LOS ANGELES -- Rocketship Education is continuing with plans for a charter school in Morgan Hill, Calif., despite failing to secure approval from city officials to issue up to $50 million in bonds.

The bonds would be issued for the charter school system by the California Municipal Finance Authority.

The Morgan Hill City Council did not approve the issuance at a Tax Equity and Fiscal Responsibility Act, or TEFRA, meeting, but the San Jose-based charter school system is moving forward in the charter process, according to Jessica Garcia-Kohl, Rocketship’s director of community engagement for the Bay Area.

Garcia-Kohl said Rocketship has submitted its charter petition to the Morgan Hill Unified School District and will need to have another public hearing within 30 days.

The first TEFRA hearing was held on Aug. 28 at a Morgan Hill city council meeting and, amid strong opposition from the community, and general confusion about the nature of the meeting, the council denied the request in a four to one vote.

But Rocketship can still seek TEFRA approval at another level of government.

A TEFRA hearing is required by the Internal Revenue Service in order to give the public an opportunity to comment on the use of tax-exempt funds for private activity financings. It must be held by a governmental unit that has jurisdiction in the area in which the project will be completed.

In this case, the hearing can also be held at the county level or the state level.

Josh Mukhopadhyay, counsel for Rocketship, said it chose to hold the hearing in Morgan Hill because it was the most transparent forum that would maximize the possibility that interested parties could provide input and testimony.

The majority of input from the community was in opposition of a new charter school. Teachers said it would result in other schools closing, others said it would encourage re-segregation. There were some who favored the charter school, saying it would provide parents and their children with more choices.

Morgan Hill’s city council members expressed general confusion about the purpose of the hearing and whether a vote would, in effect, approve the actual project.

“I’m more worried about the political aspect about whether or not we’re in any way endorsing the charter school, which we have no business doing,” Mayor Steve Tate said during the hearing.

City attorney Renee Gurza tried to clarify the purpose of the meeting, saying that their action would not be an approval of the actual project, nor would Morgan Hill have any liability to repay the bonds. She said the vote is just an initial step to provide notice to the public that there is an entity that will be seeking private activity bonds.

All but councilmember Gordon Siebert denied approval for the bond issuance, saying they were not voting against charter schools, but they did not want to disrupt Morgan Hill’s school district, its teachers, and its families.

“Even though the wording is so confusing and I really don’t know what we’re voting for, I just want to say that I value our school district and our students, but I also value our parents,” Mayor Pro Tempore Rich Constantine said during the meeting.

“This does not strengthen Morgan Hill in my estimation and I’m not going to support it,” he said.

Morgan Hill’s city council isn’t the first to get confused by TEFRA. The National Council of State Housing Agencies recently asked the IRS to simplify approval requirements for private  activity bond issues. Several municipal bond groups have also requested clarification of the process.

Rocketship’s Garcia-Kohl said she’s confused about the actual purpose of a TEFRA bond hearing.

“I’ve been to a couple TEFRA hearings in the past and they were just nonissues,” she said. “They were usually on the consent calendar, and not really actual action items.”

The denied request is not the end of the line for the charter school project. Rocketship can try again and hold another public hearing at Morgan Hill in the future, perhaps once it secures other necessary approvals. Or it can take the hearing to the county or the state.

Other requirements for the project to get the green light, in addition to the public hearing, include a site development permit, California Environmental Quality Act approval, a conditional use permit, and a charter.

Rocketship Education currently has nine charter schools located in San Jose and one charter school in Milwaukee.

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