Sec. 8. Credit enhancement
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Subpart 1 of part B of title V of the Elementary and Secondary Education Act of 1965 (as amended by this Act) (20 U.S.C. 7221 et seq.) is further amended— by redesignating sections 5207 through 5211 as sections 5208 through 5212, respectively; and by inserting after section 5206 the following: The purpose of this section is to provide grants to eligible entities to permit the eligible entities to demonstrate innovative credit enhancement initiatives that assist charter schools to address the cost of acquiring, constructing, and renovating facilities.
After reserving any funds as necessary for grant evaluation or administration consistent with any applicable provisions (including section 9601(a) of this Act and section 402(b)(1) of the Department of Education Organization Act), the Secretary shall use the amounts available to carry out this section to award, on a competitive basis, not less than 3 grants to eligible entities that have applications approved under this section to demonstrate innovative methods of assisting charter schools to address the cost of acquiring, constructing, and renovating facilities by enhancing the availability of loans or bond financing for charter schools.
The Secretary shall evaluate each application submitted under subsection (e), and shall determine whether the application is sufficient to merit approval. Subject to subparagraph
(B)and paragraph (3), the Secretary shall award— not less than 1 grant to an eligible entity described in section 5211(6)(A); not less than 1 grant to an eligible entity described in section 5211(6)(B); and not less than 1 grant to an eligible entity described in section 5211(6)(C). Subparagraph
(A)shall only apply if applications are submitted that permit the Secretary to do so without approving an application that is not of sufficient quality to merit approval. In the event the Secretary determines that the funds made available under this section are insufficient to permit the Secretary to award not less than 3 grants in accordance with this section, the 3-grant minimum under paragraph
(2)shall not apply, and the Secretary may determine the appropriate number of grants to be awarded in accordance with subsection (d). Grants under this section shall be of a sufficient size, scope, and quality so as to ensure an effective demonstration of an innovative means of enhancing credit for the financing of charter school acquisition, construction, or renovation. To receive a grant under this section, an eligible entity shall submit to the Secretary an application in such form as the Secretary may reasonably require. An application submitted under paragraph
(1)shall contain— a statement identifying the activities proposed to be undertaken with funds received under this section, including how the eligible entity will determine which charter schools will receive assistance, and how much and what types of assistance charter schools will receive; a description of the involvement of charter schools in the application's development and the design of the proposed activities; a description of the eligible entity's expertise in capital market financing; a description of how the proposed activities will leverage the maximum amount of private-sector financing capital relative to the amount of Federal and State funds used and otherwise enhance credit available to charter schools, including how the applicant will offer a combination of rates and terms more favorable than rates and terms that a charter school could receive without assistance under this section; a description of how the eligible entity possesses sufficient expertise in education to evaluate the likelihood of success of a charter school program for which facilities financing is sought; in the case of an application submitted by an eligible entity that is a State governmental entity, a description of the actions that the entity has taken, or will take, to ensure that charter schools within the State receive the funding needed to have adequate facilities; and such other information as the Secretary may reasonably require. An eligible entity receiving a grant under this section shall use the funds deposited in the reserve account established under subsection (g)(1) to assist 1 or more charter schools to access private sector capital in order to accomplish one or more of the following objectives: The acquisition (by purchase, lease, donation, or otherwise) of an interest (including an interest held by a third party for the benefit of a charter school) in improved or unimproved real property that is necessary to commence or continue the operation of a charter school. The construction (including predevelopment costs in a case where construction or renovation cannot proceed as a result of predevelopment findings) of new facilities, or the renovation, repair, or alteration of existing facilities, necessary to commence or continue the operation of a charter school. To assist charter schools to accomplish the objectives described in subsection (f), an eligible entity receiving a grant under this section shall, in accordance with State and local law, directly or indirectly, alone or in collaboration with others, deposit the funds received under this section (other than funds used for administrative costs in accordance with subsection (h)) in a reserve account established and maintained by the eligible entity for this purpose. Amounts deposited in such account shall be used by the eligible entity for one or more of the following purposes: Guaranteeing, insuring, and reinsuring bonds, notes, evidences of debt, loans, and interests therein, the proceeds of which are used for an objective described in subsection (f). Guaranteeing and insuring leases of personal and real property for an objective described in subsection (f). Facilitating financing by identifying potential lending sources, encouraging private lending, and other similar activities that directly promote lending to, or for the benefit of, charter schools. Facilitating the issuance of bonds by charter schools, or by other public entities for the benefit of charter schools, by providing technical, administrative, and other appropriate assistance (including the recruitment of bond counsel, underwriters, and potential investors and the consolidation of multiple charter school projects within a single bond issue). Making limited loans to charter schools, under such terms and conditions as the Secretary may prescribe. Funds received under this section and deposited in the reserve account established under paragraph
(1)shall be invested in obligations issued or guaranteed by the United States or a State, or in other similarly low-risk securities. Any earnings on funds received under this section shall be deposited in the reserve account established under paragraph
(1)and used in accordance with such paragraph. An eligible entity may use not more than 2 percent of the funds received for any fiscal year under this section for the administrative costs of carrying out its responsibilities under this section. The financial records of each eligible entity receiving a grant under this section shall be maintained in accordance with generally accepted accounting principles and shall be subject to an annual audit by an independent public accountant. Each eligible entity receiving a grant under this section annually shall submit to the Secretary a report of the eligible entity's operations and activities under this section. Each annual report submitted under subparagraph
(A)shall include— a copy of the most recent financial statements, and any accompanying opinion on such statements, prepared by the independent public accountant reviewing the financial records of the eligible entity; a copy of any report made on an audit of the financial records of the eligible entity that was conducted under paragraph
(1)during the reporting period; an evaluation by the eligible entity of the effectiveness of its use of the Federal funds provided under this section in leveraging private funds; a listing and description of the charter schools served during the reporting period; a description of the activities carried out by the eligible entity to assist charter schools in meeting the objectives set forth in subsection (f); and a description of the characteristics of lenders and other financial institutions participating in the activities undertaken by the eligible entity under this section during the reporting period. The Secretary shall review the reports submitted under paragraph (2)(A) and shall provide a comprehensive annual report to Congress on the activities conducted under this section. No financial obligation of an eligible entity entered into pursuant to this section (such as an obligation under a guarantee, bond, note, evidence of debt, or loan) shall be an obligation of, or guaranteed in any respect by, the United States. The full faith and credit of the United States is not pledged to the payment of funds which may be required to be paid under any obligation made by an eligible entity pursuant to any provision of this section. The Secretary, in accordance with chapter 37 of title 31, United States Code, shall collect— all of the funds in a reserve account established by an eligible entity under subsection (g)(1) if the Secretary determines, not earlier than 2 years after the date on which the eligible entity first received funds under this section, that the eligible entity has failed to make substantial progress in carrying out the purposes described in this section; or all or a portion of the funds in a reserve account established by an eligible entity under subsection (g)(1) if the Secretary determines that the eligible entity has permanently ceased to use all or a portion of the funds in such account to accomplish any purpose described in this section. The Secretary shall not exercise the authority provided in paragraph
(1)to collect from any eligible entity any funds that are being properly used to achieve one or more of the objectives described in subsection (f). The provisions of sections 451, 452, and 458 of the General Education Provisions Act shall apply to the recovery of funds under paragraph (1). Nothing in this section shall be construed to impair or affect the authority of the Secretary to recover funds under part D of the General Education Provisions Act. To carry out this section, the Secretary shall reserve for each fiscal year not less than 5 percent and not more than 15 percent of the amount appropriated under section 5212. .
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