Want junk bonds for charter school project? Meet John Cairns

  • Updated: November 29, 2009 - 10:00 AM

In the specialized world of lease-aid deals, John Cairns is not merely a defender of the faith. He may be the supreme authority.

A former lobbyist, Cairns said he helped draft parts of the 1991 legislation that produced the nation's first charter schools as well as the subsequent law that established the rental assistance program known as lease aid. He has been profiting from those programs ever since, often pairing with broker Dick Ward and financial consultant Mark Beltz to arrange junk-bond financing for charter school projects.

Of the 18 charter schools built through lease-aid bond money, the Minneapolis lawyer played a key role in 15 of those deals.

"I think there are very few people in the last 20 years who have not only created a brand new area of law, which I have, but have been able to take their interest and commitment to the community and put it into a profession,'' said Cairns, an ex-president of the Minneapolis City Council who became interested in alternative education in the late 1960s. "I advise more clients on this issue than anyone else."

The money is good.

Records show Dougherty & Co. received at least $3.6 million in fees on nine charter projects, or enough to build a small school. Company executive Dick Ward said the underwriting fees for handling the bond deals are justified by the complexity of the transactions.

Cairns, who split from Briggs & Morgan to form his own law firm in 2007, said he has typically earned fees from the low $40,000s to the mid $50,000s per school, or about $600,000 over the past decade.

Les Hittner, director of Bluffview Montessori School in Winona, said Cairns and Ward dominate the business of charter school financing. Bluffview used the team's services twice to build and expand the charter school, even though Hittner said their fees were "rather costly."

"They have the experience,'' Hittner said.

When charter school officials meet anywhere in Minnesota to debate their real estate options, Cairns is likely to be there.

He extols the benefits of ownership over renting, reminding charter school officials they can't control a rented site over the long term, and that rents often include tax-related charges other schools don't pay. He explains how charter schools can legally get around a state prohibition on owning property by forming nonprofit building companies. And he claims Minnesota taxpayers will never feel the sting of a failed charter school project because any bond default would be eaten by investors, though that wasn't the case in 2005 when a charter school failed in St. Paul.

While public officials cringe at the costs of financing school construction through junk bonds, Cairns maintains the approach will pay off in the long run. Charter schools, he said, don't have to use some of the premium building codes that must be followed in the construction of regular public schools, allowing them to design more efficiently and create less space per student.

Public school districts create "monuments," he said, while charter advocates build "schools."

TONY KENNEDY

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