The Massachusetts Board of Elementary and Secondary Education
Charter Schools - Information Regarding Approval of Loan beyond Charter Term for Prospect Hill Academy Charter School
|To:||Members of the Board of Elementary and Secondary Education|
|From:||Mitchell D. Chester, Ed.D., Commissioner|
|Date:||December 4, 2009|
Under the charter school statute, M.G.L. c. 71, § 89(j)(6), a charter school may incur temporary debt in anticipation of receipt of funds, but requires approval of the Board of Elementary and Secondary Education (Board) if it wishes to agree to repayment terms that exceed the duration of the school's charter. At its October 21, 2008 meeting, the Board voted to delegate to me the authority to approve such loan requests.
Prospect Hill Academy Charter School
The board of trustees of Prospect Hill Academy (PHA) requested approval to enter into a loan agreement for up to $6,500,000 of debt, as described in a letter dated November 9, 2009. This loan agreement between PHA and Century Bank and Trust Company consists of a qualified zone academy bond (QZAB) with a term of 15 years, to bear interest at the tax credit rate allowed pursuant to Section 54E of the Internal Revenue Code. The QZAB will be secured by a first security interest in all of the school's assets except for equipment leased from or financed by third parties. The school will maintain an annual debt service coverage ratio of at least 1.25 times, commencing with the fiscal year ending June 30, 2009. This financing will be used to pay the cost of leasehold improvements to the school's leased facilities located at 50 and 54 Essex Street, Cambridge, Massachusetts.
The final loan agreement(s) must contain the following language:
The parties to the loan(s) acknowledge and agree that the Commonwealth of Massachusetts, including but not limited to the Board and the Department of Elementary and Secondary Education, provides no representations or guarantees with respect to these loans and has no liability for any portion of the loans. Furthermore, specifically and without limitation, the Board's approval of the loan has no impact on any action that the Massachusetts Board of Elementary and Secondary Education may choose to take in the future with respect to probation, revocation, or renewal of the school's charter.
These written acknowledgements will be required of any new lenders should there be changes to the parties to the loan(s).
The Department of Elementary and Secondary Education has reviewed this request and it is reasonable and consistent with the charter school statute and regulations. This memo provides written confirmation of my approval of these loan term repayment requests pursuant to M.G.L. c. 71, § 89(j) (6). This approval is explicitly conditioned upon the inclusion of the above-referenced language in the loan agreement(s).
If you have any questions regarding this approval or wish to see the school's full request, please contact Mary Street, Director of Charter Schools, at 781-338-3200; Jeff Wulfson, Associate Commissioner for School Finance, at 781-338-6500; or me.