Bergen Record: Frisch School Bonds are Kosher

Much ado on the front page about the tax exempt government bonds backing $28 million in loans for the Frisch Yeshiva High School in Paramus. And the bottom line is... it is all kosher. Then what is the fuss? One slant of the story is, "Look at how the separation of church and state is eroding." Placing the story on page one makes me uneasy and gives it another slant. It says to me, "It is front page news that those those Jews are clever with their financing." I dunno...

N.J. agency OKs tax-free financing for religious schools
Sunday, November 18, 2007

By JOHN CHADWICK and RICHARD COWEN
STAFF WRITERS

An Orthodox Jewish high school in Paramus received some unusual help in financing its new, $42 million campus: $28 million in loans backed by tax-exempt government bonds.

The loans were the result of a deal approved by the New Jersey Economic Development Authority that allowed the Frisch School to save hundreds of thousands -- if not millions -- of dollars because such financing typically carries a lower interest rate than bank loans.

The arrangement, while not directly using taxpayer dollars, highlights an increasingly common partnership between religion and state -- one that's allowing religious institutions, which are already tax-exempt, to reap the benefits of public economic development programs.

And though New Jersey expressly prohibits funding religious instruction through government bonds, Frisch, a self-described "yeshiva high school," was able to receive approval and continue its Bible-centered religious curriculum.

"The raison d'etre of the Frisch School ... is to promote the values and study of the Judaic heritage," the school's mission statement says.

The authority also approved $6.15 million in bond financing last year for an Orthodox Jewish elementary school in Passaic and $1.5 million for a gym and classrooms at St. Nicholas Greek Orthodox Church in Wyckoff.

The trend alarms some First Amendment activists, who fear the government is bestowing inappropriate benefits on religious groups in the name of economic development.

"If this spreads, then the state is going to be baby-sitting an awful lot of religious institutions," said Edd Doerr, president of the Maryland-based Americans for Religious Liberty, a group that supports strong separation of religion and government.

The authority, a state agency charged with improving the state's economy, routinely approves bond financing for a range of projects. Typically, private investors buy the bonds and pass the tax savings on in the form of low-interest loans for specific authority-approved projects.

The authority's CEO, Caren Franzini, said the three North Jersey projects boosted the economy without cost or risk to taxpayers. A review by the authority and the Attorney General's Office concluded that the projects posed no threat to the separation of religion and government, she said.

"There are construction jobs; there are new permanent jobs, and that's a benefit to the economy of the state of New Jersey," Franzini said.

She also said religious groups must agree to a number of conditions if they seek bond financing. The schools, for example, can't discriminate on the basis of race, religion or gender in their hiring or admissions policies. And they have to exempt any student who doesn't wish to take the religion classes.

Franzini added that it's the investor, not the state, who assumes the financial risk.

"The purchaser is clearly told that the bonds will be paid back by the applicant," she said. "They must review the credit of the applicant to get comfortable with them paying back the bonds."

A spokesman for Frisch declined an interview and request for a campus tour.

"It's not something we're interested in talking about right now," Aaron Keigher said.

Frisch used its loan to convert a former Hewlett-Packard site on West Century Road to a state-of-the-art campus that reportedly includes a two-story library, six science laboratories, an 800-seat auditorium and a 20,000-square-foot gym.

"The wonder of modern technology will mesh with the values and foundation of modern Orthodoxy," the school's Web site says of the new campus.

Frisch told the state that the new campus would generate 25 full-time jobs at the school in its second year.

The school, which charges an annual tuition of $18,000 per student, essentially provides Orthodox Jews with an alternative to public schools by offering both a high school education and a thorough grounding in Orthodox Judaism, which includes study of the Bible and other sacred texts.

By viewing the school's program as two distinct missions -- religious and general studies -- state officials said they were able to approve the financing despite their policy prohibiting the use of tax-exempt bonds to fund religious instruction.

"The overall idea is you determine what percentage is secular and what percentage is sectarian, and you do a bond allocation based on the secular use of the facility," said John Cavaliere, who served as the authority's bond counsel on the two Jewish school projects. "We do this all the time."

David Wald, communications director for the Attorney General's Office, said the method helps separate the secular from the sacred so that the bonds aren't financing religious instruction.

"We're very careful not to become entangled," Wald said.

But a lawyer with the group Americans United for Separation of Church and State said the process sounds highly suspect.

"The state's really eviscerating their own policies to allow [religious groups] to get around the policies like that," said Alex Luchenitser, a senior litigation counsel. "It also raises another constitutional problem in that the state shouldn't be in the business of analyzing school's curriculum to find out how much is religious and how much isn't."

Meanwhile, the Web sites of the two schools suggest that each institution is suffused with religion.

"The classes and corridors reverberate with ruach," the principal of Frisch wrote, using a Hebrew word associated with spirit.

The Passaic school -- YBH of Passaic-Hillel -- said its commitment to biblical values is "integrated throughout all educational programs, including general studies."

That school used its loan to help build a 75,000-square-foot building on Passaic Avenue.

Jonathan Gold, chairman of the school's building committee, said in an interview that the school complied with all state policies, and he stressed that the project's economic impact was considerable. He didn't know how many new permanent jobs were created.

"You can't understand the impact of a huge building project in the middle of Passaic," he said. "It's tremendous."

A board member at St. Nicholas, meanwhile, said its new gym and classrooms essentially serve secular purposes, such as Greek language and culture classes, and athletics.

He also said the church is now required to allow outside groups to use the facilities.

"The construction didn't have anything to do with the church," said George Mellides. "It didn't touch the chapel."

But the project's economic impact, other than short-term construction jobs, appears negligible. When the state asked in writing what the economic benefit would be, the church answered "n/a" for "not applicable."

The practice of financing overtly religious institutions with tax-exempt bonds survived a key court challenge in 2002.

A federal appeals court upheld a Tennessee board's approval of bond financing for David Lipscomb University, a Christian college. The court ruled the state's program was available to any organization, not just religious institutions.

"The funding ... is available on a neutral basis," the decision by the Sixth Circuit Court of Appeals said. "The benefit to be obtained ... is the same provided to private companies."