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North Star Academy, a member of Uncommon Schools Students at North Star Academy, in Newark, New Jersey, work to excel. North Star charter schools consistently outperform their neighboring district schools and rank among the top schools in Newark and New Jersey.

Barry Wides, Deputy Comptroller, Community Affairs, OCC

Public schools are the cornerstones of our communities. But quality education and the percentage of successful graduates have decreased over the past three decades, especially in inner-city areas. To address the issue of quality education, many parents, teachers, and community activists have joined forces to establish independent public schools called charter schools. These schools offer an alternative for their communities, and many offer a financial opportunity for banks.

Financing can be difficult for public charter schools because many lenders are unaware of the credit enhancements that are available. The articles in this issue of Community Developments Investments give facts about charter schools based on data collected over the past two decades and help clarify the present status of charter school financing and the need for new private financing partners.

Charter schools are not a perfect answer to today’s education problems, but in some cases they are showing potential for success in their improved student test scores and increasing numbers of graduates. You can learn more about the achievement gap that exists today and how charter schools are helping to narrow that gap in our article "Why Charter Schools?"

One critical problem that is common among many charter schools is the lack of available financing for the purchase of school buildings. In response, a small number of nonprofit financial organizations and foundations have partnered with banks to offer financing for school facility purchase and renovation. To support these financial arrangements and reduce lender risk, the U.S. Department of Education has developed a credit enhancement program for charter schools seeking financing assistance. You can read about the enhancement program in "Addressing the Finance Gap."

Banks can invest in charter schools through New Markets Tax Credit (NMTC) offerings. These investments may be eligible for Community Reinvestment Act positive consideration under certain circumstances.¹ There also are opportunities to provide debt financing to facilitate NMTC transactions. Two of our articles, by officials of NCB Capital Impact ("Charter Schools: A Good Credit Risk to Improve Communities") and the U.S. Bancorp Community Development Corporation ("Charter Schools Benefit From New Markets Tax Credit Financing"), illustrate how this financing works.

If you are looking for a way to support your local community, financing a charter school may be an opportunity for you to explore. For resources on charter schools and more information, I encourage you to check out our resource guide and to continue reading.