Back in March, I wrote about a DGS FOIA production covering 2021 through 2023 that showed that most DC charter schools do not pay rent for the former DCPS schools they lease from DC—all the while the production also made clear that DGS had no records or receipts for sublet proceeds due DC and no receipts or records for work done for the rent credits DGS grants to the majority of charter schools leasing former DCPS facilities.

Figuring that the DC council ought to hear about this lack of data (and its ominous fiscal sequelae), I signed up to testify at the April 5 DGS budget oversight hearing.

Then, 48 hours before the hearing, I unexpectedly received from DGS a “revised” production.

Unlike the first production, from March 19 (see “charter school payment” and “rent credit”), this April 3 “revised record to satisfy the FOIA case” showed that three of the schools that the March FOIA listed with uncollected rent actually pay $0 rent in exchange for renovation credits—despite not being listed as such on DGS’s recent response to the council with such buildings. That April 3 FOIA production also listed payments for two schools previously listed with uncollected rent and had slightly different amounts of rent (and number and date of payments) for several schools listed on the March FOIA production as paying rent.

There was no reason given as to why this April 3 data was omitted from the first FOIA production in March—or which data set was in fact accurate.

But both FOIA productions show clearly that DGS recordkeeping around DC charter leasing of former DCPS facilities is not in service to DC taxpayers.

Specifically, both data sets make clear that for the last 3 years DGS has inaccurate and/or incomplete rent payment records for leased former DCPS buildings; has no receipts for, or records of, the modernizations and renovations done for rent credit at those buildings (22 out of 31); and has no records of sublet proceeds due DC for those leased buildings, all the while DGS is charging rent (at just 9 of 31 buildings) at unbelievably low rates (i.e. <$4 square foot).

I calculated the potential losses to DC taxpayers of all of that around these 31 city-owned assets. I conservatively estimated the losses to be $10 million every year. On April 5, at the DGFS budget oversight hearing, I presented these findings in testimony to the DC council.

Really: $10 Million Lost Every Year On Leasing Of Former DCPS Facilities?!?

Well, to be honest, that figure may not be correct.

The losses are probably more.

Here is the methodology I used to arrive at that number by way of examining uncollected charter sublet proceeds due DC; potentially uncollected charter rents; untracked charter renovation credits; and abnormally low rents for buildings leased to charters alongside potential rents for the same.

There are many reasons why a loss figure of $10 million/year is a low estimate.

For instance, even if we grant that the rent payments shown for the last 3 years in all the DGS productions to me are accurate, they are for most extraordinarily low with no explanation given (i.e. SEED paid about $1000/month for 3 years at a building with tens of thousands of square feet).

In addition, many of the schools listed on those FOIA productions have duplicate dates of rent payment, while the two FOIA productions have for some schools different payments listed. Recordkeeping like this suggests that DGS has little accurate, timely, and robust bookkeeping around leased former DCPS schools.

And that is not mentioning the possibility that some charter schools have skipped rent. For instance, a FOIA request I earlier made of DGS and the CFO for a 5-year period of rent payments at just one leased school starting in 2009 turned up no records at either agency. While DGS (later) attributed this to the fact that those records are beyond their recordkeeping horizon, the reality is that there should be clear outlines of payments for DC-owned buildings—and now we know there are not, regardless of whether the payments are from the last 3 years or the last 3 decades.

As it is, in 2017 the DC IG found that two charters never paid rent owed to DC. And years ago I was told that Briya occupied Sharpe, another city-owned school building, without paying rent (see their application to the charter board here). Briya’s March 2022 board meeting minutes show (as did their January 2022 meeting minutes) that they were ahead fiscally >$1M that year. So: Was Briya paying for Sharpe or, if not, was the school’s $1M surplus a result of nonpayment? And was Briya paying for its prior DCPS location, at Bancroft?

Requesting this information by FOIA from DGS might lend some answers to these questions—but given the agency’s lack of longstanding payment records, nonsense numbers for rent credits (and lack of receipts for work therein) for just the last 3 years, and discrepancies in its FOIA productions to me for data (again, from just the last 3 years), it is doubtful one would receive anything meaningful.

Then there is the reality that DGS declared that it had NO records or receipts for the last 3 years for sublet proceeds due DC for former DCPS buildings leased to charters (see here for its March 19 response letter and here for its April 3 response letter). This is rather extraordinary, given that at least one charter’s lease (Perry Street Prep’s lease of Taft) specifies that DC is supposed to get 50% of sublet proceeds. As it is, Perry Street Prep has been subletting Taft for many years, including right now. In fact, a Perry Street Prep staff member recently testified (starting at the 2 hour, 18 minute, and 27 second mark of the April 5 budget oversight hearing video) that the school uses the Taft facility to pay its bills by way of subletting.

It is also clear that DC taxpayers have no alternative for such records anywhere in DC government, because even the CFO doesn’t have this information. See here for my FOIA request of the CFO and here for its response.

To be sure, all of these problems do not exist in isolation OR are unknown to policymakers.

For one, the recently released adequacy study made clear (specifically, on p. 18) that annual per pupil facilities allocations to charters are about $20 million more than reported building costs. That’s $20 million annually *on top of* whatever poor return on investment DC taxpayers are seeing with the leasing of former DCPS schools to charters.

For another, my earlier DGS FOIA request (for the 5-year period starting in 2009) came up at the April 8 budget oversight hearing for DGS (starting at the 2 hour 57 minute mark of the video). That was when W4 CM Janeese Lewis George specifically asked DGS director Delano Hunter about that $10 million annual loss figure that I had spoken of in my testimony. Hunter responded that $10 million was “inaccurate” and then went on to note that I had FOIA’ed records that DGS no longer has (i.e. from 2009).

Naturally, he left out the part about “records and receipts” from the last 3 years that I requested and that his agency admitted it doesn’t have or simply didn’t provide (naturally, with no explanation). Nor did the director verify whether there were payments in that 5-year period starting in 2009.

Then, when Lewis George asked about renovation credits, Hunter said that the “receipts” DGS has demonstrate that work was completed. Again, the DGS director left out that FOIA productions from his own agency presented NO receipts and NO record of work done for any rent credit at leased former DCPS schools for the last 3 years. The best I got for rent credits was a bunch of numbers in the March FOIA production that included no dates or any description of work done.

At some point, perhaps, the DC council will understand (or at least pretend to be interested in discovering) how deep this fraud at DGS goes—because that is exactly what this is: fraud committed against DC taxpayers.

Until then, perhaps the DC auditor can have a go, as I asked in my testimony.

Charity For Charter Facilities

One of the most repeated talking points of charter advocates during recent education budget oversight hearings was the proposed zeroing out of an increase to the annual charter facilities allowance. Amounting to about $180 million in DC taxpayer funds annually, this per pupil allowance goes to charters without anyone anywhere in DC government tracking it—and it can be used for anything.

But while charter advocates and council members repeatedly expressed concern about not having an annual increase in this allowance, at no point has anyone in DC ever calculated what is needed every year for charter facilities, much less what the >$1 billion of taxpayer funds handed over for charter facilities in the last decade has actually been spent on. The closest we have come to a statement of need is in the recent adequacy study (p. 18), which indicated annual overpayment by $20 million.

Ironically, the most compelling evidence that some DC charter schools are overpaid by DC for facilities comes from the charter schools themselves.

To wit:

–At the April 4 budget oversight hearing (at the 12:32:50 mark of the video), the leader of DC Wildflower decried the proposed zeroing out next year of the annual increase in the facilities allowance to charters because of “increases built into our lease.” Weeks later, at the April 22, 2024 charter board meeting, that same Wildflower staff member noted (starting at the 2:18:35 mark of the video) that the school is electing to fund renovations to its new facility in W8 without financing—and with the potential help of funding from the office of the state superintendent of education (OSSE)—in the wake of signing an 11-year lease.

–DC Prep’s chief development officer testified at the April 5 budget oversight hearing (starting at the 6 hour, 24 minute, 5 second mark in the video) that the school needs money for facilities beyond DC’s current per pupil allowance. Unmentioned was the fact that the school owns three properties, one of which it appears to have bought for cash and has never occupied while paying tens of thousands in property taxes.

That property, at 1619 Frankford St. SE, was purchased by DC Prep in December 2019 for $1.2M. The stated idea was that it would be the site of DC Prep’s Anacostia middle school. At almost an acre, the property had then (and still does) a small and somewhat decrepit house on it that had been used as a church.

But many in the community pushed back against any school there. In a public statement at the November 2019 charter board meeting, DC Prep’s CEO, Laura Maestas, noted (at the 2 hour, 52 minute, 40 second mark of the charter board meeting video) that “if we can secure an alternative site for our permanent location [of the Anacostia middle school], we will resell the Frankford Street site.”

Not long afterward, DC Prep was awarded the former DCPS school Wilkinson for its Anacostia middle school.

Now–more than 4 years after the school pledged to sell it and 3 years after Wilkinson was awarded—DC Prep still owns that Frankford Street property. In fact, the school has paid more than $100K in property taxes (and penalties) for it since 2020.

(To be sure, if that Frankford St. property is being retained as an investment, it’s not a new idea for DC charters. In May 2022, for instance, DC Prep’s board discussed investing almost $30 million in cash reserves (>10% of its operating budget then). Shortly thereafter, the school advertised for an investment manager (see the notice in the charter school section of the DC register, 69/26, dated 7/1/22). A staffer noted at minute 39 of the May 2022 meeting video that DC Prep had of late seen an extra $4 million annually, mainly due to “healthy increases in per pupil funding.” At the 56 minute mark of the video of that May 2022 board meeting a DC Prep board member worried about the “optics” of a publicly funded charter school having an investment strategy for tens of millions. Likewise, KIPP DC retains ownership of a 12 acre W7 parcel not far from Winston that AFAIK remains undeveloped–which even at a (unrealistic) bargain basement assessment of $100k/acre is still a substantial asset.)

–In 2019, Rocketship applied to have a new Ward 5 campus, its third. Its application noted that eventually, the total facilities costs for all three of its DC campuses would amount to $6.5 million per year, for about 2100 students. The application noted that comes out to about $3068 per student–less than what the school expected to receive in per student charter facilities funds (in FY20, that was $3335 per student).

–Similarly, in 2019 Meridian applied for a new location and noted they would be realizing about $500K per year beyond what they needed to make payments for leases. Specifically, the school noted that “costs are projected to be significantly below Meridian’s allowance. Meridian anticipates our per pupil facility costs for SY20-21 to be around $2600 per student, compared to a facilities revenue of $3460 per student, and this includes rent, occupancy, and debt service.”

–The Family Place just bought a second property around the corner from its current 16th St. NW site, which it also owns. The charter’s April 2024 application with the charter board to have a second location there (notably, after the property was purchased) states that the purchase occurred in December 2023. Per the deed database, on March 20, 2024 the charter school got a grant from OSSE to help fund the purchase of that new property. The school apparently paid off its current location in 1993. The budget worksheet included with its application for the new location and facility shows little fiscal difficulty around this new location.

— Sojourner Truth charter school is planning to purchase a large church building, and its April 2024 application to the charter board to locate there suggests no difficulty paying for it while simultaneously subletting part of the former Taft (which we know DC is receiving nothing of, despite Taft’s lease specifying 50% of sublet proceeds going to DC taxpayers, because DGS has no records or receipts for those proceeds at any leased former DCPS school.)

But But But $0 Leases Mean Old DCPS Schools Are Fixed AND Used For DC Kids!

In theory, the idea of charging $0 rent for old (and often less than fully modern) DCPS buildings is that the charter schools that lease them will be incentivized to renovate, so DC kids will have the best facilities possible alongside their increased choices of schools.

Unfortunately, no one in DC has any proof this actually works this way–much less that DC kids are the direct beneficiaries. That is because DGS apparently has no records of ANY modernizations or renovations for the 22 of 31 former DCPS schools granted $0 rent–and no one in DC government appears interested in holding them accountable for it.

Yes, I know: The DGS director testified last month that they have “receipts” for such work—and grant rent credits for it. But two FOIAs productions later, I can attest that is not what DGS has—or, if they have it, they are not publicly disclosing it to *anyone*, even the DC council.

Such lack of information leaves open the real possibility that $0 leases actually benefit only the private charter entities leasing these buildings. Consider the information we do not have:

–the amount charters report they spent on modernizations and renovations at those publicly owned buildings;
–what they spent it ON (i.e. the stuff and the companies the charters contracted for the work);
—when they spent it;
—for what purpose they spent it (i.e. for their own school or entirely private entities subletting renovated space from the charters); and
—all supporting documents for those statements (i.e. receipts of expenses).

We also lack any assurance that DGS is keeping tabs on this spending overall at each facility with rent credits. After all, every lease has a fixed date at which the credits *stop*–but there is no way to know from the DGS data on rent credits whether this is even being done.

The problems with not having this information go in many directions:

1. DC taxpayers cannot know if contracting on these public assets is fair with respect to the quality and price of work done with public money–or even truly necessary. Maybe it’s great!

OTOH, given that TWO charters in the space of less than a decade renovated the same former DCPS school on DC’s dime, DC needs more than a very absentee landlord in DGS.

Specifically, Chavez closed its campus at the DC-owned former Bruce school and allowed the building to remain empty for SY19-20 because they hoped to “monetize” the asset that was the city’s own lease for it. (So much for ensuring charters have facilities.)

Meridian then presented a winning bid for that lease, which included $2 million in cash, without taxpayers knowing how much of that winning bid was going toward paying off the remaining $22 million of Chavez’s DC revenue bonds versus profit for the school. Taxpayers also could not know whether a new lease with new terms for that city-owned asset would provide better return on investment for taxpayers, as Meridian hinted it would merely assume the same lease terms Chavez had. (So much for delivering taxpayer value with facilities.)

And then, Chavez’s revenue bonds were used to, among other things, renovate the former Bruce school. The closure of Chavez there resulted in financial losses, such that Chavez eventually defaulted on its DC revenue bonds. But Meridian then got new DC revenue bonds to renovate the same building! (Again: so much for delivering taxpayer value in facilities for students.)

2. We cannot be sure that any of the credited work is being done for the charter school leaseholder versus for an organization subletting the space from the charter leaseholder. This is an important distinction because at least one charter, Perry Street Prep, is subletting its publicly owned building to a private school. It is thus entirely possible that DC taxpayers are underwriting a charter’s profiting from its sublet of a DC-owned building with utterly NO return to the public because the subletting is to a private school and not a school DC kids are entitled to enroll in for free.

And no, we cannot assume such profiting is necessarily (or even ever) helping DC kids. In fact, taxpayers may be triple sponsoring private entities involved in the leasing of these city-owned assets by way of uncollected sublet proceeds due DC; untracked annual facilities allowances; and rent credits for work that may never benefit the public because it was never intended for the public.

It is impossible to know often this is happening at other facilities because of nonexistent oversight by DGS—but the reality is that DGS’s lax oversight allows it to easily happen at at least one DC-owned property.

3. We cannot know what precautions DGS is taking to ensure charters are not simply reporting expenses up to the limit they get credit for without actually doing that work or spending that money. If it’s all done with a phone call or a handshake, why wouldn’t you claim the maximum credit? And if DGS is not keeping track of the timeline of credits (which would be a reasonable conclusion given those FOIA productions), then credits could go on theoretically in perpetuity.

Now, all this is just basic accounting around renovation credits.

For an accounting of rents at these DC-owned properties, we also have no records and receipts from DGS for the last 3 years. Instead, what I received for my FOIA request were PDFs created by DGS the day before they were sent to me, with numbers representing payments (and in some cases, with different values on the two different FOIA productions I received in March and April). Needless to say, those PDFs are most certainly not records and receipts! Although the schools being charged rent are of course a minority of leased former DCPS schools (9 of 31), this means we have no actual records to verify what their charter leaseholders were actually paying in that timeframe. The only thing we seem to know with certainty through those FOIA productions is that leasing charters are apparently paying substantially less than $4/square foot per year. (Good luck for getting a house in DC at that rate, much less a commercial property.)

In the wake of saying all of this repeatedly before the council (yeah, this too), the best we seem to have is that maybe there will be something at the council later this year or next year (or, possibly, never) to follow up on these concerns with DGS.

If that’s not good enough for you in the wake of tens of millions in taxpayer funds every year needlessly gifted to private entities for facilities, consider sending a little note to the council. After all, many of our representatives there appeared content last month to wring their hands about charters not getting a raise in their facilities allowance next year.