Wednesday, July 8, 2009

Charter schools and facilities again

Typically, after an Imagine-managed charter school gets approval to open, Schoolhouse Finance, Imagine's real estate arm, purchases a campus and charges the school rent. After the school begins to pay that rent, Schoolhouse sells the campus to a real estate investment trust, which then leases it back to Schoolhouse.
The charter school eventually sends rent payments – in one case upward of 40 percent of the school's entire publicly funded budget – to two for-profit companies.
That's from EdWeek reporting here on "one of the largest for-profit charter school management companies, running several dozen schools in 12 states."
School buildings are only a good investment if you can count on quite a long run in the school business in that exact location. That's hard to count on if education is a fully competitive market. It's even harder to count on if you want not just to get back not just the principle you sink into the facility but a profit on that principle for each year you wait for repayment.

Buildings are easier to plan and afford if you have a permanent obligation to serve a large majority of the students in the surrounding area and also have a permanent claim on the fiscal support of the taxpayers in that same territory. That's a major reason that schooling has so consistently been seen as a government responsibility.

Even then, securing bond funding for a twenty-year period is tough and expensive for small local entities, which is why there's also consistent pressure to make facilities a state government responsibility, along with other infrastructure requirements of similar scale.

Among private schools, the usual pattern is to use charitable donations, large and small, to build facilities. Tuition doesn't pay for bricks and mortar directly, and it doesn't provide a credible income stream to let most schools borrow money for buildings, either.

Knowing that, I don't assume that the Imagine company is doing anything dishonest or extortionate. It may merely be showing us how facilities costs would need to be calculated and covered in an education system that worked like a market.

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Updates and data on Kentucky education!