Some Charter schools are robbing taxpayers blind, and more will follow once they start noticing how others are learning to game the system. In Republican states, where little if any regulation is in place, private schools will have a field day. Is the Obama administration paying attention?
The Dallas Morning News: Charter School Company’s Lease Deals Criticized
A national charter school company that plans to open new schools in Texas has run afoul of an education official in Nevada and two of its former principals, and they all pose the same question.
Does Imagine Schools Inc. force its charter schools to spend too much money on complex real estate deals and not enough money on teachers and academic programs?
Typically, after an Imagine-managed charter school gets approval to open, Schoolhouse Finance, Imagine's real estate arm, purchases a campus and charges the school rent. After the school begins to pay that rent, Schoolhouse sells the campus to a real estate investment trust, which then leases it back to Schoolhouse.
The charter school eventually sends rent payments – in one case upward of 40 percent of the school's entire publicly funded budget – to two for-profit companies.
"The arrangement is very lucrative because it's a direct conduit to public funds. The school [property] is paid off with public funds," said Gary Horton, who oversees charter school funding for the Nevada Department of Education.
Imagine executives say their business practices are sound and comply with all state laws, according to Barry Sharp, Imagine's chief financial officer. After hearing testimony about Imagine's complex deals to acquire land and construct school buildings, Texas Board of Education member David Bradley asked Sharp, "So are you in the real estate business or the charter [school] business?"
Sharp responded, "We are in the business of educating children and giving parents a choice, and part of that is real estate."
In Nevada, the state awarded 100 Academy of Excellence in North Las Vegas a charter, and the school hired Imagine to run its educational services. But 100 Academy of Excellence's annual rent, which represents 40 percent of its annual state-funded budget, leaves the school struggling to pay for textbooks, according to Nevada Department of Education records. "My concern is that I have to make payments [to the charter school], and I know the payments aren't going to the kids," said Guy Horton, who oversees charter school funding for the Nevada Department of Education.
In general, charter schools in Texas are exempt from the financial oversight that the state education officials give school districts. The agency annually grades how school districts spend their money, but not yet for charters. Hugh Wallace knew accepting the principal's job at 100 Academy of Excellence in North Las Vegas presented a challenge. Eight months into the job, he said, he realized that nearly 40 percent of his state funding went to pay rent to Schoolhouse Finance. And the rent jumps a few percent each year, according to the charter school's lease agreement.
So Wallace said he asked his boss if the school's lease on the 50,000-square-foot building could be reduced. "I was told to never ask about the lease payment or I would get fired," he said. "I was given a reprimand." But Wallace kept asking about the lease and about Imagine's control of the charter school. Wallace said Imagine fired him in early November. "I was asking too many questions about finances and operations," he said.
So if it’s legal, is it fair to use taxpayer money for high rents, allow private schools to profit from those rents and finally give parents a choice?
A nearby charter school unrelated to Imagine receives about the same state funding as 100 Academy of Excellence. But last year, it paid about 14 percent of its state funding for building rent, according to Nevada's education department.
The Dallas Morning News: Charter School Company’s Lease Deals Criticized
A national charter school company that plans to open new schools in Texas has run afoul of an education official in Nevada and two of its former principals, and they all pose the same question.
Does Imagine Schools Inc. force its charter schools to spend too much money on complex real estate deals and not enough money on teachers and academic programs?
Typically, after an Imagine-managed charter school gets approval to open, Schoolhouse Finance, Imagine's real estate arm, purchases a campus and charges the school rent. After the school begins to pay that rent, Schoolhouse sells the campus to a real estate investment trust, which then leases it back to Schoolhouse.
The charter school eventually sends rent payments – in one case upward of 40 percent of the school's entire publicly funded budget – to two for-profit companies.
"The arrangement is very lucrative because it's a direct conduit to public funds. The school [property] is paid off with public funds," said Gary Horton, who oversees charter school funding for the Nevada Department of Education.
Imagine executives say their business practices are sound and comply with all state laws, according to Barry Sharp, Imagine's chief financial officer. After hearing testimony about Imagine's complex deals to acquire land and construct school buildings, Texas Board of Education member David Bradley asked Sharp, "So are you in the real estate business or the charter [school] business?"
Sharp responded, "We are in the business of educating children and giving parents a choice, and part of that is real estate."
In Nevada, the state awarded 100 Academy of Excellence in North Las Vegas a charter, and the school hired Imagine to run its educational services. But 100 Academy of Excellence's annual rent, which represents 40 percent of its annual state-funded budget, leaves the school struggling to pay for textbooks, according to Nevada Department of Education records. "My concern is that I have to make payments [to the charter school], and I know the payments aren't going to the kids," said Guy Horton, who oversees charter school funding for the Nevada Department of Education.
In general, charter schools in Texas are exempt from the financial oversight that the state education officials give school districts. The agency annually grades how school districts spend their money, but not yet for charters. Hugh Wallace knew accepting the principal's job at 100 Academy of Excellence in North Las Vegas presented a challenge. Eight months into the job, he said, he realized that nearly 40 percent of his state funding went to pay rent to Schoolhouse Finance. And the rent jumps a few percent each year, according to the charter school's lease agreement.
So Wallace said he asked his boss if the school's lease on the 50,000-square-foot building could be reduced. "I was told to never ask about the lease payment or I would get fired," he said. "I was given a reprimand." But Wallace kept asking about the lease and about Imagine's control of the charter school. Wallace said Imagine fired him in early November. "I was asking too many questions about finances and operations," he said.
So if it’s legal, is it fair to use taxpayer money for high rents, allow private schools to profit from those rents and finally give parents a choice?
A nearby charter school unrelated to Imagine receives about the same state funding as 100 Academy of Excellence. But last year, it paid about 14 percent of its state funding for building rent, according to Nevada's education department.
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