February 10 — 1:08 pm, 2012

District eating millions in facilities costs at Audenried, other Renaissance charters

by Benjamin Herold
for the Notebook and WHYY/NewsWorks
 

[Updated 3:45 p.m. with clarification on maintenance staff.]

Even while slashing staff, programs, and hours at schools across the city in an effort to close an enormous budget gap, the School District has been swallowing millions of dollars in facilities-related expenses at its 13 Renaissance Schools now run by outside charter operators.

Nowhere is the situation more pronounced than at Audenried High in South Philadelphia. There, the District has allowed Universal Companies to operate cost-free in a new, $55 million District-owned building since July because the parties have yet to come to terms on a facility license agreement.

Universal is “not paying for anything” at either Audenried or Edwin Vare Middle School, said District spokesperson Fernando Gallard. The District, he said, is “currently managing both buildings and covering [their] costs.”

Representatives from Universal declined to comment.

Audenried and Vare Middle, both “Promise Neighborhood Partnership Schools” awarded to Universal by the District last spring, are the only two Renaissance charters without an executed facilities license agreement.

But even at the Renaissance charters where such agreements are in place, said Gallard, the District has incurred millions in facilities-related expenses. In some cases, the District is continuing to employ pay unionized blue-collar employees whose school positions have been eliminated, not to work so that Renaissance charter operators can have flexibility in how they provide services like maintenance, cleaning, and food service.

So just how much is it costing the District to convert struggling schools into charters?

Despite the budget crisis, District officials say they don’t know.

Asked to put a price tag on this second year of the Renaissance charter initiative, Gallard said only that the District’s most recent calculation – a number he identified as “south of $10 million” – is likely too low.

“The District has an estimate, but we believe we need to do further work on it,” said Gallard. “We don’t want to put a number out there that we don’t believe is capturing all the costs.”

Nevertheless, the District intends to move forward with a planned expansion of the initiative in 2012-13. 

Disputed figures

Some of the Renaissance charter operators, meanwhile, disputed the notion that they are costing the District anything.

“The Renaissance charters are neutral to the [District’s] budget,” maintained Alfredo Calderon, the executive director of ASPIRA of Pennsylvania, which operates Stetson Middle and Olney High schools.

ASPIRA paid the District roughly $800,000 to use the Stetson Middle School building last year, said Calderon. Among other things, that covered a District building engineer and cleaning crew, heating costs, snow removal, waste removal, and a small percentage of the District bond financing costs, he said.

“They’re giving us some of the worst schools, in terms of both facilities and academics,” said Calderon. “We’re assuming all of those responsibilities.”

At the heart of the uncertainty surrounding the costs associated with the Renaissance charters are the terms under which new outside managers have been granted access to operate in District-owned facilities.

District officials maintained that Internal Revenue Service regulations prohibit them from making a profit from renting or leasing public school buildings. Instead, officials said, they can seek only to recover from Renaissance operators the actual cost of owning and maintaining the building.

But even recouping those expenses has proven difficult.

In 2010-11, the first year of the initiative, it cost the District more than $10 million to convert seven low-performing schools to Renaissance charters, largely due to higher than expected facilities costs and student enrollments.

This year, with six additional schools converted to charters, new costs appear to have arisen from the District’s decision to allow all the Renaissance operators to opt out of paying the District for some services. In cases where Renaissance charter operators decided to clean their own buildings or remove their own snow, the District ended up having to create other positions for some of pay its unionized blue-collar employees – whose contract requires them to be given a year’s notice before they can be laid off.

“We are incurring costs due to stranded personnel,” confirmed District spokesperson Gallard.

That’s the District’s problem, said ASPIRA’s Calderon.

This year, he said, ASPIRA opted not to keep the District’s cleaning crew at Stetson.

“Why would I keep cleaning people who didn’t clean?” asked Calderon. “I knew we could do it better and cheaper and have a building that’s actually clean and shows respect for the students, staff and parents who are there.” Calderon added that over two years, ASPIRA has itself raised and put nearly $2 million into building improvements at Stetson.

‘Dismantled from within’

Allowing the Renaissance charter operators the kind of flexibility exercised by ASPIRA has led the District to incur significant personnel costs, said Gallard. The District must also continue to pay debt service costs and other administrative expenses for the buildings that Renaissance charters now occupy, he maintained.

But figuring out exactly how much that’s all costing will have to wait until further cuts have been made elsewhere and until newly installed District Chief Recovery Officer Tom Knudsen has hired outside consultants to conduct a deeper cost analysis, said Gallard.

“Hopefully, we can put them to work really quickly,” he said.

In the meantime, said Gallard, he does “not have enough information” to comment on why the District agreed just seven months ago to new facilities license agreements that quickly proved so costly.

He also declined to identify a time frame for when an agreement might be reached with Universal over the operation of Audenried and Vare.

“We’re still working on that,” said Gallard.

It’s not unusual for school districts to mismanage the leasing of their facilities, said Mary Filardo, the executive director of the 21st Century Schools Fund.

“In general, school districts don’t understand how much it costs to own a particular asset, so [they] tend to share them or lease them out at really highly subsidized costs,” said Filardo, a national expert on school facilities.  

Subsidizing charters’ use of public facilities could very well be a legitimate policy choice, she said. But districts should make such decisions transparently, with the public being given a full understanding of the implications, Filardo added.

That has not been the case in Philadelphia, where District officials have consistently been guarded in discussing how much the Renaissance initiative costs and have given the public little chance to offer input on how continuation of the initiative should be weighed against other priorities.

Just last month, for example, School Reform Commissioner Feather Houstoun presented a grim portrait of the District’s finances, saying that everything from music to gifted to athletics at traditional public schools may need to be on the chopping block as part of a last-gasp effort to find $61 million in cuts before the end of the fiscal year.

The possibility of altering the District’s relationship with its Renaissance charter operators as a strategy for easing the budget crunch has never been publicly discussed, however.

 “The thing that’s amazing to me is the extent to which districts are being dismantled from within,” said Filardo.

Houstoun, who has been traveling, responded in an email that the SRC is "sorting out a lot of issues at the moment and I’m not sure that extrapolations on cost elements would be very enlightening." She said she would do further checking.

More to come

Despite the uncertain costs, District officials and charter operators alike continue to tout the Renaissance initiative as a success that furthers their central strategy of replacing 50,000 seats in poor-performing schools with high-performing seats.

Overall, the initial 2010-11 cohort of seven Renaissance charters showed significant improvements on standardized test scores and school climate while continuing to function as neighborhood schools.

In January, District officials announced that they will continue to expand the initiative in its third year next fall. A list of targeted schools and prequalified “turnaround teams” are expected to be announced later this month.

“The bottom line is that we need to continue moving forward, replacing low-performing seats with high-performing seats,” said District spokesperson Gallard. “We are making a call here that it’s a priority to continue this work. That’s what we believe is the best use of our funding at this point.”

The District does not have a reliable working estimate of what such an expansion might cost, however.

“We’re working on it,” said Gallard.

[An earlier version of this story incorrectly stated that some maintenance staff were being paid not to work. The Notebook has corrected the story and regrets the error.]

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