Destin High School is restructuring roughly $20 million in debt to better align with actual student enrollment numbers.

• The school, which opened in August 2021 serving grades 9-12, was originally financed based on projections of 800 students. 

Enrollment has instead held around 600 – a difference that translates to an annual shortfall of approximately $1.6 million in state and local per-pupil funding, according to Executive Director Donald “Willy” Williams.

At roughly $8,000 per student, Williams told Okaloosa County Commissioners Tuesday, 800 students would generate around $6.4 million annually. Six hundred students brings in approximately $4.8 million.

“The bottom line is no one wants the school to fail,” Williams said. “You’ve got 600 kids. It’s a vibrant school community. Lots of great things happening.  It didn’t reach the number of kids that the original proforma and the census data showed.”

Okaloosa County Commissioners on Tuesday approved an amendment to the school’s loan documents – a procedural step required as part of an ongoing forbearance agreement between Destin High School and its bondholders. 

• The county serves as a conduit issuer for the bonds but bears no financial liability.

Williams described the amendment as the first step in what he called “a strategic restructuring of our debt.” The school’s governing board and administration have reduced the budget and are continuing to make reductions, he said, while working with bondholders to restructure obligations.

“Restructuring the debt is a proactive strategic decision by our governing board to maintain the school’s financial strength given the changes in student population and state funding patterns,” Williams said.

The revenue shortfall prompted the school to pause payments from June through December of last year under a forbearance agreement with bondholders. Williams said the school made a catch-up payment of approximately $150,000 in December and has amortized its next sinking fund payment. He said the school is current on payments under that negotiated arrangement and believes it can meet its obligations going forward based on the renegotiated terms.

• Williams noted that while the state of Florida is projecting a 10 to 13 percent decline in student enrollment over the next five years, Destin High School is holding steady.

Commissioner Sherri Cox pressed Williams for specific figures on how much the school had fallen behind before the forbearance agreement, noting that the last number she had seen was approximately $335,000. Williams did not provide exact figures during the meeting, instead emphasizing that the school had operated under a legal agreement with bondholders and was paying according to those terms, and would get Cox the specifics.

Cox, who said she has a child that currently attends Destin High School, ultimately abstained from the vote, citing the potential appearance of a conflict of interest.

The school financed its five-acre campus at 4325 Commons Drive West in two phases — $9.365 million in Series 2021 bonds for initial acquisition and development, followed by $11.025 million in Series 2022 bonds for a second phase of construction.

• Those bonds were issued through what’s known as conduit financing, a mechanism that allows nonprofit organizations to access tax-exempt municipal bonds. County Attorney Lynn Hoshihara and bond counsel Rick Harb explained that while the bonds are issued in the county’s name, Okaloosa County bears no financial liability.

Chairman Trey Goodwin sought to clarify the arrangement for the public, asking Harb whether this was essentially “a way of navigating what’s probably federal law with regard to taxes.”

“The federal government wanted to give an ability to lenders to incentivize loans to not-for-profit projects with a public purpose, which include educational facilities such as charter schools,” Harb said.

Goodwin asked whether the county’s name could be attached to a default if the school were to fail.

Harb said no. 

A default would be attributed to the charter school, he explained, with the county’s role as conduit issuer mentioned only in passing. The loan documents state explicitly that the bonds are not an indebtedness of the county, and that Okaloosa County would have no obligation to pay any amounts owed if the borrower defaulted.

“I encourage you to view it more as a service that you provide to any qualifying constituent entity,” Harb told commissioners.

The amendment imposes new requirements on Destin High School, including maintaining enrollment of at least 600 full-time equivalent students and meeting specific debt service coverage ratios beginning June 30, 2026. It also grants the bond trustee authority to require termination of the school’s executive director if the school defaults.

Palmer noted that public schools across Florida, including the Okaloosa County school district, are experiencing enrollment challenges.

• “It’s not a huge surprise that it’s harder to meet the numbers that were projected,” Palmer said. “This is a public school. It is a charter school, but it’s a public school. And it’s encountering many of the same problems that our Okaloosa County School District is encountering.”

The measure passed 4-0, with Cox abstaining.