[Ed Note: This is the third installment of a series of tales of missing public education information and active disinformation by a wide variety of city actors (and all before the current pandemic!). To see the first and second in this series, see here and here.]
Tale #3: The Mystery Of Taft’s Money
Let us begin this story of an old, former DCPS school building–and the amazing flow of public money through its corridors–on February 24, 2020.
That evening, the DC public charter school board discussed the application of Sojourner Truth charter school (see here and here and here) to locate at the former DCPS Taft junior high building (either at 1800 Perry St. NE or 3825 18th St. NE). The charter board will vote on this location at its June meeting.
At 201,000 square feet, Taft is a very large, DC-owned former DCPS junior high school adjacent to a public recreation area. It was closed in 2008 and since leased to charters–first Hyde, then its successor, Perry Street Prep, which holds a lease for the entire space.
But Perry Street Prep is hardly the only school located at Taft.
Perry Street sublets a portion of the building to LAMB. Perry Street also sublets another portion of the building to the private (and wealthy) nonprofit Charter School Incubator Initiative (CSII), which was founded (per its tax return) to provide new charter schools with facilities at below market rates. And Perry Street sublets yet another portion of the building to a small private school, St. Jerome.
In turn, CSII sublets its rented portion of Taft to LAMB.
And now, LAMB is proposing to rent a portion of its subleased space to Sojourner Truth (presumably in anticipation of moving its entire school out of Taft in the next few years to a new facility in Ward 4).
That lease between LAMB and Sojourner is in the materials on the charter board website for the charter board’s February 2020 meeting.
But the posted lease is missing exhibits A, B, and C. In their place are blank pages.
Those exhibits appear to be related leases of Taft. From what I can deduce, it appears exhibit A is Perry Street Prep’s lease with DC for Taft; exhibit B is the lease between Perry Street and CSII; and exhibit C is the lease between LAMB and CSII.
On March 3, 2020, I sent an email to Rick Cruz, chair of the charter board; Tomeika Bowden, spokesperson for the charter board; and Scott Pearson, executive director of the charter board, asking if they could supply the missing exhibits.
I got no response–and no bounces. So I left a voicemail for Ms. Bowden–and got no response. Another voicemail yielded the same. (If this lack of response seems, uh, familiar, recall that this happened before.)
Thankfully, I obtained what I believe are the missing exhibits through FOIA requests to both the charter board as well as DGS (the agency in charge of city-owned buildings), along with other information.
Those missing pieces illustrate the many ways in which a publicly owned building, literally flowing with public money through charter facilities payments, can enrich private organizations. At the same time, DC taxpayers are more than likely shut out from any monetary benefit and have little chance of knowing how much they’re losing out–or even why.
Now that we face a terrible budget crisis, it seems past time to change this apparently privately lucrative business of leasing DCPS buildings:
♦In its lease for the entirety of Taft (dated May 13, 2010 for a term of 25 years), it appears Perry Street Prep pays DC $1.15 million a year, at a rate of $5.72 per square foot for 201,000 square feet. The lease allows Perry to sublet as much as 30% of the building (about 60,000 square feet) to other entities related to education, as long as 50% of what Perry realizes by doing so is sent to DC. That lease also gives a $21 million credit for renovations in the first 15 years, so that depending on what is done and how, Perry Street Prep may not be paying much rent directly for its lease.
BOTTOM LINE: DC may be taking in as much as $1.15 million annually from this lease–but without an accounting of credits and renovations, it’s impossible to know.
♦In an undated lease (but likely May 1, 2013, given what the new lease between LAMB and Sojourner says), Perry Street Prep rented out 22,500 square feet of Taft to CSII. This lease goes until 2034 and is for $5.72 per square foot, or $128,700 a year. It also gives a credit for $4 million for renovations.
BOTTOM LINE: Perry Street Prep could be taking in $128,700 annually through this sublet, half of which ($64,350) should go to DC.
♦In a lease dated May 1, 2013, CSII sublet 22,500 square feet of its leased space at Taft to LAMB. That lease goes until 2028 and specifies that LAMB must have at least 100 students. The lease is for $29 per square foot, or $652,500 a year, apparently with utilities included.
BOTTOM LINE: CSII appears to be taking in $523,800 annually ($652,500 – $128,700) from its sublet to LAMB, charging a rate about five times what CSII leases the space for. It’s impossible to know what CSII is actually making on the sublet, but it’s probably not insubstantial.
The larger point is that CSII’s sublet to LAMB at a rate five times what it is paying calls into question its stated mission of providing below market facilities for charters. It also ensures that CSII’s profit at Taft is entirely borne by DC taxpayers: first, through charter facilities fees paid by DC to LAMB and then turned around to CSII, and second, through proceeds of LAMB’s rent, since it’s not through Perry Street Prep and thus likely not 50% shared with DC.
Conversely, if Perry Street Prep sublet that same space directly to LAMB (and not CSII) and adopted the same terms ($29 per square foot), DC would theoretically realize $326,250 annually from the sublet (i.e., half of the $652,500 that LAMB is paying CSII for that same space).
♦In a lease dated June 17, 2016, LAMB sublet a 9960 square foot portion of Taft from Perry Street Prep until 2028, for $29 per square foot, or $288,840 a year, apparently with utilities included.
BOTTOM LINE: Perry Street Prep appears to be taking in $288,840 annually through this sublet, half of which ($144,420) should go to DC.
♦In a lease dated January 28, 2020, LAMB sublet 10,000 square feet of its leased portion of Taft to Sojourner until June 2021. The lease is for $30 per square foot, or $300,000, with at least 70 students enrolled.
BOTTOM LINE: LAMB appears to be taking in $300,000 annually on this lease. DC likely gets none of that, because the lease is not through Perry Street Prep.
♦In a lease that is not publicly available, St. Jerome, a parochial high school, is subletting 6,000 square feet from Perry Street Prep for terms publicly unknown.
BOTTOM LINE: Despite being a lease held by a publicly funded entity, for space in a publicly owned building, the lease between Perry Street Prep and St. Jerome is not publicly available. The charter board said that because the lease is not for a charter school to be in that space, it doesn’t have it, period. DGS, the agency in charge of DCPS school buildings, not only did not have the lease when I asked for it via FOIA, but also did not disclose per my FOIA request what payment it is receiving from Perry Street Prep for the 50% proceeds that DC is due for this rent. (See here and here and here for the response I got from DGS. Yeah.)
♦Muddying the water is the fact that in its FY20 budget, Perry Street Prep notes that it is paying $291,593 in rent. Since its only facility is Taft, it’s unclear what that figure involves–but as noted above, it could be accounting for renovation credits, as provided by the original 2010 lease. Perry Street Prep’s FY20 budget also notes that the school took in $1.19 million in DC charter facilities payments in FY20.
BOTTOM LINE: Assuming the leases enumerated above are in fact the sum total of annual rentals happening at Taft, it appears that Perry Street Prep is making some payment to DC for renting Taft, while apparently taking in at least $417,540 annually in sublet rentals there ($128,700 + $288,840), half of which ($208,770) is owed to DC per the terms of its original lease of Taft.
At the same time, Perry Street Prep is taking in a publicly unknown amount through its sublet to St. Jerome. The payment of half of that to DC is also unknown.
Since the $1.19 million in DC charter facilities payments Perry Street Prep received in FY20 is technically more than it would need to fulfill payment of the entirety of its original lease with DC for Taft, that suggests that the school takes in more than $200,000 annually in profit through subletting at Taft (while, of course, paying DC 50% of its sublet proceeds). That profit could be more, however, if DC is actually not tracking or collecting the 50% proceeds it is due. Because it’s not clear that is actually happening with respect to St. Jerome’s rent payments, that leaves the distinct possibility it may also not be happening with rent from Perry Street Prep’s other sublets.
So here’s our mystery (cue once again the cheesily scary organ music!):
How much is DC receiving in straight rent for Taft from Perry Street Prep?
How are Perry Street Prep’s occupancy costs related to its sublets of Taft and renovations therein?
Has DC made any valuation of Taft’s completed renovations, to determine the value of the $21 million lease credit extended by DC for those renovations?
How much money is DC realizing from the 50% proceeds it should have from Perry Street Prep’s sublets of Taft?
What is the public value of CSII as an entity at Taft–and who determined the rate it’s charging LAMB there?
Will the public ever see the missing exhibits from the lease between LAMB and Sojourner posted on the charter board website?
Will the public ever see the St. Jerome lease?
Why is at least one private organization apparently profiting from subleasing a publicly owned building?
And, most notably,
Why is our city seemingly not ensuring that the greatest monetary benefit from subletting and leasing a publicly owned building goes directly to the public?