Wall Street Hearts Charter Schools, Gets Rich Off Them

This is an interesting article about the intersection of charter schools and hedge fund managers:

Wall Street has always put its money
where its interests and beliefs lie. But it is far less common that so
many financial heavyweights would adopt a social cause like charter
schools and advance it with a laserlike focus in the political realm.

Hedge fund executives are thus emerging as perhaps the first
significant political counterweight to the powerful teachers unions,
which strongly oppose expanding charter schools in their current form

They have been contributing generously to lawmakers in hopes of
creating a friendlier climate for charter schools. More immediately,
they have raised a multimillion-dollar war chest to lobby this month
for a bill to raise the maximum number of charter schools statewide to
460 from 200.

The money has paid for television and radio advertisements, phone
banks and some 40 neighborhood canvassers in New York City and Buffalo
-- all urging voters to put pressure on their lawmakers.

Why, exactly, are hedge fund managers, primarily concerned with
their own net worth, bankrolling an advocacy campaign for increasing
the number of charter schools in New York? You won't get much of an
answer to that from this article, which mainly restricts their answers
to: 1) Mike Bloomberg likes them, 2) hey, free market! But if you go outside the New York Times, you'll find that there's more going on here:

On Friday, NY Daily News columnist Juan Gonzalez wrote a column
about how big investors can double their money in seven years using a
special tax credit to invest in charter schools, and he also discussed
what he uncovered in a brief segment on Democracy Now! which he co-hosts with Amy Goodman. Here's how he summarized it on the air:

There's a lot of money to be made in charter schools, and I'm not
talking just about the for-profit management companies that run a lot
of these charter schools. It turns out that at the tail end of the
Clinton administration in 2000, Congress passed a new kind of tax
credit called a New Markets tax credit. What this allows is it gives
enormous federal tax credit to banks and equity funds that invest in
community projects in underserved communities and it's been used
heavily now for the last several years for charter schools. I have
focused on Albany, New York, which in New York state, is the district
with the highest percentage of children in charter schools, twenty
percent of the schoolchildren in Albany attend are now attending
charter schools. I discovered that quite a few of the charter schools
there have been built using these New Markets tax credits.

What happens is the investors who put up the money to build charter
schools get to basically or virtually double their money in seven years
through a thirty-nine percent tax credit from the federal government.
In addition, this is a tax credit on money that they're lending, so
they're also collecting interest on the loans as well as getting the
thirty-nine percent tax credit. They piggy-back the tax credit on other
kinds of federal tax credits like historic preservation or job creation
or brownfields credits.

The result is, you can put in ten million dollars and in seven years double your money.

I have been told once or twice, when expressing skepticism about
charter schools, that they are the product of the most dedicated
teachers in America, who are tired of watching public schools fail
children and have sought an alternative model to provide the best space
for underprivileged kids to learn. I wonder if they'll just use the
same rhetoric when faced with this reality, that charters are just
another investor playground for easy money passed from taxpayers to the

Read Juan Gonzalez' column for more, including how the hedge funds and top investors are getting rewarded as rents rise on charter school buildings

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