Star Tribune
Rochester charter schools serving Somali children declare bankruptcy, leaving future in doubt
A Rochester charter school organization filed for bankruptcy earlier this month after years of legal tussles over its debt, prompting concerns for its future.
The Rochester STEM Academy and Rochester Math and Science Academy, which serve kindergarten through 12th grades in one building, filed for Chapter 11 reorganization on Dec. 6. The move was in response to pressure from Kansas City-based UMB Bank, which holds more than $15 million in debt the school borrowed in 2018.
The southwest Rochester schools, started in 2005, serve about 560 students, all of whom are Somali.
UMB Bank’s legal team argued in court filings the schools’ record of operating at a financial loss puts it at risk of closing. Lawyers say, absent an agreement with the bank, the organization “will soon be administratively insolvent and be required to liquidate.”
School officials have not responded to multiple requests for comment. The school’s attorney, Paul Ratelle, said Rochester STEM Academy and Rochester Math and Science Academy aren’t in danger of closing but were forced to file for bankruptcy after UMB Bank took more than $5 million from the schools’ bank accounts.
“From my perspective, this is a dispute that involves an unreasonable lender, to say the least,” Ratelle said.
Both sides will head into mediation starting next week.
In 2018, the city of Rochester issued revenue bonds to finance the school’s renovation of an existing property — and to build a 25,000-square-foot addition. UMB Bank is the current trustee representing the bondholders’ interests, taking over from U.S. Bank a few years ago.
An arm of Paris-based Amundi, one of the world’s largest asset managers, owns the majority of the bonds. Court records indicate Amundi’s concerns are driving the bond trustee’s actions.
The school bonds had several financial covenants, which are common in commercial loans. The schools did not meet two covenants involving certain cash and income benchmarks. So, the trustee — U.S. Bank at the time — declared the loans to be in default in 2020.
The schools continued making required payments on the bonds, so it is what’s known as a technical default.
In June 2021, UMB — which had taken over as trustee — called the bonds, demanding repayment. UMB claimed the schools were not filing requisite financial reports and had not fully implemented recommendations by a consultant it had appointed.
Two months later, the schools, UMB and Amundi signed a “forbearance agreement.” It essentially paused the default proceedings if the schools agreed to certain financial requirements and paid the bond trustee for its expenses.
The schools paid $290,266 to U.S. Bank, the former trustee. UMB then sent the schools a bill for $329,516 for its own expenses. That prompted the schools to sue UMB in November 2021 for breach of contract. UMB countersued, claiming the schools had breached the forbearance agreement.
U.S. District Court Judge Eric Tostrud, who is based in St. Paul, ruled in April that the schools had indeed breached the forbearance agreement. But he did not rule on the reasonableness of UMB’s fees, and he denied the bank’s request to foreclose on the school.
After Tostrud’s ruling, the schools and UMB began working on a settlement. They were close to an agreement earlier this month, bankruptcy court records show. But the talks appear to have fallen apart after UMB transferred the $5 million out of the schools’ accounts — everything they had, according to Ratelle.
Ratelle said state and federal payments over the next two months would give the school sufficient funds to operate — albeit without any more payments to UMB because of the dispute over its cash.
Charter school experts said it’s rare for schools to declare bankruptcy while still operating — most charters close first. Those schools faced the same kind of economic headwinds public schools did during the pandemic, and charters rely on fewer revenue streams since they don’t access levy funding like public schools.
Officials with the Minnesota Association of Charter Schools said the Rochester STEM Academy/Math and Science Academy organization is currently the only charter school operator that was looking to file bankruptcy in the state.
Rochester officials said the school’s bankruptcy proceedings will not affect the city’s financial situation — the bonds were structured so the city is not obligated to pay them off.
“There’s no implications for the city,” said Jean McGann, the city’s interim finance director.
Rochester Public Schools officials say they are watching the bankruptcy filings in case the district needs to enroll some of the charter schools’ students. The district recently announced a plan to streamline its operations and cut its budget but walked back most of those changes after a $10 million donation from Mayo Clinic.
Two men are dead and one woman was injured in a shooting at a homeless encampment in south Minneapolis on Sunday afternoon, police said. It was the second shooting at a Minneapolis encampment this weekend.
At about 2:20 p.m. Sunday, police responded to a reported shooting in the 4400 block of Snelling Avenue near the railroad tracks at the small encampment between Snelling and Hiawatha avenues. At the scene, officers found two men with fatal gunshot wounds, said Sgt. Garrett Parten Minneapolis Police spokesman. Responders rendered aid, but both men died at the scene.
A woman was found at the scene with life-threatening injuries and was taken to a local hospital where she was being treated Sunday night, he said. Police have yet to say whether the three were living at the encampment.
Officers detained three people, who Parten said have since been released after police found they were not believed to be involved in the shooting. No suspects had been identified as of 6:30 p.m. Sunday.
The shooting is the second at a southside homeless encampment this weekend. One man died and two were critically injured early Saturday at an encampment shooting near E. 21st Street and 15th Avenue S. On Sunday, the man was identified as Deven Leonard Caston, 31, according to the Hennepin County Medical Examiner’s Office.
“We don’t know if there’s a connection between this homeless encampment shooting and the one that occurred yesterday,” Parten said on Sunday. “That is a consideration of the investigation. We can’t rule it out.”
Ward 12 Council Member Aurin Chowdhury, who represents the area and lives nearby, was at the site of the shooting Sunday afternoon. She said officials need information about what happened to better understand how to address situations like this long-term.
“This is an absolute tragedy, and this type of violence should never occur within our city,” she said. “It really makes me think about how we need to look at this more systemically and not just take a whack-a-mole approach and expect the problem to go away.
During Sunday’s Twitch stream, Walz and Ocasio-Cortez played Madden while discussing making homebuying more accessible, building affordable housing, eliminating student loan debt and raising the federal minimum wage.
After the match, Walz showed off his Sega skills in a round of “Crazy Taxi,” the Y2K-era racing game where gamers play as a taxi driver picking up passengers and taking them to their destination for cash.
Walz called himself a “first-generation gamer” and recalled playing “Crazy Taxi” when he bought a Sega Dreamcast. He also mentioned the Minnesota Star Tribune’s coverage of how his old game console was sold and ended up with a Plymouth resident, who still has it.
Afterward, Walz and Ocasio-Cortez watched a short clip of Trump denying on Rogan’s podcast that he lost the 2020 presidential election. Democrat Joe Biden won that year.
Ocasio-Cortez during the livestream also showed viewers her farm on the cozy, indie game Stardew Valley. Walz said the game reminded him of Minnesota: “You’ve got mining,” he said. “You’ve got agriculture. You’ve got snow.”
Before Walz headed out to a rally in Nevada, he pleaded with viewers to vote. More than 12,000 viewers tuned into the livestream on Ocasio-Cortez’s Twitch channel. More watched from Harris’ channel.
”Hey guys, they’re now scrambling and trying to call us Nazis and fascists,” said Alina Habba, one of Trump’s attorneys, who draped a sparkly ”MAGA” jacket over the lectern as she spoke. ”And you know what they’re claiming, guys? It’s very scary. They’re claiming we’re going to go after them and try and put them in jail. Well, ain’t that rich?”
Declared Hogan in his characteristic raspy growl: ”I don’t see no stinkin’ Nazis in here.”
Trump has denounced the four criminal indictments brought against him as politically motivated. He has ramped up his denunciations in recent weeks of ”enemies from within,” naming domestic political rivals, and suggested he would use the military to go after them. Harris, in turn, has called Trump a ”fascist.”
The arena was full hours before Trump was scheduled to speak. Outside the arena, the sidewalks were overflowing with Trump supporters in red ”Make America Great Again” hats. There was a heavy security presence. Streets were blocked off and access to Penn Station was restricted.
In the crowd was Philip D’Agostino, a longtime Trump backer from Queens, the borough where Trump grew up. The 64-year-old said it was appropriate for Trump to be speaking at a place bills itself as ”the world’s most famous arena.”
”It just goes to show ya that he has a bigger following of any man that has ever lived,” D’Agostino said.
