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July 10, 2015

Charter Schools on Borrowing Binge as Enrollment Grows

Bond sales by taxpayer-funded, frequently nonprofit-run charter schools are on a pace to break last year's record of $1.9 billion as swelling enrollment and low interest rates fuel a borrowing spree, writes Bloomberg.

Exemplifying the trend, venerable New York City charity the Children's Aid Society is entering the bond market for the first time in his 162-year history, selling $36.6 million in debt to finance a new building for its school in the South Bronx.

Charter schools have issued $1.14 billion of municipal bonds this year, up $50 million from the same period of 2014, and sales have more than doubled over the past four years. Such debt is exceptionally risky because charters receive public funds based on enrollment and can close if student numbers sink too low, but their bond issues have benefit from high demand, the track records of established schools, and moves by some states to guarantee charters' debt, Bloomberg says.