In 2019, the charter school tax-exempt bond sector registered another record volume year with issuance exceeding $3.7 billion—up from almost $3 billion in 2018 and representing a robust 25% increase. This record volume was the seventh annual record out of the last eight years.
Public charter schools do not have access to the same affordable financing options as government supported district schools. Single-site charter schools, those in high-poverty or rural areas, and those with new models are at a significant disadvantage in the facilities financing market—they have to pay much higher interest rates to borrow money. States can provide financing solutions at little to no cost. Even in a best-case financing scenario, charter schools end up saddled with debt or lease obligations—which they must pay for with their per-pupil operating funds.
The National Charter School Resource Center published A Synthesis of Research on Charter School Facilities, a new, in-depth report on charter school facilities that examines the current state of charter school access to facilities, including facility acquisition and owne
Financing a charter school facility is challenging enough. Refinancing a charter school facility is often a larger project and has more consequences because long term debt can last for 30 years or more. The stakes can be significant when locking into long term financing.
Since the early 1970s, moral obligation bonds have been used to finance housing, higher education facilities, hospitals, corrections facilities, and more. Some states are now using this tool to help charter schools save on borrowing costs.
State credit enhancement programs can provide effective, low-cost financing support for charter schools seeking to reduce costs for facilities financing.
Charter schools are eligible uses of New Market Tax Credits (NMTC). There have been 75 NMTC transactions in schools, and most of them have been charter schools.