Mavericks High Schools Hope to Profit From Education – But at What Cost?

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Money has long been a problem for Mavericks. At the Fort Lauderdale Mavericks in June, independent auditors found the school met state criteria for a "financial emergency,"with a net deficit of at least $520,000. At the same time, an audit showed that the North Miami Beach Mavericks was $400,000 in debt and had borrowed from the Mavericks management company to stay afloat. The state department of education also required the Mavericks school in Pinellas to create a financial corrective action plan.

Mavericks officials say Fort Lauderdale's debt was temporary, because the school's original enrollment was low. Hollander wrote a check to cover the budget hole, and the school is "now on its feet and very healthy," Biden says.

By law, school district officials can shutter charter schools with serious academic or financial problems. But Mavericks has managed to avert the worst penalties by submitting plans to correct its finances and by earning "incomplete" instead of "D" or "F" on its state report cards. Plus, Florida law is designed to encourage charters, not shut them down. Even failing schools are given time to improve before they are closed.

John Schuster, spokesman for the Miami-Dade school district, says no action has been taken against Mavericks there. "The district monitors charter schools' academic and financial performance. In general, it takes two years of poor performance data to result in closure."

Both Miami-Dade Mavericks schools have been open since August 2009. The Broward and Palm Beach schools are newer, and thus do not have a two-year track record.

The management fees paid by the individual schools to Mavericks in Education Florida have been a source of controversy. School district officials want to know what the fee will be before they approve a new school, but it's not always clear. Last year, the management fee was $267,000 for the Fort Lauderdale Mavericks school. In 2010, Mavericks in Homestead paid the management company $418,000, or 17 percent of its state funds. In Palm Beach County, Mavericks' fee is not specified in its contract. Hollander says the fee varies based on enrollment, but it's capped at 11 percent of the state funding the school receives.

According to Biden, Mavericks turns a profit because of its savvy real estate choices. "It's all about the buildings we buy," he says."Certainly the operation of the schools isn't profitable."

But most of the time, Mavericks isn't buying buildings. It's striking deals with private landlords, then charging individual schools rent of $350,000 per year for five years, regardless of the price of the building. That's the case in Homestead, North Miami, Kissimmee, and Pinellas. In Homestead, the school building's current market value is $1.2 million, but the school is on the hook for $1.75 million in rent over five years.

That sum, combined with its management fee, means the Homestead school paid 28 percent of its revenue to Mavericks in Education in 2010.

Hollander says Mavericks does not want to be the go-between, collecting rent from the schools, but it's tough for a landlord to "wrap his mind" around a five-year lease.

Mavericks cut out the middle man when negotiating a lease in Fort Lauderdale. Charles Barnett, Mavericks' secretary, bought a building at 424 W. Sunrise Blvd. for $2.2 million. Barnett, a lawyer in Palm Beach Gardens, purchased the building with a newly formed corporation called School Property Development LLC. The manager of the corporation is Charles Berle, who also sits on the board of the Mavericks school in Palm Springs.

Hollander says Barnett bought the school because they couldn't strike a rental deal with the previous owner.

According to Miron, the Michigan expert on charter schools, it's common for "separate but connected companies" to own the buildings that house charter schools. "A lot of profit comes from equity accrued in the facility, or above-market leases that are paid to the company that owns the facility," Miron says.

To lease the Fort Lauderdale property, Barnett's company, School Property Development, charges Mavericks High of Central Broward rent. The cost: $350,000 a year.

In June 2010, Hollander and Rodberg reached an undisclosed settlement agreement with Wade. With the fight behind them, they focused on growing Mavericks.

Yet not every school district was eager to put faith in Mavericks. Hernando County officials turned down Mavericks' charter application three years ago, partly because of questions about Mavericks spending. And for two years, Palm Beach County school district officials refused to approve a Mavericks school, saying the charter applications didn't meet state standards.

In February, district staff once again recommended denying Mavericks' application to open the school in Palm Springs. Staffers said the school's budget projections were "not realistic," objected to the management fee not being specifically defined in the contract, worried about the Pinellas school's financial difficulties, and noted that four existing Mavericks schools "contain deficiencies in their Accounting Policies and Procedures."

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Lisa Rab
Contact: Lisa Rab