Remember that scene in the Dustin Hoffman movie “The Graduate” where a sharp guy whispers to the young Hoffman that the business of the future is “plastics!”
In the charter industry, the profits are not in tuition money. They are in real estate.
Pennsylvania theoretically does not permit for-profit charters. But that doesn’t mean that charters don’t make a handsome profit. It is all about real estate, or leasing the property you own to yourself for a fine fee.
The five-story brick and concrete building overlooking Brighton Road in Perry South features a Propel schools banner over its front door, with signs for the charter network at every approach.
The 99,155-square-foot Propel Northside is owned, though, by School Facilities Development Inc., a nonprofit corporation with a very narrow role: Leasing property to Propel.
SFD’s ownership allows Propel to collect around $322,000 in annual lease reimbursements from the state — money it wouldn’t get if it owned its school buildings. It’s an arrangement that had drawn criticism from the state’s top auditor and is threatened by proposed legislation.
“You’ve created this nonprofit and sort of in a sense, you control it,” said Auditor General Eugene DePasquale, a critic of the state’s charter school law. “You’re getting a lease reimbursement for renting to yourself.”
Since 2004, SFD has spent $32.6 million buying a portfolio of seven schools, comprising most of Propel’s 11 locations. With no employees and just a few volunteers and part-time consultants, the nonprofit receives $3 million in annual lease payments from Propel schools, and after debt payments runs annual six-figure surpluses.
From 1965 to 2006, the Pittsburgh Public Schools owned the Brighton Road building, maintained it and used it as Columbus Middle School. That simple arrangement isn’t mirrored in the charter school world, where specialized nonprofits take on various roles and receive millions of dollars in public money.
“Real estate is held in a separate company,” said Propel Executive Director Jeremy Resnick, recounting the advice he’s gotten from attorneys and financiers during Propel’s 15-year history. “This is how it’s being done.”
Jeremy Resnick–founder of the Propel Charter Chain–is the son of the esteemed education researcher Dr. Lauren Resnick of the LRDC at the University of Pittsburgh.
Diane Ravitch's blog 
The CEOs and other officials of many nonprofits are profiting handsomely from their “non-profit status”
College Board and ETS are perfect examples.
The whole “non-profit” category is a joke.
LikeLike
This is the result of irresponsible government passing laws without really understanding the implications of these laws. When government allows grifters and corporate carpetbaggers to profit from funds that should be used to educate the young people of the state, government is being an irresponsible steward of public funds. Unless government steps up to oversee and manage where the money goes, the crooked deals will continue.
LikeLike
The link goes to the last [charter schools] section of a long Pitt-Post-Gazette article “Pittsburgh’s Powerful Non-Profits” which is pretty fascinating. It covers major med, uni et al employers & foundations which “now employ 1 in 5 workers in the region, control at least one-tenth of its property, and have amassed wealth that far exceeds the remnants of our profit-driven industrial heyday.” Where other rust-belt areas decay, looks like these entities have allowed Pitt to transition to a decent economy despite the demise of USSteel.
Unlike the self-serving drive-by ed contributions dumped into cities/ campaigns/ legislation by Gates, Walton, Zuckerberg, Broad, these are home-grown benefits plowed into the home area in partnership w/local & state gov’t: “Pittsburgh’s 14 Big Givers depend almost entirely on the vast endowments left to them by industrialists (Alcoa, Hillman foundations), food or housewares entrepreneurs (Eden Hall, Grable, Heinz), financiers (McCune, Mellon and Scaife-related philanthropies), fuel magnates (Benedum) or developers (Buncher).”
Clearly the non-profits are big drivers of the economy/ big employers of the locals. But it’s not a rosy article. E.g., altho it details heart-lifting transformations of crummy residential projects into decent living for the low-income, plenty of sensible questions are asked about whether & if so how such expensive projects can be sustained/ continued. And lots of points about democracy, i.e., level of control/ input of local govt, virtually no monitoring by IRS, the large surpluses held by non-profits. Major points are made about how, tho these entities obviously benefit the overall city economy, they pay minimally into local/ state taxes supporting PUBLIC SCHOOLS and other public goods.
Charter schools weigh in at the bottom of the article’s scale on non-profit contributors to the economy– & this section on charter schools sticks out like a sore thumb, even tagged in the sub-headline as due to a “quirk in the law.” The only point they raise is the one in Diane’s cite, i.e., how law allows charters to set up a dummy RE co virtually owned by the non-profit — so charter co can buy properties & lease it to their schools. A number of experts/ state reps point out this practice is shady/ illegal just on the face of it, & legislation needs to be changed.
My take was, charters are not in same league as other non-profits examined, which may need to be reined in to ensure full participation by elected govt. Charters are just a leech growing off “a quirk in the law.”
LikeLike
Anybody see the movie, Founder? Owning the real estate is how McDonald’s was stolen. https://www.rottentomatoes.com/m/the_founder/
LikeLike
The article is informative and your comments extend the ideas; it was rather helpful reading both the post and your comments.
LikeLike