This post is part 4 of a series published by northjersey.com 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.”

Open the link and read the whole article.

Northjersey.com and USA Today New Jersey are publishing a five-part series of the abuse of taxpayer funds by charter operators. This is part 3 of an investigation called “Cashing In on Charter Schools,” written by Abbott Koloff and Jean Rimbach.

“Hundreds of millions of dollars in federal aid was steered to New Jersey’s largest charter school management companies over the last decade, helping them to create a network of school buildings that are privately owned.

“In other parts of the country, the same aid programs provided interest-free loans to both traditional public schools and charters to construct and renovate buildings. But a much different model emerged in New Jersey as Gov. Chris Christie’s administration gave the state’s entire share of the federal aid — bonds worth more than a half-billion dollars — to charters and other non-traditional public schools.

“More than three-quarters of that money was awarded to the state’s two largest charter school operators, KIPP New Jersey and Uncommon Schools, which used it in ways that strayed far from the intent of the aid programs.

“The companies fashioned complex financial structures that allow them to exploit the bonds by tapping into the aid as a steady stream of income over decades, using methods that in some cases have drawn the scrutiny of federal investigators.

“The result is a string of school buildings that were built with taxpayer money but remain in private hands. The companies that own them were created to purchase real estate and renovate buildings for charter schools, but they are kept legally separate from the charter schools that send millions of dollars their way each year in rent.

“Charter schools rent these buildings indefinitely. Leases do not contemplate a time when rent payments would end or when the buildings would be turned over to the public charter schools, even after the debt is paid.

“The deals involve related companies that are created to lend money to one another — an arrangement that is not uncommon in the world of private finance. But in this case the arrangements steer tax dollars — federal aid that subsidizes the projects by covering the interest on the loans — to private groups that don’t have to share details with the public or the state about how they use the cash.”

Northjersey.com and USA Today New Jersey are posting a five-part series about how taxpayers are being taken for a ride by the charter industry. 

Part 2 is about the millions of state dollars spent to bailout a low-performing charter school.

Reporters Jean Rimbach and Abbott Koloff write:

“By 2010, four years after it opened, the Central Jersey Arts Charter School in Plainfield was in trouble.

“The state had just put it on probation for a host of deficiencies, ordering it to limit spending, develop a curriculum and address problems with its board and student achievement.

“Yet little more than three weeks later, a state agency voted to issue bonds that allowed a fledgling nonprofit called the Friends of Central Jersey Arts Charter School to borrow $8.2 million to buy and renovate a building for the school to rent and, one day, potentially own.

“It was a loan whose repayment was based on the tax dollars flowing to the public charter school.

“The Friends quickly ran out of cash, and about six months later approached a different state agency seeking millions of dollars in additional financing to finish the project without explaining why they had come up short. The next year, another $1.7 million in bonds were issued, this time with the federal government picking up most of the interest.

“While the Friends were permitted to borrow nearly $10 million, the school itself was floundering. A financial report covering the 2010-11 school year stated that Central Jersey Arts was “not in good financial condition” and raised “substantial doubt” about its survival.

“The building opened with fanfare as contractors went unpaid. The next year, the school was back on probation, where it stayed until the state shut it down in 2015 for weak finances and “dismal” academic performance — but not before dumping more taxpayer cash into a now-defunct for-profit management company in the hope of turning it around.

“This is the story of a charter school that failed, and a building that used up millions in public dollars and continued to receive federal aid long after it was left vacant. It’s a story about dubious decisions by multiple state agencies, one that raises questions about the use of public money and the oversight of private groups that own real estate for public charter schools.”

The school “churned through teachers and business administrators at an alarming rate…At one point, a janitor was doing the books.”

It became difficult to know whether to attribute the school’s failure to fraud, theft, or incompetence.

Ultimately, the public money was lost and the education of hundreds of students was squandered.

In this brilliant article, the wisest comment came from a woman who had served as Board president for a time. She said, “You know, the bottom line is greed should not supersede education.”