True or false: A charter school is a private school. If you answered “true,” you would be incorrect. However, the notion that charter schools are private schools is a common misconception. Charter schools have been affirmed as public entities by state law and court rulings. Charter schools cannot charge tuition, nor can they select their students through a screening process.

Misconceptions about charter schools also exist within the investment community. The transparency of the charter school sector has lagged other sectors due to its relatively young age and the dearth of data on the magnitude of issuance and performance of charter school borrowers, explains Elise Balboni, project director with the Local Initiatives Support Corporation’s Educational Facilities Financing Center, and co-author of a recently released report that fills this gap in data.

Charter School Bond Issuance: A Complete History traces the performance of charter school bonds since the first of its type was issued in 1998. The report, which tracks the 13-year history of the sector, is designed to increase transparency for both municipal investors and charter school borrowers. Certain findings emerged from the study. Primary among them is that no charter school bond assigned an investment grade rating has defaulted. Another finding was a trend toward the issuance of rated debt. In 2009 and 2010, roughly 60% of the number of charter school bond issues and 80% of the par amount issued has been rated, a significant shift from the sector’s early years.

Another goal of the report was to encourage equal treatment of charter schools so that they are treated in the same manner as traditional public school districts, with the same financing options as traditional public schools and ideally with equal access to the stock of public school buildings which have already been paid for by taxpayers.

“Many public policy financing options could help level the playing field for charter schools, although credit enhancement is probably the least expensive from a fiscal standpoint,” says Balboni.

“Access to the bonding authority of school districts and/or other municipal or state level entities in terms of tax-backed debt is also an option. Giving charter schools access to building aid, financial reimbursement for construction and renovation costs that many states provide to traditional public schools is another, as is institution of a per-pupil facility allowance for charter schools equal to average statewide per pupil capital expenditures.”

Maria Sazon, Senior Director, Facilities Initiatives with the National Alliance for Public Charter Schools adds, “States, in general, can provide more support to charter school facilities. For example, only 11 states provide direct per-pupil funding of facilities; only two states provide credit enhancement to back-up charter school bonds; and only a handful have policies that provide charter schools access to unused and available school district buildings – hence, the  continued facilities dilemma.”

“The National Alliance for Public Charter Schools and its state advocacy partners urge state lawmakers to take a comprehensive approach in addressing charter schools’ facilities challenges.”

Charter School Bond Issuance: A Complete History is the first report to examine the universe of 478 rated and unrated charter school bond transactions totaling over $5 billion undertaken by approximately 400 charter schools through year-end 2010. The full report is available for download on the Local Initiatives Support Corporation website.