Amid state talk of more charter school accountability, Eagan OKs financing for school expansion

Leaders of Great Oaks Academy came before the Eagan City Council recently to ask for help financing the expansion of their charter school.

The otherwise routine request for what’s known as “conduit financing” turned into an hourslong discussion, with dozens of people weighing in. They pointed to a recent Minnesota Star Tribune investigative series on charter schools’ failings and raised concerns about the enrollment and financial impacts of an additional charter on the area’s traditional public schools.

“I’ve been on this dais for 20 years and this is by far the richest conversation on educational policy in Minnesota that I’ve ever seen in a City Council chambers,” Mayor Mike Maguire said.

The debate, which ended with the City Council agreeing to help, could be a preview of discussion to come in the 2025 legislative session.

After the Star Tribune series revealed failings of the state’s pioneering charter schools, some lawmakers say they want to examine ways to hold charters more accountable and ensure they are financially stable. A record number of the state’s charters closed this year.

“We have had a lot of closures, said Sen. Erin Maye Quade, DFL-Apple Valley, who serves as vice chair of the Education Policy Committee. ”To me, that is an indicator that the system is not working like it should be. And that demands legislative attention.”

Meanwhile, Great Oaks Academy is looking to expand.

It wants to add middle and high school grades in Eagan in a three-story office building on 16 acres along Blue Cross Road. The school, which offers a classical liberal arts education, currently has a site for younger grades in Farmington.

Great Oaks aims to “flourish in the Eagan area and the great metro area,” said Paul McGlynn, the school’s executive director. The school’s board chair, Erik Queen, said the expansion is a way to help the school “grow stable, established and thrive.”

To do that, it needed the city’s help to set up $18 million in financing.

Though conduit financing is often used to fund projects that benefit the public, city staff said, the request marked the first time Eagan was asked to issue bonds to support a charter school.

One of the findings in the Star Tribune’s investigation: Charter schools are often hobbled by state rules that bar them from owning property. They are then forced to rent second-rate locations or locked into expensive leases that can mean financial instability.

Minnesota charter schools cannot use public funds to buy land or facilities, so they must create an affiliate to buy property. Because they can’t levy taxes like traditional districts, they fund large-scale building projects through the issuance of municipal bonds to their affiliate company.

“It remains one of the few ways that charter schools can stabilize the cost and terms of a long-term lease,” said Julie Lundgren, chief financial officer for Lakes International Language Academy, a charter school in Forest Lake.

With such financing, the school pays down the principal and interest on the bonds over a period of years, much like a mortgage.

In Eagan, Great Oaks Academy was asking for $18 million in lease revenue bonds to purchase the school’s new home.

Council Member Mike Supina, the only member to vote against the issuance of the bonds for Great Oaks' expansion, said he felt like the board action represented “putting a finger on the scale” to benefit the charter school and was a more active approach than, say, approving a business to move into the space.

City staff said that amid widespread office space vacancies, the school’s desired site was unlikely to be purchased for commercial use.

Council Member Paul Bakken noted the council had already approved a development plan for the site that allowed for a school.

“One could fairly say this amounts to an indirect subsidy, somehow, of the school,” Bakken said. “I think it’s just as fair to say that not allowing [conduit financing] to be used is a backdoor repudiation of the land use decision” made this fall.

In a letter posted on the school’s website, school leaders said the layout and structure of the site “allow for incredible flexibility and affordability in renovation,” and the land aligns with the goals of connecting students to nature. “The acquisition of this site removes the specter of uncertainty about where and how our upper grades will be developed, or what limitations we might otherwise be forced to accept,” the statement read.

School leaders say if the financing and purchase are successful, the renovation will begin with the goal of opening for the 2025-2026 school year.

The Star Tribune’s investigative series revealed that weak oversight allowed many charter schools to fall short of their promise to deliver better educational outcomes for students.

The legislative session begins Jan. 14, and Maye Quade said she would support a moratorium on new charters.

Sen. Julia Coleman, R-Waconia, said a moratorium isn’t needed, but she supports widespread efforts to prevent waste, fraud and abuse, including in education.

With the support of the Minnesota Association of Charter Schools, Coleman pushed for legislation that, starting last year, requires prospective charter schools to complete a market study before opening their doors. That change, Coleman said, was “key legislation” to slow the cycle of charters failing before or soon after opening.

“I think, though, that more steps need to be in place to make sure that charter schools are viable so they don’t eat up all the funding,” she said.

Charter schools statewide draw about $1 billion per year in state funding, a number that has grown as the schools have multiplied. About 8% of all Minnesota students now attend a charter.

Osprey Wilds and Innovative Quality Schools, two of the 10 nonprofits that serve as charter school authorizers in Minnesota, said they don’t have any new or expanding schools in 2025.

The other authorizers did not respond to a request for comment.

Jeffrey Meitrodt contributed to this report.