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john-covingtonYour recent column by Darrell Dawsey, DPS Loans To State Education Authority Smell Mighty Foul, reflects a fundamental misunderstanding of the loans that were taken by the Educational Achievement Authority to help address some start-up cash-flow issues.

The focus of the column is Dawsey’s assertion repeated again and again throughout that the loan in question was a loan from the “cash-strapped” DPS Detroit Public Schools to the Education Achievement Authority.  That is not true.  The loan was made to the EAA through the Michigan Finance Authority.  Every year the authority arranges loans totaling $600 to $700 million for several hundred of school districts all over the state under their State Aid Note Program to help them work through cash flow issues.  This was one of those routine loans.

Because the EAA is not codified in state law as a school district, the loan was made through DPS, which forwarded the state money to the EAA.  It was a pass through.  The loan did not involve a dime of DPS funds.  In fact, DPS was paid processing fees of more than $168,000 fee just to process the loan.  The loan is being repaid on schedule and will be fully repaid in July.  DPS does not have to worry about being stuck with the loan because the payments come directly out of the EAA’s state school aid payments.

So when he asks, “Why not go directly to the state itself for the cash?” he is in fact endorsing the approach that was taken.  The loan was entirely State money through the Municipal Finance Authority, not DPS money.

Check out the rest of Covington’s letter to the editor on Deadline Detroit

Here is a sneak peak of Darrell Dawsey’s response: 

Unsurprisingly, John Covington tells half-truths and bald-faced lies.

First off, the loan to DPS came from a bank, not the state. Interest accrues and payments must be made. How isn’t that a loan?

That DPS took out the loan — rather than lend EAA money directly from its accounts — is immaterial since DPS is on the hook for the loan.

EAA doesn’t start paying on the buildings until August. So far it hasn’t paid a nickel. My column doesn’t say it wouldn’t ever have to pay, but that they got into the buildings for next to nothing. That’s true.

Also, taxpayers who agreed to refurbish and build schools did so with the express intent that that money be used for DPS schools, not EAA experiments. That was my point, not what Covington suggests in his disingenuous misinterpretation.

I stand by what I wrote.

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