Dallas Defers Decision on Charter School Conduit

DALLAS — The Dallas City Council on Wednesday postponed a decision on whether to create a conduit issuer that could issue tax-exempt revenue bonds to finance the expansion of a charter school chain.

The council voted 11 to 3 to defer for at least two weeks a decision on a proposal by Uplift Charter Schools to establish the Dallas Education Finance Corp.

The council will receive a briefing on the plan next week, and vote on it the following week.

Uplift, which operates 20 public charter schools in Dallas, Fort Worth, and Arlington, said it plans to issue up to $90 million of bonds to expand its operations in the region, with $36 million of the proceeds earmarked for projects in Dallas.

Assistant city manager Ryan Evans said the Education Finance Corp. could serve as a conduit to issue tax-exempt bonds for other charter schools, accredited private schools and private universities in Dallas.

The city has approved bond issues for private schools in the past, Evans said, but the sales were through the Red River Education Finance Corp.

Evans told the council that the revenue bonds issued by the finance corporation would be an obligation of the school operators and not the city of Dallas.

He said the proposed bonds would not be supported by any local taxes, and would not affect the city’s ability to issue debt.

The debt would be supported through the per-student funding provided to accredited charter schools by the state, Evans said.

The proposal was included on the council’s consent agenda, which normally includes routine, non-controversial items that are approved with little discussion or debate.

After an extended and often emotional debate, the council rejected a 45-day delay on a decision, but agreed on the shorter deferral.

Uplift’s chief executive officer, Yasmin Bhatia, said if the conduit issuer is not established quickly and the bonds sold soon, the system would lose its allocation of $15 million of federal stimulus in the form of qualified school construction bonds from the Texas Education Agency.

Bhatia said Uplift was asking the city to create the conduit because federal regulations require the proceeds to be used within the geographical boundaries of the issuer.

Dallas County could not create the finance corporation, she said.

The QSCBs must be issued by the end of April, Bhatia said.

If the conduit issuer is not approved within two weeks, she said, Uplift would go ahead with a taxable bond issue in March.

According to Bhatia, Uplift Charter Schools opted for QSCBs to reduce its borrowing costs after the state reduced the system’s funding by 8% in fiscal 2012 and 2% in fiscal 2013.

The federal subsidy on QSCBs would reduce Uplift’s annual debt service by $300,000 a year, Bhatia said.

“We came to you immediately when we learned of this option,” she said. “These bonds would give us $300,000 that we could put into classroom education, books and raises for teachers.”

Council member Jerry Allen said the City Council needed at least two weeks to consider the proposal, and criticized its placement on Wednesday’s consent agenda.

“This thing needs to be teed up a whole lot better,” Allen declared. “This was pathetic.”

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