Facilities challenge and its consequences

Transcription

1 SchoolBuild: Project Cost Calculator Webinar Presented By: Sara Sorbello, Local Initiatives Suppor t Corporation Anand Kesavan, Char ter School Growth Fund March 30, 2017

2 Facilities challenge and its consequences One million students remain on waitlists; denied their opportunity to access high quality education options No taxing authority No buildings 1 million students Little to no funding 2

3 About the SchoolBuild Webinar Series Purpose: As we prepare to launch our SchoolBuild research portal to connect schools to the resources and partners they need to complete their facility projects, our SchoolBuild webinar series allows schools to preview the information that will be available on the site. 3

4 About Us The Local Initiatives Support Corporation s Charter School Financing team supports education facilities improvements, construction, and development $16.2 billion invested, leveraging $48.5 billion in total development Over $278 million in loans, tax credit allocations, guarantees, and grants invested in 194+ charter schools across the country LISC-financed charter schools outperformed their surrounding districts by 20% on average CSF also conducts research that informs policy changes around facility financing CSGF is a national non-profit that identifies the country s best charter schools, funds their expansion, provides technical expertise on facilities, and helps to increase their impact. The 770+ schools that CSGF supports enroll more than 320,000 students, of whom 79% are low-income and 94% are of color. CSGF has a dedicated Facility Fund through which it enables the charter networks in its portfolio to affordably build, expand, and renovate school buildings. It has loaned a total of $68M help charter networks access nearly $440 million in facility project financing to build more than 40 new buildings throughout the country. By providing low-interest, short-term loans and advice on how to get more affordable loans from private lenders, CSGF has saved the charter school networks in its portfolio millions of dollars in facility-related expenses. 4

5 School Founders Executive Directors Principals Real Estate Managers School Board Members Directors of Facilities Directors of Finance Who is in the Audience? 5

6 Agenda Welcome & Introductions Facilities & Financing Lifecycle Cost & Affordability Planning Calculator How Much Does It Cost? How Much Can You Afford? Financing Options Troubleshooting and Q&A 6

7 Facilities and Financing Lifecycle Growth Years Lease space that can grow with you Secure shortterm interim financing Nonprofit/CDFI lenders Stabilization Move to ownership of property with longer-term financing Nonprofit/CDFI or traditional bank lenders Replication Charter renewed, larger enrollments Consolidate financing and develop larger properties Tax-exempt bond market 7

8 Cost and Affordability Planning Calculator What you want to build may not jive with what you can reasonably afford Spending too much on a facility can jeopardize the quality of education by diverting resources from teacher salaries and other program expenses Looking at cost and affordability in parallel from the outset will help you design a financeable project 8

9 How Much Does It Cost? Wide range of construction costs by market: $175-$400+ per square foot Urban vs. suburban vs. rural New construction vs. renovation Space planning rule of thumb: square feet per student School model Specialized spaces (labs, etc.) Climate (use of outdoor space) 9

10 How Much Does It Cost? Hard costs are the brick-and-mortar costs of construction Rule of thumb: budget 10% hard cost contingency Soft costs (architecture, engineering, legal, financing fees, etc.) typically add 20-30% to total project costs Total project budget is the upfront cost of developing a building (excludes start-up operating costs, ongoing maintenance, etc.) 10

11 How Much Can You Afford? Total project debt should be sustainable: affordable without taking revenue away from the classroom How much you can afford is a function of enrollment, recurring per pupil revenue, and how much of your budget you can allocate to servicing debt without compromising quality of education 11

12 How Much Can You Afford? Rule of thumb: debt service should be no more than 12-15% of recurring public revenue (your affordable annual debt service) Debt burden + other ongoing facilities costs = your facility burden Tradeoffs 12

13 How Much Can You Afford? Types of Financing Affordable annual debt service supports different amounts of principal, depending on interest rate and amortization Multipliers provide a shortcut between annual debt service and loan amount Early-stage schools (2-5 yrs) Single site or small network Leased or owned facilities 10% equity DSCR > 1.15x Low income student population Nonprofit/ CDFI Financing Expanding and mature schools (3-5 yrs+) Multiple campuses, CMOs Charter renewed or likely 20-25% equity DSCR > 1.2x Multiple campuses, CMOs (emphasis on enrollment) Charter renewed Equity may not be required DSCR: 1.25x to 2x Bank Financing Tax-Exempt Bond Market 13

14 Troubleshooting the Gap Raise More Money Equity Philanthropy Subordinate Debt Subsidies such as NMTCs and QSCB/QZABs Re-scope Your Project Are you overbuilding? Incubators or other alternative space Revisit Assumptions Could you dedicate a higher percentage of your budget to facilities? Could you increase class size to boost revenue? 14

15 Questions 15

16 SchoolBuild: From Idea to Construction SchoolBuild: From Idea to Construction is a new research portal to guide schools through the entire facility process from start to finish. This research portal is meant to be a one stop shop for charter schools, no matter their stage of facility development. Sign up and get a glimpse of our research portal: 1. Visit Bit.ly/liscresearchportal 2. Share your name and 3. Tell a colleague! Launching in

17 Appendix 17

18 Primary Financing Methods for Charter School Facilities Source: 2017 California Charter School Conference: Ready or Not? Planning for Facilities Financings Joint Presentation by BAIRD, Buck Financial, and Charter School Growth Fund; 18