Cape Breton University, Financing the Social Economy Research Case Study: Halifax

Project Independent School

Case Study: Halifax Independent School

(formerly known as the Dalhousie Co-operative School)
Blended Value Approach to Accessing Capital1

It was fall 2002, and Cate Allen, a teacher at the Halifax Independent School (HIS) sat in the board
room thinking about how the school could acquire funds to build a new building and keep the
school in operation past the end of the current school year. The governmental Department of
Transportation and Public Works (DTPW), the school’s current landlord, made the decision to use
the building for its own operations and thus could no longer rent the space to HIS. This sparked
a major initiative by HIS to purchase a building to maintain sustainable operations on its own
terms.

However, even after a successful fundraising campaign, rejections from various financial
institutions to cover the remainder of the building cost made the future of the school seem bleak.
HIS’s Board of Directors, made up of parents and teachers, had invested a significant amount of
time and effort into this new initiative because they believed so strongly in the benefits provided
by the experiential, theme-based learning model. They were not ready to give up just yet. Feeling
at once deflated and as passionate as ever, the Board needed a new and innovative action plan
to secure financing and ultimately, keep the school in operation.

About Dalhousie Co-operative School

History
In 1972, Dalhousie University’s Department of Education began operating a ‘laboratory school’,
called Dalhousie Experimental School, which emphasized experiential learning – encouraging
students to learn by doing and exploring the world around them. The school started out with a
small number of students between 5 and 9 years old, in multi-age classrooms, supported by 1
full-time teacher and a variety of student teachers.

For over a decade, teachers at the school developed and implemented the theme-based
approach to learning. Theme-based learning involves an in-depth study of various topics, under
an umbrella of a larger theme, and in which all of the traditional core subjects are integrated.
“The themes are of broad interest, appropriate for any age group, and are chosen to reflect a
balance of science and social studies subtopics”. The five umbrella themes at the school include:

1
This case study was prepared by Naomi Arron. All information is based on facts provided by Cate Allen, Head Teacher at
Halifax Independent School. The author does not intend to illustrate either effective or ineffective handling of a managerial
situation.

1
 Cape Breton University, Financing the Social Economy Research Case Study: Halifax
Project Independent School

oceans, the world of work, discovery, living things, and Nova Scotia. Each theme involves a
widespread examination of concrete situations, and materials including thorough use of
community resources. An important goal of the theme studies is to encourage an understanding
and appreciation of both the community and the environment in which the children live and
grow. It has been proven that by learning in themes, children are better able to question, analyze,
and communicate their discoveries.

By 1990, the theme-based approach to learning and unique philosophy of the school had
attracted enrollment of 35 students, with 1 full-time teacher and 2 part-time teachers employed
by Dalhousie University. Operations relied exclusively on the tuition fees paid by students in
Dalhousie University’s Faculty of Education. There was no outside funding or financial support of
any kind during the school’s start-up phase.

When Dalhousie University decided to shut down its Department of Education, the Dalhousie
Experimental School became an orphan. The building where it was located would be torn down,
and the funding would no longer be available. Teachers and parents of the school’s students felt
the learning concepts and methods within the school were important to the students’ future
success. As they searched for ways to keep the school open, the co-operative model stood out
as a natural progression. As a co-operative, the school could raise funds through membership
while maintaining a democratic structure and ongoing involvement in the school’s day-to-day
activities.

By 1992, the school was incorporated as a co-operative called Dalhousie Co-operative School. It
moved into a rented space on South Street owned by DTPW. The building had formerly been
used as apartments for DTPW’s employees but was transformed into unconventional classrooms
suitable for the school’s experiential learning methods. The new space was larger than what was
provided at Dalhousie University, which allowed the school to open up enrollment to meet the
growing demand for spaces in the classes. The school gained a good reputation throughout the
community and a relatively large number of parents were eager to send their children to learn at
the Dalhousie Co-operative School. As enrollment went up, portables were added to provide
space for new classrooms and eventually middle school classes were offered. In 1998, the name
was changed to Halifax Independent School. By 2002, the school had over 100 students, with
operations financed solely by tuition fees.

Democratic Governance
The co-operative school is governed by a Board of Directors comprised of elected parents and
staff members, who meet regularly to discuss and coordinate the operations and direction of the
school. As a rule, there is always at least one more parent than teacher on the Board to ensure
the students’ best interests are always kept at the forefront of operations. Typically, the Board

2
 Cape Breton University, Financing the Social Economy Research Case Study: Halifax
Project Independent School

meets monthly. However, general meetings open to all members are held 3 times per year to
inform and update members, and provide them with the opportunity to voice their opinions
and/or concerns about the school.

There are also a number of committees which deal with the various aspects of the school. These
committees are comprised of staff members and parents who work together for the betterment
of the school as a whole, while gaining a deeper involvement in the institution. These committees
deal with everything from landscaping to finance, parent support to public relations, and
everything in between. This democratic structure allows parents and staff to be involved in real
decisions that affect the school and the students.

Students are also heavily involved in day-to-day operations of the school. Twice a week, the
entire student body has an assembly where they discuss issues of their own concern. They set
their own agenda and address issues as they arise. All students are encouraged to participate in
the discussions and resolutions are made only when sufficient options and opinions have been
heard. For example, as a result of one particular bi-weekly meeting, the school altered its ban on
chocolate to allow for chocolate milk and chocolate chips in the school’s cafeteria. Students can
also get involved through student council which coordinates many of the school’s activities and
events.

Financial Position
The Dalhousie Co-operative School received no outside funding and therefore relied solely on
member contributions and tuition fees. For the 2001-2002 year, tuition fees were:

Base Tuition Fees*

first child enrolled $4550

second child enrolled $4095

third child enrolled $1138

*These prices do not include childcare before or after school, enrichment fees, ESL support fees, or lunch fees.

3
 Cape Breton University, Financing the Social Economy Research Case Study: Halifax
Project Independent School

Bonds
Upon acceptance into the school’s program, each family pays a $500 bond (regardless of the
number of children/students). The bond is paid in part at the time of the deposit, with the
remainder being paid over the course of the first academic year of the family’s affiliation with
the school.

When a child graduates/withdraws from the school, the bond is considered to be refundable only
if the child has attended the school for a minimum of three consecutive years. Refunds must be
requested in writing at the time of the withdrawal and are made in two payments. The first
payment is sent out in December of the academic year following the child’s graduation or
withdrawal; the second payment is made in the following June.

HIS’s Limited Rental Options

In April 2002, the Board of Directors of HIS received notice that they had 1 year to vacate the
building the school rented from DTPW. This became an important turning point for the school.
The Board, made up of 6 parents and 4 teachers, would have to be both cautious and strategic in
its next steps.

The urgency of the situation resulted in weekly, in lieu of monthly, Board meetings to determine
the best possible course of action to ensure the ongoing operation of the school. The school
needed a new location and it was up to the Board to find it. A set of criteria for this new location
was developed including:

Criteria for the new Halifax Independent School building

1. It had to have appropriate zoning.
2. It had to be on a large enough piece of land to have a playing field.
3. It had to be on the Halifax peninsula.
4. The land never had an industrial building on it (to ensure non-
contamination of the land that would directly affect students)
5. It had to be relatively inexpensive to stay within the school’s budget.

The demands of these criteria limited rental options and a suitable location did not immediately
present itself. The Board decided to employ someone to conduct an environmental scan for
suitable locations. Allen, teacher at the school, accepted an offer to be paid 60% of her salary for
a 6-month period to find an appropriate new space for the school. Goodwill and volunteerism
4
 Cape Breton University, Financing the Social Economy Research Case Study: Halifax
Project Independent School

are an important part of the school and Allen felt strongly about the schools’ model – so strongly
that she was willing to take a pay cut to ensure the school could continue operations for the
benefit of future generations.

Allen’s initial findings showed that there were no rental properties on the Halifax peninsula that
fit the Board’s strict criteria while remaining within the school’s limited budget. She did, however,
come across a piece of land which would soon be up for sale by the Department of National
Defense (DND). The piece of land fit all of the criteria. It was a bit further out of the city’s core
than had originally been planned for but other than that, it was an ideal piece of land upon which
HIS could build a new school.

At that point, Allen realized that the purchase of land and construction of a building that would
be conducive to the school’s experiential learning model would provide a long-term solution to
the school’s sustainability issue. Since HIS began operating in 1972, the school had been forced
two times, for reasons beyond the school’s control, to move to a new location. She advocated to
the Board to the purchase of a building, in lieu of moving into yet another rental property.

Allen’s proposal of purchasing a building would eliminate the possibility of having to move, yet
again against the will of the Board. Her thoughts were that by owning a building of their own, HIS
could focus on their core operations, students’ learning outcomes, rather than spending limited
resources in finding a new location which could once again turn out to be temporary if the
landlord so decided. The Board was weary of embarking on such a major project that would
require access to a significant amount of capital and expertise that the school simply did not have.
However, given the strong belief in the school’s model and the drive to keep the school open and
with its principles intact, the Board agreed to allow Allen to move forward with her proposed
strategy.

HIS’s Plan to Invest in a Building of its Own

After the Board agreed to purchase a building, one of the parents on the Board came across a
piece of land that could be used for the school. It had a central downtown location, but was
smaller than they were looking for and once had an industrial building (glass factory) on it which
could have contaminated the land. There was a heated debate in the Board meetings that
followed. In the end, the Board decided to move forward with plans to purchase the DND land
Allen had recommended at a price of $250,000.

HIS’s only source of revenue was tuition fees which were sufficient to cover operating costs and
little more. It certainly did not have $250,000 saved to invest in a capital asset. As a social

5
 Cape Breton University, Financing the Social Economy Research Case Study: Halifax
Project Independent School

enterprise, Allen and the HIS Board agreed that they would embark on an aggressive capital
fundraising campaign to acquire the funds needed to purchase a new building for the school. The
campaign would focus on the proven positive social outcomes of the school’s operations to
appeal to people who believed in the experiential theme-based learning model of the school.

In order to maintain control of the school’s operations, they first sought funding from parents
and community members who could support the school. While co-operatives could raise funds
through membership, HIS had to look outside its members for additional funding to satisfy
project needs. At the time, co-operatives could not issue a tax receipt for financial contributions.
The Board deemed this a major deterrent to receiving private financial support and therefore
made the decision to replace its legal status as a co-operative with a non-profit model to attract
additional donations. The democratic governance instilled in co-operatives, however, never left.

The fundraising strategy consisted of cold-calling parents of both alumni and current students,
as well as staff members. Allen contacted each family and each staff member directly, requesting
donations by stating that the school’s investment partners needed assurance that every
stakeholder made some sort of a contribution, no matter how small. One of the tactics was to
request that each family donate the amount equivalent to their HST (Harmonized Sales Tax)
refund which was an unanticipated refund for all Nova Scotia residents that year. Eventually, and
somewhat miraculously, the school was able to fundraise the money needed to purchase the
land.

The next step would be to raise capital to build a building on this land. The parents on the Board,
however, remained skeptical. The capital campaign to raise money for the land had already
tapped into parents and community supporters. The Board knew it had to look towards financial
institutions to raise capital to fund the purchase of a building. And they knew that convincing the
banks of the school’s ability to repay a loan would not be an easy task.

This caused concern among certain Board members that the school would be left with land they
could not afford to build upon if they were not able to obtain financing to build the building. So,
they built in a contingency plan before the land was purchased. It was decided that if the school
couldn’t raise enough capital for the building, they would sell off at least part of the land to secure
a down-payment for a bank loan to construct a building. This would significantly reduce the size
of the land and the school’s playing field would have to be eliminated from their plans. The
playing field was deemed important in the school promoting active and healthy lifestyles. The
Board did not want to have to eliminate the program for purely financial reasons but had to be
realistic given the school’s current financial situation.

6
 Cape Breton University, Financing the Social Economy Research Case Study: Halifax
Project Independent School

Securing Capital to Construct a Building

It was important to the Board that the building be a sufficient size so as to satisfy increased
student enrollment while adhering to strict environmental standards. An environmentally-
friendly building would set an example for the students by demonstrating the importance of
using environmentally-friendly materials and practices in daily life. The Board knew that this
would significantly increase the costs but were adamant about not sacrificing social objectives to
meet financial constraints. This added yet another layer of difficulty in making the building a
reality.

To begin this process, the Board identified the parent of a student who was an architect. The
parent agreed to work with the Board to draw up plans for the ideal building. They looked at
plans for other schools in the area and took ideas for their own building. They researched
environmental standards that would ensure a respect for the physical environment and
sustainability of their actions and included these standards in the architectural plan.

Once the plans for the new building were completed, the Board created a business plan to attract
investment. They took this business plan to banks, credit unions, and the Business Development
Bank of Canada. Their request for capital financing was rejected by each of these traditional
financing institutions.

HIS estimated that they needed a mortgage of approximately $1 million to complete the project.
Certain parents felt so strongly about the need for the school that they agreed to personally
guarantee a mortgage provided by a bank. Unfortunately, regardless of the school’s positive
credit rating, financial institutions were concerned about how they would repay the loan. After
all, the school’s only source of revenue was the tuition fees and these fees were only sufficient
to cover the school’s operations.

Time and time again, loan requests were rejected by various financial institutions. From a
financial perspective, the Board’s plans to build a new school did not seem feasible. On the other
hand, the Board and all stakeholders involved with the school truly believed in the concept of the
school and the positive impact it would have on the future success of its students. From a social
impact perspective, closing the school did not seem like a feasible option either.

Current Challenge
HIS’s Board needed to find a way to attract funding from new and innovative sources. They had
already tapped out parents and community members and had been rejected from every
reputable bank in the area. The repeated rejections were hard for the Board. It caused them to

7
 Cape Breton University, Financing the Social Economy Research Case Study: Halifax
Project Independent School

re-think the entire operation. If the banks wouldn’t give them money to build the school, why
should any other investors?

After much deliberation, it was decided that they would come up with a blended value approach
to raising capital. According to the banks, the project was not financially viable. But the HIS Board
knew that there was so much more benefit of the school than financial gain. They needed to
demonstrate the blended value of the project to potential investors. But questions remained that
would have to be answered if the school would attract sufficient capital to build a building. Who
should HIS target to attract investors? What strategy should be used to reach the investors? How
would they demonstrate the blended value of the project? And, at what point do they decide to
sacrifice the piece of land (and the students’ physical education) to secure a down-payment? To
answer these questions and more, Allen had to come up with a detailed action plan that would
help the school to attract investors and/or lenders.