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Albany Charter Cash Cow: Big Banks Making a Bundle on New Construction as Schools Bear the Cost
May 07, 2010
Wealthy investors and major banks have been making windfall profits
by using a little-known federal tax break to finance new charter-school
construction.
The program, the New Markets Tax Credit, is so lucrative that a lender who uses it can almost double his money in seven years.
In Albany, which boasts the state's highest percentage of charter school enrollments, a nonprofit called the Brighter Choice Foundation has employed the New Markets Tax Credit to arrange private financing for five of the city's nine charter schools.
But many of those same schools are now straining to pay escalating
rents, which are going toward the debt service that Brighter Choice
incurred during construction.
The Henry Johnson Charter School, for example, saw the rent for its 31,000-square-foot building skyrocket from $170,000 in 2008 to $560,000 last year.
The Albany Community School's rent jumped from $195,000 to $350,000.
Green Tech High Charter School rents went from $443,000 to $487,000.
Meanwhile, all the Albany charter schools haven't achieved the
enrollment levels their founders expected, even after recruiting
hundreds of students from suburban school districts to fill their seats.
The result has been less money in per-pupil state aid to pay operating costs, including those big rent bills.
Several charters have fallen into additional debt to the Brighter Choice Foundation.
You'd think these financial problems would raise eyebrows among
state regulators - or at least worry those charter school boards.
But the powerful charter lobby has so far successfully battled to
prevent independent government audits of how its schools spend their
state aid.
And key officers of Albany's charter school boards are themselves
board members, employees or former employees of the Brighter Choice
Foundation or its affiliates.
Christian Bender, for example, executive director of the foundation,
is chairman or vice chairman of four of the Albany charters.
Tom Carroll,
the foundation's vice chairman and one of the authors of the state's
charter law when he was in the Pataki administration, was a founding
board member of Albany Community Charter School and is currently chairman of two other charters, Brighter Choice School for Boys and Brighter Choice School for Girls.
Carroll also sits on the board of directors of NCB Capital Impact, a Virginia organization that used New Market Credits to pull together investors for all the Albany building loans.
A Brighter Choice official confirmed Thursday that the Virginia
organization gets "a 3% originating and management fee" for all school
construction deals that Brighter Choice arranges.
Under the New Markets program, a bank or private equity firm that
lends money to a nonprofit to build a charter school can receive a 39%
federal tax credit over seven years.
The credit can even be piggybacked on other tax breaks for historic preservation or job creation.
By combining the various credits with the interest from the loan
itself, a lender can almost double his investment over the seven-year
period.
No wonder JPMorgan Chase
announced this week it was creating a new $325 million pool to invest
in charter schools and take advantage of the New Markets Tax Credit.
So does Carroll see any problem with being simultaneously part of
the landlord, tenant and lending bodies for Albany charter-school
construction?
"I sit on the nonprofit NCB Capital Impact board as a volunteer," he
said this week. "On that board, I have never voted on any of the deals
that Brighter Choice Foundation has been a party to."
Albany is exhibit A in the web of potential conflicts that keep
popping up in the charter school movement. It's one reason the state
Legislature should refuse to lift the current cap on charter schools
unless it also adopts stringent new government auditing rules.
If wealthy investors and banks can double their money simply by
building charter schools, taxpayers deserve to know exactly who
arranged those deals, who will benefit and what they will ultimately
cost each school.
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Juan Gonzalez
Juan Gonzalez is a columnist for the New York Daily News and frequent co-host of Democracy Now! Juan's book "Fallout: The Environmental Consequences of the World Trade Center Collapse" (2002) documents cover-ups by Environmental Protection Agency and government officials about health hazards at Ground Zero in New York. He is also the author of: "Harvest of Empire: The History of Latinos in America" (2011) and "Roll Down Your Window: Stories from a Forgotten America" (1996).
Wealthy investors and major banks have been making windfall profits
by using a little-known federal tax break to finance new charter-school
construction.
The program, the New Markets Tax Credit, is so lucrative that a lender who uses it can almost double his money in seven years.
In Albany, which boasts the state's highest percentage of charter school enrollments, a nonprofit called the Brighter Choice Foundation has employed the New Markets Tax Credit to arrange private financing for five of the city's nine charter schools.
But many of those same schools are now straining to pay escalating
rents, which are going toward the debt service that Brighter Choice
incurred during construction.
The Henry Johnson Charter School, for example, saw the rent for its 31,000-square-foot building skyrocket from $170,000 in 2008 to $560,000 last year.
The Albany Community School's rent jumped from $195,000 to $350,000.
Green Tech High Charter School rents went from $443,000 to $487,000.
Meanwhile, all the Albany charter schools haven't achieved the
enrollment levels their founders expected, even after recruiting
hundreds of students from suburban school districts to fill their seats.
The result has been less money in per-pupil state aid to pay operating costs, including those big rent bills.
Several charters have fallen into additional debt to the Brighter Choice Foundation.
You'd think these financial problems would raise eyebrows among
state regulators - or at least worry those charter school boards.
But the powerful charter lobby has so far successfully battled to
prevent independent government audits of how its schools spend their
state aid.
And key officers of Albany's charter school boards are themselves
board members, employees or former employees of the Brighter Choice
Foundation or its affiliates.
Christian Bender, for example, executive director of the foundation,
is chairman or vice chairman of four of the Albany charters.
Tom Carroll,
the foundation's vice chairman and one of the authors of the state's
charter law when he was in the Pataki administration, was a founding
board member of Albany Community Charter School and is currently chairman of two other charters, Brighter Choice School for Boys and Brighter Choice School for Girls.
Carroll also sits on the board of directors of NCB Capital Impact, a Virginia organization that used New Market Credits to pull together investors for all the Albany building loans.
A Brighter Choice official confirmed Thursday that the Virginia
organization gets "a 3% originating and management fee" for all school
construction deals that Brighter Choice arranges.
Under the New Markets program, a bank or private equity firm that
lends money to a nonprofit to build a charter school can receive a 39%
federal tax credit over seven years.
The credit can even be piggybacked on other tax breaks for historic preservation or job creation.
By combining the various credits with the interest from the loan
itself, a lender can almost double his investment over the seven-year
period.
No wonder JPMorgan Chase
announced this week it was creating a new $325 million pool to invest
in charter schools and take advantage of the New Markets Tax Credit.
So does Carroll see any problem with being simultaneously part of
the landlord, tenant and lending bodies for Albany charter-school
construction?
"I sit on the nonprofit NCB Capital Impact board as a volunteer," he
said this week. "On that board, I have never voted on any of the deals
that Brighter Choice Foundation has been a party to."
Albany is exhibit A in the web of potential conflicts that keep
popping up in the charter school movement. It's one reason the state
Legislature should refuse to lift the current cap on charter schools
unless it also adopts stringent new government auditing rules.
If wealthy investors and banks can double their money simply by
building charter schools, taxpayers deserve to know exactly who
arranged those deals, who will benefit and what they will ultimately
cost each school.
Juan Gonzalez
Juan Gonzalez is a columnist for the New York Daily News and frequent co-host of Democracy Now! Juan's book "Fallout: The Environmental Consequences of the World Trade Center Collapse" (2002) documents cover-ups by Environmental Protection Agency and government officials about health hazards at Ground Zero in New York. He is also the author of: "Harvest of Empire: The History of Latinos in America" (2011) and "Roll Down Your Window: Stories from a Forgotten America" (1996).
Wealthy investors and major banks have been making windfall profits
by using a little-known federal tax break to finance new charter-school
construction.
The program, the New Markets Tax Credit, is so lucrative that a lender who uses it can almost double his money in seven years.
In Albany, which boasts the state's highest percentage of charter school enrollments, a nonprofit called the Brighter Choice Foundation has employed the New Markets Tax Credit to arrange private financing for five of the city's nine charter schools.
But many of those same schools are now straining to pay escalating
rents, which are going toward the debt service that Brighter Choice
incurred during construction.
The Henry Johnson Charter School, for example, saw the rent for its 31,000-square-foot building skyrocket from $170,000 in 2008 to $560,000 last year.
The Albany Community School's rent jumped from $195,000 to $350,000.
Green Tech High Charter School rents went from $443,000 to $487,000.
Meanwhile, all the Albany charter schools haven't achieved the
enrollment levels their founders expected, even after recruiting
hundreds of students from suburban school districts to fill their seats.
The result has been less money in per-pupil state aid to pay operating costs, including those big rent bills.
Several charters have fallen into additional debt to the Brighter Choice Foundation.
You'd think these financial problems would raise eyebrows among
state regulators - or at least worry those charter school boards.
But the powerful charter lobby has so far successfully battled to
prevent independent government audits of how its schools spend their
state aid.
And key officers of Albany's charter school boards are themselves
board members, employees or former employees of the Brighter Choice
Foundation or its affiliates.
Christian Bender, for example, executive director of the foundation,
is chairman or vice chairman of four of the Albany charters.
Tom Carroll,
the foundation's vice chairman and one of the authors of the state's
charter law when he was in the Pataki administration, was a founding
board member of Albany Community Charter School and is currently chairman of two other charters, Brighter Choice School for Boys and Brighter Choice School for Girls.
Carroll also sits on the board of directors of NCB Capital Impact, a Virginia organization that used New Market Credits to pull together investors for all the Albany building loans.
A Brighter Choice official confirmed Thursday that the Virginia
organization gets "a 3% originating and management fee" for all school
construction deals that Brighter Choice arranges.
Under the New Markets program, a bank or private equity firm that
lends money to a nonprofit to build a charter school can receive a 39%
federal tax credit over seven years.
The credit can even be piggybacked on other tax breaks for historic preservation or job creation.
By combining the various credits with the interest from the loan
itself, a lender can almost double his investment over the seven-year
period.
No wonder JPMorgan Chase
announced this week it was creating a new $325 million pool to invest
in charter schools and take advantage of the New Markets Tax Credit.
So does Carroll see any problem with being simultaneously part of
the landlord, tenant and lending bodies for Albany charter-school
construction?
"I sit on the nonprofit NCB Capital Impact board as a volunteer," he
said this week. "On that board, I have never voted on any of the deals
that Brighter Choice Foundation has been a party to."
Albany is exhibit A in the web of potential conflicts that keep
popping up in the charter school movement. It's one reason the state
Legislature should refuse to lift the current cap on charter schools
unless it also adopts stringent new government auditing rules.
If wealthy investors and banks can double their money simply by
building charter schools, taxpayers deserve to know exactly who
arranged those deals, who will benefit and what they will ultimately
cost each school.
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