In law school, we were taught to evaluate contracts, including leases, looking at the interests created and protected within the four corners of the document. Using this approach we can see which party has the most power by determining the dominant interests, despite public proclamations to the contrary. Through this lens and looking at a recently state superintendent approved long-term lease with an option to buy public school property granted to a charter school in Newark, we see the inequity of bargaining position that has been visited upon the taxpayers, parents and students in Newark. If one examines the interests advanced in this document, we see evidence of the belief held by many people in Newark that we have a two-tiered education system in Newark, one for charter schools and their private partners, and one for the general population of students.
So let us examine the lease with option to buy 18th Ave. School, between Newark Public Schools (NPS) and TEAM Academy. This lease-purchase arrangement was recently the subject of a Newark Advisory Board veto, but was overridden by District Superintendent Cami Anderson. The tenant is a nonprofit corporation, but not TEAM. Under the lease, the tenant has the option to assign (or transfer) its interest to any entity with which it is “affiliated.” This assignment is not subject to NPS or even state approval.
Also, the tenant or its “assignee” has an option to purchase the building which can be exercised on or before July 1,2013 at a “market price” which will reflect the value of a beat-up, old building, built in the 19th century. A cheap sales price is therefore guaranteed.
But then the document makes reference to use by the tenant or it assignee of a federal program called the Qualified Zone Academy Bonds (QZAB) to renovate the building after the option has been turned into a contract of sale on July 1, 2013. Upon a call to The National Education Foundation, I learned that New Jersey has been allocated $32 million under this program. But the state, which runs the Newark District, has processed $14 million for renovation for charter school use, but none for public school use. The $17 million remains uncommitted, but the Newark District under state supervision has not stepped forward, although eligible. The governor has frozen state bonds available for school construction. Why can’t the DOE ask the Economic Development Administration to sell and guarantee these interest-free bonds under this program for NPS to improve its general population schools, requesting the use of the Face Book money as the 10% match? This would enable the District to modernize 18th Avenue, issue short-term leases to TEAM or any other charter school with a right to reclaim possession upon sufficient notice. The city is growing and the taxpayers would then preserve a valuable asset for future use.
Under the lease, a private entity will enjoy the benefits of the appreciation in the value of 18th Avenue School, using the taxpayers’ money to fix it up, after it has been sold at a rock bottom price. The new private owner of the school can lease it back to NPS or even TEAM at top dollar, and depreciate and get other tax advantages if it is for-profit entity.
The injustice of this policy is also seen in rental revenue in four short-term leases, also approved by the state through Superintendent Anderson at the same time as the 18th Avenue lease-purchase agreement. NPS administrators revel in the projection of $500,000-$600,000 in rent from all five leases. Between the commencement of the lease and the date of sale, 18th Avenue School will be leased for $1.50 per square foot. The best-projected rental price for another school is $5.25 per square foot. However, business property in Newark is going for about $14 to $17 per square foot. The QZAB bonds have been available to the state for years. If Newark buildings were renovated and upgraded using the QZAB and/or state Abbott bond money, the district would be in a better bargaining position to rent unused schools at a higher price, and thus earn two or three times more rent. The sum of $500,000-600,000 is not very much money when the district has a shortfall of $36 million, caused in part by increased reliance upon charter schools.
Instead of a policy to empty the buildings of neighborhood schools, and enter into a lease-sale scheme that will turn public real estate over to private interests at bargain prices, the state should use all available funding, including QZAB, and Abbott construction bond proceeds to renovate and construct new schools for the general population, providing them with improvements such as science labs and electrical upgrades for high-speed internet, or complete rehabilitation in the case of schools like 18th Avenue. The state should use its resources equitably, rather than provide good deals only for charter schools and their partners. All our children deserve quality schools, and quality education within them.