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The Massachusetts Board of Elementary and Secondary Education

Approval of Loans beyond Charter Term for 7 Schools

To:
Members of the Board of Elementary and Secondary Education
From:
Mitchell D. Chester, Ed.D., Commissioner
Date:
January 18, 2013
Re:
Charter Schools - Information Regarding Approval of Loans beyond Charter Term for Abby Kelley Foster Charter Public School, Dorchester Collegiate Academy Charter School, Edward W. Brooke Charter School, Edward W. Brooke 2 Charter School, Edward W. Brooke 3 Charter School, River Valley Charter School, and Salem Academy Charter School.

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Under the charter school statute, G.L. c. 71, § 89(k)(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 a term of repayment that exceeds the duration of the school's charter. At its meeting on October 21, 2008, the Board voted to delegate to me the authority to approve such loan requests. This memo provides written confirmation of my approval for seven such loan requests, as summarized below, pursuant to G.L. c. 71, § 89(k)(6), of terms of repayment for these loans that exceed the durations of these schools' charters. The Department has reviewed these requests and they are reasonable and consistent with the charter school statute and regulations. These approvals in no way reflect either the accountability status or the potential outcome of the charter renewal process for these charter schools. Approval is explicitly conditioned upon the inclusion of the following language in all of the loan agreements:

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.

The board of trustees of Abby Kelley Foster Charter Public School (AKFCPS) requested approval to enter into loan agreements, as described in a letter dated October 25, 2012. The school sought to refinance debt originally incurred in 2008 to finance the school's current facilities to lower the interest rate. AKFCPS will refinance its long term debt, which totaled $31,908,344 at the end of fiscal year 2012, with new direct purchase tax exempt bond(s) in an amount sufficient to pay off existing debt, not to exceed $32,035,000. The school has approved a loan agreement with UniBank for Savings outlining bond issue with a 10 year maturity and 26 year amortization.

The board of trustees of Dorchester Collegiate Academy Charter School (DCACS) requested approval to enter into loan agreements, as described in a letter dated November 19, 2012. In the 2013-14 school year, the school will add an eighth grade and will continue expanding until it reaches grades 4-12, the grade span for which it is chartered. The school purchased its current school facility in August 2011 for $1,100,000, utilizing tax exempt bond financing. DCACS sought further approval for loans to renovate and improve the facility in order to house an expanded school. Boston Private Bank and Trust Company will provide a loan to the school utilizing funds obtained from Massachusetts Development Finance Agency through the issuance of tax-exempt bonds with a par value of $1,640,000. The loan has a ten year term.

The board of trustees of Edward W. Brooke Charter School (EWBCS), Edward W. Brooke 2 Charter School (EWBCS2), and Edward W. Brooke 3 Charter School (EWBCS3) requested approvals to enter into loan agreements, as described in a letters dated September 12, 2012 and November 30, 2012. EWBCS and EWBCS2 proposed to borrow or guarantee up to $35,000,000 with a term of up to 30 years. The proceeds of the debt will be used (i) to acquire property at 150 American Legion Highway to be occupied by EWBCS2 and to renovate the building; and (ii) to refinance original debt incurred for the existing facility occupied by EWBCS at 190 Cummins Highway. On November 30, 2012 the board of trustees requested approval for EWBCS to borrow up to $25,000,000 with a term of up to 30 years to acquire or lease property at 619 Bennington Street and 145 Byron Street in East Boston and to renovate and improve the building. This property would be occupied by EWBCS3. Portions of both debts are expected to be issued as Qualified Zone Academy Bonds or as tax exempt bonds. Additionally the board of trustees requested an extension of debt beyond the term of the charter for EWBCS2 and EWBCS3 to guarantee the debt incurred for the facility of EWBCS3.

The board of trustees of River Valley Charter School (RVCS) requested approval to enter into loan agreements, as described in a letter dated October 9, 2012. The school, which currently enrolls 288 students, leases its facility in Newburyport. The lease expires in 2014, and the school has an opportunity to purchase the property. RVCS reports the purchase will allow the school to provide financial stability with longer term financing opposed and sufficient space for the current program, allowing for programmatic growth in the future. The school will be the guarantor of debt obtained by a related 501(c)(3) corporation, the River Valley Charter School Foundation, Inc., the proceeds of which will be used to purchase the property. The River Valley Charter School Foundation, Inc. will lease the property in perpetuity to the school at an amount equal to the debt service. To fund the facility purchase, Mass Development Corporation will issue a tax exempt bond with a par value of $4,580,000 financed by RBS Citizens, N.A., with a 10 year term.

The board of trustees of Salem Academy Charter School requested approval to enter into loan agreements, as described in a letter dated July 18, 2012. The school is expanding its current facilities to accommodate their enrollment increase of almost 70 students. The proposed loan is with the Beverly Cooperative Bank for $400,000 with a ten year amortization. The first five years of the loan payment will be at a fixed interest rate of 4.5 percent. The rate will adjust in the sixth year to the Federal Home Loan Bank Five Year Classic Advance Rate plus 275 basis points for the remainder of the term.

If you have any questions or require additional information, please contact Cliff Chuang, Associate Commissioner (781-338-3222) or Jeff Wulfson, Deputy Commissioner (781-338-6500).



Last Updated: January 3, 2013
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