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The Journal Gazette

  • Imagine Schools on Wells.

Wednesday, March 16, 2016 3:56 pm

Charter déjà vu

 If details in a federal lawsuit filed in Missouri sound familiar, they should. Substitute Fort Wayne’s "Imagine MASTer Academy" for Kansas City’s "Imagine Renaissance Academy," and you’ll find striking similarities.

U.S. District Judge Nanette K. Laughrey ruled in December that Imagine Schools Inc. profited from a "double-dealing" lease scheme and that it must pay the local board of the now-closed Kansas City school nearly $1 million. 

The national charter school chain used its own finance company, Schoolhouse Finance, to sell Imagine Renaissance’s two campuses to obtain lower lease rates, according to the suit. While it benefited from the lower rate, it continued to collect taxpayer dollars through the local charter board at the higher rate.

"There is not evidence that Imagine Schools ever told any Renaissance board member how Imagine Schools would benefit from the leases," the judge wrote. 

The Kansas City Star reported that Imagine Inc. did not appeal the ruling, as the company and the local charter board have reached a confidential settlement.

The judge’s findings are remarkable for their parallels with the charter operator’s Fort Wayne experience. The company opened the city’s third charter school, Imagine MASTer Academy, at the former YWCA campus on North Wells Street in 2006. Oversight was supposedly provided by the Imagine-Fort Wayne Charter School Inc., a local board once headed by businessman Don Willis, but the board came under fire from its authorizer, Ball State University, for lax oversight.

Imagine’s local real estate dealings were complex from the start. The YWCA campus was purchased in 2006 by North Wells Schoolhouse LLC, an Indiana company with the same Arlington, Va., mailing address as the for-profit Imagine Schools Inc. The sale price was $2.9 million. The local Imagine school board then subleased a portion of the campus from Schoolhouse Finance, Imagine Inc.’s real estate subsidiary. Schoolhouse, in turn, sold the property to JERIT CS Fund, a wholly owned subsidiary of Entertainment Properties Trust, a Kansas City-based real estate investment trust. The same company owned the Kansas City school at the heart of the lawsuit.

The REIT, in fact, still lists the North Wells campus among its charter school real estate holdings, although Imagine MASTer Academy – threatened with closing by Ball State – relinquished its charter and reopened as Horizon Christian Academy. Three Fort Wayne Horizon schools collected nearly $2 million in tax-funded vouchers from Indiana last year. An Imagine spokesman said at the time of the switch that Horizon would pay Imagine for operation and facility support under terms of a private agreement. About $3.6 million in state loans made to Imagine were forgiven.

Last week, school choice supporters in Indiana and across the country celebrated the growing number of voucher and charter opportunities for students. But as the Missouri suit reveals and Fort Wayne’s experience affirms, the financial opportunities behind those choices are every bit as fascinating. Indiana lawmakers considering further school choice expansion would be wise to take a look at the Kansas City case.