This report on what we might term, the charter school industrial complex in the San Antonio Express-News should irk any taxpayer with a heart beat. 

For those wanting to address this more fully, here is a helpful piece from the Texas House Research Organization in 2021 titled, "Charter school not entitled to tax exemption under recent ruling by Texas Supreme Court." The HRO presents a legal case, Odyssey 2020 Academy v. Galveston Central Appraisal District, where this particular charter school was not permitted a tax exemption its operators had requested. This case has broader implications germane to this Express-News report. Read on.

-Angela Valenzuela

Good morning, readers.

We're starting the week off with a pair of investigations into Texas' property tax rules and who is reaping benefits at taxpayers' expense.

First, consider a 2020 land purchase by Universal Academy. A nonprofit formed to support the Texas charter school bought a luxury horse ranch and equestrian center. Sales prices aren't public in Texas, but the property had been listed for $12 million when former ExxonMobil Chairman Rex Tillerson bought it in 2009. Because of the foundation's nonprofit status and its plans to offer equine therapy, the parcel was removed from the tax rolls.

An analysis by Hearst Newspapers found cases in which charter schools collected valuable real estate at great cost to taxpayers but with a tenuous connection to student learning. In others, administrators own the school facilities and have collected millions from charging rent to the same schools they run.

Meanwhile, Texas' Chapter 313 program expired Dec. 31, but a rush of applications as the law expired has put taxpayers on the hook for a projected $31 billion in tax breaks for nearly three decades to come.

-Cameron Songer, newsletter editor

Lax Texas charter school laws allow splashy land buys, profits for leaders

Just over two years ago, Universal Academy, a Texas charter school with two campuses in the Dallas area, made a surprising move.

In November 2020, a nonprofit foundation formed to support the school bought a luxury horse ranch and equestrian center from former ExxonMobil Chairman Rex Tillerson. The 12-building complex features a show barn “designed with Normandy-style cathedral ceilings,” a 120,000 square foot climate-controlled riding arena and a viewing pavilion with kitchen and bathrooms.

RELATED: IDEA Public Schools signed $15M lease for luxury jet despite being under state investigation

Last summer the Texas Education Agency granted Universal Academy permission to create a new elementary campus on the horse property’s manicured grounds. It will offer students riding lessons, according to a brochure, for $9,500.

Sales prices aren't public in Texas, but the 100-acre property had been listed for $12 million when Tillerson, who also served as secretary of state under former President Donald Trump, bought it in 2009. Because of the foundation’s nonprofit status and its plans to offer equine therapy, the parcel has been removed from the tax rolls.

School board President Janice Blackmon said Universal hopes to use the facility to start a 4H chapter and Western-style horsemanship training, among other programs that take advantage of its rural location. “We’re trying to broaden the students and connect them to their Texas roots,” she said.

Splashy purchases like the horse arena are receiving increasing public scrutiny as charter schools continue to expand aggressively across Texas. Under state law, charter schools are public schools — just owned and managed privately, unlike traditional school districts. 

An analysis by Hearst Newspapers found cases in which charter schools collected valuable real estate at great cost to taxpayers but with a tenuous connection to student learning. In others, administrators own the school facilities and have collected millions from charging rent to the same schools they run.

In Houston, the superintendent and founder of Diversity, Roots and Wings Academy,  or DRAW, owns or controls four facilities used by the school, allowing him to bill millions to schools he oversees. DRAW’s most recent financial report shows signed lease agreements to pay Fernando Donatti, the superintendent, and his companies more than $6.5 million through 2031.

In an email, superintendent Donetti at DRAW said the property transactions were ethical, in the best interest of DRAW’s students and properly reported to state regulators. He said his school was “lucky” he was able to purchase the property because of challenges charters can face finding proper facilities. 

DRAW Academy, center, photographed Thursday, Jan. 19, 2023, in Houston.Jon Shapley/Staff photographer

Also in the Houston area, at ComQuest Academy Charter High School, the superintendent and her husband also own the company to which the school pays rent.

And Accelerated Learning Academy, a charter school based in Houston, is still trying to get a tax exemption on one of the two condominiums it bought just over a decade ago in upscale neighborhoods in Houston and Dallas. The school claims it has used the condos for storage, despite a nearby 9,600 square foot facility.

The battles between school districts and charter networks have become increasingly pitched, as they are locked in a zero-sum battle for public dollars. 

Last year in Houston, about 45,000 students transferred from the ISD to charter schools, resulting in a loss to the district of a minimum of $276 million. That figure includes only the basic allotment received by the districts, excluding special education funding or other allotments.

In San Antonio, the two largest school districts are Northside ISD and North East ISD. More than 12,000 Northside students transferred to charter schools in the 2021-2022 school year, as did just under 8,000 from North East ISD. That means Northside lost at least $75 million, while North East lost $50 million, using the same basic allotment figures.

Each side cries foul about the other's perceived advantages: charters are able to operate with less government and public scrutiny, while school districts benefit from zoning boards and can lean on a local tax base for financing. 

Georgina Perez, who served on the State Board of Education from 2017 until this year, noted arrangements such as these would never be permitted at traditional school districts.

“If it can't be done in (school districts), they probably had a good reason to disallow it,” she said. “So why can it be done with privately managed charter franchises?” 

Lawmaker: 'Sunshine' is best cure

The largest charter network in Texas was a catalyst for the increased public scrutiny of charter school spending.

IDEA Public Schools faces state investigation for its spending habits, including purchases of luxury boxes at San Antonio Spurs games, lavish travel expenditures for executives, the acquisition of a boutique hotel in Cameron County for more than $1 million, plans to buy a $15 million private jet and other allegations of irresponsible or improper use of funds. The allegations date back to 2015 and led to the departure of top executives — including CEO and founder Tom Torkelson, who received a $900,000 severance payment.

IDEA Public Schools CEO Tom Torkelson talks Wednesday Feb. 29, 2012 at the Carver Cultural Center about the just-announced partnership between the Carver Academy and IDEA Public Schools to bring IDEA schools to San Antonio. The company has been operating in the Rio Grande Valley for 11 years and now operates 20 schools there. (William Luther/wluther@express-news.net)

William Luther/San Antonio Express-News

Over the years lawmakers have steadily tightened rules for charter governance. A 2013 bill included provisions to strengthen nepotism rules; a 2021 law outlawed large severance payments. That bill was sponsored by Rep. Terry Canales, a South Texas Democrat whose district has some of the highest rates of charter school enrollment in the state. 

“There’s a lot of work to be done for the people of Texas when it comes to charter schools,” Canales said. “Sunshine is the best cure for corruption. And the reality is it seems to be sanctioned corruption in charter schools.”

Considering the increased scrutiny, “It’s a myth that charter schools today are unregulated,” said Joe Hoffer, a San Antonio attorney who works on behalf of many charter schools. “Every session, more and more laws get passed.” If anything, he said, charter schools often have to jump through more regulatory hoops than local schools.

Yet acquiring property remains a gray area.

Charter schools that can’t purchase their own property typically must lease it and pay taxes. A 2021 state law authored by Rep. Barbara Gervin-Hawkins, a San Antonio Democrat who operates a charter, made such arrangements tax-free. But the Texas Supreme Court later blocked parts of the law, and it has been applied differently by counties across the state.

Barbara Gervin-Hawkins talks in her office after she works on the Culture, Recreation and Tourism Committee at the Capitol on March 5, 2019.

Tom Reel/Staff photographer

It's unusual for school districts to lease their facilities; typically they are publicly owned or constructed. Local school districts are governed by nonpartisan elected boards, and when the board decides to purchase real estate, it must notify the public of the contract and voters can petition the district to block it. If a project requires bonding or new taxes, it must be put on the ballot.

At charters, by comparison, the governing board is appointed, not elected, so it does not answer to local voters. The main public scrutiny comes later, when the information about the sale must be disclosed in annual required filings with the Texas Education Agency. 

The state education agency has the authority to review charter real estate transactions and sometimes does. In Dallas, Golden Rule Charter School is under state investigation for a real estate deal and possible nepotism. The school declined to release details because the investigation is pending.

But such reviews are often cursory, if they happen at all.

When charters report a real estate transaction to the education agency, Hoffer said, they typically just receive a letter back saying it has been recorded, with a clause reminding the schools that state regulators have the authority to return for an audit or demand the deal be re-done.

Critics say it isn't enough. “The problem that a lot of us have had with charters is that they are considered public schools and they are taxpayer-funded, but they don’t have taxpayer scrutiny,” said state Rep. Donna Howard, an Austin Democrat and former trustee at Eanes ISD. “It’s a real lack of accountability.”

Some deals benefit administrators

According to its website, Horizon Montessori Public School operates four campuses in the Rio Grande Valley, one on Sugar Cane Drive in Weslaco. Until recently, records show, the property and its two commercial buildings were owned by Superintendent Alim Ansari.

Hidalgo County appraisal records show Ansari also apparently lived in a 4,800-square-foot home at the back of the 2.85-acre parcel, a portion of which was granted a homestead limitation on its taxes.

In addition to serving as Ansari's home, records from the Texas Education Agency show that between 2015 and 2020, the superintendent leased his Weslaco property to Horizon for classroom and office space, collecting $118,000 a year in rent during the period. In 2020, Ansari-the-landlord signed a new five-year contract with his school for the property, for $168,000 annually, according to education agency records.

A home can be seen on the same piece of property as the Horizon Montessori Public School on Sugarcane Drive in Weslaco on Thursday, Jan. 19, 2023. The home belonged to the superintendent of the public charter school who leased his Weslaco property to Horizon for classroom and office space, collecting $118,000 a year in rent from 2015-2020. State and local records show Ansari sold the campus and residence last June. The buyer was a nonprofit organization called South Texas Educational Technologies, which according to its tax records conducts business as Horizon Montessori. Ansari is its chairman. State and local records show the foundation purchased the property from Ansari for $1.9 million, or more than twice the $840,000 at which Hidalgo County appraised it. Records show the foundation used a private appraiser to value the parcel.James Hord/Contributor

State and local records show Ansari sold the campus and residence last June. The buyer was a nonprofit organization called South Texas Educational Technologies, which conducts business as Horizon Montessori, according to its tax records. Ansari is its chairman. 

State and local records show Ansari's foundation purchased the property from Ansari for $1.9 million — or more than twice the $840,000 at which Hidalgo County appraised it. The foundation used a private appraiser to value the parcel. 

Ansari did not respond to multiple phone and email messages. James Hayes, a CPA who sits on Horizon’s board and who also is paid $48,000 a year by the charter for accounting services, declined to comment.

Related-party arrangements are rare among modern charters, said Hoffer, the attorney who represents some of them. In some cases, he said, new schools might be forced to make such deals temporarily because they did not have the creditworthiness to borrow money to purchase facilities.

Pioneer Technology and Arts Academy, which has several campuses in the Dallas area, paid about $5 million in rent in the 2021 fiscal year to two companies, one a nonprofit and one a for-profit. Records show Superintendent Shubham Pandey has stakes in both.

Just under $3.5 million went to the nonprofit controlled by two board members of Pioneer, including Pandey. Another $1,296,418 went to Pandey’s for-profit business, PNC Partners, with more than $3 million total reported in the previous three years.

In an email, Pandey said that Pioneer’s goal all along was to transfer the school buildings from his for-profit ownership to a nonprofit. Three campuses were taken over by the nonprofit in 2019, while three others were transferred last year. Future campuses will be owned by the nonprofit, he said, and he no longer collects rent checks from the school.

But the nonprofit  did not exist when Pioneer was given its charter, and its initial application did not mention future plans to transfer assets to a nonprofit.

At ComQuest Academy Charter High School, the Houston-area charter, Superintendent Tanis Stanfield and her husband, Glenn, said they don’t earn a profit from the rent it pays their company, Peachwood Station LLC

Peachwood collected $91,000 in rent in 2021. Documents also say the company provided an additional $117,000-worth of rent for free. 

Tanis Stanfield said the couple followed the law and provided the needed space at a steep discount to the school she ran. “State charter funding for facilities was not available for the campus acquisition,” the superintendent wrote in an email.

School-owned condos?

In 2017, the Chronicle reported on Accelerated Learning Academy's purchase of a 1,119-square-foot condo unit in the 22-story Cosmopolitan, a glassy high rise near Memorial Park, for $427,000. The school then bought a 1,340-square-foot condo in downtown Dallas’s Metropolitan Club the same year, appraisal records show. 

The school claimed both of the residential units were needed for storage space. The Dallas Appraisal District accepted that explanation, though the school already had a 9,600-square-foot, nearly empty campus in nearby Lancaster, and granted the condo a full property tax exemption. Records show Accelerated sold the condo in 2021.

The Cosmopolitan condominium building at 1600 Post Oak Blvd where Accelerated Learning Academy purchased a 1,119-square-foot condo unit, claiming they needed the space for storage, photographed Thursday, Jan. 19, 2023, in Houston.

Jon Shapley/Staff photographer

Harris County appraisal officials have been more skeptical about the school’s use of the unit for educational purposes: "Personally, I cannot imagine that the state of Texas would allow the use of state funds to purchase this property," the agency’s exemptions coordinator wrote in 2013, noting the Cosmopolitan’s deed restrictions prohibited condos from being used for businesses.

Accelerated has continued to seek a tax exemption. The appraisal district’s 2018 field inspection showed some plastic totes scattered throughout the unit.

“Very nice condo with granite and hardwoods,” the inspector noted. The exemption was again denied because the property did “not meet the tests prescribed by the tax code.” Records show Accelerated paid about $9,000 in property taxes on the unit last year.

Another example is the A.W. Brown Leadership Academy, which has two campuses in the Dallas area that serve about 1,000 students. Property records show it owns eight properties, several worth millions that have sat unused — even as taxpayer money has gone to repay the loans used to buy them.

Records show A.W. Brown's real estate holdings include nearly 50,000 of commercial office space purchased with bonds in 2017. Appraised at more than $4 million, the property has been tax-free since 2018 and is vacant. Taxpayers pay for the bonds. A.W. Brown spokesman Charles Roberts said the school is still deciding how to use it.

The charter also owns a 3,400-square-foot house with an in-ground pool on 6 acres in Duncanville, identified as an office and valued at $630,000, plus 99 acres next to it, valued at more than $4 million by the appraisal district. Those were purchased more than a decade ago from professional basketball player Larry Demetric Johnson, records show.

The school has paid no taxes on either since 2014, according to appraisal records. In the fall of 2022, the school announced its plan to turn the more-than 100 acres of land into a community garden and farm for students “to learn more about agriculture and entrepreneurship,” said Roberts, the school spokesman. 

In response to questions from Hearst, Roberts said the charter would be starting "an internal audit of facility purchases." He declined to comment further.

edward.mckinley@chron.com

eric.dexheimer@chron.com