The Walton Family Foundation is unquestionably the vampire squid equivalent to Goldman Sachs in the education deform world. I am working to update my data for WFF donations over last decade and half. I am open to suggestions on how to release this and with whom; send me a comment if you’d like a copy or have any ideas.
If one looks at the first years of nearly any charter school in the country the chances are very good that the school founders received either a charter application writing grant (usually $20,000 or $30,000) or a start-up grant (between $225,000 or $250,000) or both from the Walton Family Foundation. Bronx Charter School for Excellence is one such school.
And the doors to other financing from the state or other funders usually open after a school secures a WFF start-up grant. Such a school has a few years to prove itself but it can go back to WFF-backed funds like New Schools Venture Fund or New Schools for Chicago or Newark Charter School Fund or others to secure on-going support. I’ve always suspected that many charter operators were happy to take WFF money but didn’t want long term association with the Waltons so by agreement these pass-through entities were created (and also its a nice job program for wingnut welfare.)
But a new actor (to me at least) in the WFF orbit was the latest vehicle for Bronx Charter School for Excellence to obtain its $23.3 million tax exempt bonds in April 2013. This financial enabler, the Charter School Financing Partnership, was co-signer with Bronx CSE at the New York City Economic Development Corporation.
The NYCEDC is seemingly moving in new direction with issuing tax exempt bonds for city charter schools with the Bronx CSE and a second deal [for International Leadership Charter School; subject of a future post] in 2013 where in the past NYCEDC had no track record for conduit financing for charters. In fact, EMMA counts only 5 issuances total since 2008 in New York so the new willingness of NYCEDC to issue such debt marks a big development for the pro-charter lobby in New York City.
The NYCEDC has a board full of heavy political hitters. Including:
- Seth Pinsky, President of the New York City Economic Development Corporation
- Amanda Burden, Chair Commissioner of the Department of City Planning
- Michael Cordozo, New York City’s Corporation Counsel and chief legal officer of New York City
- John Liu, New York City Comptroller
- Albert M. Rodriguez, General Counsel for Bronx Borough President Ruben Diaz Jr.
- Robert K. Steel, Deputy Mayor for Economic Development of the City of New York
- Kevin Doyle, Executive Director of 32BJ
For some officials simply waiting to take a position with the Bloomberg Family Office after the end of his misrule, the association with charter schools is not problematic. But association with the Waltons may be a bridge too far. That’s where the Charter School Financing Partnership provides plausible deniability or at least the public relations distance from the Waltons.
The Charter School Financing Partnership is a key player for using small amounts of private money (“enhancements” from the Waltons or ugh the US Dept of Education) to get leveraged funds ie debt through tax exempt bonds. I had not looked at CSFP before but its role is clearly laid out through the promotions of its related partners:
Five community capital organizations have formed the Charter School Financing Partnership to increase capital access for high-performing, emerging charter schools. With credit enhancement from the US Department of Education and the Walton Family Foundation, CSFP offers innovative, flexible-financing solutions for schools. Through CSFP, schools can buy down the effective rate on tax-exempt bond executions and enhance New Market Tax Credit transactions as well as other conventional financing products.
Partners
- Community Reinvestment Fund
- Housing Partnership Network
- NCB Capital Impact
- Piper Jaffray & Co.
- Raza Development Fund
- The Reinvestment Fund
- US Department of Education
- Walton Family Foundation
CSFB Program Benefits
- Program enhances the security of the tax exempt bondholders by:
- reducing the leverage
- improving the debt service coverage ratio
- reducing debt per square foot and debt per student
- reducing other underwriting metrics investors and rating agencies consider when reviewing charter school’s credit
So CSFP can take the financial supports from WFF to sweeten the pot for bond investors in evaluating the credit worthiness of individual charter schools by providing “enhancement.” Why would “bondholders” need enhanced “security” in the case of the Bronx CSE deal?
Because even the New York Charter School Institute recent financial evaluations "dash board" release on April 30 put forward a less-than-secure assessment for Bronx CSE for the 2011-12 year. The key metrics from the NYCSI were: “fiscally needs monitoring”, “working capital risk: high”, “acid test ratio: high”, “debt to asset ratio risk: medium”, “months of cash risk: high.”
The school is purchasing its present facility for $7.455 million and acquiring/constructing a building attached to it for $16.773 million. In comparison the school paid $1.05 mm in “land/rent/lease” payments in 2011-12 according to CSI financial dash board, the school will pay $1.151 mm in debt payments in 2014 and $1.67 mm in 2018 to pay bondholders. In essence that is $500,000 more per year (until 2043 unless re-financed!) at a school already recognized as needing monitoring by its authorizer SUNY CSI.
The school governing board is primarily responsible for deciding that more debt to get a bigger building is the most prudent way forward for Bronx CSE. The board leadership should be asked that question:
- Chairman Joyce Frost, “Secretary of New York Cares”
- Vice Chair Stacey Lauren, “a private tutor for New York city private schools”
- Treasurer Dierdre Flynn, “an independent consultant managing finance and operations of growth companies and not-for-profits”
- Secretary Kimberly Hartman, “founder of KH Designs and interior design firm in New York City.”
I don’t have much confidence that this board leadership will be able to give full accounting of how 30 years of public funds paying private bondholders millions of dollars in interest payments advances public education in the Bronx and if this huge outlay for a small school will bring systemic change in the borough.
But if you asked the Walton family and the ideologues they employ, they could clearly explain how their money in Bronx CSE was a worthwhile investment for their policy goals.
