One generally doesn’t address tax reform and education reform in the same breath. But now is the time to do so. As Congress assesses federal tax credits as part of a possible tax rewrite package, they should be acutely aware of the significant value of the New Markets TaxCredit (NMTC) program to charter schools nationwide. NMTCs incentivize private lenders to provide critical funding for charter school facilities.
Facilities funding is one of the greatest challenges for public charter schools. Charters schools, unlike traditional public schools, lack public bonding authority and most must use their operating revenues to pay for their facilities. Raising the bar further, charter schools on average, according to one study, receive about 20 percent less public money per student than traditional public schools. Turning to the private capital markets without assistance is generally a bridge too far — as the perceived lending risks are often deemed too high. Consequently, it’s estimated that only one in 10 charter schools has ever obtained private bond financing for their facilities.
{mosads}According to NMTC data through fiscal year 2010 and an additional survey conducted by the Charter School Lenders’ Coalition, community development entities provided more than $1.15 billion of NMTC allocations to public charter schools through 260 transactions. These investments supported more than $2.5 billion in total financing of academic space for 125 public charter schools in 23 states and the District of Columbia. Not exactly pocket change. However, demand for NMTCs vastly outstrips their annual allocations.
City Garden Montessori School is a public charter elementary school serving five neighborhoods in South St. Louis City. Operating as a small private preschool since 1995, the school was established as a charter school under the sponsorship of Saint Louis University in 2008. One of the highest-performing charter schools in Missouri since 2010, City Garden recently garnered a perfect 100-percent score as part of Missouri’s new system for evaluating and accrediting school districts. This St. Louis school was awarded the “Charter School of Excellence” award by the Missouri Charter Public Schools Association in 2012, and is becoming a model for innovation in urban public education. In 2012, City Garden moved from a church basement into a newly renovated, LEED-certified building that more than doubled its enrollment capacity.
That occurred because of $5 million in NMTC financing from the St. Louis Development Corporation, as well as a tax credit investment from the U.S. Bank Development Corporation, financing from People’s National Bank and assistance from IFF, a Midwest-based community development financial institution (CDFI).
National education reform wholly depends on public charter schools having the same opportunity to succeed as traditional public schools. And the success of charter schools wholly depends on these schools having access to adequate facilities at affordable costs – precisely one of the objectives of the New Markets Tax Credit program. NMTCs are, in a way, helping pay for the bricks and mortar of education reform.
As Congress considers a reform of our national tax code, we hope they will fairly weigh its potential impact on the ongoing efforts to reform our national school system. The latter is certainly no less important to our nation’s future than the former.
Huck is executive director of City Garden Montessori Charter School in St. Louis, Mo.