HILO, Hawai'i — The nonprofit arm of the Connections New Century Public Charter School last week paid $2.25 million to buy the landmark Kress Building that houses the school, transforming the organization into a significant downtown Hilo landowner with tenants that include an ice cream shop and movie theaters.

It is the largest property purchase yet by a charter nonprofit, and some observers see the willingness of a lender to finance the deal as a sign charter schools have entered a new era of more generous and stable state funding, and greater community acceptance.

"The lending community has enough confidence in the long-term success of charters that they're willing to lend money to a nonprofit whose main client is a charter school," said Jim Shon, former executive director of the Department of Education's Charter School Administrative Office.

"The charter school part is that we're here to stay, we're mature, we're professional; you can count on us the way you can count on any entity you are investing in."

Connections was the first New Century charter school in the state to be created from scratch, starting as a school within a school on the campus of Mountain View Elementary in 1995 and obtaining its state charter in 2000.

Today the school has about 330 students, and has been operating from the three-story Kress Building on Kamehameha Avenue since 2001. The school has classroom space on the bottom and top floors of the building, which was designed to house a department store.

STATE MONEY AN ISSUE

The 40,000 square-foot Kress building was built in 1932. It underwent $2 million in renovations in 1995, with four movie theaters operated by Wallace Theaters opening in the second floor of the building afterward.

The school-affiliated nonprofit Community Based Education Support Services — Friends of Connections, bought the building from Kress Properties Inc. and Ocean View Cemetery Ltd., two investment entities with ties to the late Sen. Hiram Fong's family.

Connections principal and chief executive John L. Thatcher II said the school will pay about $18,000 a month in rent to the nonprofit that now owns the building. That is a bit more than the school has been paying to rent space in Kress, but Thatcher said it's worth it.

Finding suitable places to hold classes is a major challenge for almost all charter schools, and "it's exciting for us because now we have a lot more security," Thatcher said.

Disputes over charter school funding play out every year at the state Legislature, with charter schools protesting that they are being shortchanged. Shon was fired by the state Board of Education in September in what the charter schools see as yet more proof of a hostile state Department of Education bureaucracy.

Facilities funding, or money to help the state's 27 charter schools to rent, buy or build classroom space, has been near the center of those disputes.

This school year was the first in which state officials provided facilities money to the charters, with the Legislature providing $700 per pupil for the schools. Connections will receive about $230,000 in state facilities money this year, but the matter still isn't settled.

The state Board of Education deleted all facilities funding for charter schools from the board's proposed budget for the next two years, but Gov. Linda Lingle nevertheless included a request for facilities funding for the charter schools in her proposed budget.

That request will be considered by state lawmakers in the new session of the Legislature that begins next month.

Big Island Board of Education member Herbert Watanabe said he has advised the charter schools they should be submitting a list of the facilities they need to the Board of Education instead of asking that a per-pupil allocation of money for facilities be paid to the charter schools each year.

THRIFTY STEWARDSHIP

Watanabe said he is glad Connections was able to "stabilize" its location, and said the purchase price was "quite a deal" compared with the much larger cost if the state were to build a building to house the school.

However, Watanabe wondered how the nonprofit will pay for the purchase because "the state doesn't provide that much money for them to buy facilities."

Board member Karen Knudsen said the purchase "shows a lot of creativity and a go-getter attitude. This sounds great for them."

Thatcher said the purchase is a great deal for taxpayers.

"If you look at the history of charter schools, we have proven ourselves to be very frugal and very good business people, and so we are giving probably a better bang for the buck than traditional schools can do," he said.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.