The story of a charter school that should never have opened, but did, because of bad public policy, the wishes of Jersey pols, campaign donations, big-money and entities set up to make profit. A deep dive, a cautionary tale. Photo: Darcie Cimarusti, Don Norcross, Dana Redd and others in photo op. Promoted by Rosi.
2017 has been an otherwise watershed year for charter supporters: the State DOE granted 21 out of 22 charter renewals and a whopping 22 charter expansions, many amid local outcry. But in a surprise move, Camden Community Charter School has been directed by the State to close by June 30 because of “poor academic performance.” Once a photo-op regular of South Jersey Dems, CCCS’ story is a perplexing one— but is an important as a lesson to us all. It serves as an illustration of what can go wrong amid a toxic swirl of terrible public policy mixed with Jersey politics, campaign donations, big money and for-profit entities (CMOs and Real Estate Investment Trusts) in education. The school should never have been opened— but once it did open, once it is a functioning school with teachers and students, with people’s jobs, and children’s educations– we really have to be careful closing it on a political whim. And if we are going to close it, it should be after a thorough investigation of all the financial dealings of this organization, its founder, and the Real Estate Investment Trust that owns the land of this school and its sister school in Atlantic City. All of this is far more important to know than some bogus claim of “poor test scores.” So let’s look into what we do know.
The Story of Camden Community Charter
I realize not everyone has been quite as obsessed as I, with those mauve colored, pre-fab buildings and fenced-in campus you see as you approach the toll booths at the Ben Franklin Bridge. So allow me to fill in some of the details. Because this story is a good one, and I doubt we’ve seen the end of it. (For a fantastic recap of this organization’s history in Pennsylvania and the circumstances of its expansion into NJ, please read Mark Weber’s series on CSMI, Darcie Cimarusti’s series on for-profit charters in NJ, and her piece on Atlantic City Community Charter. Kudos to these two for bringing this to all of our attention in the first place.)
What is a CMO and how does the money flow?
Camden Community Charter School (CCCS) is run by a for-profit Charter Management Organization (CMO), called CSMI. A CMO is an organization that oversees management duties that the charter school does not handle in-house. In the charter school industry, CMOs can be nonprofit (KIPP), or for-profit (CSMI or White Hat Management). In Camden Community Charter School’s case, the organization was not hired as an independent entity after the fact by a school looking to fill a need— in CCCS’ case, the CMO was the party directly responsible for the founding of the school and public records show that CSMI staff filed the application to the state.
CMOs often work like this: The CMO sets up the charter school by applying to the state; the CMO arranges for a place to house the school; once approved and the school opens, taxpayer money flows to the charter school in the form of state aid per-pupil (which is much more money in Camden as compared to Philadelphia, perhaps a reason CSMI chose NJ as a next target); the charter school “educates” those children and also pays a handsome fee to the CMO for their services; the CMO accumulates a profit. In a nonprofit CMO, the CMO can use the excess cash to start new schools in a sort of pyramid-scheme type model, or pay administrators a hefty salary. In a for-profit CMO, it is fairly straightforward: the owners gain a profit, and because it is a private entity, citizens and taxpayers don’t know how much profit the organization is making off their schools.
In NJ, our law strictly states that for-profit charter schools are illegal. But under Christie, that law was ignored – or at least very loosely interpreted. During his second term, the State approved a small handful of for-profit charter chains in NJ, including Sabis, K12, and CSMI. It’s important to note that all of these for-profit chains are in NJ’s poorest cities: Trenton, Newark and Camden. (It’s the weirdest thing, no for-profit chains have opened in wealthy suburbs. Go figure!)
CSMI, the CMO of Camden Community Charter, is run by a big-money political player from Pennsylvania, Vahan Gureghian. CSMI owns and operates Chester Community Charter School, in Chester PA, and had been under intense scrutiny for a cheating scandal in PA (definitely read these details in Mark Weber’s piece), as well as a very distasteful real-estate scheme where Gureghian himself profited handsomely. But despite these shenanigans in PA, CSMI was approved in NJ to open a school in Camden.
The nature of this cheating scandal is worth repeating. Once Pennsylvania forced Chester Community Charter to adhere to stricter security measures, test scores dropped 30 points! But, hmm… nothing to see here, folks. According to Philadelphia’s The Notebook:
“CSMI is the for-profit management company that operates Chester Community Charter School, which educates more than half the elementary-age children in Chester-Upland. That charter school, described on the company’s website as “one of Pennsylvania’s great educational success stories,” last year was among those investigated by the state for suspicious PSSA test score patterns, including high numbers of wrong-to-right erasures, and was required to impose much stricter test security protocols in 2012. After the measures were adopted, student proficiency rates in math and reading plummeted by 30 points. A school spokesman attributed the decline to reduced funding from the state.”
So what about CSMI in Camden? According to Camden Community School’s 2016 Comprehensive Annual Financial Report, the School counted among their expenses $777,368 in “School Administrative Services” and $745,294 in “Other Administrative Services.” That amounts to a total of over $1.5 million in “Services.” These categories are distinct from an expense called “Regular Instruction” which totals $4,741,645. None of these line items are broken down in greater detail, and I have an email out to the auditing firm for further explanation. But, given CSMI’s record in Pennsylvania, it may mean they are paying themselves over $1.5 million in fees, directly from a pool of taxpayer money earmarked for NJ’s poorest children.
Real Estate Deals in Camden
But simple management fees aren’t the only source of revenue in a for-profit charter scheme. Which brings us to our next revenue source: real estate.
In April, 2013, a profitable real estate flip involving the land that would eventually become the campus of Camden Community Charter School moved the property from the public domain to the private, for-profit educational industry. This flip involved several players: CSMI, the Camden Redevelopment Authority, Education Capital Solutions, LLC and an affiliated Real Estate Investment Trust, EPR Properties.
On April 3, 2013, The Camden Redevelopment Authority sold the property to CSMI for $300,000. Three weeks later, on April 24, CSMI re-sold the property to Education Capital Solutions, LLC for $500,000. A tidy $200,000 profit in three weeks! In one of NJ’s most vulnerable cities! Not bad.
So, who is Education Capital Solutions, LLC? Turns out they are an affiliate of the Kansas City based Real Estate Investment Trust, EPR Properties. EPR Properties boasts a list of Charter Schools it “partners” with. According to its website, “EPR Properties has invested more than $700 million in public charter school facilities that educate more than 36,000 students nationwide, making us one of the nation’s largest institutional owners of public charter school properties.” This February, EPR was recognized by Street Authority as a “Buy First” stock, given its growth potential in the charter sector during the Trump/DeVos administration. There are six NJ charters on EPR’s list, including the Camden Community Charter’s sister school, Atlantic City Community Charter, which is also operated by CSMI. EPR Properties presumably financed the construction of the buildings themselves, and over time the idea is to make back that money (plus a handsome profit) through the payment of rent from the charter school to EPR Properties.
And, rent is indeed paid. According to Camden Community Charter’s 2016 CAFR financial statement:
“Rental payments under this operating lease for the fiscal year ended June 30, 2016 were $1,711,368. In addition, under the agreement, the Charter School paid the property taxes in the amount of $150,642 to the City of Camden” (pg 48).
We don’t know who benefits from paying these sums to EPR Properties. That information is not publicly available, as it is a private for-profit company. However, we do know that in past dealings, CSMI’s president, Mr. Gureghian, has effectively paid himself rent through lease reimbursements in Pennsylvania. So does Mr. Gureghian or any of his people have a stake in EPR Properties? We don’t know. But it would not be surprising given his business pattern across the Delaware.
So why should we care?
Because when NJ’s taxpayers pay taxes to bolster education our poorest areas, we do not want our money lining the pockets of for-profit companies with strong political ties. We would prefer real estate speculation not be the motive for choosing a school’s location, and we don’t want the incentives of a company (to make money) competing with the goals of our society (to educate children). Those two things do not align.
The State’s recent decision to discontinue to charter might be the right one— but as I mentioned earlier, the reasoning is suspect, especially since the school actually serves a population that is representative of the city’s demographics, unlike many charters in Camden and elsewhere. There are plenty of good reasons to look deeply into this school and its practices, and simply claiming “low academic performance” misses the point entirely. If CSMI is indeed “getting rich off the backs of poor children” as one Philly activist put it, then the citizens of NJ deserve to know every gory detail, so we don’t fall for that same trick again.
But, alas. In 2014, the State approved the Atlantic City Community Charter School, also operated by CSMI, which, just last year moved to a shiny new location in Galloway after being granted an expansion by the state. The twisted, tumultuous story of Camden Community Charter and its sister school shows us is that the process of opening and closing charter schools in NJ is arbitrary and prone to political influence. Why would we grant an expansion to a school that has proven dubious leadership, at the same time we are still evaluating the first school? Why would we instead hold this school “accountable” for test scores, when they are the only school whose population actually mirrors the demographics of the city? Why has the State not yet launched a full-scale investigation of the financial dealings of this organization?
We would all benefit from better transparency in the charter sector in NJ— at the CMO level, the school level, as well as the state approval level. What we have now is absurd, with no local input, no consistency, and none of the tough questions asked at the front end. Closing a school is always a travesty- it would be far better to never have opened bad actors in the first place.
A few footnotes worth reminding you, dear reader, because I just can’t help throwing rocks at a hornets nest:
1. Bringing CSMI to Camden was a bipartisan effort. Republican Christie’s DOE approved this charter, and the South Jersey Democrats were in big support of it, as you can see by the many photo-ops of the groundbreaking. Camden Mayor Dana Redd has been a consistent supporter of the school, even participating in a read aloud at the school on March 3. She was listed as a supporter in a letter sent out to school stakeholders from the board president on the day the state announced its decision.
(During Christie’s tenure, there were many alliances between the South Jersey Dems and the Republican governor, including the growth of Renaissance and Charter Schools in Camden at the expense of local control. Politically beneficial alliances evident in these education-business arrangements have become a very useful “canary in the goldmine;” a way to gauge a Democrat’s progressive credibility. Has your “progressive” Democrat supported for-profit charters? Has your “progressive” Democrat been active in the removal of local school control from low-income areas with high concentrations of people of color? Yes? Then, sorry. Your Democrat is not progressive.)
2. Democrats and Republicans alike supported CSMI, despite a massive test cheating investigation and other shady practices already practiced Pennsylvania. At no time did either party insist that the DOE investigate Vahan Gureghian’s financial dealings in Pennsylvania (which included revenue in the form of enormous management fees and rent payments from the school) before approving the charter. In fact, both the state and local entities welcomed its arrival in Camden.
3. Democrats and Republicans have both benefited from Gureghian campaign contributions. Here, see for yourself! Type “Gureghian” into the Name field here. You’ll see many donations attributed to Mr. Gureghian and his family, as individuals and on behalf of CSMI. Most notably, Gureghian donated $37,000 and then $25,000 (for a total of $62,000!) to the Democratic Assembly Campaign Committee (in 2001 and 2007, respectively); $5,000 to Joseph Cappelli, Democrat on the Camden County Board of Freeholders (2011); $7,800 to Vincent Mazzeo and Nick Russo, Democrats from Atlantic County (2013- the same year Atlantic City Community Charter was approved); $1,000 to Don Norcross (2013); and many more— and this doesn’t even include the fact that Camden Community School’s health insurance broker (see page 8) is George Norcross’s company, Conor, Strong and Buckelew. And, on the Republican side, Gureghian was one of the region’s largest donors to the Christie-for-President PAC, setting fire to a whopping $50,000.
As Darcie Cimarusti put it in 2014, “We need to demand a full investigation of Gureghian’s connections to politicians and officials in the NJDOE, and complete and utter transparency regarding his involvement in and operations of the charters in Camden and Atlantic City.”
Never has there been a better time than now.