A Utah charter school — with potentially millions of dollars in debt — will close. Here’s what led to that decision.

(Courtney Tanner | The Salt Lake Tribune) The American International School of Utah will close on Aug. 15 after years of financial struggles.

The bullying started when he was in fifth grade.

The boys in his class would tease him and call him a “little b---h.” By middle school, they were sharing pictures of him on Snapchat. One altered image had his face joined to the body of an orangutan.

When he asked them to stop, they didn’t. And when he reported it to school administrators, the taunting got worse.

That’s when Amie Gallo decided to take her son out of their neighborhood school, she said, and transfer him to the American International School of Utah, a nearby charter in Murray.

“He found a really good place there,” she said. “He’s been doing a lot better.”

Next year, though, her 14-year-old won’t be able to go there any more. Facing potentially millions of dollars of debt, the school’s board of directors voted unanimously to close AISU by the end of August. And the more than 1,300 students there will be pushed out into surrounding public schools and the few charters with space.

For Gallo’s son, that likely means he’ll be going back for ninth grade at the same school where he was bullied.

“We don’t really have another option,” Gallo said, noting there aren’t other schools close to where they live. “I think AISU has been a sanctuary for a lot of kids. So I had hoped that there would be some sort of resolution and they would stay open.”

But the board — facing pressure from the state after it was put on “warning status” late last year — said before its decision Wednesday night that it simply cannot pay back the funds it owes. In fact, it’s not even clear just yet how deep that debt goes.

The issues began almost as soon as the school was founded five years ago. Its executive director set up the charter as a unique public-private hybrid with students in kindergarten through 12th grade — free for Utah kids but requiring international attendees to pay tuition. The idea was to teach students about different cultures and provide a level of diversity not seen anywhere else in the state.

In the first three years, said current school spokesman Jordan King, funds were mismanaged. The for-profit part of the charter invested in stock overseas and spent millions on flashy incentives for students, such as visits from Broadway singers and trips to Carnegie Hall in New York. Then the director stepped down.

“It got messy,” King said. “We were just kind of collateral damage.”

A state audit completed in March ordered the school to pay back $514,900 in special education funds that it either misspent or didn’t document. In 2017, the Utah Board of Education found that the charter had spent more than $125,900 it couldn’t account for.

According to its own budgeting, its liabilities also potentially include $5 million owed to investors and $1.5 million for violating the terms of its charter. One option for the school was to continue operating without its international program. That, however, would have meant an untenable $1 million loss over the next year, King added.

AISU has appealed some of those costs. And it has worked over the last two years to correct its course. This year was the first time it was operating in the black. It just didn’t recover fast enough.

So, as several trustees cried and a few hid their faces behind tissues, they voted to close the school in an agreement approved by the state Charter School Board. The board will help the charter repay its debts using state funds.

Gallo found out about the pending closure a few weeks ago. Her three kids, including her oldest son who had been bullied, attended AISU for the last year. Now, they have a month left before their last day on June 7.

She’s mad that she didn’t know sooner. But mostly, Gallo wishes the current staff wasn’t paying for mistakes made in the past. “They actually care about their students,” she said. “It wasn’t just putting a Band-Aid on everything they were struggling with.”

Along with the kids, about 150 full-time and 20 part-time teachers will be displaced. As for the students, roughly 40 percent come from economically disadvantaged homes. Nearly a quarter are minorities. One in ten had a disability. Many, like Gallo’s son, saw the place as a haven for those from all sorts of backgrounds.

(Christopher Cherrington | The Salt Lake Tribune)

Waiting in her family’s sedan in the carpool lane Thursday morning, spunky 7-year-old Mila Matsuura listed her favorite things about the school: Her friends, the nature walks the students take at a nearby park and her sparkly binder.

“Oh, and I like the Spanish teacher,” she declared.

Her mom, sitting in the front seat outside AISU, said the best part is the attention her daughter gets — something she said Mila didn’t have at their crowded neighborhood elementary school, where she fell behind and was told she had to redo the first grade.

“We got a second chance here,” Matsuura added. “We were looking for consistency and stability. But now we’ll be starting over again.”

“They better not close on me,” Mila said.

Inside the school Thursday, students carried on as normal while outside parents stopped to talk to each other about what would happen next.

“My youngest one has done really well here,” said mom Shala Smith.

“We’re very sad,” noted dad Ruslan Stepanenko. “This place made the students feel at home.”

(Courtney Tanner | The Salt Lake Tribune) Ruslan Stepanenko and his son, Max, smile as they walk into the American International School of Utah on Thursday, May 9, 2019. The school will close after years of financial struggles.

The building, which is tucked next to the freeway, was previously the Utah Fun Dome. It was the Salt Lake Valley College temporarily after that, and at one time, it served as a hotel. Now, with AISU leaving, it will again be something else. The dragon mascot on the walls will be painted over and the signs touting “AISU pride” will come down.

“It’s a difficult decision to come to,” noted Kent Burggraaf, chair of AISU’s board of directors, during Wednesday’s vote. “It has not been reached without great thought and great effort.”

Beyond finances, the relatively new school has struggled to gain its footing academically. Last year, the state said it was below average in its test scores and graduation rates. Before that, in 2017, the charter received an F grade. In 2016, it was a D.

But the charter’s features — its teachers, its different approach to class, the flexibility for students to work at their own pace — made it a good fit for those who struggled in traditional schools, many suggested.

“My daughter has been crying a lot,” said Natasha Robison about her fourth grader. “She says, ‘This is the only school I’ve ever made friends at. These are the only teachers that like me.’”

Robison’s daughter attended Heartland Elementary School before transferring to AISU last year. Now, like Gallo’s son, she’ll likely go back there as the charter closes its doors.