The Massachusetts Board of Elementary and Secondary Education
Charter Schools - Information Regarding Approval of Loan beyond Charter Term for Sturgis Charter Public School
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 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.
The board of trustees of Sturgis Charter Public School (Sturgis) requests approval to enter into two loan repayment agreements, as described in a letter dated May 2, 2011. These loans provide financing for the purchase of the land and all construction costs for a school to be built for 400 additional students in grades 9-12 at 125 West Main Street in Hyannis, MA. The funds will also provide other related capital expenditures and legal fees. Sturgis will continue to enroll 400 students at its current building at 427 Main Street in Hyannis. The anticipated term length of the first loan is 15 years using a Direct Subsidy Taxable Bond via Qualified School Construction Bond which is subject to MassDevelopment approval for $6,000,000. The current rate is 5.29 percent for the first 5 years, with an adjustable rate at the 5 and 10 year anniversaries. At which point, the rate will adjust to: the greater of the originally established rate at closing, or the Federal Home Loan Bank of Boston 15 year amortizing rate, at that future point in time, plus 250bp. The second loan is a Tax Exempt Bond for $5,000,000 which is also subject to approval and issue through MassDevelopment. Assuming non-bank qualified tax-exempt status, the interest is at an adjusted rate equal to the sum of 1) 69 percent times the one month London International Bank Offered Rate and 2) 2.0025 percent.
The final loan agreements for these loans 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.
This written acknowledgement is also required of any new lender should there be changes to the parties to these loans.
The Department has reviewed this request and it is reasonable and consistent with the charter school statute and regulations. Please be advised that this approval in no way reflects either the school's accountability status or the potential outcome of the charter renewal process. This memo provides written confirmation of my approval of this loan term repayment request pursuant to M.G.L. c. 71, § 89(k)(6). This approval is explicitly conditioned upon the inclusion of the above-referenced language in the loan agreement.
If you have questions regarding this approval or wish to see the school's full request, please contact Jeff Wulfson, Associate Commissioner, at 781-338-6500, or me.