DETROIT – The Board of Education for Detroit Public Schools rejected two loans Monday morning in an attempt to block the massive financial rescue plan passed in Lansing and signed by the governor.
The two loans total $385 million in seed money for the new district. One loan carries an interest rate of 10 percent and the other is 18 percent.
The high rates are due to the district’s high-risk and its poor credit rating.
School Board President LaMar Lemmons spoke out against the loans Monday.
“It would be irresponsible to borrow at a rate other than the state’s preferred rate,” Lemmons said. “We are questioning and have questioned Judge Rhodes’ wisdom.”
The funds are critical to the transition to a new district.
By rejecting the loans, the board is legally bound to propose an alternative plan of its own. In their own plan, it must meet the state’s obligations and it must be approved by the state’s Emergency Loan Board. The Emergency Loan
Board then has the option of accepting the original financial package.
“He wants us to borrow at a usury rate, a rate that I wouldn’t even accept a credit card at,” Lemmons said.
The school board is expected to reveal their plan Wednesday.