The taxpayers of Cherokee have already been left holding the bag on deals structured like Cherokee Charter’s. For example, our officeholders’ failure to include basic financial protections cost us more than $18 million on the Bobo recycling deal.
Lyn Carden, board chair of Cherokee Charter, does not appreciate how much free money taxpayers have actually given to Cherokee Charter. The value exceeds $1 million when you factor in the interest that a normal, unsubsidized business would have to pay on $620,000 (the startup capital that Carden concedes Cherokee Charter received from taxpayers).
I made that point during conversations with Michael Geist, a Cherokee school board member with children attending Cherokee Charter, as well as Danny Duke, treasurer/founder of the school, a former banker and Cherokee Charter board member. Neither disagreed the value to Cherokee Charter of the taxpayer-provided startup capital far exceeded $620,000. (Incidentally, Carden concedes they used the money to buy books, desks, and other equipment, which are clearly startup expenses.)
Carden also acknowledges Charter USA ( privately owned operating company) put up about $1 million as a tax-deductible “donation” to Cherokee Charter to get a management contract that pays them roughly the same amount each and every year.
This is a very lopsided, easy-to-understand deal: Charter USA got a contract that pays it close to $1 million a year in exchange for an up-front donation of about $ 1million — and got taxpayers to contribute to their startup costs to boot!
But wait, there’s more! If Cherokee Charter goes broke and closes during a school year, they do not have to repay the free startup money. And, because the terms of this sweetheart deal don’t require common financial protections (such as a bond guaranteeing that they stay open for the entire school year), Cherokee schools would have to accommodate a sudden influx of over 1,000 former Cherokee Charter students.
Sadly, this is not a long shot scenario: Charter USA has already had schools go out of business and Cherokee Charter’s finances have recently received negative press.
Finally, Carden refuses to share a copy of the management contract for Cherokee Charter has with Charter USA. I have repeatedly asked, verbally and in writing, for Carden to let their financial backers (i.e. taxpayers) see that contract. We have already been burned by these horribly crafted, taxpayer-subsidized deals. It’s our money. Let us see the contract.
I would be happy to openly debate Carden regarding these issues. Nobody, especially me, is “demonizing” profits — just crony capitalism.