State board OKs $385M in financing for Detroit schools

Evan Carter
The Detroit News

Lansing — A state board approved the transfer of assets from Detroit Public Schools to the new Detroit Public Schools Community District, plus two loans totaling $385 million, despite vocal opposition from school board members.

By approving a $150 million emergency loan and $235 million in school financing stability bonds, the Local Emergency Financial Assistance Loan Board sided with Emergency Manager Steven Rhodes and against the Detroit school board, which offered an alternative plan.

School board supporters chanted “Racist” and “Shame on you” after the loan board’s vote.

The board has opposed creation of a new, debt-free district under a $617 million rescue package approved last month by state lawmakers, arguing that the state ran up hundreds of millions of dollars in debt while controlling DPS since March 2009.

LaMar Lemmons, the disputed president of the DPS board, said the loan board members did the bidding of Gov. Rick Snyder, who signed the rescue package.

“Those were three Snyder appointees and they know what side their bread is buttered on,” Lemmons said right after the vote.

The Local Emergency Financial Assistance Loan Board is comprised of state Treasurer Nick Khouri; the director of the Licensing and Regulatory Affairs Agency, Shelly Edgerton, and state budget Director John Roberts.

“We wanted to go on record, we want them to know the consequences of their actions in terms of public as well as we wanted to make sure that we get certain things read to the record when we go to court,” Lemmons said.

In a statement, Rhodes praised the board for approving the financing package.

“The approval of the proposed loans transaction is an important step toward satisfying past debt obligations and moving forward,” Rhodes said. “The funds outlined in the proposal allow the new district to pay transition costs, to pay our teachers and other obligations through the summer, to operate the district through the first October (per-pupil state aid) payment and to invest in our academic programs, safety enhancements and facility improvements as outlined in the approved FY2016-2017 proposed budget.”

The DPS board has already filed an injunction against the restructuring of the district in the Michigan Court of Claims. Lemmons said Monday’s decision by the board was anticipated and that he plans to take the issue all the way up to the U.S. Supreme Court if necessary.

Much of the hour-long meeting was taken up by public comment. About a dozen supporters of the school board voiced their support for the school board’s alternative financing plan as well as their disgust with the rescue legislation.

“They don’t have any other options; what are they going to turn to? It’s not just going to stay in Detroit; it’s going to spill out into other communities,” said Jason Patton, founder and CEO of Urban Education Solutions.

Lemmons has suggested the Detroit district would be required to pay an 18 percent interest rate on the state’s loan and called it “usury” or an unreasonably high interest rate, a characterization state officials disputed. The school board voted last month to reject the state financing.

During Monday’s meeting, in one of his few comments, Khouri said the school district was “clearly” not going to get an 18 percent interest rate.

Under the rescue plan, the current Detroit school board, which has operated with little power in recent years, will be dissolved and city voters will choose new members in November.