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9486 in the collection
Charter school company with plans for McKinney is criticized
Dennis Bakke, President and CEO of Imagine Schools, Inc., has graduate degrees from Harvard Business School and the National War College. He is co-founder of AES, a global power company. Researchers at the University of Massachusetts Amherst, based upon 2002 data, have identified AES as the 51st-largest corporate producer of air pollution in the United States, with roughly six million pounds of toxic chemicals released annually into the air.[2] Major pollutants indicated by the study include sulfuric acid, hydrochloric acid, and compounds of manganese, chromium, and nickel.[3]
From the film "Power Trip," set in Tbilisi, capital of the former Soviet Republic of Georgia:
Mr. Bakke, speaking about the ''40-some countries'' AES ventured into in the 1990's, acknowledged, "We didn't always make the right decisions."
Mr. Devlin said, "I got a sense of how sometimes that limitless American optimism doesn't always do the job." Americans ''build a system that should work, but they're building it on rubble," he added. "If you don't have the foundation, the structure falls apart, and I think that may apply to other ventures in the world."
Would that filmmakers cared enough about public schools to document the corruption in charter school management.
This article features a good question from a school board member: "So are you in the real estate business or the charter [school] business?"
Matthew Haag
A national charter school company that plans to open new schools in Texas, including one in McKinney, 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?
Virginia-based Imagine Schools has emerged as one of the largest for-profit charter school management companies, running several dozen schools in 12 states. It plans to open Imagine International Academy of North Texas in McKinney next year.
Charter schools house their students in Texas in a variety of ways, according to the former Charter Resource Center of Texas, from renting space in a shopping center to doing complex property transactions such as Imagine's.
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. Nevada's charter schools include Imagine's 100 Academy of Excellence in North Las Vegas.
Imagine executives say their business practices are sound and comply with all state laws to ensure that enough money goes into academic programs. The company's real estate transactions are "transparent," according to Barry Sharp, Imagine's chief financial officer.
Last fall, Sharp appeared before Texas' State Board of Education, which was considering whether to approve Imagine's applications for new schools in McKinney and in Georgetown, north of Austin.
After hearing testimony about Imagine's complex deals to acquire land and construct school buildings, 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."
Nevada school's operations
Texas began awarding charters to private operators a decade ago with a simple idea: giving parents an alternative to traditional public schools. The schools are privately run, but the state treasury sends about $6,000 a year to a charter school for each enrolled student.
Imagine's campus in McKinney was approved for an enrollment of up to 1,000 students, meaning the school could receive $6 million a year in state funds. The planned Texas schools won't open until at least 2010, but Imagine's operations in other states shed some light on what might happen in Texas.
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. Schoolhouse Finance, the Imagine subsidiary, paid for the school's property and building construction. Schoolhouse Finance then leased the property to the charter school for $1.4 million a year.
Next, Schoolhouse Finance sold the $8 million property to a real estate investment trust, Kansas City, Mo.,-based Entertainment Properties Trust. The trust then leased the property back to Schoolhouse Finance at a lower rate than the charter school pays.
Money remaining after Schoolhouse Finance pays its lease to the trust goes to Imagine Schools Inc. This tiered lease system has led to 10 percent returns on investment for owners and investors in the two companies, Sharp said.
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 Horton, a persistent critic of Imagine's operations.
Alan Olkes, another Imagine executive, acknowledged that Schoolhouse Finance keeps a portion of the rent money it receives from a charter school. But he insisted the payments are needed to strengthen cash reserves to maintain the school buildings and to pay down debt.
"There are reserves that have be collected, and that's the gap between what we pay to the real estate investment trust opposed to what the schools are paying Schoolhouse Finance," Olkes said.
The Texas Education Agency doesn't regulate how much money charter schools can spend on leases, officials said.
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.
"There is no real evaluation of their finances and how they are being spent," said Suzanne Marchman, an agency spokeswoman.
Gov. Rick Perry's executive order that school districts must spend at least 65 percent of their budget on classroom instruction – a requirement recently dropped – never applied to charters.
'Too many questions'
Bruce Greening, a former principal at Imagine MASTer Academy in Fort Wayne, Ind., said Imagine required him to pay $650,000 a year to rent a 28-acre campus valued at $3.4 million. But the school used only two buildings on the sprawling property, he said.
"Obviously, I thought the rent was kind of steep," he said. "But I had no choice, because it was part of the company's procedures. We couldn't go anywhere else."
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.
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.
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.
Imagine officials have said Greening and Wallace were fired for job performance reasons that had nothing to do with questions about real estate payments.
TEA officials refused to say whether they knew about Greening and Wallace's concerns before recommending approval for Imagine's charter school operations in Texas.
— Matthew Haag
Dallas Morning News
2008-07-04
INDEX OF OUTRAGES
Pages: 380
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