This post is part 4 of a series published by and USA Today New Jersey. Written by Jean Rimbach and Abbott Koloff, it is called “Cashing in on Charter Schools.” It explores the many ways that charter operators exploit taxpayers.

This post describes how charter operators and real estate developers are cashing in. 

Interest-only mortgages with rates that grow each year. Multimillion dollar fees for paying off loans early. Property that quickly doubles in price. And buildings sold with markups as high as 70 percent.

“Deals like these inked by New Jersey charter schools — or the private groups that support them — highlight how tax dollars meant for public education can reap profits for investors.

“But they also illustrate the lack of options some charter schools face when trying to find and finance facilities — and an absence of state oversight in the process.

“State education officials say they have no authority to review financing or lease agreements struck by charter schools before they are signed. And they don’t police the private organizations, often called “Friends of” groups, that are created to support charter schools by owning or financing their real estate and, in many cases, enter into contracts on a school’s behalf.

“That includes groups like the Friends of Marion P. Thomas Charter School, which agreed to buy two former Newark public school buildings and paid a deposit but said they couldn’t get financing to complete the purchase. So the group struck a deal with a developer who bought the buildings, which documents show needed “limited” work, and sold them to the Friends at a $10 million markup.

“Other schools, such as the International Academy of Trenton, turned to a Kansas City-based real estate investment trust, or REIT, for financing. The charter school, which the state shut down in June, signed a lease that didn’t allow it to buy its building for five years. At that point, after spending near $8.4 million in rent, it would have been required to pay 120 percent of the total development cost.”

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