DPS, state finalize $150M transition loan
A $150 million emergency loan to the Detroit Public Schools Community District to ensure teacher pay days was signed Friday by Emergency Manager Steven Rhodes.
The loan also was approved by the Emergency Loan Board and the Michigan Department of Treasury.
“I’d like to thank the Emergency Loan Board Members and the Michigan Department of Treasury for promptly approving and closing the loan today,” Rhodes said in a statement. “Today’s closing is another significant step in the direction of returning Detroit Public Schools Community District to local control. These funds will ensure that teachers are paid, transition costs are covered and our three startup priorities are addressed. Our three priorities to ensure a quality education include critical investments in academics, facilities and safety.”
The $150 million loan will be used to transition Detroit Public Schools to the new Detroit Public Schools Community District created under the $617 million rescue package approved last month by state lawmakers.
Of the total loan amount, $125 million will be used to pay obligations incurred by the old DPS, including June payroll, paychecks for teachers who spread their annual wages over 26 paychecks and vendor liabilities, the district said in a news release. The remaining $25 million will be transferred to the new DPS, with $8 million for academic initiatives, $10 million for facilities, $2 million for safety and $5 million to provided a minimum cash balance.
The interest rate for the loan is 1.3 percent, the district said. The loan will be paid back through the 18 mil nonhomestead property taxes, as authorized by the rescue legislation.
“Our team is working hard on the legal and financial tasks that are necessary when starting a new entity,” Rhodes said in the statement. “Our next steps include helping to educate the upcoming school board candidates for the November election.”