Charter school rent stirs debate

Group decries high payments

Imagine School for the Arts on Madison Ave.

The charter school Imagine School for the Arts is paying rent of nearly $1 million a year on a downtown building with the education funding it gets from the state, prompting criticism from a progressive advocacy group that studied charter-school finances around the state.

The complicated financial arrangement also involves a school-affiliated trust company spending more than $7 million last year to buy a building valued at less than $2 million.

The liberal advocacy group ProgressOhio attacked the size of the rent payments at charter schools operated in Toledo and other Ohio cities by Imagine Schools Monday as excessive. Imagine is a national for-profit educational management company.

According to ProgressOhio, Imagine’s subsidiary, Schoolhouse Finance, collected at least $14.4 million in public money last year for the company’s 17 Ohio schools. Of that, $8.9 million covered rent for long-term leases to Schoolhouse Finance. The $5.5 million balance went to pay “indirect costs” to Imagine to provide management services.

“The state of Ohio and its oversight have been asleep at the wheel. If you look at the Imagine schools and the annual rents, they are outrageous,” said Brian Rothenberg, executive director of ProgressOhio in Columbus. “These for-profit management corporations have become profiteers, and they are taking this money to enrich themselves.”

ProgressOhio receives some of its money from public school teacher unions in Ohio, which are opposed to charter schools because they divert money from traditional public schools.

Mr. Rothenberg denied that support from school unions was a factor in the agency’s analysis of charter school financing.

According to ProgressOhio, Imagine Schools pays annual rent of $301,320 for the Clay Avenue Community School building, $175,464 for the Hill Avenue Environmental School, and $942,549 for the Madison Avenue School for the Arts.

In addition, all three pay a management fee to Imagine: $483,852 for Clay Avenue, $124,646 for Hill Avenue, and $608,020 for Madison Avenue.

All three had a performance index grade of D in the most recent statewide report card. The district in which those schools are located, Toledo Public Schools, had an overall performance index grade of D.

According to an audit by state Auditor David Yost, Madison Avenue School for the Arts received funds from the state of $4,296,395 for its school of 595 pupils in 2013, making its rental payments of $942,549 less than a quarter of its state funding.

Rhonda Cagle, senior vice president of communications for Imagine Schools, said the rent on Madison Avenue is part of a lease-purchase plan and is based on the cost of buying and renovating the building.

“Imagine Schools is not profiting through the real estate support services we offer to our campuses,” Ms. Cagle said.

She said Schoolhouse Finance obtained long-term financing for several Imagine school buildings by selling them to a real estate investment trust at cost, then leasing them back for 25 years. The cost is limited to the combination of the original purchase price plus the actual cost of necessary renovations to make the building appropriate to the special use of a school and the educational needs of the students, she said.

The Madison Avenue school is in the former Zenobia Shrine. Schoolhouse Finance bought the building at 1511 Madison Ave. and the parking lot across the street in 2007 for $1.5 million. The property was sold in April, 2013, to a real estate investment trust, Educational Capital Solutions in Kansas City, for $7,126,312.

The property has a market value of $1.63 million, according to the Lucas County Auditor.

Ron Adler, president and founder of the Ohio Coalition for Quality Education, pointed out that charter schools can’t tap into the Ohio School Facilities Commission or ask taxpayers for a levy to pay to buy, renovate, or upgrade a building, as public schools can.

“The state has put all charter schools in a very precarious position. They start with 30 percent less funding and they have to take foundation money to buy or rent or lease a facility,” Mr. Adler said.

Mr. Rothenberg blasted Gov. John Kasich, saying the audits of the charter schools are available to the governor’s office, yet he’s done nothing to rein in “abusive” rental payments.

“Our ‘fiscally conservative’ governor needs to explain why he’s allowed all this money to be wasted and all these kids to be hurt,” Mr. Rothenberg said.

Governor Kasich’s spokesman, Rob Nichols, declined to comment on Mr. Rothenberg’s statements, referring calls to John Charlton, spokesman for the Ohio Department of Education.

Mr. Charlton said the education department has little direct authority over charter schools but does have authority over the agencies that sponsor the charter schools. He said the state is considering strengthening its regulations to allow or require charter school sponsors to have more oversight of their schools’ lease and management contracts.

“We’re aware of this situation with Imagine and some other management companies and we’re looking into this,” Mr. Charlton said. “We’re hoping after the first of the year we can have some discussions and put something in place.”

Contact Tom Troy: tomtroy@theblade.com or 419-724-6058 or on Twitter @TomFTroy.