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Updated
May 12, 2010
A weblog about the politics and affairs of the old and glorious City of Albany, New York, USA. Articles written and disseminated from Albany's beautiful and historic South End by Daniel Van Riper. If you wish to make a response, have anything to add or would like to make an empty threat, please contact me.
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May 12, 2010
Charter Schools And Obscene Profits
Why Brighter Choice is so hot to impose even more unwanted charter school buildings on the City of Albany and soak the taxpayers
Last week a major story about corruption in the City of Albany broke nationally, but the story has been completely suppressed here in the Capital District. As of the date of this posting, not one media outlet in our region, corporate or otherwise, has seen fit to so much as mention in passing this explosive expose. Consider it regional censorship, even though it adversely affects every taxpayer in the City of Albany.
Juan Gonzalez is that rarest of creatures, a real actual journalist working regularly for the corporate media. How a real journalist like Mr. Gonzalez has ended up writing a column for a worthless rag like the Daily News is just one of life’s mysteries. But for some reason his employers let him write groundbreaking investigative articles, he does not merely provide content.
Friday morning (May 7) I was kinda half listening to Democracy Now! on WRPI FM (91.5) and lingering over a late breakfast when I suddenly heard Mr. Gonzalez say, “I have focused on Albany, New York, which in New York state, is the [school] district with the highest percentage of children in charter schools, twenty percent of the schoolchildren in Albany are now attending charter schools.” I nearly spilled my coffee.
Sometimes a blog post writes itself because, well, someone else wrote it for me. Rather than paraphrase Mr. Gonzalez’ explanation, I have chosen to reprint his Democracy Now! report, which in itself is a concise summary of his May 7 column for the Daily News. Juan Gonzalez often co-hosts on Democracy Now!, here he is with Amy Goodman:
AMY GOODMAN: Juan, before we move on to the Gulf, you have a very interesting column in the “New York Daily News” today, an exposé around big banks and charter schools.
JUAN GONZALEZ: Yes, Amy, one of the things I’ve been trying now for a couple of years is to try to figure out why is it that so many hedge fund managers, wealthy Americans, and big banks, Wall Street banks- executives of Wall Street banks, have all lined-up supporting and getting involved in the development of charter schools. I think I may have come across one of the reasons.
There’s a lot of money to be made in charter schools, and I’m not talking just about the for-profit management companies that run a lot of these charter schools. It turns out that at the tail end of the Clinton administration in 2000, Congress passed a new kind of tax credit called a New Markets tax credit. What this allows is it gives enormous federal tax credit to banks and equity funds that invest in community projects in under served communities and it’s been used heavily now for the last several years for charter schools.
I have focused on Albany, New York, which in New York state, is the district with the highest percentage of children in charter schools, twenty percent of the schoolchildren in Albany are now attending charter schools. I discovered that quite a few of the charter schools there have been built using these New Markets tax credits.
What happens is the investors who put up the money to build charter schools get to basically or virtually double their money in seven years through a thirty-nine percent tax credit from the federal government. In addition, this is a tax credit on money that their lending, so they’re also collecting interest on the loans as well as getting the thirty-nine percent tax credit. They piggyback the tax credit on other kinds of federal tax credits like historic preservation or job creation or brownfields credits.
The result is, you can put in ten million dollars and in seven years double your money. The problem is, that the charter schools end up paying [with] rents the debt service on these loans and so now, a lot of the charter schools in Albany are straining paying their debt service- their rent has gone up from $170,000 to $500,000 in a year or- huge increases in their rents as they strain to pay off these loans, these construction loans.
The rents are eating-up huge portions of their total cost. And, of course, the money is coming from the state.
One of the big issues is that so many of these charter schools are not being audited. No one knows who are the people making these huge windfall profits as the investors. Often, there are interlocking relationships between the charter school boards and the nonprofit groups that organize and syndicate the loans.
There needs to be some light on this whole issue and the state legislature right now is considering expanding charter school caps, but one of the things I press for in my column, there has to be the power of the government to independently audit all of these charter schools or we’re not going to know how public dollars are ending up in the coffers of Wall Street investors.
AMY GOODMAN: Congratulations on doing this and we’ll continue to expose it as you do.
Thanks to the investigative efforts of Juan Gonzalez, we now know why our poor abused City of Albany has been saddled with so many brand spanking new charter school buildings, courtesy of the Brighter Choice Corporation. Now we see why our elected officials are so hot to duplicate our school system. and raise taxes. There’s money to made off of the taxpayers, lots of it, enough to make all of the right sort of people very happy with charter schools.
And we now have a very plausible explanation for Albany mayor Jerry Jennings’ militant enthusiasm for corporate charter schools (as opposed to community based charter schools, for which He has displayed no interest.) Like many other observers, I’ve been puzzled by Jennings’ behavior. I mean, here’s the former public school teacher and vice principal using all of his powers as mayor to sabotage the public school system that He used to work for, and at the same time assist the Brighter Choice Corporation construction plans in any way that He can.
I believe it is very much in the public interest to ask, has Jerry Jennings, along with any of His family or loyal minions, been given an opportunity to invest in and profit from the construction of all of these Brighter Choice charter school buildings that we don’t want or need?
Since there is absolutely no information available about these privatized scam operations, there is no way to prove that Jennings is profiting personally. But lack of information is exactly why Jennings comes under suspicion. Can the Mayor prove that his personal enthusiasm for Brighter Choice is not motivated by His own personal investments in Brighter Choice?
But even though we taxpayers are paying more and more every year to finance these corporate charter schools, we are legally barred from inspecting the finances of Brighter Choice and other similar scam outfits. For example, who are the investors? Who exactly is doubling his or her money in seven years? We aren’t allowed to know.
Juan Gonzalez’ Daily News column considers this nondisclosure problem:
Meanwhile, all the Albany charter schools haven't achieved the enrollment levels their founders expected, even after recruiting hundreds of students from suburban school districts to fill their seats. The result has been less money in per-pupil state aid to pay operating costs, including those big rent bills. Several charters have fallen into additional debt to the Brighter Choice Foundation.
You'd think these financial problems would raise eyebrows among state regulators - or at least worry those charter school boards. But the powerful charter lobby has so far successfully battled to prevent independent government audits of how its schools spend their state aid.
So the next time some State legislator starts blabbering about how privatized charter schools with no public accountability are going to turn Albany into the Garden of Eden, we can ask him or her how much they invested in the charter school corporations. You can pretty much figure the more indignant our elected representatives get at hearing that question, the more of their own money they invested.
Next, Mr. Gonzalez brings up two old friends of Mayor Jennings, suburbanites Tom Carroll of Clifton Park and his boy, Chris Bender of Loudonville. I’ve written before about Carroll and his sneering contempt for the City of Albany. But like Mr. Gonzalez, I’ve always wondered about the precise mechanism by which he and Carroll’s gang collect corporate welfare from the taxpayers. Again from the Daily News:
And key officers of Albany's charter school boards are themselves board members, employees or former employees of the Brighter Choice Foundation or its affiliates. Christian Bender, for example, executive director of the foundation, is chairman or vice chairman of four of the Albany charters.
Tom Carroll, the foundation's vice chairman and one of the authors of the state's charter law when he was in the Pataki administration, was a founding board member of Albany Community Charter School and is currently chairman of two other charters, Brighter Choice School for Boys and Brighter Choice School for Girls.
Well, we knew all that. We’re talking about a tight little clique that is feeding like a pile of squirming maggots from the not-quite-dead-yet carcass of the City of Albany. Here’s a little tidbit about how Brighter Choice manipulates public money, something every Albany taxpayer needs to know:
Carroll also sits on the board of directors of NCB Capital Impact, a Virginia organization that used New Market Credits to pull together investors for all the Albany building loans. A Brighter Choice official confirmed Thursday that the Virginia organization gets "a 3% originating and management fee" for all school construction deals that Brighter Choice arranges.
Did you catch that? Three percent of the taxpayer money spent constructing each Brighter Choice school building is delivered free of charge to... drum roll please... Tom Carroll and several of his buddies. He pays himself for his one time consulting services. Isn’t that sweet? Restores your faith in the American Dream, work hard and some sharpie like Tom Carroll gets your reward.
Now that we know about one of these sweet little arrangements, perhaps there are a few more nasty little creatures like that curled up under the blankets, eh? What we have are legal kickbacks, legal because Tom Carroll wrote the law that legalizes charter school kickbacks when he was part of the failed administration of former governor Republican George Pataki.
The standard counter argument to that, a lame one, is that charter school corporations are private entities with all the rights of a citizen but with none of the responsibilities. In contrast, politicians are routinely brought down by mixing their work with their private investments. Look at Republican Joe Bruno’s recent conviction. Even the lowest and least paid State workers are strictly prohibited from stealing from the taxpayers.
And imagine the outcry if a public school official got caught concealing personal financial transactions from the taxpayers. But inside the shadowy charter school zone ethics and personal standards of behavior do not apply. The only rule is don’t do anything that will compromise public relations for the corporation.
Perhaps some of our elected officials may have a personal incentive to keep secret the monetary dealings of charter school corporations. Perhaps some of our elected officials are so deep inside the charter school cesspool that they wouldn’t dare defy Tom Carroll. Perhaps that’s why they always give him everything he wants, such as extending caps on building new charter schools or suppressing financial disclosure legislation.
With this kind of financial flimflammery nothing is clear or easy to explain. Such arrangements are deliberately constructed to befuddle the casual observer, confusion acts as a cover to institutionalized corruption and any of the little routines that may not be entirely legal. But Mr. Gonzalez manages to explain further how this little tax scam works:
Under the New Markets program, a bank or private equity firm that lends money to a nonprofit to build a charter school can receive a 39% federal tax credit over seven years. The credit can even be piggybacked on other tax breaks for historic preservation or job creation. By combining the various credits with the interest from the loan itself, a lender can almost double his investment over the seven-year period.
No wonder JPMorgan Chase announced this week it was creating a new $325 million pool to invest in charter schools and take advantage of the New Markets Tax Credit.
Now, suppose we had a New Markets tax program for rebuilding City of Albany neighborhoods. Imagine foreign corporate financial parasites like JPMorgan Chase rushing into our own South End with $325 million because they expected to double their investment by building much needed housing. Impossible, you say? It’s all how our legislators structure the tax laws.
Unfortunately, the tax laws are specifically design to simultaneously exploit and destroy the Cities of upstate New York. And unfortunately, the City of albany is saddled with a mayor who doesn’t give a crap about the City and is only interested in accommodating the guys with the money. Jerry Jennings is getting ready to retire, that exclusive condo in Florida is calling His name.
Other than the brief midmorning report on a college radio station, this national story has so far been censored locally. The local media is too tied up in the corporate machine, none of the local media managers would dare defy the corporations to which they are loyal.
For example, take Alan Chartock, the owner of WAMC FM and also of a radio network that dictates radio content for a good chunk of the northeast US. It seems that Alan’s own son Jonas Chartock is the executive director of the SUNY Charter School Institute, his job is to maintain the illusion that charters are subject to effective oversight. Do you think Dad will ever allow even light criticism of sonny boy’s career choice anywhere on his Northeast Public Radio Network?
And the Hearst Times Union. Many people seem to be thoroughly confused by how Hearst has handled stories about local charter schools. When Tom Carroll was rewriting State laws and securing his own financial future, the Times Union backed him one hundred percent. But recently they became very critical of one particular charter school in Albany.
This sole charter school competitor to the Brighter Choice Corporation in Albany was a struggling charter called New Covenant, which is closing this year. I’ve been told by employees of New Covenant that students rejected by Brighter Choice generally ended up at New Covenant, that is why New Covenant could not keep up “educational standards’ and got decertified. Now those kids rejected by Brighter Choice as unfit to teach will be dumped en masse on Albany public schools, unlike charter school corporations the public schools have no choice but to take them.
Word is that Tom Carroll relentlessly lobbied the SUNY Charter School Institute to close his competitor. According to those that I talked to, he did so because he wanted New Covenant to dump these rejected kids on the Albany public schools to overburden his real competitor. Alan Chartock’s son Jonas was in charge of making that decision. Small world, isn’t it?
I’m not even going to discuss the corporate owned TV and radio stations, they would never attack the corporate political agenda so succinctly. Perhaps Metroland will give us Juan Gonzalez’ expose. Maybe another blog will link to the story. Maybe.
I’ll leave the last word to Mr. Gonzalez from the tail end of his Daily News article:
Albany is exhibit A in the web of potential conflicts that keep popping up in the charter school movement. It's one reason the state Legislature should refuse to lift the current cap on charter schools unless it also adopts stringent new government auditing rules.
If wealthy investors and banks can double their money simply by building charter schools, taxpayers deserve to know exactly who arranged those deals, who will benefit and what they will ultimately cost each school.
Thank you, Juan. I wish we had a few real journalists like you working locally. Then maybe we might be able to get a handle on the spectacular corruption that is killing the City of Albany.
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