PLANNING AND ZONING POLICIES SHOULD PROTECT LOCAL TAXPAYERS

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As a Southside Civic Association board member, I was introduced to Planning and Zoning ordinances and their importance to establishing and maintaining the character of our neighborhoods. I have since come to appreciate how these ordinances affect patterns of development, the role they play in the structure of our local economy, and their pertinence to oversight of taxpayer dollars. Many residents in District 12 and across the parish intuitively recognize that the pattern of disinvestment and gentrification affecting our parish does not benefit average citizens or genuinely small businesses. Planning and Zoning ordinances are key to controlling growth so it benefits the community as a whole. I commit to truly “smart growth” that benefits the people of District 12 and the entire parish.

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I also will advocate for Planning and Zoning policies that protect local control of taxpayer dollars. One such example: Our Planning and Zoning policies must be amended to address a change in state law which has effectively eliminated taxpayer oversight of local tax dollars. It’s costing the taxpayers in East Baton Rouge Parish tens of millions of dollars.

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Before the change to Louisiana state law, local school boards were the sole governing body able to authorize the use of public funds to construct school facilities, and these facilities constituted public property. The buildings belonged to the public which paid for them.

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The Louisiana Charter School Law extended this power to charter schools but did not stipulate—as most states do—that any asset or facility purchased with taxpayer dollars constitutes public property. As a result, many charter schools are entering into finance or capital lease agreements which effectively allows public tax dollars to be used to purchase buildings for for-profit real estate companies. This financing model has become a vehicle for real estate investors.

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Here’s how it works:

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

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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 finance or capital lease agreements with for-profit real estate affiliates. A finance lease (previously referred to as a capital lease) unlike an operating lease requires the lessee to commit to an extended lease term, typically 20-30 years. The finance lease agreements associated with charter school proliferation are characterized by these longer terms—20-30 years, and effectively cover the cost of the construction of the facility and often include additional interest payments. The result: taxpayers pay for the cost of the construction of the building plus interest and at the end of the lease term the lessor, not the taxpayers, retains ownership of the facility. They’re like mortgages with no appreciable assets at the end of the lease terms. 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.

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Currently, the Planning and Zoning commission members are prohibited from considering such real estate agreements when deciding to approve or reject applications for building permits, and it costs our community immensely.

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An Example of a Finance Lease Agreement and its Cost to Taxpayers

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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.

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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, an article in the Baton Rouge Business Report stated 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 total future payments including interest of approximately $25 million. 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 America 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.

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WHAT CAN WE DO?

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We must advocate for changes to our Planning and Zoning policies.

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1. 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.

2. 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.

3. 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.