News release - The Local Initiatives Support Corporation and The Goldman Sachs Group Inc. has announced the formation of a $25 million charter school facility that will finance the development of approximately 16 charter schools over the next two years.
The Goldman Sachs Charter School Loan Facility will be capitalized by Goldman Sachs and credit-enhanced by funds awarded by the US Department of Education to LISC, which will also manage the facility and its lending program. LISC currently supports 130 charter schools nationwide. This facility will be focused on the greater New York City and New Jersey areas. In total, the fund is expected to leverage approximately $100 million in additional capital to support high-quality charter school facilities.
"Access to a quality education is fundamental to families and is at the core of healthy communities," noted Michael Rubinger, LISC President and CEO. "By funding this facility, Goldman Sachs ensures that thousands of low-income children will have access to innovative local schools that also help revitalize blighted neighborhoods."
Progressive Review - And just how will these schools "revitalize blighted neighborhoods?" Primarily by having their students leave the 'hood. As we have pointed out, DC white voters - including heavily gay precincts - overwhelmingly supported education deformer Adrian Fenty yet only five percent of the schools are white. Why the huge interest? What appears to have happened is that public schools are now playing much the same role that crime rates used to: make them look good and real estate values rise. The gentrifiers don't have to have any direct experience with what is going on; they just have to feel good about it. In short, in many ways what is happening is not about test scores at all, but about real estate prices.
Juan Gonzalez, NY Daily News, May 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.
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.
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. . .
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.