Charter School Real Estate Bubble Soon to Crash?

cash-burningHow much charter school debt is too much?  We may find out.

Most of us are not aware of how management companies finance charter facilities.  These companies form their own real estate companies from which they lease facilities.  These charter school buildings are privately owned, and if the charter closes, the buildings remain with the management companies.

Many of these charter facilities are financed through long term revenue and other types of bonds.  Funds  from the charter operating budget, financed by state tax dollars, is used to make principal and interest payments on these loans.  Building loans may be several million dollars, and lease payments are kept relatively small for several years.  Then, as the bonds become due, the schools face large balloon payments.  Where the money will come from is unclear.  It may be another form of  the construction bubble that burst in 2007.

These facility loan practices occur in many ways.  In School Finance 101, Bruce Baker provides graphs showing how this debt is mounting on purchases of public buildings by private firms that were initially paid for by tax dollars and in other startling ways.  However the financing occurs, the buildings are owned by private firms.  The public pays for them.  Some states have funding and financing guidelines.  Florida does not.

 

Posted in Charter School Management, Facilities, Funding.

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