Another charter school privatization ripoff... 'Venture capitalist' Bruce Rauner sees opportunity in Chicago charters to gain possession of public school buildings through privatization
Chicago Teachers Union members and citizens concerned about the future of public education in Chicago should check out a recent article in Crain's Chicago Business that outlines plans by a major Chicago venture capitalist to gain possession of public school buildings in Chicago. This edu-preuneurial plan is to have CPS sell old school buildings to investors such as Rauner. This arrangements appear to be very similar to the one that reporter Juan Gonzalez exposed in New York City. In the Big Apple hedge fund operators who are executive directors of charters were making money off the charter through complex bond arrangements to finance capital expenditures. In other parts of the country, hedge fund operators and other investors were gaining title to public school buildings and then leasing them back to charter schools, often at very high rental rates.
Despite repeated protests by community activists that the building is needed, Mayor Daley's school board has refused to reopen the Near North high school building for public school use, leaving many skeptics concerned that the building, and the nearby Mulligan Elementary School building, are slated for part of Mayor Daley's ongoing privatization schemes. Near North is located adjacent to the Cabrini Green housing project, which has been destroyed and gentrified. Substance photo from 2007 by George N. Schmidt.It would probably be worth the union's time to target this Bruce Rauner, since according to the Crain's article he's so shy it might inspire him to think twice about these plans. Rauner helped Noble Street charter schools, which has named one of its "campuses" after him.
ARTICLE FROM CRAIN'S CHICAGO BUSINESS (July 26, 2010). Venture capitalist Bruce Rauner floats plan to raise cash for public schools while supporting charters. By Greg Hinz July 26, 2010
Some great ideas are born in times of economic malaise. There's something about rough times that makes folks think outside their normal parameters and come up with new thoughts.
Chicago private-equity maven Bruce Rauner has come up with a beaut. He's begun to quietly but widely float a plan that could deliver hundreds of millions of dollars to needy Chicago public schools while giving a big assist to the emerging charter schools that much of the business community loves.
But the road to success could be rocky — even rockier than those that big-time reforms usually face. If Mr. Rauner proceeds, his partner in such a venture, Mayor Richard M. Daley, may be accused of a new form of privatization by those already leery of some of the mayor's financial schemes.
CORE protesters against the appearance of U.S. Education Secretary Arne Duncan at the Hyatt Hotel in Chicago on June 19, 2009, cited the (then) recent privatization of Chicago's parking meetings as just one example of how Mayor Daley's rush to privatize was costing the city hundreds of millions of dollars. Substance photo by George N. Schmidt.Still, the idea of trading in unused and underused Chicago Public Schools buildings for cash — and then leasing those buildings to charter operators — is absolutely fascinating.
Here's what's going on.
Mr. Rauner, principal in and chairman of GTCR Golder Rauner LLC, reportedly is proposing to sell empty and near-empty academic buildings to a privately capitalized venture fund that he and perhaps some other well-connected types like the Gates Foundation would put together. Those same buildings then would be leased to charter schools, whose most difficult task in building code-crazy Chicago often is finding a building that meets their needs and qualifies under the law.
Mr. Rauner wouldn't talk to me about his idea.
Though he flirted a year or so ago with running for governor of Illinois, Mr. Rauner — who is chairman of the education committee of the Civic Committee of the Commercial Club — still has more than a little of that big-stage shyness that often afflicts business types. And he understandably doesn't want to see his baby killed before it learns to walk.
All he'd say, in an e-mail, is that he's "deeply interested in improving the way we educate our children," that he's looking for "different" and "innovative" approaches and that he has chatted with many people in a bid to "provoke creative thinking and solutions to the greatest challenge our city faces."
Right-o.
But when those folks include Mr. Daley, high-level business types and leading education activists, it becomes a bit more than just chatter. And when specific, really big numbers get mentioned — like, in this case, $200 million in equity, $600 million in debt and 100 school buildings — it definitely is of interest.
Mr. Rauner's plan could do something for just about everyone. In theory, Mr. Rauner's idea could do something for just about everyone — a really big win-win.
Like Chicago Public Schools. The district owns at least a dozen empty buildings now and, with 100,000-plus fewer students than it had three or four decades ago, certainly could afford to consolidate some. The eternally strapped system obviously could use the money. And if CPS doesn't have 100 available buildings, the Archdiocese of Chicago might be able to provide the remainder.
Or the charter schools. Though there are good charters and bad charters, they clearly are here to stay. Given that, their students and staff deserve the opportunity to teach in a building in which the bathrooms don't flood and shovels aren't needed to remove snowdrifts from the classrooms in the winter.
Then there are the investors, the folks who put up the equity for this plan. Maybe they'll just be angels. Or maybe they'll get tax breaks by claiming depreciation on buildings that CPS now can't claim. But I certainly have heard of worse investment schemes than this one.
Yes, I can hear some of the opposition already, even before there's a plan.
We'll be undercutting the regular schools . . . Daley will blow the money . . . Dedicated union professionals will lose their gigs to cheaper young folks.
All of those, to a degree, are risks. But all of those arguments have counters. For instance, when does "undercutting" become just an excuse to prevent competition for a system that could use some?
On balance, it sounds like Mr. Rauner has come up with something worth talking about. I'm curious to see how it will work out.
Comments:
By: Andrew Martinek
fuzzy math = tyranny and abuse
Here's the problem. In order for these buildings to be of value, they have to generate revenue. Charter schools in Chicago are generally given a pass on rent or have to pay CPS $1 a year or some nonsense. Of course, they don't follow any public disclosure rules, even though they operate predominantly off of public funds and resources. That makes any deal of this sort difficult to assess. That also makes any deal of this sort automatically shady. Mr. Rauner needs to be a solid public citizen and come forward with details of his plan including the exact buildings being targeted, the names of his investors, the rents that will be charged etc. Also, leaving buildings abandoned for depreciation purposes costs our city more in blight and crime and reduced property values that CPS would earn in the sale. Such intents must be forbidden.
By: chgotchr
What will the mayor be mayor of?
If Daley has his way, he will be the mayor of City Hall and his wealthy friends will be doing his bidding and sending cash to his friends. There will be nothing for the mayor to do except watch the money flow.