Gates Foundation Becomes Bond Guarantor for Houston Charter Schools

The Bill and Melinda Gates Foundation unveiled a new financial guarantee instrument to assist high-performing charter schools in Houston.

Bill & Melinda Gates at the KIPP School, Houston, TexasCharter schools are granted more freedom in curriculum and hiring but typically receive significantly less public funding than conventional district public schools. With no state funding for capital expenses and an inability to issue voter-approved general obligation bonds, charter schools can’t borrow money on favorable terms.

The Gates Foundation’s investment will allow KIPP Houston to obtain favorable borrowing terms, saving an estimated $10 million over the 35-year life of the bonds, said the charter network’s founder Mike Feinberg. It will also allow the Gates Foundation - whose assets declinedn by about 20% in 2008 - to use their balance sheet to support the causes they care about without having to give the money away. via Wall Street Journal

The first bond guarantees will advance Houston’s Knowledge Is Power Program, or KIPP, to help its schools secure funding in tax-exempt bonds. The financing is aimed at expanding student enrollment from 4,500 in 15 schools to 21,000 students in 42 schools in the next decade.

The Gates education initiative is the first time a private foundation has backed charter school facility bonds at this scale.

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