Years of budget balancing and the widespread acceptance of inadequate facilities has desensitized providers to their environment and created chronically low expectations. Periodic relocations, expansions, or rehabilitations, engender opportunities to inject needed capital into facilities—to raise money that can be invested in facilities and equipment, offering lasting value. The value of these opportunities is lost if the center’s leadership fails to nurture a vision of the way things ought to be. Providers need to cultivate the cognitive dissonance of living with inadequate facilities while harboring an ambitious vision that could sustain a greatly enhanced program.

Moreover, providers should seek out design and other professionals who truly support their vision. Waddell and Sullivan formed a relationship that more closely resembled a partnership than a client-consultant connection. One of the most serious dangers of pro bono professional services is that in saving money clients may sacrifice the level of commitment they are entitled to. Another is the possibility may lack expertise in child care facilities. What happened in Peabody was out of the ordinary.

Underpaid and overworked, child care professionals usually learn a harsh lesson: Determination that goes unrewarded causes burnout. To conserve energy for the educational tasks at hand, many teachers and administrators learn to live with modest expectations. They avoid disappointment by sacrificing their vision.

The typical child care environment does not cultivate the type of risk-taking behavior that is needed to conceive and carry out a major facilities improvement project. Yet it can emerge, as it did with Waddell. In this project Waddell’s style of risk taking and strong-willed leadership was rewarded and supported by its corporate parent NSCAP. Hopefully it will encourage others to entertain ambitious ideas for improving child care facilities and perhaps, like Waddell, they may even realize them.

Lesson 5:  Learn new ways to raise money -- Lots of it

Vision is important because it translates a staff’s child care experience into a plan. Equally important, it provides the motivation to tackle the most distasteful and seemingly insurmountable problem: raising the money to carry out the plan.

Many directors give up here. Don’t. Waddell scraped together $90,000 to finance her vision. The actual cost grew to $290,000. The architect figures the real value of the rehabilitation at closer to $350,000. The $60,000 difference between the actual cost and the value of the rehab can be attributed to good will, successful negotiations, timing, and good luck. A recession created a competitive environment for negotiations with contractors. Moreover, the contractor who eventually landed the job had previously worked with the architect, needed an interior construction job for the winter months, and was willing to substantially reduce his original bid, thus working with little overhead and no profit.

The original $90,000, a figure that eventually grew to $170,000, represented a Head Start grant. When Waddell could not bridge the $70,000 gulf between grants in hand and the construction budget that existed at that point in the development planning, Sullivan suggested borrowing the balance from the Children's Investment Fund.

This is where many child care directors would have climbed off the bus. Without access to bank credit, child care providers, like most smaller nonprofit organizations, have relied on grants to cover capital costs. The practice is so ingrained that nonprofit child care providers are more likely to forgo needed capital improvements than to borrow the funds to pay for them. This aversion to debt made sense when capital-grant-making was common. But according to philanthropists, there is a long-term trend away from capital-grant-making.

Most providers are hesitant to entertain alternatives to grants. Waddell might have been too had it not been for her single-minded desire to develop a model facility and her participation in a two-week management-training program sponsored by Johnson and Johnson for Head Start directors at the UCLA School of Management. There she began to think about her program as a business as well as a place for children and parents. Most important, she was encouraged to borrow funds—"to use other people’s money," as Waddell later described the lesson. Finally, NSCAP, the Head Start grantee, shared Waddell’s vision, agreeing to enter into a long-term lease for the space and consenting to borrow almost 40% of the renovation costs.

Borrowing money to make capital improvements makes sense because buildings, equipment, and renovations have a long, useful life. Just like a car or a house, these are items that can (and in many cases ought to) be paid for over a period of years. Indeed, it may be the only way to purchase most expensive items. A loan provides that capacity. Child care directors fear—with some reason—that they simply cannot afford to add interest and principal payments to their already tight budgets. As with any new expense, the center’s management and board need to evaluate the cost relative to what it buys. In any event, neither the borrower nor the lender want to create a financial burden that the center cannot manage. However, sometimes centers can find ways to make cuts elsewhere in their budgets. In other cases the improvements may themselves generate operating savings, such as reduced fuel bills, or new revenues, such as fees from previously vacant slots now filled because the center has enhanced its marketability.

After all was said and done, Waddell’s $70,000 loan grew to $100,000 when the contractor encountered unexpected conditions that had to be rectified during the construction. The 5% loan, spread over a relatively short seven-year period, translated into very manageable loan repayments of $1.54 per square foot per year—an amount made all the more palatable by the fact that the center convinced the landlord to abate the rent for five years. Waddell negotiated this concession because the center was financing the entire rehabilitation, including a number of expensive items that were the landlord’s financial responsibility. Head Start generated the final $20,000 from its operating budget by conserving supplies and deferring other costs.

The financing scenario in Peabody also highlights an important public policy issue. Head Start has provided start-up grants that have helped pay for facilities improvements. These funds, which have never been adequate to the need, remain scarce. Most state child care subsidy programs reimburse providers for less than the full cost of caring for the children. These inadequate state-financed programs create the culture of undercapitalization that plagues the nonprofit child care industry and thwarts efforts to deliver the quality that generates lasting value.

To make adequate space improvements financially feasible and to leverage additional private-sector loans, philanthropists and governments interested in supporting facilities development must invest public equity—grants to cover a portion of the costs. That was, in effect, the role of Head Start’s grant money. Few child care programs could afford to support the full cost of facilities improvements on the scale undertaken in Peabody by relying entirely on borrowed funds repaid out of future operating budgets. Philanthropy and public policy must recognize the value of facilities through loans, grants and compensation practices that reflect the cost of facilities appropriately adapted for child care.