Education Funding

Charters Struggle in Search for Affordable Space

By Katie Ash — July 25, 2013 9 min read
Contractor Joe Martinez paints door trim last month inside the South Side Middle School in Memphis, Tenn. Originally South Side High School, the site now houses a traditional public school and a separate charter school, according to Shelby County school officials. Some charter schools around the country, needing facility space, are seeking to share locations with traditional public schools.

Before Le Monde French Immersion Public Charter School opened its doors last fall in Portland, Ore., it had already overcome one of the biggest challenges facing charter schools: finding and financing its facility.

“It was a traumatic experience,” said Shouka Rezvani, the board president for the independent public school. “We all know what our academic models are, but as a startup, you have no financial history that you can fall back on with respect to getting money.”

Unlike regular public school systems, which can seek taxpayer-backed bonds for school construction and renovation, many charter schools have no mechanism in place to offset their facilities costs. And while some of the larger charter networks have more experience and financial track records to fall back on, startup charters are hit particularly hard when seeking loans and other financial assistance because of their lack of a financial history, experts on the sector say.

In addition, charters’ contracts with their authorizers tend to range from three to five years, while loans are typically paid back over several decades, making banks wary of lending to the schools for fear that their contracts will not be renewed.

For the Portland startup, even before tackling how it would pay for the facility, an even bigger hurdle was simply finding a suitable space, Ms. Rezvani said.

“We have to meet all of these code requirements that older schools [and private schools] may not have to comply with because we’re a new school, which makes even the consideration of most spaces impossible and difficult,” she said.

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In addition, when it was seeking to move into a Portland school system building that was no longer in use by the district, Le Monde faced competition from private schools with larger budgets.

Allowing charter schools to occupy former district-owned buildings is a practice that has spread to many states, and in some cases, it has increased the tension between charter and district-operated schools.

Ultimately, Le Monde ended up where many charters start out: co-locating with a church. And while that arrangement has worked so far, it hasn’t been ideal, Ms. Rezvani said.

The school has installed reversible bulletin boards that can be flipped over depending on the use of the room, and the school and the church have signed agreements about where student artwork can be posted and what can and cannot be displayed.

For now, the arrangement is working, but officials of Le Monde are continuing to seek suitable but affordable spaces as the charter’s enrollment increases, Ms. Rezvani said. The school currently serves about 150 students in grades K-2 and plans to add grade levels each year until it is a K-8 school.

Le Monde is not alone in its struggle for a space, said Josh Kern, the owner of Ten Square, a Washington-based consulting firm that works with charters to help them find and finance facilities.

‘Political Battle’

“This is the single biggest business decision that schools will make,” he said. “Making a bad facilities decision in the first year can really determine the performance of the school.”

Mr. Kern, who founded and ran a charter school, Thurgood Marshall Academy, in the nation’s capital for 10 years, said that although charter schools in the District of Columbia receive one of the charter sector’s largest per-pupil facility allowances (about $3,000 per student), the Washington real estate market makes it nearly impossible to find an appropriate and affordable location.

“It’s a nonstop political battle,” said Robert Cane, the executive director of a Washington-based charter advocacy group, the Friends of Choice in Urban Schools, or FOCUS. A city law requires the District of Columbia public school system to give charter schools “right of first offer” whenever a public school building transfers hands, but Mr. Cane contends the school district has been hesitant to do so.

“There’s a tendency to want to keep control because [the district] is afraid that if [it] gives up [the facilities] to charter schools, that will just accelerate the decline in their enrollment,” he said.

That is also a problem for charters elsewhere, said Emily Dowdall, a senior associate for the Philadelphia Research Initiative at the Pew Charitable Trusts.

“In a number of cities, there is a growing concern that turning those buildings over to charters will lead to expanded enrollment for charters and even further rounds of closures [in regular school districts],” said Ms. Dowdall, who recently wrote a paper about what happens to shuttered school buildings in 12 cities around the country.

But while districts may be hesitant to embrace charter schools, Ms. Dowdall’s research showed that the biggest share—42 percent—of shuttered school buildings do end up in the hands of charter operators. “In many cases, there might not be a lot of choices,” Ms. Dowdall said. “The charter school may be the only prospective buyer.”

Tracking Facility Needs

Until recently, charter advocates could only estimate the percentage of operating budgets that charters typically spend on facilities-related costs, including lease and loan payments as well as maintenance and other upkeep of the properties.

But the newly formed Charter Schools Facilities Initiative—a collaboration between the Denver-based Colorado League of Charter Schools and the Washington-based National Alliance for Public Charter Schools—has launched a national effort to gather comprehensive information on charters’ access to affordable facilities.

Preliminary data from April, collected from a survey of nearly 1,000 charter schools in 10 states, show that charters spend roughly 10 percent of their operating budgets on facilities. And that has a direct impact on the academic quality of charters, said Nina S. Rees, the executive director of the National Alliance for Public Charter Schools.

“Every penny that’s spent on facilities is a penny that’s not spent on the classroom,” she said.

Jim Griffin, a former president of the Colorado League of Charter Schools, said the issue also affects what kind of services and programming the schools can offer. (Mr. Griffin is now the president of Momentum Strategy and Research.)

In nine of the 10 states surveyed, for instance, fewer than 50 percent of charters reported having kitchen facilities that qualified schools to prepare meals on site and met federal guidelines for the free- and reduced-price lunch program. (While a lack of such facilities does not exclude those schools from participating in the federal program, it may increase their expenses by forcing them to buy vendor meals that cost more than the federal reimbursement rate.)

Many charters also do not have access to gyms, libraries, computer labs, and science labs, the survey found, and fewer than a quarter of the charter schools surveyed met regional and national standards for overall facility size.

“We have to break this challenge down into its parts and recognize that there are options, and there are improvements that the state can make to public policy that don’t have to dip into the public treasury,” said Mr. Griffin. He cited examples such as requiring districts to share derelict or underutilized school buildings with charters or creating credit-enhancement programs that allow charters to negotiate loans at more-affordable rates.

‘Bogus Comparison’

Still, some researchers say that charter advocates are oversimplifying the debate around facilities.

“To suggest that charters pay 100 percent through their operating budget [for facilities] and districts get them for free is really a bogus comparison,” said Bruce Baker, a professor and researcher at Rutgers University’s graduate school of education in New Brunswick, N.J., who studies school finance. “The fact that the money flows are not simple and direct means that making those comparisons isn’t easy,” he said.

Gary Miron, a professor of education at Western Michigan University and a researcher at the Boulder, Colo.-based National Education Policy Center who studies school finance and charter schools, said that while policies vary from state to state, many traditional public schools pay for at least some facilities costs out of their operating budget as well.

“It is true that [regular public schools] have low-cost and low-interest bonds that have been issued over time but this notion that charter schools have to take a big chunk of their operating budget [for facilities]—districts have to do that, too,” he said.

But Mr. Baker, from Rutgers, agrees that regular district schools receive more systematic support for facilities than charters do.

“Clearly, the funding should be fair, and one of the baseline issues that comes up with charters is that most states from the outset did not set up a mechanism for charters to finance their capital,” he said.

Around the country, states and districts have experimented with different ways of providing more-equitable access to facilities for charter schools.

New York City, for instance, has embraced co-location, an arrangement by which charter schools are housed in the same facility as district-run schools and sometimes other charters, for free. So far, 159 charter schools, or 64 percent, are co-located.

But the United Federation of Teachers, New York City’s affiliate of the American Federation of Teachers, has called for a moratorium on co-locations and has filed a lawsuit against the New York Department of Education, challenging the legality of the arrangements.

The lawsuit does not question the legality of co-location as a practice, but seeks to stop those decisions from being made over a year in advance of the proposed sharing of facilities, explained Michael Mulgrew, the president of the union.

In some cases, co-locations have been arranged three years in advance, which does not allow parents and community members to accurately assess whether the agreement is a good fit for their school, especially if demographics and programming change dramatically during that time, Mr. Mulgrew said.

In addition, in some cases, co-location has forced schools to cut back on the programming and services they provide to students in order to make room for another school, negatively affecting those teachers and students, he argued.

Some charter advocates acknowledge that co-location can be challenging since charters often depend on the cultivation of a distinctive culture and school model. But Sara Batterton, the senior director of real estate and facilities for Uncommon Charter Schools—a network of 38 charters in New York, New Jersey, and Massachusetts—said the practice is working.

Uncommon Schools currently operates 14 schools in Brooklyn that are participating in the co-location program, and Ms. Batterton said she would like to see the practice replicated in other cities.

“The system in place in New York City has allowed us to grow and scale quickly and provides an amazing partnership with the city of New York and the city school system,” she said. “There are understandably challenges to sharing any kind of space to any co-tenant, but we’ve found really positive ways of working together.”

A version of this article appeared in the August 07, 2013 edition of Education Week as Charter-Space Seekers Run Into Hurdles on Several Fronts

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