New Jersey Charter Leverages Creative Funding Strategy For Historic Building
Above: The historic school building pre-renovations.
Above: A rendering of the building post-renovations, courtesy of KIPP.
Finding a way to secure affordable space for charter schools remains a consistent challenge for the sector, which does not typically have access to the means to raise taxpayer-backed bonds for capital costs like district-run schools.
But one school in the Knowledge Is Power Program, or KIPP, network found a unique way to pay for the purchase and renovation of a Newark, N.J. school built in the 1880s—historic tax credits.
Those credits are reserved for buildings that are purchased by a for-profit company and are on the National Register of Historic Places.
The process can be somewhat cumbersome, said Ryan Hill, the chief executive officer of TEAM schools, which compromises the six KIPP schools in Newark, and Gabriella DiFilippo, TEAM schools' chief operating officer, but could be replicated in other cities to help charters finance affordable facilities.
"What [historic tax credits do] is ultimately make a lot of facilities that exist already affordable that would not have been otherwise," said Hill in an interview with Education Week.
"It wasn't like, 'Do this and save money, or pay $30 million for renovations and buy less books,' " he said. "It was like, 'Do this, or we don't know what we're going to do' because it just wasn't affordable and the building would have fallen down eventually without question."
The building was ultimately purchased, and is now going through renovations, because of a combination of bonds and tax credits the network was able to secure, including $24 million in Qualified Zone Academy Bonds from 2011 and 2012, $3 million in Qualified School Construction Bonds from 2011 and 2012, and $5 million in equity from the Historic Tax Credits.
To be eligible for the Historic Tax Credits, TEAM schools first had to create a for-profit company to purchase the building. Then, the building had to be registered to the National Register of Historic Places, a process that DiFilippo said was "pretty seamless" because of the efforts of other nonprofit groups that had done some of the legwork of getting eligible school buildings in Newark onto the list.
Overall, the network estimates that it is saving about $1 million compared to the average facilities cost for a charter school in New Jersey, said Hill. That money will be re-invested in the school and will most likely go towards hiring more teachers.
The school, which is expected to open in the fall of 2015, will house an elementary and middle school serving about 900 students.
And while this method of helping fund facilities for charters could be replicated, it may be easier for larger networks like KIPP, which have the expertise and personnel to pull it off, said Hill.
"We have a great team," he said, "folks like Gabriella and our finance team who put in an incredible amount of work to make this happen."
But despite the heavy lift, the effort has been worth it, said DiFilippo.
"Having the ability to access these tools and having them at our disposal is worth the energy and effort even though it's complicated because we're improving the lives of our kids, and hopefully the people in the neighborhood."
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