Charter District Bonds
ATTORNEY GENERAL CONSIDERS EDUCATION CODE PROVISION LIMITING CHARTER DISTRICT BOND GUARANTEES
Case citation: Tex. Att’y Gen. Op. KP-0005 (Feb. 27, 2015).
Summary: The Commissioner of Education asked the Attorney General whether Texas Education Code § 45.0532 should be construed as a limit on each separate issuance of charter district bond guarantees or as a maximum limit on the cumulative amount of guaranteed charter district bonds.
Article VII, section 5(d) of the Texas Constitution authorizes the Legislature to provide for the use of the state “permanent school fund to guarantee bonds issued by school districts or by the state for the purpose of making loans to or purchasing the bonds of school districts for the purpose of acquisition, construction, or improvement of instructional facilities” and furnishings. To implement this constitutional provision, the Legislature created the Bond Guarantee Program (BGP) in chapter 45, subchapter C of the Education Code. The BGP is administered by the commissioner of education and the Texas Education Agency (TEA) pursuant to rules promulgated by the State Board of Education (SBOE). Section 45.053 of the Texas Education Code limits the “total amount of outstanding guaranteed bonds” that the commissioner of education may approve, establishing a maximum of two-and-a-half to as much as five times “the cost value of the permanent school fund.” The state auditor is required to certify annually whether the amount of bonds guaranteed by the BGP is within this limit.
In 2011, the BGP, which was previously available only to school district bonds, was extended to bonds issued by open enrollment charter schools that qualify as a charter district. Section 45.0532 of the Texas Education Code contains a further limitation on guarantees available for charter district bonds: In addition to the general limitation under Section 45.053, the commissioner may not approve charter district bonds for guarantee under this subchapter in a total amount that exceeds the percentage of the total available capacity of the guaranteed bond program that is equal to the percentage of the number of students enrolled in open enrollment charter schools compared to the total number of students enrolled in all public schools in this state, as determined by the commissioner. The statute further explains that for purposes of subsection (a), “the total available capacity of the guaranteed bond program is the limit established by the board under Sections 45.053(d) … minus the total amount of outstanding guaranteed bonds.”
According to the Commissioner, pursuant to SBOE rules, the TEA receives BGP applications and recalculates the BGP capacity monthly. Two different methodologies have been proposed to ascertain the limit on charter district bond guarantees in section 45.0532, depending on how the phrase “in a total amount” in that section is construed. The first method assumes that section 45.0532 is a limitation on the total amount of charter district bonds that the commissioner may approve each month, not a limitation on the total amount of charter district bonds that the commissioner may approve for guarantee in the cumulative amount. Under the first method, each month the total available capacity for the BGP would be determined by deducting all outstanding guaranteed bonds, whether school district bonds or charter district bonds. Then, the percentage based on the number of open-enrollment charter school students compared to all public school students (charter student ratio) would be applied to the total available capacity to determine the total amount of charter district bonds the commissioner may approve for guarantee that month. Using this methodology, charter district bond capacity is calculated for the month without regard to outstanding charter district bond guarantees that were approved in prior months. Because this method does not establish a cumulative limit for the total amount of charter district bonds that may be guaranteed, over time the cumulative BGP guarantees allocated to charter district bonds could exceed the charter student ratio limitation in section 45.0532.
The second methodology construes section 45.0532 as establishing the maximum limit of BGP capacity available for charter district guarantees. This method begins by subtracting all outstanding bonds to determine the total available capacity for the BGP and applies the charter student ratio, but also considers outstanding charter district guarantees to determine the total amount of charter district bonds that may be guaranteed under section 45.0532. The Commissioner, therefore, asked the Attorney General which methodology is allowable under section 45.0532, specifically whether section 45.0532 should be construed as “a limit on each separate issuance of charter district bond guarantees or whether it represents a maximum limit on the cumulative amount of guaranteed charter district bonds.”
Ruling: According to the Attorney General, a court would likely conclude that section 45.0532 of the Texas Education Code establishes a maximum limit on the cumulative amount of charter district bonds that may be guaranteed under article VII, section 5(d) of the Texas Constitution. Courts construe statutes according to the plain language read in the context of the statutory scheme. In subsection 45.0532(a), the phrase “in a total amount” refers to “charter district bonds.” The statute establishes a maximum by broadly prohibiting the commissioner from approving charter district bonds for guarantee in excess of the charter districts’ share of the BGP’s total available capacity based on the charter student ratio. The statute does not specify how often the commissioner must issue approvals and leaves the methodology for complying with the statute to be determined according to SBOE rules. Because the plain language of section 45.0532 broadly limits the “total amount” of charter district bond guarantees that may be approved, not the amount of bond guarantees that may be approved each month, a court would likely construe section 45.0532 as an ongoing limitation on the cumulative amount of charter district bonds that the commissioner may approve for guarantee.
A methodology that prevents the commissioner from approving charter district bonds in an amount that would cause the cumulative amount of guaranteed charter district bonds to exceed the charter student ratio would be consistent with the legislative text contained in section 45.0532. Conversely, a methodology that allows the cumulative amount of charter district bonds to exceed the charter student ratio would conflict with the legislative text. There are any number of good policy reasons for the Legislature to treat charter schools the same as other public schools with regard to the bond guarantees. But this matter is one for the Legislature to resolve, according to the Attorney General. A construction of section 45.0532 as a limitation on the cumulative amount of charter district bonds that may be approved would be consistent with the legislative history of the statute. Thus, the Attorney General held that a court would likely conclude that section 45.0532 of the Texas Education Code establishes a maximum limit on the cumulative amount of charter district bonds that may be guaranteed under article VII, section 5(d) of the Texas Constitution.
THE COMMISSIONER CONSIDERS DISPUTES OVER A DISTRICT PROPERTY LEASE
Case citation: Cook v. Eanes ISD, Dkt No. 043-R8-02-2014 (Comm’r Educ. Dec. 10, 2014); Alexander v. Eanes ISD, Dkt. No. 044-R8-02-2014 (Comm’r Educ. Dec. 10, 2014).
Summary: The Eanes Independent School District purchased an 86.7 acre tract of undeveloped land for educational purposes. Later, the district determined that it had no need for approximately 50 acres of the tract. In 2010, the district issued a request for proposals seeking a long-term tenant for the 50 acres. Western Hills Little League (WHLL) was the only entity to submit a bid. In April of 2011, the district executed a Ground Lease with WHLL, for a term on fifty years. Under the agreement, WHLL would use the property as a multi-sport park. It did not give the district the right to use the tract during the term of the lease. The lease gave WHLL a limited right of first refusal. It also allowed the district to terminate the lease after one year’s notice if the district needed the property for educational uses or if a defined financial exigency occurred. The First Amendment to the Ground Lease was executed in October of 2012, to clarify that the tract at issue was actually 51.8 acres. A Second Amendment to the Ground Lease was signed by the district on September 10, 2013, and by WHLL on September 9, 2013. It provided that the district had the right to use improvements on scheduled school days during school hours. It provided that WHLL may sublease with the district’s prior approval and the district’s approval of subleases was given for Weslake Pop Warner and Weslake Youth Soccer. It amended the limited right of first refusal.
Two grievances were filed concerning the lease. Caren Cook filed a grievance on September 9, 2013, and another group filed a separate grievance as well. They claimed the district violated the Texas Open Meetings Act, Texas Education Code § 11.151, Texas Constitutional, article III, section 52(a), and Local Government Code 272.001. When the grievances were denied, both grievances were appealed separately to the Commissioner of Education. The main issues before the Commissioner were whether the grievances were filed timely, whether jurisdiction existed over the claims, and whether the District was authorized to lease the property.
Ruling: The Commissioner returned each case to the district to consider the grievances over the original Ground Lease, but jurisdiction did not exist over claims brought under the Texas Open Meetings Act, Texas Education Code § 11.151, Texas Constitutional, article III, section 52(a), and Local Government Code § 272.001. The district had denied grievances as untimely. Under Eanes ISD policy GF(Local), a complaint must be filed within fifteen days of the date the individual first knew, or with reasonable diligence should have known, of the decision or action giving rise to the complaint or grievance. The district, in each case, argued that the grievants knew or should have known of the ground lease more than fifteen days before filing their grievances. The Commissioner disagreed, holding that substantial evidence did not support the district’s conclusions on timeliness for all but one of the grievants.
Jurisdiction under Texas Education Code § 7.057(a)(2)(A) provides for violations of the school laws of Texas. The school laws of Texas are defined as the first two titles of the Education Code and the rules adopted under those titles. Thus, the Commissioner did not have jurisdiction over alleged violations of the Texas Open Meetings Act, Texas Education Code § 11.151, Texas Constitutional, article III, section 52(a), or Local Government Code § 272.001.
Ultimately, the Commissioner held that the parties had stated a potential violation of the district’s implied authority for a school district to lease property. According to the Commissioner, the implied right to lease is found in Texas Education Code § 11.151(a) and (b). A school district may lease property but only when the lease does not interfere with the district’s use of the property for school purposes. Thus, the main issue was whether the lease at issue interfered with the district’s use of the property for school purposes. Issues also were raised concerning whether the lease prohibited subleases and the impact of any such sublease. The Commissioner returned the two matters to the district.