Charter dealings raise questions
SPANISH FORK - The cinder block walls of American Leadership Academy are going up in chunky growth spurts around developer Glenn Way.
Squinting in the blinding sunlight, he gingerly steps around workers and over splatters of wet cement into the barren concrete shell of a school auditorium.
"It's hard to believe this thing's going to be up and running by September," Way says.
The business of building this charter school goes at a brisk clip - nine months from state approval to slamming locker doors. By Sept. 6, the school's teachers are scheduled to lead kindergartners and high school seniors in hands-on classes using the Socratic method.
This academy is just one of four that Way's company, U.S. Charter Development, is building this summer. Several other developers/property managers have built charter schools slated to open this fall in an attempt to keep up with the demand of parents frustrated with the state's regular public school system.
But Way, a former state lawmaker, has a unique advantage in charter school construction - a business relationship with two of the most vocal charter school advocates in the state Legislature: Rep. Mike Morley, R-Spanish Fork, is the contractor building all four schools for U.S. Charter; and Rep. Jim Ferrin, R-Orem, who routinely ferries legislation easing charter school development through the Capitol each year, arranges the financing.
The particularly cozy relationships in Way's development company - found in a Salt Lake Tribune review of charter school applications and leases - worry both critics and advocates of the alternative public schools. With millions of tax dollars available to pay charter school leases that range from $15,000 a month to $120,000 a month, skeptics say it appears Morley and Ferrin are greasing the skids of charter school development as part-time legislators and lining their pockets with the public's money in their full-time jobs.
Other legislators are involved in the business of building and managing charter schools. Sen. Sheldon Killpack, R-Syracuse, is a vice president of Academica West, a charter-school development and management company based in Layton. Several legislators sit on charter school governing and advisory boards - including Draper Reps. Greg Hughes and Todd Kiser, Lehi Republican Sen. Mark Madsen and Utah Taxpayers Association President Howard Stephenson. A number of lawmakers' children attend charter schools.
"As they pass laws to build more and more charter schools and they're the ones building them, what is their motive - better schools or more money in their pockets?" asks Holladay Democratic Rep. Carol Moss, a retired school teacher. "That's a legitimate question for people to ask."
Difficult to open doors: Although wildly popular among conservative legislators, the Utah Taxpayers Association and Parents for Choice in Education, charter schools are easy to dream up but much harder to open. Charter school founders complain of a public school system reticent to give up control of students and money and of bankers unwilling to finance schools that may not succeed.
State Charter School Director John Broberg, former administrator of the performing arts charter school Tuacahn Academy, says alternative school development is not easy.
"The legwork is extremely involved," he says. "In 10 months, you have to do all your hiring, training and purchasing. They have to make 100 percent right choices although they have never done this before. They have to follow every law. It's tough."
Charter schools depend on public money - the $2,280 Utah allots for each student - to pay their bills. But that money does not arrive in charter school bank accounts until the school opens. As a result, many school founders have charters, but nowhere to teach. U.S. Charter Development and other companies have evolved to fill that void, lining up investors to buy the land and pay the construction costs. Once the privately owned building opens, the school administrators use diverted public school funding to pay the leases.
"This is by far the hardest part of putting these schools together," says Celia Johnson, a founder of Paradigm High School.
Johnson struggled to find investors willing to come up with $6 million to build her South Jordan charter school based on the trendy Socratic method. After the Charter School Board approved her plans in May, she was contemplating a developer/manager's "lease-back" contract.
"That's a lot of money for a little charter school," she says.
Lending a hand: That's where Way and others like him come in. He figures he's providing a service - both to the charter school founders and to taxpayers - by financing and building cheaper charter school buildings that can relieve school crowding in growing communities. His company and its investors - including Ferrin and Morley - have wagered $30 million buying land and constructing buildings for five charter schools. When the doors open, U.S. Charter Development will collect more than $1 million a year in publicly funded rent from American Leadership Academy alone. Still, he compares his $15 million cost of building American Leadership Academy project to the $27 million price tag for a public high school.
"We ought to be looking at ways to save money if we can," Way says. "Charter schools aren't the only answer, but they're a component of the public education system."
Although American Leadership Academy has scooped up about 800 students from the overcrowded Nebo School District, the way the school evolved has raised chatter of nepotism in Spanish Fork.
Morley acknowledges the questions, but dismisses them as products of the rumor mill.
In November 2004, the parents on the board of the then-American Achievement Academy - including Way's wife, Shelina Way, and Rep. Morley's wife, Krystin Morley - presented their school's curriculum to the Utah State Charter School Board. Up to 1,300 students would read classical philosophers and learn the Lincoln-Douglas debate format in a school where 5-year-old and 15-year-old siblings would pass each other on campus. One month later, the school was approved by the State Office of Education. The school's founders awarded Way the development contract. He hired Morley's M-13 Construction Inc. to build the $15 million project. Work on the school started in May.
Former school founder David Purinton defends the selection of U.S. Charter Development to do the work. He split amicably with the school's board last February. At the time, Purinton says, Way's company offered the most affordable financing and development plan.
"I could not find anything cheaper," Purinton says.
Legislative connection: The relationship between Way and Morley is long-standing. Morley took Way's seat in the Utah Legislature when Way resigned three years ago in the midst of financial and personal troubles. Last year, when Way was looking for a contractor to build the Summit Academy in Draper in less than three months, he asked Morley. This year, Morley has the contract to build Reagan Academy in Springville, Lincoln Academy in Pleasant Grove, Thomas Edison Charter School-South in Nibley and ALA in Spanish Fork. He will collect a proportion of each project's total cost.
Morley openly lists charter schools as a conflict of interest on his legislative disclosure form. He acknowledges his role in the development of American Leadership Academy has raised complaints among his neighbors. But Morley insists the convenient deal-making - particularly the decision of a board that included his wife to grant the management contract to U.S. Charter Development without the official bidding process required of other public schools - was necessary to facilitate quick development of the school.
Besides charter schools, his 25-year-old construction company builds dentists offices, condominiums and factories. Morley insists the business of building charter schools is not easy money. He has no plan to specialize.
Charter schools "are very risky. If they're not successful, we've got a problem," Morley says. "I'm not setting up a new business to build charter schools exclusively. Anyone who wants to take the risk is welcome."
State Sen. Sheldon Killpack also openly acknowledges making his living by building and managing charter schools. Five years ago, Killpack was one of the parent organizers of North Davis Preparatory Academy, an elementary school founded to teach a dual, English-Spanish curriculum. He voted to hire Academica West, a charter-school development company similar to Way's, to build and manage the school. Last January, after 20 years marketing Lagoon amusement park, he left that job to work for Academica West. The company is building two charter schools this year: North Star Academy in Riverton and Wasatch Peak Academy in Bountiful.
Killpack says conflicts of interest like his are inevitable with a part-time Legislature. Still, the Syracuse Republican says he will never sponsor charter school legislation.
"It's one thing to do it for your profession. Legislation is another thing," Killpack says. "But for sheer appearances, I won't be carrying charter legislation."
Charter champion: Ferrin, on the other hand, is perhaps the charter school movement's most passionate spokesman on Capitol Hill. Last year, he resigned as the registered agent of Charter One Management Co., a precursor to Way's U.S. Charter Development. But Ferrin still is listed on Utah Department of Commerce records as a principal in Way's Charter One Development Co., Charter School Properties I and Charter One Management Co. Ferrin says those old listings are an oversight; he divested late last year to avoid problems with his securities license. He only rejoined his old partners in U.S. Charter Development this summer.
This year, Ferrin sponsored legislation to exempt the specialty schools from local zoning and design rules to speed approval of 10 charters and another bill to give neighborhood children preferential enrollment in the alternative schools. Last year, when Way was waiting for Draper's approval of his plans for the Summit Academy, Ferrin summoned city leaders to the Capitol to explain themselves. Ferrin initially did not list charter school development as a conflict of interest on his 2005 disclosure form, but has amended the form. He will not rule out the possibility of sponsoring future legislation to tweak charter school rules.
"There will be those who perhaps disagree with what I'm doing, who might want to make hay of that," Ferrin says. "I have nothing to hide. I'm really proud of the schools we've built."
While many Utah lawmakers openly disclose their conflicts on the topic, their involvement continues to raise questions about their objectivity.
"The public message is that this is driven by parents demanding choice for their students," says Pat Rusk, Utah Education Association president. "What we see behind the scenes is a different message: This is about making a profit."
Even Broberg, the state charter schools director, acknowledges some discomfort with the shortcuts U.S. Charter Development took to build American Leadership Academy. He worries the self-serving development deals common in the private sector but forbidden in the public arena will undermine the integrity of the charter school system and feed the ongoing debate about alternative schools. Charters can be revoked. In this case, they won't be. But Broberg talked to Way's attorney about the irregularities. He says taxpayers have to trust charter school boards to do the right thing.
"When they make that commitment, they take on a legal stewardship for what they're doing and that they do it fairly and correctly," Broberg says.
In the meantime, Way has lined up six more schools to build next year.
Charter schools are alternative, taxpayer-funded public schools that are meant to offer unique learning experiences for students. Since Utah lawmakers authorized parents and others to organize and manage the specialized schools in 1998, 38 schools have opened - some renting space in strip malls and abandoned motels, others paying for brand-new buildings financed by private developers.
In 1999, the first seven Utah charter schools offered specialized education for 300 students. In the ensuing six years, another 31 have opened their doors to more than 5,000 additional students. The pace of development has increased in the last two years. In 2004, 10 charter schools were approved. This year, 17 groups applied for charters. When they open their doors this fall, nearly 12,000 Utah children will stream into charter schools.
U.S. Charter Development/Charter One Development
(American Leadership Academy, Lincoln Academy, Reagan Academy, Summit Academy, Thomas Edison Charter School-South)
The key players
Profession: Manager U.S. Charter Development and subsidiaries, former
Charter school job: Makes bids to charter school founders, finds investors, hires construction company
Profession: President M-13 Construction, Inc., state
Charter school job: Builds charter schools, hires subcontractors, coordinates construction
Profession: Ferrin Capital Advisors' certified financial planner, state
Charter school job: Arranges financing