Sabis Educational Services has signed a purchase agreement to buy the former Kaufman Elementary School building and grounds, shown here, from Bridgeport-Spaulding Community Schools. Sabis plans to open the International Academy of Saginaw, a public charter school, at the site.
Finding and financing a school building continue to be among the main
challenges facing new charter public schools in Michigan, but experts say those
with a proven track record are now attracting interest from financial investors.
Locating a place for a new charter school is difficult because of the expense
and the building requirements. Conventional public school districts may levy a
tax to raise money for new buildings or renovations; charter schools cannot.
Instead, charters use part of the per-pupil aid they receive from the state, or
privately raised funds, to pay for facilities.
While some charter start-ups are backed by management companies that pay for
buildings up front, many new charters can’t afford to build or purchase a
building immediately, and lenders are less likely to provide money to a school
that has yet to prove itself. Even if the seed money is in place, not all
buildings are suitable for use as schools, and some conventional public school
districts have said they will not sell or lease their unused buildings to
The cumulative effect is that charters call a wide range of facilities "home"
as they look for affordable and suitable spots, according to a report issued
jointly by the Michigan Council of Charter School Authorizers and Charter FS
Corp., a financial consulting firm.
"Charter public schools … rely on innovative facilities arrangements and
financing options to secure safe, secure learning environments for their
children," the report states.
Charters are found in storefronts, modular facilities, former industrial
buildings and former private or parochial schools, according to Christine
Smiggen, vice president of Charter FS. Many of them open under lease-to-own
agreements that let the school build a track record it can show to investors
when it’s time to purchase the building.
"New charter schools really need to start in a leased facility," Smiggen
said. "They can’t build. It’s really hard for them to borrow up front like
"Our experience is that new charter schools can’t build their own building. …
They have no financial track record, no credit. They almost have to rent,"
agreed John Romine, president of The Romine Group, an education service
provider. The company currently manages five charter schools in Michigan, but
has worked with 18 schools over the years and helped a dozen of those find
Smiggen and Romine both said that charters that stay the course — those whose
contracts are renewed by their respective authorizers and show stable enrollment
— are beginning to attract financial investors who see the schools as a viable
The U.S. Department of Education has also entered the scene, recently
announcing a $6.5 million grant for the Michigan Public Educational Facilities
Authority through the federal Credit Enhancement for Charter Schools Facilities
program. The grants are designed to help charter schools increase credit
worthiness and help them obtain facilities funding.
"Charter schools are one of the fastest-growing sources of school choice in
American education today, but many can’t obtain financing for the facilities
they need to house their schools," Secretary of Education Margaret Spellings
said in announcing the grant. "These grants will help communities open up new
spaces to charter schools so that, in turn, these schools can open their doors
to new students."
In some of the state’s largest urban areas, charter organizers can’t look to
conventional public school districts for school sites. Even though a number of
districts have buildings for sale (See ‘School for sale,’ this issue), at least
two large districts have said publicly that they will not sell or lease their
buildings to a charter organization or to a third party acting on behalf of a
Detroit Public Schools plans to close more than 30 buildings this year and
next, but the Detroit Free Press reported that the board of education adopted a
resolution not to make the buildings available to charter operators. The Lansing
School District, which has put eight vacant school buildings on the market since
spring of 2006, said it would not sell one of its empty elementary schools to
the Mid-Michigan Leadership Academy, a charter school that was renting space at
the nearby state-owned Michigan School for the Blind.
Lansing Board of Education member Hugh Clarke Jr. was asked by local media
about selling property to a charter operation. He was quoted as saying, "From an
ideological standpoint, it might be difficult for me to swallow. … That’s almost
like cutting off your nose to spite your face."
The Academy later purchased about eight acres at the School for the Blind
site from the state.
The Michigan School Code states that school boards and intermediate school
boards "shall not impose any deed restriction prohibiting, or otherwise
prohibit, property sold or transferred by the school board … from being used for
any lawful public education purpose" without advance approval of the State Board
of Education. Further, "the school board or intermediate board shall not refuse
to lease or rent the property to a person solely because the person intends to
use the property for an educational purpose, if the intent of the person is to
use the property for a lawful educational purpose."
"It’s been the law for 11 years, but people know how to get around it," said
Leonard Wolfe, an attorney who helped develop the language. Wolfe, a former
Michigan Senate staffer and clerk in the executive branch’s legal division under
former Gov. John Engler, is now an attorney in Lansing. The law doesn’t require
conventional school districts to sell their property to charters, he said, but
is supposed to prevent them from putting advance restrictions on such sales.
"It’s been a horrible situation," Romine said. In one case, he said, a
conventional public district put a building up for sale, then took it off the
market after a charter school showed interest.
"They took the for-sale sign down," he said, until the charter organizers
found a different site.
In general, new charter operators like to buy existing schools because they
require less renovation to meet school code requirements and are located in
residential neighborhoods. But Sabis Educational Systems Inc., an international
company with 31 private and charter schools, has converted various types of
buildings to educational facilities, according to Jose Afonso, director of the
board and governmental affairs.
In one case, Sabis converted a former department store to a school by
installing skylights and a large central courtyard and rimming the courtyard
with classrooms, Afonso said. He believes that could be a model for other
"It was so cheap for us to do that," he said. The facility now houses 700
students and cost $12 million to purchase and renovate.
As an exception to most districts refusing to sell to charter operators,
Sabis recently signed a purchase agreement to buy a former elementary school
from Bridgeport-Spaulding Community Schools for $150,000 as the site for its new
International Academy of Saginaw. The school will be the company’s second
Michigan site; the first is the International Academy of Flint.
Before bidding on Kaufman Elementary School, Sabis considered putting in a
bid on a two-story, 109,000-square-foot site in downtown Saginaw. They dropped
the plan because there was no room for parking or a playground, "unless we used
the roof, which we thought about," Afonso said.
Afonso, who formerly worked in the Massachusetts Department of Education,
believes conventional school districts are shortsighted in declining bids from
charter schools and that their time would be better spent improving their own
"Charter schools are here to stay," he said. "This kind of opposition is an
awful waste of time and energy and money. Very, very few charters have been
stopped by a district’s intransigence on charter schools. Charter schools are
created by people who are determined to provide choice. They will find a way."
But conventional school districts have a responsibility to consider the
financial impact that selling their property will have on their operation, said
William Bowman, president of the Great Northern Consulting Group. Bowman’s firm
works with school districts to plan and carry out real estate sales. Bowman said
that it doesn’t necessarily make economic sense to sell property to a
competitor, whether charter or private.
His company advises schools to put out requests for proposals for the
purchase of school property and then determine the "net economic value" of each
offer. That includes projecting how many students are likely to leave the
conventional school district and attend the new school. Each student who
switches schools represents a loss in state aid to the host district, he said.
If a conventional district receives three offers for a building, he said, one
from a competing school, one from a project that would have no effect on school
enrollment and one that would boost the conventional district’s enrollment, then
"purchase price is only one thing they’re going to take into consideration."
Royal Oak Public Schools, for example, has sold most of its elementary sites to
Bridgeport-Spaulding put Kaufman Elementary on the market as part of a
consolidation strategy, Superintendent Desmon Daniel said. In recent years the
school had been used for a day care program and as an alternative education
"We had some extensive discussions" about selling to a charter operation, he
said. The board of education voted 3-2 in May to move ahead with the purchase
"We have high-quality teachers and we believe our teachers do a more than
competent job at educating our stakeholders — the students of this district," he
Another group — financial investors — "are finally realizing that charters
are here to stay," Romine said. Charter schools that find suitable facilities
and that show stable enrollment, fiscal responsibility and the trust of their
authorizers are attracting attention in the bond market and from some lending
institutions, added Smiggen, of Charter FS.
"There are more players coming into the marketplace," she said. Two years
ago, when Charter FS looked for underwriters for academies interested in selling
bonds, there was only one active investor, she said. This year, the firm’s
latest request for proposals brought in 10 possible buyers.
"That’s a significant difference," she said. "Bankers by nature are
risk-averse and nobody wants to be the first one," but now they realize, "Hey,
this is a pretty good place to make money."
In Big Rapids, Crossroads Academy got its start by purchasing an empty
building from Big Rapids Public Schools, according to former superintendent Dave
VanderGoot. The 1928 facility had been used over the years as a high school and
a middle school, but was left empty after Big Rapids built a new high school.
Crossroads opened with approximately 330 students in kindergarten through
eighth-grade and today has nearly 700 in kindergarten through twelfth-grade.
When they outgrew their building, they decided to build a new high school in two
phases, VanderGoot said, first building nine classrooms and an office complex
and, in the second phase, nine more classrooms and a gymnasium.
"We built by borrowing from a local bank," he said. "They watched our growth.
… Suddenly you have people willing to spend on charter schools."
Because they pay for facilities out of their general operating budgets, not
sinking funds or debt millage levies, charters look for less-expensive options,
Smiggen said. They might build over time, design multi-use rooms or go without
media centers or gymnasiums.
In response to a challenge to build a school at half the normal cost, Bouma
Construction has developed a model for charter school construction that it says
saves money by using standardized products, design and construction methods.
According to its Web site, the Grand Rapids-based company has been involved in
35 school construction or renovation projects, with an additional 10 in
"They (charter schools) have got to make that foundation allowance stretch
much further," Smiggen said. "They understand that and the parents understand
that. I’m always amazed at some of these charter schools that have huge waiting
lists and there’s nothing special about the building."