By Lee Delaporte | November 11, 2011
KIPP Houston expects to issue long-term tax-exempt debt in the future as it executes its growth strategy, according to Steve Mancini, spokesperson. Other financing options may be considered based on market conditions, availability and specific project requirements, he said.
As previously reported, KIPP Houston has plans to grow to 40 schools by 2020, serving 20,000 students pre-kindergarten through 12th grade. While KIPP does intend to continue expansion efforts to meet that goal, because of the state of the capital markets, there is no specific timeline for construction, Mancini noted.
There is a plan in place to ensure KIPP’s organizational infrastructure grows to enough space for each school year, Mancini said. Since KIPP schools start one grade at a time, first-year schools can temporarily be housed at existing KIPP school sites while long-term facilities are being built, he added.
“We are being extremely deliberate about creating efficiencies by ensuring that the majority of funds are spent at the classroom level,” Mancini said.
As previously reported by Debtwire Municipals, the La Vernia Higher Education Finance Corporation issued USD 66.8m in education revenue bonds for KIPP Houston in 2009. Those bonds were backed with a credit enhancement from the Bill and Melinda Gates Foundation.
“The credit enhancement opened up the capital markets for charter schools during a time when greater financial markets in the US and worldwide were volatile and effectively closed to the charter school industry,” said John Murphy, chief financial officer for KIPP Houston. “Thankfully, the financial markets have since recovered, although not completely,” he added.
The benefit of the structure established for the 2009 issuance is less effective in the current financial marketplace, Murphy noted. “We will continue to pursue alternative ways to utilize this structure and other financing structures to ensure the children in our community are properly served,” he said.
Legislation passed in Texas to open the state’s Permanent School Fund (PSF) to investment grade charter organizations presents another financing option, Murphy said. The PSF was created with a USD 2m appropriation by the Texas Legislature in 1854 for the benefit of the state’s public schools.
KIPP Houston is currently in discussions with the Spring Branch Independent School District (SBISD) and YES Prep in Houston to create a formal partnership, Mancini said. The boards of each organization signed a resolution with the intent of exploring the best approach to implementing a partnership, he added. Once the details of the partnership are structured, it would be subject to final approval by the SBISD board, he noted.