Tuesday, June 12, 2012

Atlanta Charter Schools Default On $18.9 Million Of Construction Bonds

Three Fulton County charter schools – Fulton Science Academy Middle School, Fulton Science Academy High School, and Fulton Sunshine Academy elementary school – have received notice from their construction bond trustee Wells Fargo Bank that they are in default on an $18.9 million construction loan secured by Alpharetta Development Authority bonds. According to the default notice, officials of the middle school had been notified by the Fulton County School System that there were “significant reservations” about renewal of the schools charter before the bonds were issued, but that information was not disclosed to the bank in connection with issuance and sale of the bonds. Wells Fargo contends that failure is a breach of the bond indenture.

The middle school has 507 students, and has received over $30 million in taxpayer funds over the last ten years. Up to $3.7 million per year in public funds could have been available to cover $1.5 million in annual payments due on the bonds over the next ten years, but that funding will end June 30 when the charter contract with Fulton County School System expires. Both Fulton County Schools and the State of Georgia have refused to renew the middle school charter, citing concerns with fiscal and management practices at the facility, including no bid construction contracts entered with companies having ties to school officials. Last week some of the bonds were sold at 69% of face value by worried investors, and the bond rating has been reduced to junk status. The notice of default is the first step in foreclosure on the three schools’ under construction 44 acre campus, including a planned 90,000 square foot instructional building, and seizure of school operating revenues by the bond trustee.

Construction work on the new campus, designed to house all three charter schools, has stopped. When the  10 year charter renewal was rejected, the schools were offered a compromise 3 year charter, but rejected the compromise and determined instead to become a private school on July 1.

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