The Massachusetts Board of Elementary and Secondary Education
Charter Schools - Information Regarding Approval of Loans beyond Charter Term for Cape Cod Lighthouse Charter 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 meeting on October 21, 2008, the Board voted to delegate to me the authority to approve such loan requests. I am informing the Board of one such approval.
The board of trustees of Cape Cod Lighthouse Charter School (CCLCS) requested approval to enter into repayment agreements, as described in a letter dated September 12, 2011. These agreements are with Eastern Bank (including a $2,762,176 direct purchase of a Qualified School Construction Bond (QSCB), a $1,197,824 direct purchase tax-exempt bond, and a $250,000 working capital line of credit) and the Nonprofit Finance Fund (NFF) (one loan totaling $500,000). These loans provide financing to purchase 9 acres of land located on 195 Route 137 in Harwich, Massachusetts, and to renovate the 19,531 sq. ft. structure on that property.
The bonds will be for fixed terms of 15 years. The interest rate on the QSCB will be the Tax Credit Rate set by the Department of Treasury plus 250 basis points, and will be subsidized through a program administered by MassDevelopment, utilizing the American Recovery and Reinvestment Act of 2009 proceeds to provide reimbursement of the interest rate up to 5 percent. The interest rate on the second tax exempt bond will be the tax exempt equivalent of the Federal Home Loan Bank 15 year conventional cost of funds plus 250 basis points, and the loan will be partially guaranteed by a $990,000 Massachusetts Charter School Guarantee. An additional $500,000 will be financed by the Nonprofit Finance Fund at an interest rate of 7.25 percent for 36 months after closing, and an interest re-set thereafter at a rate change of the greater of the prime rate as of such date, plus 2.25 percent, or 7.25 percent for the remainder of the 7 year term.
CCLCS serves students from Barnstable, Bourne, Chatham, Falmouth, Harwich, Mashpee, Provincetown, Sandwich, Truro, Dennis-Yarmouth, and Nauset. The school currently has 228 students in grades 6-8. The Board of Elementary and Secondary Education voted at its November 16, 2010 meeting to approve Cape Cod Lighthouse Charter School's request to amend its charter regarding the relocation from Orleans to a new facility in Harwich, an adjacent municipality.
This memo provides written confirmation of my approval, pursuant to G.L. c. 71, § 89(k)(6), of these repayment terms that exceed the durations of this school's charter. The Department has reviewed the request and it is reasonable and consistent with the charter school statute and regulations. This approval in no way reflects either the accountability status or the potential outcome of the charter renewal process for this charter school. 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.
If you have questions or need additional information, please contact Acting Deputy Commissioner Jeff Wulfson; Marlon Davis, Director of Charter Schools, Innovation, and Redesign; or me.