Essex County approves up-to-$13 million conduit bond to refinance North Star Academy building

The Essex County Board of County Commissioners on Thursday approved an Essex County Improvement Authority plan to issue charter school revenue bonds not to exceed $13,000,000 to refinance bonds originally issued in 2009 for a North Star Academy facility on Central Avenue. Tricia Gasparin, bond counsel, said the proceeds would be loaned to NSA Central Avenue LLC, the borrower that leases the building to North Star Academy Charter School of Newark Inc.

"The authority proposes to issue its charter school revenue bonds an amount not to exceed $13,000,000," bond counsel Tricia Gasparin told the board. She said the bonds will be secured by a loan agreement with the borrower and by a mortgage on the charter school and "will not constitute the debt or indebtedness of the authority, the County of Essex, the State of New Jersey, or any political subdivision thereof."

Sam Messer, senior regional director for North Star, said the school system is chartered as one school and operates 14 campuses in Newark serving more than 6,500 students. "We currently serve over 6,500 students across, 14 campuses here in Newark," Messer said, adding the Central Avenue building houses two campuses including a middle school and the Washington Park high school campus.

Commissioners pressed staff and counsel on local approvals and the county’s exposure. Gasparin confirmed the local finance board approved the bond resolution on Sept. 11, and ECIA approved its bond resolution the day before the county meeting. County financial reviewer Frank McInerney said he had reviewed the financial statements of the entities involved and recommended approval, saying the school appears financially capable of making lease payments that support the debt service. "This is a conduit financing," McInerney said; "it does not go on our balance sheet or our financial statements," though it may be disclosed.

Commissioner questions covered who benefits from the program and whether the ECIA offers conduit financing to public school districts as well as charters; ECIA executive director Stephen Rother said the authority has used the same approach for public schools in the past. With no public speakers on the item, the board moved, seconded and approved the resolution; one commissioner was recorded as present but not voting and one was absent.

The bond issue is structured to refinance a balloon payment due in December; counsel said the refinancing was contemplated when the original bonds were issued. The ECIA bonds will be payable solely from loan payments received from the borrower and will be secured by lease payments made by the charter school. The board’s approval allows the ECIA financing to proceed through the remaining administrative steps outlined by bond counsel and the authority.

The board did not set any additional county guarantee or financial backstop for the bonds at the meeting; officials said the financing remains a conduit transaction secured by borrower revenues and mortgage collateral. The matter will move forward under ECIA administration and related disclosure procedures.