Facility Financing Workshop Self-HelpBuilding Hope

2 Who is Self-Help? Non-profit CDFI founded in 1980 Mission: Creating and protecting ownership and economic opportunity for people of color, women, rural residents and low-wealth families and communities. Over $100 million lent to charter schools nationwide since 1997

3 Financing (Loans and CE’s) $42 million in total lending since 2003 Over $17 million in guarantees Supporting $310 million in facility costs Supporting over 18,500+ seats 50+ transactions CS Business Services Provide accounting and I.T. services to over 25 charter school campuses Prepared eRate applications for over 50 schools HR Management Property Management Incubator Initiative Partnership with DC Gov’t Established 5 incubators for 6 charter schools Leased and renovated over 110,000 sq ft creating seats for approximately 1,000 students. Technical Assistance Assisted over 100 charter schools with business planning, real estate, and finance Speakers at national conferences and U.S. Department of Education programs Led ground-breaking conversion of 7 Catholic schools to charter schools Provide grants for feasibility studies Support/manage charter school applications for surplus DC school facilities Project management to build or renovate facilities Building Hope Mission: To close the achievement gap by providing student access to high quality charter school facilities through the provision of the following services: * As a % of staff time

4 Charter Schools Need To Demonstrate: Financial Control and Sustainability: Credit and Financial History –Report, tax returns, audited financial statements, year-to-date results, projections Cash Flow –Profit, increasing enrollment Collateral –School property worth ~50-75% of loan value, so need to fill gap with other real estate, cash pledges in CDs, equipment, personal guarantees, etc Cash Equity –Standard down-payment is 20%

5 Two Factors About Financial and Facilities Planning 1.Numbers of Students 2.The Amount of Per Pupil Revenue You Will Receive Plan only with money you have either in hand or committed by law Too many schools get in trouble because they assume their enrollment will grow. If you play optimistically, even a modest shortfall can challenge your school’s ability to honor its obligations.

6 Charter School Budgeting Worksheet Question 1: What is my maximum gross revenue? How many students do you expect to enroll in Year 1? 150 How much per pupil revenue will you have? $6,000 [# of students] X Per Pupil Revenue= Maximum Growth Revenue 150 X $6,000= $900,000

7 Determining a Realistic Revenue Projection Question 2: What is my likely gross revenue? Note: Most new schools suffer 10% attrition from opening day [Maximum gross revenue] x [0.9] = likely gross revenue $900,000 x.9=$810,000

8 Maximum Facilities Expenses Question 3: How much should I spend on my building? Note: Occupancy costs should be no more than 15% your revenue. This includes maintenance, rent/mortgage payments, insurance and all other building related expenses. [0.15] x [likely gross revenue] = maximum facilities expense.15 x $810,000=$121,500

9 Size of the Building Question 4: How big of a building do I need? Note: You should plan at least 75 square feet per student (100 square feet per pupil is ideal) [# of students] x [75] = minimum usable space for building 11, 250 sq ft [Max payment] / [Min square feet] = max rent or mortgage per square foot $121, 500/11, 250=$10.80/sq ft

10 Ideal Mortgage or Lease Payments Question 5: What rent or mortgage payment can I afford? Account for operating costs; typically, about $6/ft 2 Mortgage or Lease Utilities CAM Repair/Maintenance Grounds Security Administration + Insurance = Total Facility Cost [Max cost per sq ft] – [ $6 ] = Max mortgage or non-inclusive rent per sq ft $10.80-$6=$4.80/sq ft [Max mortgage or non-inclusive rent per ft 2 ] x [building size in ft 2 ] = Max mortgage or non-inclusive rent $4.80 x 11, 250 = $54, 000

11 Teaching Staff Expenses Question 6: What is my total teaching budget Your spending on teachers should equal at least 55% of your likely gross revenue. (This includes salary and benefits.) [0.55] x [likely gross revenue]= teacher staffing budget.55 x $810,000 = $445, 500

12 What’s Left? Question 7: How much do I have to spend on everything else? After 55%+ in the classroom, 15% for occupancy costs, you have: 30% likely gross revenue for student services, administration, and any other costs. [Likely gross revenue] – [minimum teacher staffing budget] – [maximum facilities expense] = What you have left $243,000

13 Caution on Facility Spending #1 Caution: Realtors may encourage you to spend 20% of your maximum gross revenue on your lease or mortgage because this can increase their commissions by as much as 30% Spending such a high % of your revenues on facilities provides no margin for error should enrollment lapse.

14 Caution on Facilities Spending #2: Caution: Schools that spend less than 55% of their revenues on instruction and more than 15% on facilities have limited budget flexibility: You can always hire additional teachers or part-time instructors to fill gaps, but you cannot easily eliminate 2,000 unused sq feet of a building they you renting or have purchased.

15 4 Key Take-Aways 1.Facility budget = Max 15% of likely gross revenue 2.Teacher staffing budget = at least 55% of likely gross revenue 3.Minimum facility size = 75 ft 2 per student. 100 ft 2 per student is ideal. 4.Be aware of your realtor’s personal interests and be wary of any single- source agreements.

16 Contact Us! Jane Ellis Director of Charter School Lending Self-Help (919) or (800) help.org Joe Bruno President Building Hope (202)