Fate of Durham charter school's $15M bond unclear as state considers closing school

The Durham charter school has been under scrutiny since it alerted the state Office of Charter Schools last fall that it had given diplomas to students who didn't earn them. The school's new principal first discovered the problem last summer.

School leaders investigated further last month and found that 40 percent of the high school's graduates – 160 of 399 students – received diplomas in the past eight years without earning all of the proper credits.

Kestrel Heights first reported the problems to the state on Oct. 5. Three weeks later, school leaders went before the Durham County Board of Commissioners and requested a bond worth up to $15 million so it could purchase its high school building, which it has been leasing. Commissioners approved the bond.

"We are not issuing the bond ourselves," said Commissioners Chair Wendy Jacobs. "Part of the legal process is that we have to give them permission to issue their own bond ... We actually don’t have any financial obligation related to the bond."

Kestrel Heights Executive Director Mark Tracy told WRAL News this week that the school is "still in the process" of completing the bond but declined to give many details. He would not say whether anyone has agreed to loan them the money.

"I don’t feel comfortable answering that question at this time," he said, adding that the school is "still in communication with the various individuals who are involved in the bond process" and that no money has been spent.

A review of Kestrel Heights' Board of Directors meeting minutes show that the board has discussed the bond several times.

On Nov. 1, BB&T representatives were present at the school's joint finance and executive committee meeting as school leaders completed "a walk through of the Due Diligence documentation needed for the issuing of the bond for the purchase of real estate."

At the Nov. 8 board meeting, Board President Brandon Paris "announced the intent" for Kestrel Heights to purchase its high school building. Attorney Mary Nash Rusher went over the bond process for procuring the building and discussed the need for the formation of an LLC, or Limited Liability Company, for legal reasons. Details about the legal reasons were not included.

The board previously voted on Oct. 11 to create Kestrel Heights Facilities, LLC holding company.

At a special meeting on Nov. 15, the board finalized and voted on documentation related to the bond issuance and other documentation related to the purchase of the high school building. Board Treasurer Travis Fisher made a motion to have the bond not exceed $13 million, which the board unanimously approved.

The state Office of Charter Schools said Friday that Kestrel Heights' leaders did not tell them about the $15 million bond approval or that they were creating an LLC. Deanna Townsend-Smith, assistant director for the Office of Charter Schools, said there is no legal requirement for the school to report that information to her office but said the school must report it in its annual audit.

In the meantime, Kestrel Heights leaders say they are "looking at our various options" in response to the state Charter Schools Advisory Board's recommendation that the high school be shut down effective July 1 due to the diploma problems.

The final decision about the school's fate rests with the State Board of Education, which will meet in February. Last month, the state board asked the Durham County District Attorney’s Office to determine whether a criminal investigation into the school's diploma issue is warranted.

School leaders say they plan to hold a community meeting at 6:30 p.m. Jan. 18 in the open space between the elementary and middle school "in order to answer questions and address any comments or concerns."