NJ Education Report

Tom Wiedmann is on a roll: today Tapinto Newark published his third installment (with co-writer Mark Bonamo) of a series on the antics of Newark Superintendent Roger León and his screwball deal with a New York City-based private investment group to build a new high school in the East Ward. Whatever you think of district facility needs, the bottom line is this scheme leaves Newark residents on the hook for a heck of a lot of cash. State taxpayers too because state aid covers 89% of the district’s total operating budget of $1.2 billion.

How did this deal come about? Why did Leon agree to these terms with Summit Assets for the construction of the new Newark High School of Architecture & Interior Design at the site of the old St. James Hospital in the East Ward? How did Mayor Ras Baraka justify falling in line? What did Newark district leadership do to snooker the School Board into approving it after a financial presentation that lasted two minutes and 18 seconds?

Finally–and perhaps most importantly—where is the Murphy Administration’s oversight of these fiscal shenanigans?

Wiedmann and Bonamo uncovered a lot of dirt, but first it’s worth noting that Abbott/SDA districts (31 districts identified as eligible for compensatory spending; Newark is on the list) are supposed to have all facilities costs paid for by the Schools Development Authority, which suffered a scandal during the early years of the Murphy Administration when it blew through $12 billion. Last year’s state budget replenished that amount by $200 million and this year over $1.9 billion. Whatever—León is going rogue.

How so? Instead of purchasing a building, or getting a loan, or refurbishing another building (the new high school will max out at fewer than 1,000 students), or getting a lease arrangement where money paid is applied to the final purchase price, León agreed that Newark will pay the landlord two streams of rent for 20 years. At that point, the district can buy the building for “fair market value,” with no discount for two decades of lease payments.

From TapInto:

The district will not receive any credit for the rent it had paid for the previous 20 years, even though it paid for 100% of the construction costs, in addition to other costs. The purchase option means NPS could end up paying twice the full cost of the building if it decides to purchase at the end of the lease.

Public tax records show that the real estate taxes on the property are about $316,000 per year. Over the course of 20 years, if property taxes stay the same, the district would pay an additional $6.3 million in property taxes alone. 

(Because the property is owned by the investment group Summit Assets, not by the school district, it’s liable for property taxes, which the district agreed to pay.)

Also,

Newark will pay $6.2 million, or $519,243 per month in base rent in the first year of the lease. By the final year, the district will pay nearly $8.3 million, or $689,010 per month, an increase of 32% over 20 years.

This deal has evolved over time, although it’s unclear when Summit Assets became involved. In February 2021 Chalkbeat reported that the district was planning on leasing the old St. James Hospital for somewhere between $3 and $5 million a year, then purchasing it if enrollment warranted the addition of a new school. From Chalkbeat: “[T]he district has not produced data showing a large influx of new high school students. Some community members also have questioned why the district is opening new high schools when many of its existing ones are under-enrolled and need extensive repairs.“

In November of 2021, Chalkbeat reported the district wanted to lease and renovate the old hospital and take out a five-year lease:

It’s a costly gambit. The district spent about $4.5 million on salaries and classroom supplies for the three schools it opened this fall, [Business Administrator Valerie] Wilson said, a price that does not include rent. Last year, it spent $3.4 million on asbestos removal while renovating several schools.

The question now is whether Newark can enroll enough new students to justify the expansion. Sir Isaac Newton Elementary had about 130 open seats in pre-kindergarten and kindergarten, according to the enrollment guide. State data from last October show only 57 students were enrolled.

Newark Public Schools District already spends a lot on facilities. The state database called Taxpayer’s Guide to Education Spending creates “peer groups,” or districts of similar size and demographics so we can compare how each district allocates its resources. Newark is in a peer group of 91 districts. In school year 2021-2022, it ranked 88th highest in its spending on facilities operation, renovation, and maintenance and 91st highest in salaries for facilities staff members. This is in spite of mostly flat enrollment. (Cost per pupil was $19,895 last year, 80th highest compared to the other districts in its peer group. Next year it will be $21,832.)

But, hey, León is going to be #1 in real estate. Too bad there’s nothing left for Newark students, their families, and state taxpayers.