bond offering, he says, is the best way to finance that purchase.
In the end, nearly all of the charter school leaders and advocates agree that the schools need an added degree of publicly funded support. For Ayers, it’s 1996 all over again.