Advocate for Local Control of Taxpayer Dollars

The Louisiana state charter school law has effectively eliminated local taxpayers’ oversight of tax dollars. In order to fully address this erosion of local control, there must be changes at the state level. At the local level, we must oppose attempts to further divert our tax dollars to private companies and advocate for changes to our Planning and Zoning policies.

CHARTER SCHOOL APPLICATION PROCESS EMPOWERS CHARTER SCHOOLS NOT TAXPAYERS

The Louisiana state charter school law has effectively eliminated local taxpayers’ oversight of tax dollars.

In regards to charter school expenditures, local taxpayers do not have final say. When an approved non-profit decides to open a charter school, it must first submit an application to the local school board. The local school board must use certain prescribed criteria to decide whether to grant that charter. If the local school board denies the applicant a charter, then the prospective charter school may submit an application to the state Board of Elementary and Secondary Education(BESE). BESE typically grants the charter.

At first glance, it may appear the local board has some decision-making power about the opening of charter schools. However, the local board effectively only has the ability to approve charters or to allow charters to be approved by the state. The final result is more charter schools in the parish regardless of the decision of the local board members who are accountable to the local taxpayers. Such a system provides the appearance of a democratic process, but it’s a meaningless one. Ultimately, it’s the private charter school—and its affiliated charter management organization—that holds the decision-making power since it’s the decision to submit an application that largely determines whether a charter is granted.

Once open, the non-profit charter school is required by law to hire a charter management organization (CMO). The charter management organization is typically for-profit. The CMO is able to enter into business agreements with other companies. They are not required to make the terms of these agreements public since they are private companies.

THE CAPITAL LEASE AGREEMENTS BOONDOGGLE

One of the reasons charter schools are proliferating is they have become vehicles for real estate investors. Here’s how it works:

 

Current Louisiana Charter School law gives broad powers to charter schools. Revised statute 17, section §3995, subsection D states:

Any approved charter school may solicit, accept, and administer donations or any other financial assistance in the form of money, grants, property, loans, or personal services for educational purposes from any public or private person, corporation, or agency and comply with rules and regulations governing grants from the federal government or from any other person or agency, which are not in contravention of the constitution and any other law.

This allows charter schools to enter into capital lease agreements with for-profit real estate affiliates. The cost to the taxpayer is substantial.

 

WHAT IS A CAPITAL LEASE?

A lease will be categorized as a capital lease if it meets any of the following conditions:

  • There is a bargain purchase option, where the asset either automatically transfers to the lessee at the end of the lease term or can be bought for an amount that is less than what the asset would actually be worth.

  • The term of the lease is more than 75% of the effective useful life of the asset.

  • The present value of the lease payments exceeds 90% of the original cost of the asset.

 

The capital lease agreements associated with charter school proliferation are characterized by longer terms—20-30 years, but the lessor retains ownership. They are like a mortgage with no appreciable asset at the end of the lease term. These agreements are attractive to investors, because the investor assumes very little risk, especially when secured by a government agency or bond sale. Some charter school companies use them as a marketing strategy to potential investors.

CHARTER SCHOOLS, CMO’S, REAL ESTATE AFFILIATES & CAPITAL LEASE AGREEMENTS

Louisiana’s permissive charter school law has encouraged the use of these capital lease agreements.

  • The non-profit charter school hires a for-profit charter management organization.

  • The for-profit charter management organization has a for-profit real estate affiliate.

  • The for-profit real estate affiliate purchases and develops a property.

  • The for-profit charter management organization enters into a capital lease agreement with the for-profit real estate affiliate for the use of a facility.

  • The non-profit charter school pays the lease note with the tax funds allocated to it by the state.

  • At the end of the lease term, the non-profit charter school has paid the cost of the construction of the facility (sometimes with interest), but the ownership of the building does not transfer to the non-profit charter school or the community whose tax dollars essentially paid for its construction.

  • Instead, the for-profit real estate company retains ownership of the facility though it was paid for with taxpayer funds.

 

Here in Baton Rouge, the new facility on Burbank Drive currently occupied by South Baton Rouge Charter Academy is one such example. The school is overseen by the South Louisiana Charter School Foundation. Its charter management organization is Charter Schools USA. Charter Schools USA has a for-profit real estate affiliate, Red Apple Development LLC.

In December 2013, Ryan Construction, a frequent partner of Red Apple Development, purchased the land for South Baton Rouge Charter Academy for $1.1 million. In December 2014, it was reported in an article in the Baton Rouge Business Report that Red Apple purchased the completed facility from Ryan Construction for $13.2 million. South Louisiana Charter Foundation’s 2015 Financial Report indicates that they entered into a capital lease agreement for the property. The same 2015 Financial Report indicates that South Baton Rouge Charter has a capital lease liability in the amount of $13,954,059 with a long term liability of $14,192,265. The payments for the lease are made from the school’s budget. This facility, which will be paid for with taxpayer funds, belongs to Red Apple Development LLC, a subsidiary of Red Apple Conglomerate. According to FORBES, Red Apple Conglomerate is one of the largest private companies in American with more than $4 billion in revenue.

Arrangements such as these allow charter schools to siphon our tax dollars out of our community so that those funds are no longer invested in facilities and resources that will benefit future generations.

CAPITAL LEASE BOONDOGGLE UNDERMINES EQUITABLE INVESTMENT IN INFRASTRUCTURE

Historically, African American communities garnered less investment than majority white communities in public infrastructure, including school facilities. Unfortunately, this disparity in investment is continuing by the use of these capital lease agreements. As a result of the discriminatory nature of our accountability system, majority minority school systems with a high percentage of children living in poverty are disproportionately targeted for school privatization and these types of real estate agreements. Once again our tax dollars are not being used to invest in public infrastructure in majority African American communities. Instead, our tax dollars are being used to invest in facilities owned by private, for-profit companies. This diversion of resources hurts all taxpayers in the parish regardless of their race.

THE COMMON ENROLLMENT SYSTEM (ONEAPP) BOONDOGGLE

The Baton Rouge Area Chamber and other proponents of charter schools that benefit national and multinational corporations have long been advocating for a common enrollment system, sometimes called OneApp. They claim it will streamline the application process for parents and “increase choice.” This is not the primary purpose of OneApp. It’s not even one of the results.

 

The primary purpose of OneApp is to guarantee charter operators that an agreed upon number of students will be enrolled in their schools. This in turn guarantees the charter school will receive a certain amount of tax dollars regardless of whether parents chose the school for their children.

Currently, charter schools have to recruit students and parents have to freely choose to enroll their child in the charter school instead of their traditional neighborhood public school. If the OneApp is instituted, parents rank their choices and the software assigns the students to schools. However, there is no guarantee that students will be enrolled in one of the schools chosen by their parents. The OneApp guarantees only that the charter schools will be allocated the promised number of students—and their funding. The funding drain created by the diversion of our tax dollars from our democratically-controlled local school system to the privately operated charter schools sets off a cycle of school closures that further limits parents’ choices rather than increases them.

 

The OneApp is the antithesis of parental choice. It’s merely a well-marketed mechanism to eliminate taxpayer oversight by diverting our tax dollars to schools governed by boards whose members are not elected by voters. Don’t be fooled by its carefully packaged marketing campaign.

WHAT CAN WE DO?

In order to fully address this erosion of local control, there must be changes at the state level.

 

Locally, we can:

  1. Oppose the adoption of a common enrollment system or OneApp;

  2. Advocate for the following changes to our Planning and Zoning policies:

    • A current school board member should serve on the Planning & Zoning Commission. At one time the Baton Rouge Plan of Government mandated that the Planning and Zoning Commission include a current school board member. This mandate must be restored.

    • Planning and zoning policies must require that in order to gain approval, new neighborhood developments must set aside a sufficient amount of land to allow the East Baton Rouge Parish School System to build and open new schools in order to meet the needs of the growing population.

    • When considering building permits for new charter school facilities, Metro Council members and Planning and Zoning commission members should be able to consider the proposed location and any relevant real estate agreements the charter management organization has entered into in order to determine whether the new construction is a prudent use of taxpayer funds. They are currently not allowed to weigh those factors when deciding to approve or reject applications for building permits.

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