Public Charter Schools Borrowing With Tax-Exempt Bonds, Second ...

chapter one
Introduction
The public charter school movement has evolved for two decades, yet the challenge
of securing affordable facilities continues to confront nearly every charter school.
The landscape of solutions now includes government-sponsored, private sector,
and collaborative programs that provide facilities or facilities financing. Borrowing
through the issuance of tax-exempt bonds has emerged as an effective option to
obtain low-cost facilities financing.
Nonprofit corporations have borrowed money using tax-exempt bonds for
decades. As the tax-exempt bond market has experienced a substantial expansion
in the types of nonprofits using such financing (previously dominated by hospitals
and universities), individual public charter schools and groups of commonly
managed public charter schools are borrowing on a tax-exempt basis. Since 1998,
over 400 public charter schools have borrowed over $5 billion using tax-exempt
bonds. 1 Bond market access has been spurred by increasing demand for facilities,
better understanding of the benefits of tax-exempt financing, and greater market
acceptance of public charter school credits. Not only large, established public
charter school management organizations (CMOs) with substantial financial
resources need apply, but also relatively small, even start-up, public charter schools
with limited credit history may be financeable under certain circumstances.
The purpose of this booklet is two-fold: first, to provide public charter
schools that might not have previously considered or fully understood tax-exempt
financing with relevant information about the benefits of, their eligibility for, and
the procedures associated with, such financing; and second, to offer public charter
schools guidance and best practices to follow so that they are well positioned to
access the bond market if desired.
Public Charter Schools Borrowing With Tax-Exempt Bonds, Second Edition 1