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Financing for a charter school facility is not as simple as asking for a loan. We found that out quickly at Piedmont Community Charter School (PCCS) in Gastonia, NC. The choice of building, location, phases of renovation, school growth, architect, appraisal, building codes, and more all figured into the scenarios available to the school. We chose a 1915 historic county grade school as our facility in 2001. There were fire inspections and building code issues to get past, or the building would be too costly to renovate.
After following many financing leads that imposed too high lending fees, rate of repayment, and interest rates, SouthTrust Bank made the financing possible along with First National Bank, RBC Centura, and First Charter Bank. To help PCCS get into the building during the 2001-02 school year, everyone had to jump into the process immediately. SouthTrust provided an initial loan of $600,000 to proceed with the purchase, architectural plan, appraisal, and environmental abatement while awaiting the remaining paper work for a 5-year loan of the total—$1.95 million. The first PCCS Board of Directors personally guaranteed the $600,000 loan and were able to drop the personal guarantees when the 5-year loan was closed.
Fast forward to 2003, and it was time to begin looking into long-term financing opportunities and replacement or renewal of the $1.95 million balloon note to come due in February 2005. Every lead for the potential of tax exempt bonds and other financing was pursued. Attorneys, tax professionals, and many others donated hours of time to research the issues of bond financing in North Carolina for the school. The majority of the financing leads were again fruitless, even though the school now had a very good track record.
In the summer of 2004, with seven months left on the note, PCCS obtained a referral to Brent Van Alfen of Providence Financial through the NC Charter School League. Following many calls and questions, Mr. Van Alfen and Lawrence Turner, of Commonwealth Church Finance, came to NC to visit some schools and were kind enough to meet with PCCS. Initially PCCS was very concerned about the various costs, complexity, and legal terms associated with private bond placement, and continued to explore other opportunities.
In November 2004, with time running out, PCCS began the exhaustive paper work for private placement bonds with Providence Financial and Commonwealth Church Finance. By the time all was completed, a 3-month extension on payoff of the original loan was obtained. Awaiting NC Securities approval for the bond prospectus was “hold your breath day” for PCCS. On May 25th, 2005, the prospectus was approved. The bond company placed reserves for bonds with investors for $1.2 million on the first day of the sale.
The final private bond placement provided $2.75 million through a combination of simple interest and compound interest bonds. The loan amount provided for payoff of the original loans and additional technology and building improvements.
One of the unforeseen benefits of the private placement bonds is the awareness that individual investors in 18 states chose to invest in PCCS, its mission, its success, and its future. The process required through the bond underwriting also provided the school with an external grade “A” on every aspect of accountability. The payoff in 10 years, based on a 15-year amortization with opportunity to reissue bonds, matches the school’s planning with its new 10-year charter renewal. PCCS board, administrators, and staff are now able to focus on continuing an excellent and innovative education program and are beginning dissemination efforts to other interested schools in their model practices.
Barbara Lawrence, former Gastonia Downtown Development Director
Presently an Independent Development Consultant
E-mail, barbecdev@yahoo.com
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