Charter Schools: Largest Bond Deal Major Landmark for Texas School Financing

Texas Insider Report

Harmony Public Schools (HPS), located in Texas & operated by Cosmos Foundation Inc., are high performing K-12 public charter schools that focus on math, science & engineering for underserved communities. HPS’ enrollment stands at 12,000 … and each of the 25 HPS campuses has a waitlist exceeding the schools’ actual enrollment, totaling some 22,000 children patiently waiting in line.  

One of their most distinguished schools, Harmony Academy of Science was recognized and ranked No. 5 in the “Top 10 Public High Schools in Greater Houston” and No. 15 in the state of Texas, according to a study done by Children at Risk, a nonprofit organization that drives change for children through research, education and influencing public policy.

Their bond issue in early May 2010 was $90 million, and their underwriters for bonds issued are Morgan Keegan and Jefferies & Company.

Charter schools differ from traditional public schools in that schools do not at present qualify for the Permanent School Fund (PSF), which guarantees public schools’ bonds issued to build facilities.

Charter schools, however, would greatly enhance their investment rating and provide substantial savings on financing interest. Texas legislators are currently considering this option.

HPS’ popularity and reputation of success is growing, making it not only highly respected as it relates to education, but it is also one of the largest charter school networks in Texas and nationwide.

In 2009, the Texas Education Agency rated 90% of HPS as “Exemplary” or “Recognized” for accomplishments which included 100% of their graduates gaining admittance to prominent universities like Columbia, Rice and Texas A&M, to name a few.

The HPS has embarked on ambitious expansion plans as a result of being inspired by past and continued success of its schools, among them:

  • Completion of six new schools that opened in 2009;
  • Development of four additional locations expected to be commissioned in 2010-2011 academic year (2 in Houston, 1 in Dallas, 1 in San Antonio and 3 more locations are slated to be commissioned in 2011 and beyond);
  • Expansion and remodeling projects will include 11 of the existing campuses; and
  • Academic Success correlates with the funds HPS receive from the government.

The favorable performance of HPS in areas with challenging demographics serve to guarantee the demand for HPS and its continued government funding.

On the other hand, HPS’ long-standing relationship with many financial institutions has afforded it the required finances for expansion projects and continued growth. The S&P “BBB” rated and disclosed to investors that the Cosmos Foundation’s 2010 bond issue was worth a total of $90 million.

Additionally, of the $90 million bonds sold, $50.09 million were School Revenue Bonds supported by Texas Public Finance Authority (TPFA) and non-taxable, and $39.91 million are Qualified School Construction Bonds (QSCB), a program introduced in 2009 as part of the American Recovery & Reinvestment Act.

The Qualified School Construction Bond program provides $11 billion face value in tax-free bonds in both fiscal years 2009 and 2010 to help fund school construction, rehabilitation, repair, and land acquisition. It is estimated the federally-funded bonds will save schools nearly $10 billion in taxes over the next 10 years.

Legislation requires that 40% of the bond face value be distributed to the 100 local education agencies (LEAs) that have the highest number of students living in poverty, and the remaining 60% to other LEAs based on the distribution of Title I Part A Basic Education Grants.

There exist a concern charter schools could divert funding from traditional public schools, but experts agree chances are slim, as charter schools account only for 2.5% enrollment in Texas.

Whether legislators decide to allow charter schools access to the PSF, HPS will be able to secure financing for their construction, albeit probably at a higher cost.

As long as HPS continue to exhibit exemplary standards and ratings, they will continue to be held in high esteem, and considered for the “National Title I Distinguished School Award” for closing achievement gaps. In Texas, 14 out of 35 HPS have been designated as “Texas Science Technology Engineering and Mathematics Academies”, resulting in funding from public and private organizations such as the Gates Foundation and Dell Foundation as part of the Texas High School Project.

HPS are poised to attain higher academic achievement levels from the students it serves and is committed to closing the achievement gap.

Ongoing construction/remodeling of 18 projects with an estimated cost of approximately $84 million.


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  3. So, why has there not been an investigation by the federal government as to who runs Harmony charter schools? Does our government not investigate those who are chosen to run these schools?

  4. Harmony charter schools and Cosmos are thought to be run by the Islamic FGC:

    “I suspect that even many who are well-read on the issue of Islamism are unfamiliar with the Fethullah Gulen Community (FGC), a movement a February 2009 article in the respected ‘Jane’s Islamic Affairs Analyst’ labeled “Turkey’s third power.” Indeed, the article noted in its Key Points: “Turkey’s Islamist Gulen movement, while a powerful political force, is largely an unfamiliar entity to the West.”

    The FGC is named after Fethullah Gulen, a Turkish imam who now lives in the United States. He fled Turkey in 1998 to avoid prosecution on charges that he was attempting to undermine Turkey’s secular government with the objective of establish an Islamic government. Since Gulen’s arrival here the Department of Homeland Security tried to deport him, but he successfully fought the effort in federal court because it was ruled he was an individual with “extraordinary ability in the field of education” – although he has no formal education training.”

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