With 1,000 children on the waiting list for its academically successful charter school system, the city of Cape Coral is looking at alternative funding sources to keep the municipal system on sound financial ground while mitigating taxpayer subsidies.

Mayor John Gunter said at Wednesday’s Cape Coral City Council workshop that they have an obligation, if there is another funding source available, to reinstate an exemption to the tax the city placed on electric bills.

Council had repealed the first 500-kilowatt-hour exemption in October 2021 and the change went into effect in April 2022 with the additional tax dollars earmarked for the charter school system. The repeal generated $1.3 million in fiscal year 2022, $2.6 million in fiscal year 2023 and is estimated to amount to $2.6 million for fiscal year 2024.

“I am a strong supporter of the charter school. The decision is what is in the best interest of the community as well,” he said.

Other council members agreed that reinstating the exemption was the right thing to do. There was a discussion of implementing the “give back” over a certain period of years.

“We could certainly do that research for you on whether or not it is possible or not. LCEC changed rates in January this year. It was $27 then. It was a little higher now,” Financial Services Director Mark Mason said of the average cost to LCEC customers within the city limits.

He told Council that there is no shortfall on the charter school system side, but rather on the city’s side.

“The shortfall is the net available for capital on our side. The charter school side, by taking advantage of (Local Capital Improvement) funds –that comes first. It supports them and gives them additional funding, (that could) apply potentially towards teacher salaries and raises,” Mason said.

Mason took Council through a presentation that outlined different options to the lease between the city and the Oasis Charter Public Schools.

He said there has been a change to Florida statutes regarding how the Florida legislature has directed charter schools to be funded with capital funds.

The city’s charter school system was created and began in 2004 with two elementary schools. A middle school and high school were added later to create the K-12 experience.

“While we were building those buildings, each one of them, the plan, as we built them, the PECO (Public Education Capital Outlay funding that comes in for the state would pay for the debt services associated with those schools,” Mason said. “FEFP (Florida Education Finance Program) funding (is used to) pay for the operating cost for the system and for many years it did exactly that.”

In 2015-2016 the legislature changed the laws in funding charter schools, which in 2018 left funding limited to $1.5 million.

“In 2019 there were some concerns about the operating liability of the charter school system that led to the administration to do some review of the expenses, cost. At that time, and still at this time, the current debt services is $3.2 million a year for the four buildings,” Mason said.

On Feb. 24, 2021, management provided an update on the charter school options that were present at that time. The financial forecast indicated at that time if the city’s charter school continued on the same road with its then-current lease with the city, the system would have depleted its fund balance to zero by 2024.

Mason said the lease agreement was restructured from $3.2 million per year to $1.5 million. The city provided additional subsidy by assuming the back office, custodial service, and maintenance of the charter school system, a $3 million cost.

“The charter school is responsible for paying the actual debt service fund on an annual basis,” he said.

Mason said during the 2023 legislative session changes were made to the charter school capital outlet funding — local capital improvement — “charter capital outlay funding would consist of state funds when appropriated in the General Appropriations Act and revenue resulting from the discretionary millage 1.5 mil levy allowable to school districts for funding charter schools and school districts.”

He said school districts will absorb this in five years.

“The calculation for Local Capital Improvement is simple, but it starts with taxable value of the school district,” Mason said. “The statute provides for the reduction of current debt service obligation.”

The number is divided by a total of 97,000 students, which is made up of two categories — county schools and charter schools within the county.

The charter school system will receive $1,953 per student, $26 million for the LCI funds that would be shared with the charter school system,” Mason said. “In 2024, the distribution that came was $990,000.”

He said fundamentally the state has recognized PECO funding by itself is insufficient to fund capital at charter schools.

“The education delivery has been impacted by utilizing the FEFP money for funding leases and repairs in the system. The legislature has recognized there should be equal funding by capital funding raised by the school district. Creating a fair education environment by utilizing funding by the school district was not there before,” Mason said.

The LPI funding, Mason said would calculate to be $7.2 million for the charter school system in 2025.

“By 2027 in the 80% range, the funding could be redirected and reassigned to something else,” Mason said.

There were three options presented to Council. The first would be no change to the lease between the city and the charter system, which would keep the city picking up 53% of the cost of the debt service and 100% of the capital expenses.

The second option would be to amend the lease between the city and charter school and recover full cost of debt services and 100% of the capital funding expense net of buses and IT capital costs. The third option was going down a different route

“The bigger picture of the charter school system is we have 1,000 kids on the waiting list in the elementary, middle, and high school,” Councilmember Tom Hayden said. “That is a lot. That is because of the success of the charter school system.”

Hayden chose the first option because any other option would put the charter schools back to where they struggled.

“We need to put a task force together and put together a 10-year plan for our charter school in terms of space, building, maintenance, lease options. We have to have the ability to look at our options and not saddle the charter school system with continued problems they faced before,” Hayden said. “That’s the plan that needs to take place moving forward — keep it where it is at and look into the future and where we are taking our charter school system.”

The other option that many council members selected was the last option — doing something in between the two.