Philadelphia: School Reform Commission Approves Expansion of Majority-White Charter, with Real Estate Self-Dealing Issues

A 2010 report from the city controller found these arrangements at nine different charter school operators around the city and described it as a way of “transferring taxpayer-funded assets to non-profits that are not accountable to the School District.” 

The report found Franklin Towne’s high school to be among those nine. CEO Joseph Venditti leased the school’s already-purchased property to a for-profit entity he created, Franklin Towne Holdings LLC, and then subleased it back to the school. He also doubled his own compensation over the course of three years. 

As CEO, Venditti took the building bought by the high school with bonds and leased it to Franklin Towne Holdings. The holding company sub-leases the building back to the school, which pays rent to the holding company. Venditti signed the lease and sublease as both CEO of the school and manager of Franklin Towne Holdings LLC, according to the 2010 city controller’s report. 

Franklin Towne is no longer collecting state reimbursements for rent payments, but a 2014 audit of the high school’s finances found that the same circular leasing arrangement was still in place. According to the audit, this agreement will not expire until January 2033.

Franklin Towne has since expanded to open a K-8 school called Franklin Towne Elementary. Audits of that school found it is in the same sort of relationship with the Richmond Street Development Corp., a nonprofit, which collects rent on the already-purchased school building.

Richmond Street Development Corp. was established by the elementary school in 2009 to acquire land and construct a school building, according to the 2014 audit. And Franklin Towne Charter Elementary is “the sole member of the corporation.” 

The school also “effectively appoints a voting majority of the board” and Richmond Street Development Corp. is “economically dependent on Franklin Towne Charter Elementary School for financial support,” according to the audit. 

The Charter Schools Office’s evaluation of Franklin Towne’s proposed new middle school, which the School Reform Commission will consider on Thursday, would be set up with a similar arrangement. This time, the high school itself would be acting as the landlord by subleasing a portion of the building to the new middle school. 

These kinds of financial shenanigans are not uncommon in the bizarre world of charter school finance.

But the question is, why would the School Reform Commission ignore this report of Franklin Towne’s shady finances?

The SRC can’t say they were not informed.

Lisa Haver, retired teacher and public school activist, suggested some possible reasons for the SRC’s readiness to award a new charter to the Franklin Towne charter chain in her testimony to the School Reform Commission before they voted to approve expansion:

Testimony of Lisa Haver to the School Reform Commission

April 26, 2018

There is no need in the Frankford/Tacony community for another Franklin Towne Charter.  Franklin Towne already gades 6-7-8 in its K-8 school. The only reason that company needs a new school is to secure its own bottom line.

I taught at Harding Middle School in Frankford for over 10 years. It seemed that there were 2 exits for graduating 8th graders: one for the African-American and Latino students to Frankford High, and another for the white students to Franklin Towne Charter, which should be renamed the Lower Northeast Democratic Ward Leaders Apartheid Real Estate Charter Company.  How does a school in ANY neighborhood in this city, in particular that neighborhood, explain an 83% white enrollment rate? That alone is reason to deny.

As I said about Aspira, what we see here is a Real Estate company/bank that happens to run charter schools.

As CEO, Venditti took the building bought by the high school with bonds and leased it to Franklin Towne Holdings. The holding company sub-leases the building back to the school, which pays rent to the holding company. Venditti signed the lease and sublease as both CEO of the school and manager of Franklin Towne Holdings LLC, according to the 2010 city controller’s report. 

Venditti is the proposed “incorporator” of the middle school. He is also the CEO of the high school. The high school is proposed to be the management organization for the middle school, as well as its landlord.

The Charter Schools Office’s evaluation of Franklin Towne’s proposed new middle school…would be set up with a similar arrangement. This time, the high school itself would be acting as the landlord by subleasing a portion of the building to the new middle school. 

Is it the business of the SRC to fund this pyramid scheme—with taxpayer dollars?

FTC board pays Venditti $226K to manage two schools, which is almost the amount Dr. Hite is paid to mange 200 schools.  What we don’t know, because of the legal firewall charters are allowed to set up, is how much Venditti makes off of the real estate dealings.

Of all of the political connections of the FTC board, this is the crucial one:

 for Franklin Towne’s elementary school, is a legislative aide for State Sen. John Sabatina Jr., a Democrat, and would also be on the board of the middle school if it is approved.

Sabatina is the ward leader who supported Commissioner Green’s failed run for Congress.  In fact, Mr. Green’s address on his filing form, 7718 Castor Avenue, 2nd floor, is a commercial property whose sign says “Sabatina Associates”.  Ryan Mulvey’s brother, Scott Mulvey, was Mr. Green’s chief of staff when he was a city councilman.  Thus, Mr. Green, who should have recused himself when he voted to approve this application in February, must recuse himself now from any vote on FTC.

Source

https://dianeravitch.net/2018/04/28/philadelphia-school-reform-commission-approves-expansion-of-majority-white-charter-with-real-estate-self-dealing-issues/