There’s something happening in Chester, Pennsylvania. If you haven’t been following, a judge recently ordered that the school district consider proposals for a charter takeover of the district. There’s a lively debate over this happening in the Delco Times.
I recommend you look up Chester. There’s a lot going on there on the marketization terrain, including a proposal to privatize their water system. The city is a frontline in the continuing privatization of local government and services, even as the commentariat has been declaring the end of neoliberalism in the wake of the American Rescue Plan.
I was even seduced into considering this analysis, but Chester’s a great example of how short-sighted it is.
Anyway, you probably know I’ve been trying to understand how charter school finance works as part of my larger project of figuring out how school and capitalism relate to one another. I’m looking at school funding as a socialist (sign up for my newsletter here!). My method has been to read bond issuance documents, which are publicly available and contain lots of great bits of info beyond just the details on borrowers and lenders.
The largest charter operator in Chester is Charter School Management Incorporated, which runs 60% of Chester’s elementary schools as Chester Community Charter Schools. They’ve been recognized as a likely player in the takeover if it goes through. Their Board of Trustees authored the most recent letter to the editor on the Chester proposal linked above.
What I’ll do here is look a bit at CSMI and then refine that understanding with a 2010 issuance, the most recent they’ve done. The big question really should be: do we want this kind of apparatus running the Chester-Upland School District? Or do we want to go in a different direction? CSMI is an excellent case study in the kind of structures that govern and finance charter schools.
Mansions with bowling alleys
When I think about CSMI, I think about mansions with bowling alleys. That’s because a few years ago, the founder and CEO of CSMI, Vahan Gureghian, sold an $84.5 million mansion in Florida that, indeed, has its own bowling alley. Here’s the house:
Look up Gureghian. He’s a Republican donor, a mover and shaker in Pennsylvania politics. His wife Diane is a lawyer that serves as legal counsel for CSMI. He looks like this:
The Inquirer and then Diane Ravitch and the Washington Post all reported on an audit which found that Gureghian was paying himself $11 million in 2019, the same year he sold the mansion. He and Diane live in another mega-mansion in Bryn Mawr, PA. A regional mainstay, the Gureghians have given lots of money and time to education:
“Mr. Gureghian serves on the Board of Trustees of the University of Pennsylvania and the Board of Delaware County Community College. He is also a Trustee for the Villanova University Business School. Mr. Gureghian is also on the Board of Directors for the Philadelphia Regional Port Authority.
Through the Gureghian Family Foundation, Mr. Gureghian and his wife, Danielle, have provided hundreds of high school and college scholarships to promising Chester students. They are also responsible for donating for than $70,000 in Thanksgiving meals to residents of Chester over the last ten years, and giving $400,000 worth of holiday gifts to CCCS students.”
The other thing that’s been out there about CSMI was its Camden-based charter, whose renewal application was denied in 2017 due to low test scores. (Sidenote: I’m wondering what happened to their facilities. Who owns it now? They had buildings that underwent multi-million dollar expansions. Here’s their financial report from the year before they closed.) They operate Atlantic Community Charter School in Atlantic City, which still exists.
The treasurer
The most recent issuance from CCCS was in 2010. That’s a long time ago. But I did see a note from Fitch’s rating service talking about these bonds late last year. That’s because last year was a ‘maturity date’ by which the borrowers had to pay back a certain amount of the loan. They did, so Fitch’s was like “okay cool.” The next maturity date is 2030.
It was a big loan, nearly $50 million in principal. The bond was issued by the Delaware County Industrial Development Authority on behalf of the Friends of Chester Community Charter School, a nonprofit supporting organization formed for the purchasing, financing, and operating real estate for the school.
George Fieo is listed at FCCCS’s principal officer, since he signed their 990s in 2019, with gross receipts of almost $4.5 million. Fieo is Delaware County’s Deputy Treasurer, the Borough of Norwood’s treasurer, and a partner at an accounting firm. I guess sometimes he goes by Giorgio rather than George, since he’s listed here as making around $90,000/year in his official capacity. He looks like this:
Sort of interesting that he’s both the Deputy Treasurer of the county and the principal officer for the organization that acquires and maintains real estate for the charter operator. It also looks like he paid himself $3,200 for something from FCCCS coffers. Wonder why.
Peter Seltzer is the President of FCCCS’s board, serves on Atlantic CCS’s board, and was a former City Councilman in Chester. ACCS’s website says he’s an insurance broker with his own firm called Seltzer and Associates, though I can’t find much about him in general.
Owner and CEO?
When it comes to the buildings though, the issuance says that
“The Charter School currently leases a portion of the Facilities, consisting of five elementary schools, two middle schools, two gymnasiums, an administrative building, a maintenance building and two pad sites, all located on two campuses, the East Campus and the West Campus from Vahan H. Gureghian pursuant to several lease agreements,” who also “constructed the Facilities employing conventional financing.”
This means that money from the bond issuance went from DCIDA to FCCCS to Gureghian directly. Indeed, he’s referred to in the issuance as the Owner, since he owned the school’s facilities.
The deal was that the School and DCIDA would purchase the facilities from Gureghian for $50.7 million, using the lion’s share of the bond (the rest of the money goes to a debt reserve fund and the cost of issuance, which is usually around $1.5 million). “The Borrower and the Charter School intend to execute a Purchase Agreement on the date of closing on the Bonds for the purchase of the Facilities at a purchase price of approximately $50,700,000.”
It makes sense, since the yearly gross receipts of the 990 tax form come out to about the yearly rental costs for the facilities reported in the issuance. It’s about $4.4 million/year.
Remember that Gureghian is the CEO of CSMI. So the CEO of the operator owned the building as a private individual. The DCIDA took out a huge loan from an anonymous cabal of ruling class people, gave it to FCCCS (directed by Seltzer and Fieo) who then purchased the buildings from Gureghian. Gureghian made $50 million on the deal, leaving the other orgs with the debt to pay back. The money just went right into his account as the Owner.
Keep in mind, this was a big real estate deal: “five elementary schools, two middle schools, two gymnasiums, a maintenance building, an administrative building (to be used by CSMI, LLC pursuant to its Management Agreement with the Borrower), and two pad sites located on two campuses, the East Campus and the West Campus.” All of it totaling 248,802 square feet. These were deeded to FCCS, who I imagine now owns them given their 990 form.
The Charter takes in revenue from tax grants through the district’s property taxes and state grants (and other sources). If I’m getting this right, then the circulation goes something like: CCCS gets its revenue, pays it to FCCCS, who then pays out money to DCIDA to refund the bond over forty years.
Fieo can skim a little for himself off the revenue since he’s doing all the paperwork, working on the inside from Delaware County. Guerghian took the loan money in 2010. Maybe it went towards the mansion with the bowling alley? Who knows.
david (isaac) backer 