DAR File No. 30096

Education, Administration

R277-487

Charter School Revolving Loan Fund

NOTICE OF PROPOSED RULE

DAR File No.: 30096
Filed: 06/14/2007, 03:27
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is repealed because amendments to R277-470, Charter Schools, currently in process, now includes charter school revolving loan fund language revised in H.B. 164 by the 2007 Legislature making this rule unnecessary. (DAR NOTES: The proposed amendment to Rule R277-470 is under DAR No. 30092 in this issue, July 1, 2007, of the Bulletin. H.B. 164 (2007) is found at Chapter 344, Laws of Utah 2007, and is effective as of 07/01/2007.)

Summary of the rule or change:

This rule is repealed in its entirety.

State statutory or constitutional authorization for this rule:

Section 53A-21-104 and Subsection 53A-1-401(3)

Anticipated cost or savings to:

the state budget:

There are no anticipated costs or savings to the state budget. The charter school revolving loan fund language revised in H.B. 164 (2007) is added to Rule R277-470.

local governments:

There are no anticipated costs or savings to local government. The charter school revolving loan fund language of this rule is added to Rule R277-470.

other persons:

There are no anticipated cost or savings to other persons. The charter school revolving loan fund language of this rule is added to Rule R277-470.

Compliance costs for affected persons:

There are no compliance costs for affected persons. The charter school revolving loan fund language of this rule is added to Rule R277-470.

Comments by the department head on the fiscal impact the rule may have on businesses:

I have reviewed this rule and I see no fiscal impact on businesses. Patti Harrington, State Superintendent of Public Instruction

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Education
Administration
250 E 500 S
SALT LAKE CITY UT 84111-3272

Direct questions regarding this rule to:

Carol Lear at the above address, by phone at 801-538-7835, by FAX at 801-538-7768, or by Internet E-mail at carol.lear@schools.utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/31/2007

This rule may become effective on:

08/07/2007

Authorized by:

Carol Lear, Director, School Law and Legislation

R277. Education, Administration.

[R277-487. Charter School Revolving Loan Fund.

R277-487-1. Definitions.

A. "Application" means the application provided by the Loan Committee available from the USOE or online at www.usoe.k12.ut.us.

B. "Board" means Utah State Board of Education.

C. "Charter schools" means schools acknowledged as charter schools by local boards of education under Section 53A-1a-515 and this rule or by the Board under Section 53A-1a-505.

D. "Charter school assurances" means written agreements available from the USOE and signed by charter schools that include such written documentation as adequate insurance, civil rights compliance, and compliance with health and safety requirements.

E. "Charter School Revolving Loan Committee (Loan Committee)" is a committee appointed by the Superintendent and comprised of members of the Finance Committee of the Board representing expertise in finance and real-estate, a charter school representative, and a member nominated by the Governor. The Loan Committee shall review applications and recommend approval of loans to the Superintendent.

F. "Superintendent" means the State Superintendent of Public Instruction.

G. "USOE" means Utah State Office of Education.

 

R277-487-2. Authority and Purpose.

A. This rule is authorized by Utah Constitution Article X, Section 3 which vests general control and supervision of the public education system in the Board, by Section 53A-21-104 which requires the Board to make rules regarding the school building revolving account that includes charter school building Subaccount; Section 53A-1-401(3) which allows the Board to adopt rules in accordance with its responsibilities; and, Section 53A-21-104 which creates the Charter School Building Subaccount.

B. The purpose of this rule is to provide procedures and standards for eligible charter schools to apply for and receive loans to pay for the costs of constructing, renovating, and purchasing charter school facilities.

 

R277-487-3. Program Eligibility.

A. Applicant Eligibility:

(1) Schools shall have received final and official approval of their charters by either a local board of education or the Board and, if chartered by the Board, signed a contract under Section 53A-1a-505(3)(b) prior to making application for a loan.

(a) Schools chartered by a local board of education shall provide a signed copy of the Utah Charter School Assurances contained in the Charter School Application for Board-chartered schools.

(b) Existing schools chartered by the Board shall provide written affirmation that the schools are in compliance with the Utah Charter School Assurances.

(2) Charter schools operating in facilities owned by a school district or other governmental entity (e.g. state, city, county, public institution of higher education) are not eligible for this program unless they are paying reasonable rent for the facility to the governmental owner.

B. Project Eligibility:

(1) Section 53A-21-102 authorizes a loan and application procedure to pay the costs of constructing, renovating, and purchasing charter school facilities.

(2) All applicants shall demonstrate that the construction, renovation or purchase of facilities shall meet all applicable requirements of law, administrative rule, and building codes prior to submitting a loan application.

(3) Compliance includes administrative approval of safety and health requirements and accommodations mandated by the Americans with Disabilities Act (ADA) and Individuals with Disabilities Education Act (IDEA).

 

R277-487-4. Application Process.

A. Applications for loans shall be accepted on an ongoing basis, subject to eligibility criteria and availability of funding.

B. To apply for a loan, a charter school shall submit the information requested on the Board's most current loan application form together with the requested supporting documentation. The information requested is necessary to evaluate the loan request based on the review criteria.

C. The evaluation/review shall not begin until all information is provided to the satisfaction of the Loan Committee.

D. The application shall include a resolution from the governing board of the charter school that the governing board, at a minimum:

(1) agrees to enter into the loan as provided in the application materials;

(2) agrees to the interest established in R277-487-5E and repayment schedule of the loan designated by the Superintendent;

(3) agrees that loan funds shall only be used for facilities consistent with the purposes of the approved charter;

(4) agrees to any and all audits or financial reviews ordered by the Loan Committee;

(5) agrees to any and all inspections or reviews ordered by the Loan Committee;

(6) specifies the proposed loan repayment period; and

(7) understands that repayment, including interest, shall be deducted automatically from the charter school's monthly fund transfers, as appropriate.

E. If the Loan Committee recommends approval of a loan application, the Loan Committee's recommendation shall include:

(1) the amount of the loan;

(2) the repayment schedule; and

(3) the interest rate to be charged.

 

R277-487-5. Funding Criteria.

A. The maximum amount per loan is $300,000.

B. No charter school shall have more than one outstanding loan from the Charter School Revolving Loan Fund at a single time.

C. The loan may not exceed 75% of total project costs.

D. Priority shall be given to projects necessary to address student health and safety issues.

E. Interest shall be charged on the loan at the rate which the State Treasurer would receive for a five (5) year AAA rated general obligation bond at the date of loan recommendation by the Loan Committee.

 

R277-487-6. Review Criteria for a Loan.

A. The Loan Committee and Superintendent may consider the following and any additional criteria deemed relevant when recommending or approving a charter school's loan application:

(1) Soundness of the financial business plan of the applicant charter school;

(a) Soundness shall be determined by such factors as:

(i) debt to income ratios performed and available with application;

(ii) adequately performed cash flow analysis;

(iii) available and current financial statement analysis; and

(iv) adequate estimate of non-real estate assets.

(b) The Loan Committee may request additional documentation of this criterion, as needed.

(2) Availability of other sources of funding for the charter school;

(3) Geographic distribution of loans made from the Charter School Revolving Loan Fund;

(4) The impact that receipt of funds received pursuant to this section shall have on the charter school's receipt of other private and public financing;

(5) Plans for creative uses of the funds received pursuant to this section, such as loan guarantees or other types of credit enhancements; and

(6) The overall facility needs of the charter school.

B. Priority for loans from the Charter School Revolving Loan Fund shall be given to charter schools in the first year of operation for startup facility and renovation costs.

C. Because charter schools are frequently start-up programs and do not have any financial history, the loan approval process shall rely heavily on acceptable budgets and cash flow statements that demonstrate the school's ability to repay the loans. The proposed budgets cannot show deficits.

D. The loan approval shall rely heavily on the relevant experience and expertise of the management and governing board of the school.

E. The loan approval process disfavors making fundraising too large a portion of the revenues of a charter school. The Loan Committee may question the school's ability to repay the loan if the projected fundraising goal appears unrealistic or accounts for too high a percentage of the charter school's annual operating budget (more than 15 percent). A school may be asked to back up an ambitious fundraising goal with a detailed plan and designated manpower toward this effort.

 

R277-487-7. Loan Approval.

A. The Superintendent shall have the final authority to approve loans following recommendation by the Loan Committee.

B. The Superintendent's decision is final and is not subject to additional administrative appeals.

C. If an application is refused, a school may reapply only with material changes to the original application and may be considered following other applicants.

 

R277-487-8. Property Reversion or Disposal in the Event of Charter School Revocation or Loan Default.

A. If the school creates, incurs, or assumes any indebtedness in addition to a loan pursuant to this rule, the charter school shall ensure that the instrument documenting indebtedness attests that repayment rights of any and all creditors are subordinate to repayment rights of the Board.

B. Property purchased by the charter school remains the property of the charter school until such a time as its charter is revoked or the school closes.

C. In the event that a charter school closes, it is the responsibility of the charter school governing body to properly dispose of all school assets. Any assets remaining after satisfying all indebtedness associated with a loan from the Board and the claims of creditors have been satisfied shall revert to the Board and deposited in the revolving loan account.

D. The reversion of such equipment, property, and furnishings shall focus on recoverable assets, but not on intangible or irrecoverable costs such as rental or leasing fees, normal maintenance, and limited renovations.

E. The reversion of all property secured with public funds is subject to the complete satisfaction of all lawful liens or encumbrances.

F. Property purchased or leased with state funds by a charter school may be used only for a purpose for which a school district may use school district property.

G. The charter school shall maintain the property and improvements to such a degree that market value is preserved.

 

R277-487-9. Repayment Provisions.

A. Loans shall be repaid within five years, beginning one year from the date the loan is approved by the Superintendent.

B. Repayments, including interest payments, shall be made in equal monthly installments over the repayment period.

C. Each installment shall be deducted from the monthly funds transfer to the charter school.

D. The amount being repaid (both principal and interest) shall be deposited into the Charter School Building Subaccount in the State Treasury for subsequent loans to future borrowers.

 

KEY: charter schools, loans, facilities

Date of Enactment or Last Substantive Amendment: November 6, 2003

Authorizing, and Implemented or Interpreted Law: Art X Sec 3; 53A-21-104; 53A-1-401(3)]