The Dreamers Academy qualified for millions in tax-exempt bonds, allowing the fledgling charter school in need of a space to make a "market rate" offer to Sarasota's floundering Y.
SARASOTA COUNTY — A startup charter school has emerged as a possible savior of the Sarasota YMCA.
Dreamers Academy, a new dual-language charter being led by Tom and Geri Chaffee, offered to purchase a large swath of the Frank G. Berlin campus last Friday, becoming the first group to make a real estate offer that provides a viable path forward.Read more: Complete coverage of the Sarasota YMCA closures.
“It is enough to take care of the Y’s debt and put sufficient capital on its balance sheet allowing it to move forward,” Tom Chaffee said, describing the offer as a “market rate” that benefits the Y because they would still be able to use much of the facility.
While the Y’s supporters eagerly await word on the deal, which had an initial deadline of Monday that came and went without the offer being accepted or rescinded, one question circulated among the general public observing the drama:
Where does a tiny startup charter get that kind of cash?
On Wednesday, Chaffee said the school qualified for millions in tax-exempt bonds, likely carrying a 3.5% to 4% interest rate paid over 30 years that would allow it to purchase the property and do any necessary repairs. He declined to say how much the bonds were valued at, but he said the offer to the Y was to purchase the property at fair market value.
Chaffee said in addition to the bond, the school qualified for $550,000 in a startup grant from the state and will rely on roughly another $500,000 in donations, largely coming from the Chaffees along with other donors.
Startup charters like Dreamers don’t have the same extensive backing as network charters, and getting funding for initial costs can be a challenge.
Schools like Imagine Schools throughout Sarasota and Manatee counties or Manatee Charter School in Bradenton are extensions of larger corporate chains. And schools like Lincoln Memorial Academy in Palmetto or Rowlett Academy in Bradenton inherited the facilities from the Manatee School District after converting.
Cash on the front end
Startups like Dreamers need to come up with cash on the front end.
“Starting a school is bloody expensive,” Chaffee said. “You are coming from the ground up.”
Funding also can be a challenge for independent charters because of all the unknowns during the startup process, said Lynn Norman-Teck, the executive director of the Florida Charter School Alliance. Operators looking for money typically will have only projected enrollment numbers and anticipated per-pupil revenue — a pitch not likely to attract many investors.
“There is no commercial bank that would do that,” Norman-Teck said.
To tap into tax exempt bonds, operators must demonstrate both a marketable concept and a board with the experience necessary to pull it off. Chaffee said the school’s dual-language approach, where students learn in both Spanish and English, has taken off in major metropolitan areas and is sorely lacking in the area.
And the school’s board is stocked with big-name local educators, including former Sarasota High School principal and Sarasota Military Academy founder Dan Kennedy, former Sarasota School District Chief Financial Officer Al Widener, Saint Jude’s Church Deacon Humberto Alvia, attorney Jim Delgado and Chaffee, a venture capitalist.
Education advocate Geri Chaffee is the school’s founder, and former Manatee School District administrator Ruby Zickafoose will head up the day-to-day operations as principal.
As charter school popularity has grown, bonds have become a more common approach toward charter school startup funding, said Richard Moreno, president of Building Hope, a nonprofit charter school supporting organization.
Moreno said the bond's interest rate is not as important as the percentage of monthly revenue that will go toward debt service. He said his organization does not work with schools that spend 20% or more on debt service. Chaffee said Dreamers will be shooting for 18% debt service ratio, with hopes to lower that as the school becomes more efficient.
Dreamers' proposal is to purchase the roughly six acres behind the fitness facilities and share space with the Y during nonschool hours. That means the Y could run classes, after school activities and summer programs in the school’s gymnasium and gymnastic facility, and the two entities can share parking and even some staffing. Chaffee said the presence of a school on the property could potentially open up an additional revenue stream for the Y, with programs tapping into Title I funding.
Chaffee said the school would not receive public money until doors open in August 2020. He said the school would make bond payments through the per-pupil funding they will receive through the school district. Payments will not be due until after school starts in Aug. 2020, which is the standard structure for school bonds.
While the offer has generated optimism among the Y diehards grasping at hope, Dreamers’ long-term success will ultimately depend on there being a demand for dual-language schools in a region where the concept has not been widely embraced.
Chaffee believes that the board, stocked with educators, fiscal experts and passionate visionaries, will succeed.
“There is no competition for what we are doing, and there is high demand,” Chaffee said. “The second part is that we do have a board that is terrific with a lot of experience on here that knows how to run schools and be successful.”