March 7, 2019 - Franklin Discovery Saves $200,000 Per Year with Bond
KUTV is running an absurd story about us, Franklin Discovery Academy. The title to their story should be, “Franklin Discovery Academy SAVES taxpayers $200,000 per year with bond.” This National Enquirer-esque story written by an ambush reporter Jones is nothing but fear mongering run amok. He delights in “exposing” taxpayer waste to such a degree that he is willing to make it up when none exists. We unequivocally maintain that Mr. Jones is manipulating the story by withholding key facts, facts provided to him in a previous press release that he has conveniently left out.
We did what was best financially for our school, within the law, and for the benefit of our students and staff. Such a story does nothing but hurt Utah students by drawing negative attention with false claims that are not warranted. Our singular purpose is the education of our students, and we do so with complete understanding of our responsibility as a fiduciary of public funds. The unfair claims quoted from the state treasurer were made prior to the treasurer asking us for any details about this transaction or understanding of context.
We deny in the strongest possible terms this notion that we were “fleeced.” The fact remains that we are saving over $200,000 PER YEAR over our lease with this bond. We are saving about $90,000 per year in property taxes and about $110,000 per year by having a lower interest rate compared to our lease. Most importantly, we are now building equity in our facility.
The “fees” that the state treasurer has taken issue with are nothing more than an attempt to advance a political agenda to force a one-size-fits-all requirement for all charters to use the Utah Charter School Finance Authority (UCSFA), and his preferred private businesses, for bonding. We intentionally choose not to use the UCSFA because we were concerned the bond would get bogged down in politics. This story is now proof that our concern was valid. Any supposed savings on issuer fees we could have realized by going through the UCSFA would have been offset by other fees UCSFA requires that the Arizona authority did not. It is an outright lie to claim Arizona’s requirements are “less strict.” The laws governing bonds are federal and are the same for everyone. It was not that Arizona was less strict. It was that they were more reasonable to work with.
These “fees” are not out of line once the complexity of our bond is understood. Ours was not a run-of-the-mill bond but had extra layers of complexity, which rightly adds to cost. However, the financial benefit to the school was such that doing this bond was still our absolute best financial option, given the bottom-line savings. We would have been happy to have paid less in fees, but nobody else was offering any better terms, and going through the UCSFA would not have made any material difference in the fees. The comments about us being “fleeced” and “pillaged” were made without any firsthand (or even secondhand) knowledge of the details and circumstances of this bond because they were made prior to anyone in the treasurer’s office or UCSFA bothering to talk to us. Put into proper perspective, the fees we paid were completely reasonable.
Mr. Jones and the state treasurer seem to have taken particular issue with our attorney’s fees, even though the fees were in line with bonds of comparable complexity. Not all attorneys are created equal. They are not interchangeable. We hired the best and in so doing got the deal done quickly and efficiently. Our attorney did considerable extra work that is not done on the typical bond. We got our money’s worth, and then some, since he helped us save 200K per year. We are 100% satisfied with Mr. Joel Wright’s performance as our attorney and remain confident in his legal counsel. He is known statewide as an expert in charter school bonding, and for not being afraid to stand up for his clients. In addition, the state treasurer had no concern when Mr. Wright’s firm charged a fee that was 160% higher in June 2018 on a complex deal that resulted in $4 million in debt retirement. (See that press release here: https://www.kmclaw.com/newsroom-news-125.html ).
The UCSFA has disclosed fees from the most recent bond transactions and when comparing apples to apples, ours fit in. The UCSFA is comparing apples with oranges in this case. The claims made by UCSFA ignore the industry context that some fees in recent transactions were lower than historical averages due to an attorney leaving his large firm, starting his own small firm, and massively undercutting others as a way to buy business. We chose not to go that route because we knew we needed someone experienced and capable for our complicated transaction. Our attorney fees were typical for what our attorney had to do on this particular bond. Maeser Academy, for instance, paid only $5,000 less on a similarly-sized transaction for borrower’s counsel even though they have a much longer history, an impeccable reputation, and a less complicated bond. There are many recent transactions with fees similar to ours from the exact same professionals that we used. Furthermore, despite complaints by multiple charter schools, the UCSFA requires every charter to pay for two different law firms to represent the UCSFA on every bond, despite requests for the UCSFA to simply use the well qualified Attorney General to serve as issuer’s counsel. This requirement alone has cost charter schools millions of dollars in unnecessary legal fees the last ten years.
It is also inaccurate to report that 99% of charter school bonds go through UCSFA. We are aware of at least 3 others that have recently gone out of state, and that is without any digging, and those 3 alone would mean that it is mathematically impossible to claim 99% of charter school bonds go through UCSFA.
At least two of the firms used on our bond are pre-approved by UCSFA, that includes our underwriter, Jim Blandford, and bond counsel Ryan Warburton. Mr. Blandford is well-known and well-respected as one of the foremost experts on charter school finance and has completed hundreds of millions of dollars in charter school financing. He spent months putting together the most financially advantageous offer our school qualified for and our confidence in him remains complete. Being pre-approved by UCSFA, as indicated on their website, should be an indication to the treasurer that we had first-rate professionals working on our bond.
So, why does the state treasurer or anyone else care about our bond? The answer may lie in issues that have nothing to do with our particular school, but ongoing disagreements completely unrelated to our school between the treasurer’s office and some of the professionals that worked on our bond. If the treasurer is so concerned about charter schools doing well in the state of Utah, why he would decide to put unnecessary negative attention on a small school just trying to educate children is beyond us.
We support Utah State Lawmakers and the Utah Board of Education’s current policies that schools are not required to issue solely through UCSFA. Charter schools in Utah are legally able to consider the issuer best suited for their needs. When considering all issues, we decided that the UCSFA was not the right direction for us. They are now retaliating against our school for the loss of our business and on behalf of the loss of our business to private companies to whom they are currently very friendly. They are hopeful their mistreatment of our school will convince the legislature to force all schools to use the UCSFA. We support a free market.
Because the state treasurer used emotionally charged words like “fleeced” and pillaged,” these words have been turned into the story since the facts do not add up to support such claims. Based on his reporting history, it appears Mr. Jones thinks all money going to charters is a waste of taxpayer money. Whether that is your philosophical position on charters or not, reporting fiction is not the way to argue that position. We stand by our decision to execute this bond as being in the school’s best interest. We have chosen not to participate in person with Mr. Jones because of our experience that if it suits his narrative, he will manipulate our words. We have nothing to hide and are disappointed, but not surprised, that Mr. Jones would not bother to wait the time-frame prescribed by law for us to provide the documentation he requested before making his fictitious claims on TV. Reporters like Mr. Jones can twist the truth by omitting important facts, as he has done here.
What would be so much more helpful and accurate are stories about what charter schools actually do all day long, which is provide an education for about 11% of Utah school children. We could provide plenty of amazing stories about our students that would be much more relevant to the general public than our bond, such as how twenty students go out every single day on a field trip or how our strict no-homework policy gives families back their family time. We’ve offered to provide such stories to Mr. Jones, but they are apparently not salacious enough to report on.