Crumbling school buildings? Philly charter operator offering to build them better.
Charter schools like those run by String Theory, which previously took out $55 million in bonds to buy a Center City office tower, have been able to access sizable properties through taxpayer-funded bond deals.
Charter-school supporters generally talk about opportunities for children. But one Philadelphia charter operator says it has an opportunity for the School District.
String Theory Schools, which borrowed $55 million through bonds in 2013 to buy a Center City office tower and now runs the largest single charter school in the city, is applying to open a new dance-themed school in West Philadelphia.
But it’s eyeing a bigger expansion: It wants to build schools to replace the district’s in some neighborhoods, a takeover it says would spare the district from having to make costly repairs to its aging structures.
"I'm not ideological about charter schools," said Jason Corosanite, String Theory's chief innovation officer. "But I do think as an instrument, or a vehicle to address the facilities problems we have right now in the city of Philadelphia, I think it's a viable solution."
Overbrook “is an area we are particularly focused on,” in part because district schools there have large repair needs, Corosanite said. He envisions charters replacing the district schools and taking over the district’s enrollment in the neighborhood.
“We’ve made it known throughout the School District," Corosanite said of String Theory’s proposal, though “I don’t know how receptive” leaders will be.
A district spokesperson said officials could not comment because of String Theory’s pending application for a new charter school.
Pennsylvania law tasks school districts with authorizing new charter schools, which are publicly funded but independently run. In Philadelphia, charters enroll one-third of public school students, and how the newly appointed school board will address further charter-school growth has been an open question. The board is considering three applications for new charter schools, including one from String Theory.
School districts must pay charters based on enrollment. That allotment doesn’t include designated funding for facilities — something charter operators say puts them at a disadvantage.
Yet some charters have been able to access sizable properties through bond deals funded by taxpayers, while traditional public schools funded by the same taxpayers need repairs projected to cost billions of dollars.
“It’s a huge, huge issue,” said Bruce Baker, a professor at Rutgers Graduate School of Education who focuses on school finance. “There are billions of dollars of low-grade to junk revenue bonds being issued to charter operators. … There are a lot of questions about who’s on the hook if charters don’t get renewed."
Although they have only five-year contracts with the district, charters in Philadelphia have been able to secure tax-exempt bonds repayable over 30 years. Often, a nonprofit related to the school takes on the debt, then leases the building to the charter school — which uses money from its operating budget to make the payments.
“As a new entity, what’s beneficial is you’re taking on the fresh debt,” Corosanite said. Charters “have the ability to raise capital to do that.”
In String Theory’s case, if one of its charter schools were to close, the nonprofit that owns the school building would need to find another tenant, according to the school’s controller.
“We’re using public dollars to buy something … with exorbitant fees, for someone else to own,” Baker said. He said he didn’t blame charter operators: “It’s bad public policy that has left this to be the mechanism by which charters can gain access” to school buildings.
Corosanite acknowledged the higher interest rates. But he said charters didn’t face the same bidding and purchasing constraints as the district and could be “a little bit more nimble” in building schools. He pointed to charter schools in Philadelphia built at a lower cost per square foot than others for the district. The firm that managed construction of the schools, BSI, did not return messages.
The School District, which plans to spend less than 10 percent of its budget the next few years on debt service, faces extensive obligations in maintaining its buildings. A facilities assessment released in 2017 identified $4.5 billion in needed repairs. The district’s budget is $3.2 billion.
Charter growth could enable the School District “to be more strategic in leveraging its scarce building and renovation funds," said Mark Gleason, executive director of Philadelphia School Partnership, a nonprofit that awards grants to charter, district, and private schools. But “realizing those opportunities would require planning, especially around enrollment patterns and where specific schools would be located.”
District officials declined to answer questions for this article about how they planned for charter-school growth. They also did not comment on how they decided to recommend certain zip codes to applicants seeking to open charters this year.
When students leave district schools for charters, research shows, it still costs Pennsylvania school districts money, even years later. Until a school’s enrollment drops by a certain amount, for instance, the district might not be able to reduce the number of teachers.
Even with Philadelphia district schools turned over to charters — known as Renaissance schools — the district still faces some leftover costs, according to consultants hired by the district to assess the fiscal impact of charters.
As with Renaissance schools, String Theory wants to take over a district catchment — meaning every student in a given area would be able to attend the charter school. But it doesn’t want to take over an existing district building, which requires “a ton of money to invest in turning the school around,” Corosanite said. String Theory has one Renaissance school, the Philadelphia Charter School for Arts and Sciences, a K-8 in Northwood that it took over in 2012.
In 2013, a nonprofit connected to String Theory’s charter schools borrowed $55 million through bonds to buy an eight-floor, 265,000-square-foot office building at 16th and Vine Streets that had been occupied by GlaxoSmithKline. The building, which now houses grades 5 through 12 of String Theory’s Performing Arts Charter, cost $29 million, and String Theory planned $14 million in renovations. Other proceeds went toward refinancing an existing loan on another school building.
“People see this as an expensive building. On a per-square-footage basis, this is a very inexpensive building,” Corosanite said while giving a recent tour of the converted office tower. The building includes an aquaponics lab, where students raise tilapia; a dance studio with city-skyline views; an “entertainment-caliber” motion-capture studio; and a student-run cafe, with coffee beans sourced and roasted by students.
The Performing Arts charter also occupies two buildings in South Philadelphia; together, the schools serve 2,525 students. Financial documents show the charter’s building costs are $7.6 million, or 23 percent of its budget. That includes $4.9 million in building-rental payments to its nonprofits.
Like other charter schools, the Performing Arts charter has less experienced teachers than the School District and pays them less. Its average teacher salary is $52,000, compared with the district’s $70,500.
Depending on how a charter school operates — and whether its schools are of good quality — the proposal floated by String Theory for charters to replace aging district schools could be “very attractive,” said Mike Masch, a former chief financial officer for the Philadelphia School District.
“The charter schools appear to have more than enough money,” he said.