Facility Financing in Idaho: Public Charter Schools Have Some Lessons to Offer Districts
by Terry Ryan | Originally published in Idaho Ed News
The recent defeat of West Ada’s $500 million plant facilities levy is an opportunity for public education supporters in the Treasure Valley to revisit ways that Idaho’s established and growing public charter school sector can work with growing school districts to help meet the incessant demand for new school seats in our fastest growing communities.
Idaho’s public charter schools have become a critical and integrated component of the state’s overall K-12 public education system. Our state’s overall K12 enrollment averaged an annual growth rate of 2.05% from 2012-13 to 2021-22. Over the same decade, the overall Idaho charter school enrollment has seen an annual average growth rate of 5.5%. Twenty-five years after the first charter school opened its doors in 1998, there are now more than 70 charter schools serving about 30,000 Idaho students. These schools educate almost 10% of the state’s public school students. If all these students were in one school district it would be the state’s second largest.
In 2022, traditional districts received $228 million in local funding for facilities. Idaho’s public charter schools are precluded from receiving any local taxpayer dollars for facility costs from local property taxes, public tax levies or bonds. Yet, since 2018 Idaho’s public charter school sector has built 380,602 square feet of new school space for 4,104 new school seats. The average per seat cost for these new facilities is $21,890. This contrasts with the $50,000 per seat cost for the proposed North Elementary School and South Elementary School in West Ada.
Even starker are the numbers for new school space for Career Technical Education facilities. The Elevate Academy Public Charter Schools have built three CTE campuses since 2019; one each in Caldwell, Nampa and Post Falls. In total they have built 148,669 square feet of space for a total of 1,281 new school seats. The average per seat costs of these schools is $29,174. This compares to the proposed West Ada CTE Center for 1,000 students that would cost $100,000,000 or $100,000 per seat. The charter school value is even more impressive when one considers that charter schools must typically factor in the cost to purchase land in addition to financing construction costs, while district schools usually already own the land on which they build.
Savvy charter school leaders have found ways to keep costs lower by foregoing extras like school auditoriums or gymnasiums, decreasing classroom square footage, and/or by building schools in former Sears buildings or other empty mall spaces. Organizations like Building Hope, the J.A. and Kathryn Albertson Family Foundation (JKAF) and Bluum have also stepped in to help fill the financing gap for a number of Idaho public charter schools.
Building Hope is a nonprofit organization working with public charter schools to finance, purchase, build and/or renovate facilities. It opened its Idaho office in 2013. In recent years, a number of high-performing charter schools have worked with Building Hope to access low-cost financing for their facilities. Charter schools can apply directly to Building Hope for financial support for their construction projects. Through a rigorous vetting process Building Hope approves schools that demonstrate both high-quality academics and financial stability. Building Hope underwrites these loans with the help of funding from JKAF.
Once a charter school’s project has been approved, Building Hope provides a loan to the school of up to 35% of the total cost of the project, at a 3% interest rate. This cash is used to help encourage traditional financial institutions, like banks, to provide a loan for the remaining 65% at market rates. A typical deal is structured so that after five years the school will have paid down enough to have equity in the facility. The school then refinances its loan with the bank and uses the equity it has earned to pay back the portion of funds it borrowed from Building Hope. Building Hope recycles those funds into other facility projects. A key benefit to this arrangement is that the charter schools themselves benefit from any increase in equity and property value rather than the lender (which is often the case when charter schools work with private financiers.)
This process has been improved in recent years by supports now being offered by the state of Idaho. During the 2023 Legislative Session Idaho lawmakers passed, and Governor Little signed, two bills into law that will assist with charter school facility financing. S1042 helps qualifying, well-established, charter schools obtain lower interest rates on bonds through a financing tool known as a credit enhancement. S1043 created a $50 million revolving loan fund to help new and young public charter schools obtain lower interest rates on loans.
Going back 25 years, the legislative intent of Idaho’s public charter school law was to have charters serve as laboratories of innovation that traditional school systems can learn from and build on. When it comes to building and financing facilities for students our charter schools have some important lessons to share.
Our charters haven’t figured out the way to build and finance new school facilities, but they have learned some important lessons that are transferable to districts that are struggling to meet their facility financing needs through traditional public levy requests. We are game to share and collaborate. In fact, one of the lessons here may very well be that there is a larger role for the state to play in funding all public school facilities.