Nashville charter schools seek financing from Arizona

• Critics say the method insulates the schools from public scrutiny, while a charter advocate says such tax-exempt bonds are conventional funding tools.

Context: Taxpayer-funded projects, like school buildings, are typically financed with bonds issued by local boards.

• Instead of seeking approval from a local board, KIPP and Rocketship charter schools were approved for financing by the Arizona Industrial Development Authority.
• Charter schools are privately operated by nonprofit groups, but they are mostly funded by tax dollars. Unlike traditional public schools, charter schools must navigate facilities and capital expenses without help from the city, except in rare circumstances.

Flashback: In 2017, Nashville charter schools for the first time began applying to the Metro Health and Educational Facilities Board for bonds to pay for capital projects. That slate of applications ratcheted up the scrutiny on the bond deals and on who serves on the board.

• Since then the Metro Council, led by Councilmember Dave Rosenberg, has appointed board members who are viewed as charter school skeptics, altering the political dynamics and perhaps making approval of their financing plans more difficult.

State of play: Rosenberg tells Axios he was surprised to learn that a development board in Arizona has been approving bond issuances for Nashville charter schools. He called the practice another example of charter schools dodging financial accountability.

• Chris Moth, who serves on the Health and Educational Facilities Board and waged an unsuccessful bid for the Nashville school board earlier this year, says he thinks the new makeup of the board altered the landscape for charter schools.
• "While I don't speak for the [Health and Educational Facilities] board, I sense that as our membership has changed, we are increasingly asking whether our neighbors would want their tax dollars to support bond issues for either charter schools or exclusive private schools," Moth tells Axios.
• "Most Nashvillians would prefer that our taxes support the public schools that accept all children, as outlined in our Tennessee state constitution."

In March, the Arizona Industrial Development Authority approved $25 million for KIPP to refinance old debt and for other capital projects including land acquisition for a new school, according to board meeting minutes. The school plans to ask the Arizona board for more financing for another project later this year, according to the minutes.

• The Arizona board also provided financing for a charter school facilities fund, which Rocketship accessed for $7.3 million in capital project expenses.
• The Arizona Industrial Development Authority approves issuing the bonds, which are tax exempt, but that's the extent of the board's involvement, program manager Patrick Ray tells Axios. Both KIPP and Rocketship are large charter school networks, and the board has relationships with KIPP charter schools at a national level, Ray says.

What they're saying: "We've done KIPP financings before," Ray says. "So the board was enthusiastic about helping out KIPP, which is, again, one of the elite charter school networks in the country — 100% low-income students — so it's a real warm and fuzzy, kind of feel-good story."

• The Arizona Industrial Development Authority was the subject of an Arizona Republic investigative story last year examining the state's out-of-state bond deals and risky investments.

The other side: Through a spokesperson, KIPP declined to comment beyond what is in the public record.

• A Rocketship spokesperson says the organization selected a national nonprofit fund as their lender and was not directly involved in choosing the agency for the bond issuance.
• Tax-exempt bonds are a conventional and cost-effective tool to finance government projects including public charter schools, Cameron Quick, COO with the Tennessee Charter School Center, tells Axios.
• "The larger issue at hand is the fact that unlike traditional public schools, which utilize publicly financed facilities, public charter schools often have to utilize a portion of their per-pupil funding for facility costs rather than using those funds to support students and instruction," Quick tells Axios. "Public charter schools deserve the same level of facilities funding as traditional schools."