Can North Carolina charter schools use the state's Private Capital Facilities Finance Act to raise capital for school buildings?

Plain-English summary

Brad Sneeden asked the AG whether North Carolina charter schools are eligible for bond financing under Article 2 of Chapter 159D, the Private Capital Facilities Finance Act. The Act lets certain nonprofit educational institutions access bond proceeds for capital projects.

Senior Deputy AG Grayson Kelley, Special Deputy AG Thomas Ziko, and Assistant AG Laura Crumpler answered yes.

The Act applies to "institutions for elementary and secondary education," defined in N.C.G.S. § 159D-37(4a) as "a nonprofit institution within the State of North Carolina authorized by law and engaged or to be engaged in the providing of kindergarten, elementary, or secondary education, or any combination of these." The key word is "nonprofit institution."

N.C.G.S. § 115C-238.29E(b) requires charter schools to be operated by nonprofit corporations. While charter schools receive public money, their day-to-day operation, employment, and curriculum decisions are made by the private nonprofit boards. There is no board accountable to the general public that governs the school directly. So a charter school is functionally a nonprofit institution providing elementary and secondary education, meeting both prongs of the § 159D-37(4a) definition.

The AG reinforced this textual analysis with a purpose comparison. The Charter Schools Law purposes in G.S. § 115C-238.29A and the Finance Act purposes in G.S. § 159D-36 are nearly identical: "improve student learning," "increase learning opportunities for all students," "encourage the use of different and innovative teaching methods," "create new professional opportunities for teachers," "provide parents and students with expanded choices." When two statutes share such closely-aligned purposes, the AG concluded it was reasonable to read them harmoniously, with charter schools benefiting from the Act's capital assistance framework.

The practical implication: charter schools could pursue revenue bond financing for school buildings, renovations, and similar capital projects through the Private Capital Facilities Finance Act, opening a financing path that does not depend on local school district bond authority.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. North Carolina's charter school law has been amended many times since 2001, and the Private Capital Facilities Finance Act has also been updated. Anyone planning a current charter school capital financing should consult current Chapter 159D, current Chapter 115C charter school provisions, and any recent legislative or judicial developments before relying on this opinion.

Background and statutory framework

The Private Capital Facilities Finance Act. Article 2 of Chapter 159D creates a framework for nonprofit educational institutions to access revenue bond financing for capital projects. The bonds are not state debt; they are private-activity bonds with tax-exempt status. The Act lets eligible institutions tap the bond market for capital projects without requiring direct state appropriation.

The 1996 Charter Schools Law. N.C.G.S. § 115C-238.29A et seq. created North Carolina's charter school system, allowing privately-managed but publicly-funded schools to operate within the state's K-12 framework. Charter schools must be operated by nonprofit corporations (§ 115C-238.29E(b)), receive per-pupil state funding, but operate outside the local school district governance structure.

Why the nonprofit status mattered for finance act eligibility. The Finance Act's institutional definition in § 159D-37(4a) is gated on nonprofit status. Charter schools were not always intuitively classified as "private" because of their public funding, but the statutory structure required nonprofit corporate operation. That checked the nonprofit box for Finance Act purposes.

The purpose overlap analysis. When statutes share enacted purposes, courts often read them harmoniously. The Charter Schools Law and the Private Capital Facilities Finance Act articulate similar policy goals: education improvement, innovation, expanded parental choice. The AG treated this overlap as evidence of legislative intent to let charter schools benefit from the Act.

What the opinion did not address. The opinion did not analyze the specific bond issuance procedures, the limitations on charter school revenue available to secure bonds, or the interplay between charter school revocation/non-renewal and bondholders' rights. Those operational details would matter to any actual financing.

Common questions

Q: Could a for-profit charter school access the Private Capital Facilities Finance Act?

A: No. The Act's institutional definition requires nonprofit status. North Carolina's charter school law in any event requires nonprofit operation, so the question is moot in NC; but other states with for-profit charter operators would not have eligibility under analogous statutes.

Q: Did this opinion mean every charter school's bond issuance would be approved?

A: No. The opinion addressed eligibility under the Act, not approval for any specific issuance. Each financing requires separate underwriter due diligence, regulatory review, and market acceptance.

Q: What happens to bond obligations if a charter school's charter is revoked?

A: The opinion did not address this. Charter revocation could put bondholders at risk if the school's revenue stream (per-pupil funding) disappears. Bond counsel would have to structure protections, and bondholders would have to evaluate the political risk of revocation.

Q: Could a charter school issue general obligation bonds backed by state taxes?

A: No. The Finance Act involves revenue bonds, not general obligation bonds. Charter schools have no taxing authority. Bond service must come from the school's own revenue streams.

Citations

Statutes:
- N.C.G.S. Article 2 of Chapter 159D (Private Capital Facilities Finance Act)
- N.C.G.S. § 159D-36 (purposes of the Act)
- N.C.G.S. § 159D-37(4a) (institution for elementary and secondary education definition)
- N.C.G.S. § 115C-238.29A (Charter Schools Law purposes)
- N.C.G.S. § 115C-238.29E(b) (charter schools operated by nonprofits)

Source

• Landing page: https://ncdoj.gov/opinions/charter-schools-eligibility-to-participate-in-the-private-capital-facilities-finance-act/

Original opinion text

RE: Advisory Opinion; Charter Schools' Eligibility to Participate in the Private Capital Facilities Finance Act; G. S. 159D et seq.

Dear Brad:

You have asked this office for an opinion as to whether charter schools are eligible for financing pursuant to Article 2, Chapter 159D of the North Carolina General Statutes entitled, "Private Capital Facilities Finance Act." We are of the opinion that the Article does apply to charter schools.

The Act permits certain educational institutions to access certain bond proceeds and applies to both institutions for higher education and institutions for elementary and secondary education. The definition of "institution for elementary and secondary education" is:

a nonprofit institution within the State of North Carolina authorized by law and engaged or to be engaged in the providing of kindergarten, elementary, or secondary education, or any combination of these.

G.S. 159D-37(4a)(emphasis added). Charter schools are operated by nonprofit corporations in North Carolina. G.S. 115C-238.29E(b). While a charter school receives public monies, its private non-profit board operates the school, employs the staff, and determines the curriculum and policies of the school. There is no board answerable to the general public that governs the school.

Aside from the fact that charter schools are operated by nonprofit corporations, many of the purposes set out in the Act are remarkably similar to the purposes outlined in the Charter School Law. Compare G.S. 115C-238.29A with G.S. 159D-36 ("improve student learning"; "increase learning opportunities for all students"; "encourage the use of different and innovative teaching methods"; "create new professional opportunities for teachers"; "provide parents and students with expanded choices.") With such similar purposes set out in both statutes, it would seem reasonable to assume that the legislature intended for charter schools to benefit from the capital assistance available under Article 2 of Chapter 159D. In our opinion, a charter school qualifies as an institution that may participate in the program.

We hope this adequately addresses your inquiry. Should you have further questions, please do not hesitate to contact us.

Sincerely,

Grayson G. Kelley
Senior Deputy Attorney General

Thomas J. Ziko
Special Deputy Attorney General

Laura E. Crumpler
Assistant Attorney General

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