Summit Charter School asks county for loan

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Summit Charter School asks county for loan

Summit Charter School broke ground on phase II of its high school expansion on Aug. 25. Kevin Nealey photo

This year, the North Carolina General Assembly passed legislation that allows charter schools to request capital funding from their local board of commissioners.

Summit Charter School is now taking advantage of that legal change and asking for a $2.5 million loan from the Jackson County Commission.

“Recent state legislation now enables charter schools to request funding for capital purposes from their county governments,” said Head of Summit Charter School Kurt Pusch. “The purpose of our funding request is to request a loan in the amount of $2.5 million that would help bridge our cash flow through the construction project with our full intent to repay the loan and carry the full cost of the construction.”

Pusch came before the Board of Commissioners during an Oct. 10 work session to formally request the loan. Commission Chairman Mark Letson recused himself from the discussion because he also serves on Summit’s Board of Trustees.

Summit broke ground on phase II of its high school expansion in August. The whole project will cost the school an estimated $6.5 million. Fundraising efforts for the expansion have been led by the Summit Charter School Foundation, a 501(c)3 that raises private funding for the school. The foundation has raised $4.8 million toward the total goal, with $2 million of that money in hand and the remainder in pledges that are committed over the next several years. According to Pusch, it took about 14 months to raise the $4.8 million.

“Summit Charter School Foundation is debt-free; it’s our intention to stay debt-free. But we do see a loan from the county would help bridge the cash flow through this project,” said Pusch.

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Pusch said he expects the foundation to be able to repay the loan within three years and that the foundation would pay interest on the loan. Depending on the contract that is decided upon, and the frequency of payments, the interest would make the county around $200,000 over three years.

County Manager Don Adams noted that to recoup all the money the county would spend lending this loan, the Summit Foundation would need to eventually cover closing costs, as well as the interest that the county currently makes on its savings, which is about 5.5%.

“If the goal is to just make this where the county is completely whole, then that’s the type of interest we’d be discussing,” said Adams. “That 5.5% is just basically based upon the return we’re getting on our investments right now. If we don’t get that in interest, then ultimately, we’re obviously losing funds.”

During the Oct. 10 work session, Commissioner Todd Bryson asked County Manager Don Adams if it were dangerous for the commission to fund the request and get into a contract with the charter school based on legislation that is so new.

“It’s absolutely new,” said Adams, and offered a couple things for the board to consider. “One is education as a whole. How do we view this request in regard to, how does this compare to requests coming from our public school system and our community college system?”

Adams noted that while it was important for the board to consider all education funding requests in the county, Summit is requesting a loan, versus asking for funding flat out.

“If Summit Charter was asking for $2.5 million then what I would be sitting here recommending to this board would be, you need to prioritize this along with the other needs that are about to come to you,” Adams told the board. “What makes this a little bit different is it’s a loan request and I do think that potentially allows you as a board to separate this from those other priorities for the simple fact that it’s different. The school board isn’t coming in asking you for a loan and neither is SCC, they’re asking for a grant.”

The loan would be secured with a deed of trust and a promissory note put on the school property, which will be released when the loan is repaid in full. Adams said that the biggest risk to the county would be if the school defaulted on the loan.

“I’m being as honest as I can,” Adams said. “Nobody wants to work on trying to foreclose any [public school].”

Before the General Assembly passed new legislation this year that drastically changed the laws affecting charter schools, a charter school could not make a request for capital funding from its local board of commissioners. While capital funding for public k-12 schools come from local tax dollars, as well as occasional state grants, charter schools were required to raise their own money for capital projects.

Charter schools have always received state and local funding, as per pupil funding level from state and local sources follows each student who enrolls in a charter school.

The new legislation now allows counties to “provide funds to charter schools by direct appropriation” for the purposes of acquiring real property; acquisition, construction, reconstruction, enlargement, renovation or replacement of buildings and other structures; and acquisition or replacement of furniture and furnishings, instructional apparatus, technology, data processing equipment, business machines and similar items.

In April of this year, both Macon and Jackson County boards of education signed letters opposing the legislation which expanded the ways in which charter schools have access to locally-appropriated public school funding. Rep. Mike Clampitt (R-Swain), who represents Jackson County, served as a co-sponsor for the bill .

“They’ve toyed with that over the years, and commissioners have not wanted to entertain that because they know they will be approached and begged for charter school funding to build buildings for them,” Macon County School Board Attorney John Henning told board members in a presentation on the legislation. “That’s also your funding for buildings. The way the bill was written, it would be very difficult to overcome it.”

Summit Charter School was founded in 1997 and serves students predominantly from Jackson County, but also Macon, Transylvania and Swain counties.

“We are in the midst of significant enrollment growth,” Pusch told commissioners.

Over the last four years, the school has seen a roughly 28% increase in enrollment, which precipitated the planned expansion. After adding one high school grade each year, Summit graduated its first class of high school seniors in the spring of 2022. This year, it enrolled a total of 311 students, including 52 new students, with eight of its now 13 grades at full capacity.

The new high school building is expected to be operational for the start of the 2024-25 school year. It will be an entirely new space of about 15,000 square feet and will include traditional classrooms, a science lab, a learning kitchen, rooms for individualized education, an outdoor courtyard, admin offices and a large commons area. Once the building is complete, Summit will have a capacity of 468 students.

Summit Charter Foundation hired JDavis Construction of Anderson, South Carolina as general contractor for the construction project and has a contracted guaranteed maximum price of $5,835,425.

“The only other thing, if the board wishes to consider this is, do we have $2.5 million to loan?” Adams asked the board of commissioners.

Adams recommended that if the board wished to move forward it should explore the conversation further.

“I would recommend this not be taken or considered out of sales tax discussions,” Adams said.

Articles 40 and 42 allocate a half-cent sales tax that is dedicated for funding public schools, while revenues from article 46, the quarter-cent sales tax, are dedicated to Southwestern Community College and public education. According to Adams, the total amount that will be requested for public education in the coming year will allow the county to create a five-year plan for the school system, as well as SCC.

“I believe if we inserted the $2.5 million into that conversation, even though it’s a loan, it could impact some timelines there,” said Adams. “So I would more than likely recommend that the board look at our overall general fund balance in this discussion versus the sales tax fund balance if we wish to move forward and not impact other education priorities.”

The board agreed to put Summit Charter School’s loan request on the agenda for its Oct. 17 meeting.

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