A seemingly routine process last week involving bonds, City Council, and a question of tax-exempt status shed light on the fraught relationship that exists in San Antonio between traditional public schools and rapidly expanding charter schools.
Last Thursday, IDEA Public Schools, a nonprofit that operates the city’s largest charter school network, asked City Council to give tax-exempt status to a bond issue to fund expansion and new construction at three existing campuses and one new campus on Marbach Road.
The process was complicated when several superintendents from traditional school districts, including Northside and North East ISDs, asked Council members to withhold granting the status in an attempt to make it more challenging for IDEA to expand.
City CFO Ben Gorzell said this is the first time he has seen traditional school districts weigh in on this “very narrow procedural approval.”
“It was sad, it was pathetic, and it was desperate on the part of these districts,” IDEA CEO Tom Torkelson said. “It is just unconscionable, it would have benefited districts zero, it would have benefited the city zero, it just would have made us pay a higher interest rate. I think that those superintendents should be ashamed of themselves. I think that it is morally reprehensible.”
If a charter school wants tax-exempt status for bonds, tax code requires that it obtain approval from the jurisdiction in which the charter is located. The jurisdiction can grant or withhold approval, but a charter can still issue bonds regardless of the tax-exempt status. The jurisdiction, in this case, the City of San Antonio, doesn’t take on any liability or financial commitment for the bonds.
Getting Council approval likely would allow IDEA to secure a lower interest rate and pay off debt more quickly and cheaply than with non-tax-exempt bonds. Charters pay off bond debt with the funding they receive from the state.
The difference city approval makes can equate to a 3 percent lower interest rate, Torkelson said.
“All [not having city approval] would mean is we are taking more state money and sending it to all of the Wall Street bondholders, so what the districts were trying to do was trying to use the city council meeting to force us to pay higher interest rates,” Torkelson said.
The request is fairly routine; charters have successfully secured approval from the City for tax-exempt bonds 15 other times since fiscal year 2015. IDEA previously received approval for other bonds in fiscal years 2017, 2016, and 2015.
In late September or early October, charter operator KIPP Texas also is expected to ask City Council for approval on a bond.
The tax code doesn’t necessitate a vote by the City Council for approval. In fact, a city’s highest elected official – Mayor Ron Nirenberg, in San Antonio’s case – can sign off on the tax-exempt status if he or she wishes.
In the past, Gorzell said the City has done it both ways but has foregone a full Council vote in recent years.
“I know that many of the ones that have been done over the past four years were just signed off on by the mayor,” said Gorzell, who has worked for the City for 28 years. “I’m not aware of any time we have not approved the request.”
Northside Independent School District Superintendent Brian Woods was one of the educators who contacted Council members before the vote. Woods told the Rivard Report that he appreciates the issue being brought to a public vote, but believes San Antonio is at a “tipping point” of charter growth.
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“We really need a holistic look at the pace of charter expansion and the impact to students,” Woods said. “The vast majority of students are still being educated in [traditional] public schools. … When charters expand rapidly, the odds are students are going to come from school districts, because that is where the vast majority are getting their education.”
Some of San Antonio’s largest charter operators, including IDEA, have recently made plans to expand into the northwest part of the city. As new charter campuses open in this area, Northside students could leave the district to attend the charters, taking enrollment-based funding with them.
“If I have got four third-grade classes and one student out of each class leaves, I can’t consolidate down to three [classes and] I’m probably going to have the same [number of] custodians cleaning the building at night,” Woods said.
North East ISD also contacted the City prior to the IDEA tax-exempt charter bond question. It was the first time NEISD had become aware of resolutions to approve such a bond. Once the district talked to the City, administrators learned that many similar resolutions had previously been approved.
Superintendent Brian Gottardy said he felt the need to inform City Council members about the impact of charter school expansion on traditional public schools. There is no other way traditional districts can slow the growth of charters, he said.
“If City Council is serious about supporting school finance reform, then members need to understand that the state is funding two public school systems,” Gottardy wrote in an email to the Rivard Report.
Torkelson was frustrated by the superintendents’ reaction, saying that while most of IDEA’s students are minorities and low income, the superintendents who expressed opposition were mostly white Anglos who were trying to make IDEA students “shoulder a higher interest rate because they don’t like charter schools.”
Ultimately, City Council voted to approve the tax-exempt status, with members John Courage (D9), who is a former teacher, and Rebecca Viagran (D3) voting against the motion. Ana Sandoval (D7) abstained because she wanted a broader discussion before voting.
Councilman Greg Brockhouse (D6) said he believes the conversation about the efficacy of charters and impact on San Antonio was outside the scope of the question about tax-exempt status.
“I believe those conversations need to be had,” Brockhouse said. “Dr. Woods was exactly right when he said now is the time to have this conversation and I responded back to him and I said, you’re right. It is not the time on the dais on this particular issue, but I do believe it is a worthy conversation to have.”
The entire Council indicated a desire for further discussion about the way charter growth will shape the future of San Antonio.
Gorzell suggested taking up the topic in an Intergovernmental Relations Committee meeting, and traditional public school superintendents indicated they would be eager to participate. Woods said he hopes a conversation would focus on the appropriate pace for charter expansion.
The role of the city in pacing charter growth is unclear. Some City officials indicated that the arena for the discussion should perhaps be at the legislature and not the local level. Torkelson agreed but said there shouldn’t be a different set of rules for charters and districts.