Northland Preparatory Academy: An Expansion Controversy

Abstract

This paper deals with a real case in a real situation.  Northland Preparatory Academy (NPA) is a college-preparatory charter school located in Flagstaff, Arizona.  In 2004, the school board had to decide whether to expand.  Their expansion decision was driven by (1) a desire for additional programs in fine arts and music, (2) a desire for a gymnasium for extra curriculum activities, athletics, and related programs, and (3) a belief that the expansion would help with NPA’s retention problem at the high school level.   The school’s principal and several of the school board members were leaning toward constructing a new building.   However, there was a minority group on the school board which was adamantly opposed to any expansion and the taking on new debt.  Bill Johnson, the school’s principal, had been asked by the Chairman of the school board to develop three years’ worth of projected financial statements and forecasted cash flow statements assuming that expansion did take place.  In addition, Bill was challenged to present information as to whether a new bank loan or taking out a new bond would be best for the school.