On a busy stretch of North Milwaukee Avenue, the four-story windows of a sleek white limestone building are devoid of activity just weeks before the start of school.
The state spent $27 million to build the former charter school just over a decade ago. But instead of getting ready to welcome back students, the Avondale building is on the verge of being sold to a real-estate investment company for a fraction of what taxpayers spent to construct it.
The charter school’s former operator, Aspira Inc. of Illinois, recently filed for bankruptcy, after it was forced to close two schools in March, leaving more than 500 students to transfer midyear. In bankruptcy court filings, the nonprofit cited the loss of funding from Chicago Public Schools and “significant and continuing financial distress.”
The situation raises questions about whether Aspira will be able to pocket money from the sale of its taxpayer-funded building to pay for its own operations. It’s also unclear whether CPS or the state will be able to recoup anything from the sale after sending millions to Aspira.
Aspira officials have indicated in court documents that they want to sell the Milwaukee building and use the money to pay off debts and keep operating in some capacity.
Interim executive director, Melissa Batista, noted that Aspira still operates a public alternative high school within CPS that reenrolls dropouts and runs youth development and community engagement programming at the Aspira Community Center.
“Looking ahead, our focus is on rebuilding and rebranding ASPIRA while returning to the organization’s roots focused on education, youth leadership, and service to our communities,” she wrote in a statement on Tuesday. “There are significant challenges in front of us, but there is also an opportunity to rebuild with intention.”
When the state gave Aspira money to construct its building on Milwaukee Avenue, officials praised the community organization’s commitment “to the self-determination of Latino and other underserved youth.”
Now, Iris Martinez, the former Democratic state senator who helped Aspira obtain the grants from Springfield, said the situation is “a disaster all the way around.” Martinez blamed Aspira administrators and board members but said she doesn’t see any way for the state to claw back its investment.
“To see that today the school sits there right now empty, with the possibility of it being bought off by a developer who probably will convert it into condos — that to me is a heartbreak,” Martinez said.
A spokesperson for the Department of Commerce and Economic Opportunity, which awarded the grants to Aspira, said Tuesday that agency officials are looking into the matter after questions from WBEZ.
Meanwhile, Aspira’s contract with CPS, like all the district’s charter contracts, specifies that if Aspira ceases to operate its schools, the organization “shall” return “any property or assets” used to run its schools that were purchased with CPS money. 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.
Over the past decade, CPS sent $156 million to Aspira to run its charter schools, including $8 million in facility stipends for the Milwaukee Avenue building.
In the past, some have said CPS did not work hard enough to recoup assets from closed charters. Jen Conant, the charter division chair for the Chicago Teachers Union, said this time needs to be different, especially because CPS gave Aspira extra money every year to operate in non-CPS facilities.
“If CPS doesn’t recover the additional funds from the sale of the Milwaukee building, other charter operators will learn that they can open up a school and leverage public funds to do it, shut it down within a few years, and walk away with the taxpayer-funded real estate and capital for their own private purposes,” she said. “Public funds, public school dollars are for the education of our children, not for private operators to play with.”
Aspira officials did not answer questions about what they believe CPS is entitled to.
Aspira’s buildings are worth millions, but where will that money go?
Aspira’s most substantial assets are two Avondale buildings that housed high schools, court records show — the modern one on Milwaukee Avenue and another older building less than a mile away on West Barry Avenue that Aspira bought and renovated.
Court documents reveal that the two properties are tied together. The Barry Avenue property was appraised at $4.5 million — much less than Aspira officials thought it was worth. In an April resolution, board members cited that lower estimated value as one of the reasons they approved filing for bankruptcy.
Aspira still owes $5.4 million on a mortgage on the Barry Avenue property, court records show, and the organization intends to use proceeds from the Milwaukee Avenue sale to pay off that mortgage.
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.”
The building also is “LEED Gold Certified,” the listing states, meaning it meets high environmental and energy-efficiency standards.
It did not take long for Aspira to find a buyer. Last week, Aspira reported to the bankruptcy court that the organization had accepted a $11 million offer from Saxony Properties, LLC — a million dollars less than Aspira thought it would fetch. Aspira will go before the court on Aug. 25 to try to get approval for the sale.
The owner of Saxony Properties, which owns and rents dozens of North Side apartments, did not respond to a call and email asking what it plans to do with the building.
In court documents, Aspira says that $11 million is a “fair and reasonable” price and states that Saxony is not an insider and that the contract was negotiated at “arms length.”
Aspira indicated in court documents it would use profits from the sale of the Milwaukee Avenue “to satisfy creditor claims and fund the Debtor’s operations or plan of reorganization.”
If Aspira is permitted to sell the building, the first debt it has to settle is the $5.4 million it owes to Old Second National Bank, which holds the mortgage on the Barry Avenue building. Next will be the real estate attorney, a former board president of Aspira, who will get $27,500.
Aspira provided the court with a long list of other debts that need to be satisfied. The Chicago Teachers Pension Fund, Blue Cross Blue Shield of Illinois, which handled Aspira staff’s health insurance, and a lending company called PEAC Solutions are each owed more than $200,000.
Edgar Lopez, the executive director who left after Aspira’s schools closed, believes he should get $240,000, but Aspira disputes that claim. Lopez did not return messages seeking comment.
Aspira also owes more than $54,000 to ComEd and nearly $26,000 to Peoples Gas.
Altogether, Aspira lists $1.5 million in unsecured claims that are not backed by property or other collateral.
CPS is on the list of Aspira’s creditors filed in court records, but, according to the bankruptcy documents, the debt to the school district is only around $2,700. The school district’s attorney has yet to appear in court on the matter or file a motion to intervene.
The bankruptcy court decides what happens once Aspira’s creditors are paid off. In addition to any leftover money from the Milwaukee Avenue building, Aspira has the Barry Avenue building and nearly 800 items in inventory, including numerous laptops, speakers, microscopes and school furniture.
Some say Aspira’s situation points to need for more accountability
No other charter school has filed for bankruptcy in Chicago and it is extremely rare for it to happen anywhere, though a few hundred close each year, according to the National Alliance for Public Charter Schools, a Washington D.C.- based advocacy organization.
Derek W. Black, a law professor at the University of South Carolina who has written extensively about charter schools, says many people don’t understand that charter schools get public funds but are mostly left to manage and spend their money as they want. Typically, he said, their assets “do not belong to the people of the state of Ohio or Illinois or New Jersey.”
And while some states have accountability measures that dictate what happens if a charter school closes, often, when an operator walks away, there isn’t much holding them accountable.
It raises questions like: “Who is looking out for the taxpayers?” Black said. “Who is looking out for the community?”
Lopez, Aspira’s former CEO, argued that the way CPS funds charter schools led to Aspira’s financial problems. He accused CPS of giving charter schools just 83% of what the district would typically spend per student, not the 97% required by state law.
He said the organization was doomed by that discrepancy, along with a drop in enrollment and an increase in the labor costs for unionized staff.
The Illinois Network of Charter Schools, a charter advocacy group, did not defend Aspira, but said in a statement that it expected the proper legal processes to be followed in the closure of the charter schools and the bankruptcy proceedings.
The group also echoed concerns that Chicago charter schools are being underfunded as they face many of the same enrollment and financial challenges as district-run schools.
But CPS officials contend that Aspira’s difficulties are unique.
Last November, CPS told Aspira’s board that a months-long district investigation allegedly found “a failure of governance” and “a lack of financial proficiency necessary to successfully run a school.”
When Lopez asked for a second cash advance in February, the Chicago School Board balked and then voted unanimously in March to end its contract with Aspira — the only time the school district has revoked a charter in the middle of the school year.
WBEZ has been seeking information to get a better picture of what led to Aspira’s financial troubles. In March, WBEZ filed a Freedom of Information request with Aspira for payroll information, financial statements, audits and other public records.
Charter schools are subject to the state’s open-records law, but Aspira did not provide the requested records. Chicago Public Media sued Aspira in Cook County Circuit Court for access to those documents.
Aspira’s bankruptcy lawyer, Paul Bach, has asserted that the open-records case was automatically put on hold due to the bankruptcy filing. But lawyers for Chicago Public Media said they will challenge that.