"Democracy Now" - Federal tax breaks = 100% profits for charter school "philanthropists"

[Hannah Bell]

JUAN GONZALEZ:

Yes, Amy, one of the things I’ve been trying now for a couple of years is to try to figure out why is it that so many hedge fund managers, wealthy Americans, and big banks, Wall Street banks- executives of Wall Street banks, have all lined-up supporting and getting involved in the development of charter schools. I think I may have come across one of the reasons. There’s a lot of money to be made in charter schools, and I’m not talking just about the for-profit management companies that run a lot of these charter schools.

It turns out that at the tail end of the Clinton administration in 2000, Congress passed a new kind of tax credit called a New Markets tax credit. What this allows is it gives enormous federal tax credit to banks and equity funds that invest in community projects in underserved communities and it’s been used heavily now for the last several years for charter schools. I have focused on Albany, New York, which in New York state, is the district with the highest percentage of children in charter schools, twenty percent of the schoolchildren in Albany attend are now attending charter schools.

I discovered that quite a few of the charter schools there have been built using these New Markets tax credits. What happens is the investors who put up the money to build charter schools get to basically or virtually double their money in seven years through a thirty-nine percent tax credit from the federal government. In addition, this is a tax credit on money that they're lending, so they’re also collecting interest on the loans as well as getting the thirty-nine percent tax credit. They piggy-back the tax credit on other kinds of federal tax credits like historic preservation or job creation or brownfields credits.

THE RESULT IS, YOU CAN PUT IN TEN MILLION DOLLARS AND IN SEVEN YEARS DOUBLE YOUR MONEY.

The problem is, that the charter schools end up paying in rents, the debt service on these loans and so now, a lot fo the charter schools in Albany are straining paying their debt service- their rent has gone up from $170,000 to $500,000 in a year or- huge increases in their rents as they strain to pay off these loans, these construction loans. The rents are eating-up huge portions of their total cost. And, of course, the money is coming from the state.

One of the big issues is that so many of these charter schools are not being audited. No one knows who are the people making these huge windfall profits as the investors. Often, there are interlocking relationships between the charter school boards and the nonprofit groups that organize and syndicate the loans. There needs to be some light on this whole issue and the state legislature right now is considering expanding charter school caps, but one of the things I press for my column, there has to be the power of the government to independently audit all of these charter schools or we’re not going to know how public dollars are ending up in the coffers of Wall Street investors.

http://www.schoolsmatter.info/2010/05/vulture-philanthropists-double-their.html

MORE HERE:

http://www.nydailynews.com/ny_local/education/2010/05/07/2010-05-07_albany_charter_cash_cow_big_banks_making_a_bundle_on_new_construction_as_schools.html

[RandomThoughts]

1. It is really hard to tell if the news stories are not true.

Or if some peoples goal is to get to the very bottom as fast as possible.

Not sure what news is accurate, but some of the stories are contradictory, and many are just incredible in the effects they would have. It is like people think if they get deep enough into the bad they will some how stop something else, like there is some winning at the bottom.


I often wonder if people are thinking they are in groundhogs day where they think they will get some kind of reset if they mess things up bad enough, the ridiculous of some of the stories really make it seem that way, that is only a metaphor for setting things right, and temporal lore is not real. But I do wonder if some think that. Delusional nihilism trap that idea sounds like.

[Hannah Bell]

2. The story is true.