The Pink Hula Hoop isn’t about education. It’s about money for privatized charter schools. Money and how connections among powerful people beget more money. It starts at the top, with Gov. Chris Christie who, while starving traditional public schools of operating and construction funds, has allocated an unprecedented amount of public money to privately-operated charter schools, including TEAM Academy. Last year alone, in 2013, he allocated $125 million in construction funds to charter schools–$40 million to TEAM. In 2011 and 2012, TEAM projects, directly or indirectly, received some $30 million in public loan funds.
Christie’s generosity with public money to charter schools like TEAM allowed Cami Anderson, the woman he appointed schools superintendent in Newark, to come up with “One Newark,” her plan to close neighborhood public schools and expand privately-run charter schools. TEAM will grow from four charter schools to 10.
Getting all that public money to TEAM has required the help, not only of the governor, but also of familiar Christie allies—Michele Brown, Christie’s former assistant and mortgagor and now head of the state Economic Development Authority (EDA); the law firm of Wolff and Samson of Bridgegate fame; Christopher Cerf, the recently departed state education commissioner who was both a TEAM trustee and former business partner of Tim Carden, the head of TEAM’s trustees and former EDA board member, and, of course, Anderson, who can now impose her controversial “One Newark” plan with the taxpayer money flowing to TEAM and other charters.
They aren’t the only players, of course. Former Newark Mayor Cory Booker , who brought Anderson to Newark, was heavily involved in funding the privatization of Newark schools. It was, as he told me in an interview years ago, his “greatest passion”—an even greater passion than keeping cops on the street. Booker was rewarded with an easy path, opened by Christie, to the United States Senate where he now represents, well, whoever put him there—but not, certainly, the people of Newark.
But, before we trace the history of Pink Hula Hoop, let’s look at how TEAM has responded to the controversy generated by the first reports about Pink Hula Hoop. The response is both instructive and helps us understand the complicated financial dealings that led to the creation a for-profit corporation that, at a steeply discounted price, bought the 18th Avenue School, a publicly-owned, taxpayer-purchased, asset, from Anderson.
In a letter to charter families, Ryan Hill, the founder of TEAM Academy and the CEO of the firm, points out that, legally, charter schools may not borrow money to buy or build schools. So, he says, “In order to find new facilities at affordable rents, we work with nonprofit organizations that work with a range of federal tax credit programs to fund the construction, purchase, or renovation of buildings for us. In this case, we collaborated with two nonprofit organizations—Friends of TEAM Academy and Kingston Education Holdings—to fund the purchase and renovation of the 18th Avenue building.”
What Hill does not say is that TEAM gets around the prohibition against borrowing and achieves other ends by creating a stable of related non-profit and, ultimately, profit making corporations, all controlled by the same people, that exist only to channel money and other assets to TEAM Academy. For him to write, “we work with non-profit organizations” is an obfuscation. These guys are all working with themselves.
Here are the corporations that TEAM and its allies created and funded, not just to buy 18th Avenue School, but to create a TEAM empire that, in a year or two, will have 10 schools in Newark, dominating the city’s South Ward:
Friends of Team Academy, Inc. (FOT)
NCA Facility, Inc.
FOTA Finance 1, LLC.
Kingston Educational Holdings, Inc.
Ashland School, Inc.
Pink Hula Hoop 1, LLC.
How these companies—really one tight-knit group of people controlled all of them—raised money is complicated. And it’s complicated because, as Ryan Hill himself admits, the purpose was to borrow money while avoiding both high interest rates and taxes. The ultimate goal was to get tax-free bonds into the hands of the people who would buy them for the benefit of TEAM.
So these corporations, created just for the purpose, began buying and selling and loaning these bonds to each other, in some cases, transferring tax breaks.
Much of this dealing is laid out in a document that got into my hands courtesy of the Newark Teachers Union, the minutes of the Friends of Team Academy Charter School meeting of June 6, 2013, just three months after Christie announced he would give charter schools $125 million in public construction loans—and just two months before the EDA awarded $40 million to Kingston Educational Holdings, one of the self-created corporations that already had received more than $25 million in EDA funds.
Following this will be difficult, but hang on. FOT—Friend of Team Academy—owns buildings in which its tenant, the TEAM Academy charter schools–operates. In 2010, the EDA issues bonds for the Newark Collegiate Academy, one of those tenant charter schools. In February, 2011, FOT buys $30 million of those bonds by borrowing money from Manufacturers and Traders Trust (M&T) and The Prudential Company and by receiving an ”investment” from KIPP. KIPP is the national parent organization of TEAM charter schools. One M&T employees serves on the FOT trustee board but Hill says he recuses himself from votes that deal with M&T.
In December, 2011, FOT’s wholly-owned subsidiary, FOTA Finance 1 LLC, buys $25 million in EDA Bonds and loaned the bonds themselves to Kingston Educational Holdings. To do that, it borrowed the money from Goldman Sachs and received another “investment” from KIPP.
A year later, in December, 2012, FOTA borrows $32 million from Manufacturers & Traders Trust both to pay for the refinancing of the Goldman Sachs loan and to buy $31 million more in bonds issued by the EDA and loaned to Kingston.
In June, 2013, EDA issues $17 million in bonds to Ashland, Inc. Ashland, created by the same group around FOT, is the borrower of those bonds. Ashland uses the money to buy private school facilities on Ashland Street and Custer Avenue from FOT, to buy nearby property from the city, to build a gym, and to pay off debt service.
Kingston then lends its bond money to Ashland, Inc. for construction at the Ashland and Custer sites.
M&T and Prudential then want to refinance their loans. FOT renews the loans for $46 million and use the proceeds of the sale of Ashland and Custer to Ashland and to pay off previous debt on those two schools that are now Rise and TEAM Academy. Then FOT submits a bid to buy the 18th Avenue through Pink Hula Hoop with money borrowed from Kingston.
It’s hard to follow but basically FOT–which can borrow private money–is borrowing money from private sources to buy publicly-funded bonds and then using the EDA money to pay off the private loans. The group around TEAM is selling bonds to itself and selling property to itself.
The law firm that helped put together the bond transactions is, by now, familiar to most New Jerseyans–Wolff & Samson. Although the EDA has approved 21 law firms to serve as bond counsel, Wolff & Samson was hired by charters that received all but $8 million of the $125 million allocated to charter schools by Christie last year. One of its partners is David Samson, chairman of Port Authority, a public figure who has done well since Christie became governor. Take a look at the comprehensive piece by The Asbury Park Press–although the paper did miss its involvement in charter schools.
I asked Ryan Hill to explain this to me. I also asked him a number of other questions, including:
- Can you please tell me what TEAM expects to do with the $40 million plus set aside by the EDA?
- Can you tell me whether TEAM loans from M&T, Prudential, and Goldman Sachs are still open?
- Can you tell me whether EDA funds have been used to pay off any or all of those private loans or the interest attached to them?
I showed him what I was going to write–something I rarely do– and I offered him the chance to challenge any of it.
That was last week. I am still waiting.
Still to come: How TEAM—and other charter schools—gets by with a little help from its friends.
Kathleen Kleinbeck contributed to this report.