Luz Social Services files for Chapter 11 bankruptcy

2014-04-26T00:00:00Z Luz Social Services files for Chapter 11 bankruptcyBy Carmen Duarte Arizona Daily Star Arizona Daily Star

Luz Social Services Inc. — which operates two public charter schools and social services programs in Tucson and San Manuel — filed for Chapter 11 bankruptcy protection Thursday.

A hearing on the matter in U.S. Bankruptcy Court is expected early next week, said attorney Eric Sparks,  who is representing the nonprofit social-services agency.

“We are asking the court to give us time to set up a reorganization plan and payment plans within 120 days to repay obligations,” said Sparks.

He said Luz is asking that $162,183 in monthly cash funds be protected to operate its schools and programs. The agency employs 38.

Luz operates Luz-Guerrero Early College High School, which has 117 students, and El Centro for the Study of Primary and Secondary Education, which has 129 students.

The schools are on a 30-acre property that Luz owns at 2797 N. Cerrada de Beto, located off North Silverbell Road, north of West Ironwood Hill Drive. The market value of the property and buildings is $5.4 million, Sparks said. Its first school opened in 1971.

Luz is behind on property taxes, and state and federal taxes that total about $150,000, Sparks said. It also is delinquent about $22,000 on its mortgage with Compass Bank. The total mortgage owed is $2.2 million, said Sparks.

“We are planning to restructure the mortgage to decrease the amount of the monthly payment to free up cash flow for the operation of the schools,” Sparks said.

Pepe Barrón, chief executive officer of Luz Social Services and also the superintendent of the schools, said he is confident the court will approve the plan.

A drop in enrollment and federal and state education cuts during the past four years is the cause of the financial hardship, Barrón said.

“We are expecting another $20,000 to $24,000 cut in July,” he said.

Contact reporter Carmen Duarte at cduarte@azstarnet.com or 573-4104.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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