New Jersey Enacts Groundbreaking Charter School Financing Law

The state of New Jersey has enacted a groundbreaking law granting public charter schools and renaissance schools access to low-interest financing through the Public Charter and Renaissance School Facilities Loan Program. This initiative marks a significant step forward in addressing the pressing need for modern and well-equipped facilities to support quality education across the state.

Under the program, public charter schools and renaissance schools (public schools, or group of schools in a common campus setting that provide an educational program that is agreed to by the school district and is operated and managed by a nonprofit entity in certain failing districts) will have access to low-interest loans to finance the construction, expansion, and renovation of their facilities. The New Jersey Economic Development Authority (EDA) will play a crucial role in administering the new financing program as the entity that will be responsible for managing the application process, evaluating and determining program eligibility, and disbursing low-interest financing to qualified public charter and renaissance schools. In implementing the program, the EDA will collaborate with the New Jersey School Development Authority (the SDA), which will be tasked with overseeing school construction and facilities projects financed under the program. The 31 SDA districts where this program will be implemented are identified as having the greatest need for school construction and improvement projects.

As part of this program, the EDA will establish and maintain a “Charter School and Renaissance School Project Facilities Loan Fund,” which will be a non-lapsing, revolving fund that will serve as the repository of all monies used to support the loan program. The New Jersey State Legislature will annually appropriate money to the EDA for deposit into this fund until the loan program becomes self-sustaining. The EDA is permitted to utilize other funds, including federal funds, as available, for deposit into this new fund.

Eligible borrowers under this new program include non-profit charter schools; non-profit renaissance schools; non-profit charter school lenders such as community development financial institutions, charter school development corporations, lawfully constituted nonprofit mortgage lenders, and other non-profit entities with expertise in charter school lending that can leverage a loan; and any other entity permitted by the EDA. Charter schools and renaissance schools that are operated by a for-profit management company, or entities leveraging program funds to make loans to such entities are not eligible for the program. If an eligible borrower receives a loan under this program, it is not prohibited from simultaneously seeking or accepting private funding to support the undertaking of a school facilities project.

The EDA may approve applications for loans on a quarterly basis, subject to the availability of funds. Upon approval of a school’s application, the EDA will provide loans with an interest rate that is equal to the lower of either one-half of the AAA Bond Rate available on the date of the loan approval or 1.75 percent. The terms of the loan and the repayment schedule will be established by the EDA. A charter school board of trustees may incur debt for a period greater than 12 months, provided that the debt incurred is issued in connection with a school facilities project.

The loans can be used for the planning, acquisition of new land or building in the municipality in which the charter school or renaissance school’s charter has permitted them to operate, demolition, construction, improvement, alteration, modernization, renovation, reconstruction, or capital maintenance of all or any part of a school facility or of any other personal property necessary for, or ancillary to, any school facility, and includes fixtures, furnishings, and equipment. Furthermore, loans can be used for refinancing short-term bridge funding to commence construction, site acquisition, site development, services of design professionals, such as engineers and architects, construction management, legal services, financing costs, and administrative costs and expenses incurred in connection with the project.

Charter school and renaissance school applicants that lease their facility are only eligible to receive a loan under the program if their landlord is a nonprofit entity or government agency and the term of the lease is no less than ten years, inclusive of all lease renewal options.

The EDA will require, as a condition of any loan for a project on property owned by a charter school or renaissance school, that in the event the authorization to operate the charter school is revoked, not renewed, or surrendered or the authorization to operate a renaissance school is terminated or expires for any reason by the Commissioner of the Department of Education, and no substitute or replacement owner or operator for that charter school or renaissance school has been approved prior to the termination or expiration date that the operations of the school cease, the board of education of the district in which the school is located will have the right of first refusal to the title to the school. If the title transfers to the board of education, the State of New Jersey will assume or pay any outstanding debt used to finance the project.

The EDA will not approve a second or subsequent loan as part of this program to an eligible borrower who is in arrears or default of a prior loan issued pursuant to this program.

In the event that the aggregate amount of a loan exceeds $5 million for a project approved under this program, the EDA will require as a condition of the loan that the project be subject to the provisions of the SDA’s project labor agreement in accordance with the provisions of P.L.2002, c.44 (C.52:38-1 et seq.). 

All construction contracts that are undertaken for projects approved under this program must adhere to prevailing wage rate regulations as determined by the Commissioner of Labor and Workforce Development pursuant to the provisions of P.L.1963, c.150 (C.34:11-56.25 et seq.).

Prior to the signing of this legislation, New Jersey was previously a national outlier in that it was without a dedicated mechanism to provide funding for charter and renaissance schools’ facility improvement and building construction needs. The launch of this initiative has been met with enthusiasm from educators, parents, and stakeholders in the education community. Many see it as a positive step towards addressing the longstanding challenges faced by public charter and renaissance schools in securing adequate facilities.

The establishment of the Public Charter and Renaissance School Facilities Loan Program represents a significant investment in the future of education in New Jersey. The full text of the new legislation can be found here.

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