After Aspira of Illinois declared bankruptcy in June, the nonprofit listed a building constructed with $27 million in taxpayer funds that housed one of its closed charter schools. In court records, the nonprofit indicated that it planned to use money from the sale to pay off debt and continue operating with whatever was left.
But last week, an attorney for the nonprofit told a judge that Aspira will, instead, put money from the sale aside and wait on the court to decide where it should go. Exactly how much money Aspira could walk away with is unclear. Chicago Public Schools sent an attorney to the hearing on the sale of the property, indicating that the school district is ready to make a case that it should get some, if not all, of the remaining money.
These latest developments in Aspira’s bankruptcy case come after WBEZ and the Chicago Sun-Times published an article questioning whether Aspira could pocket money from the sale. What happens in this case could set a precedent for what happens to assets purchased with public funds when private operators close charter schools in Illinois. CPS has been criticized for not going after the assets of closed charters in the past, but it appears the district is stepping in now.
CPS officials said in a statement issued Friday that they “refrain from providing details on pending legal proceedings” but noted that they are working through “appropriate legal proceedings to ensure that any and all property and assets purchased with public funds are returned to the District.”
A lawyer and officials with Aspira did not respond to a request for comment.
Aspira of Illinois ran into financial trouble in March and was forced to close two charter schools in Avondale on the city’s Northwest Side. More than 500 students had to find new places to learn midyear. And Aspira’s modern school at Milwaukee and Monticello avenues was left empty.
Aspira filed for bankruptcy in June, and about a month later asked the court to allow it to sell the state-of-the-art building for $11 million.
Aspira officials explained in court documents that the money would be used to pay off a $5.8 million mortgage on a smaller, older building, as well as about $1.5 million of debt to a number of creditors, including the Chicago Teachers Pension Fund.
But Aspira officials also indicated in court records that they planned to use the rest of the money to continue operating in some capacity. The organization still runs an alternative school that’s funded through CPS, and Aspira’s interim executive director said in a statement last month that, going forward, the organization is focused on “rebuilding and rebranding.”
CPS’ claim to some of the proceeds from the sale likely stems from its contract with Aspira, which states that if the nonprofit ceased to operate its schools, the organization “shall” return “any property or assets” purchased with CPS funds that were used to run its schools.
State law seeks to clear up any ambiguity by saying that anything “purchased with public funds shall be returned to the school district” from which the charter drew its enrollment.
Though the state footed the bill to construct the building that’s up for sale, state officials have not responded to questions about whether they will go after the proceeds, nor have their attorneys showed up in court.
Reporting by WBEZ and the Sun-Times seems to have altered how the proceeds will be handled.
When Aspira’s attorney, Paul Bach, got in front of the judge last week seeking approval for the sale, he noted he spoke with CPS’ attorney after a “news article that everyone has read” was published, referring to an August report by WBEZ and the Sun-Times.
He said Aspira proposed a plan in which it would pay off some of its debts and put roughly $4 million into an escrow account, which the organization cannot access until the judge decides what should be done with it.
Bach also touched on the question of whether $11 million is a fair price for a former school building that cost $27 million in state funds to build. When Aspira put the Milwaukee Avenue building up for sale, the real estate listing touted that it remains in pristine condition, and has had “significant capital investment” that would “support continued use or seamless adaptive reuse.”
Bach told the court that $11 million was “by far the best offer we have received to date” and the next closest offer was $7 million.
He implored the judge not to put off the sale.
“The whole idea is to get this property sold,” he said last week, pointing out that each month Aspira has to keep paying the mortgage on its second building is “detrimental,” as it eats into how much money the organization has on hand.
An attorney for the Chicago Teachers Pension Fund asked Aspira to agree to a financial audit. Charter schools are supposed to cover some of their staff’s retirement benefits. According to court documents, Aspira owes the pension fund more than $200,000.