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Franklin Towne appealing conditions placed on new charter approval

If the case proceeds, it could set a precedent that would limit the ability to regulate charters.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

In a case that could have wide implications for Pennsylvania school districts’ ability to control charter expansion and regulation, Franklin Towne Charter is appealing the School Reform Commission’s requirement that it meet conditions before being granted a charter for a new middle school.

The SRC approved the new charter on April 26 after originally denying it on Feb. 22. The conditions were significant – reducing the enrollment total by a third, requiring the school to give preference to students from nearby zip codes with high non-white populations, and changing policies to conform with various state laws.

Franklin Towne’s existing two schools, which enroll 2,100 students in grades K-12, are 70 and 83 percent white, although they are located in a diverse section of the city. In the School District overall, only 14 percent of students are white.

The SRC also imposed conditions on Franklin Towne’s operational structure, which the District’s Charter Schools Office, in evaluating the application, found rife with conflicts of interest among its schools, its boards, its management organization, and its landlord.

Franklin Towne is making the argument that the conditions so completely alter its original proposal that the SRC’s vote amounts to a denial or non-action on its application, according to a source. If the state Charter Appeals Board and the courts back up this position, the new Board of Education, which will take over from the SRC on July 1, would lose an important lever in trying to manage charter growth and quality while maintaining the District’s financial viability.

The charter approval surprised many activists, who expected the school to be denied based on the charter office’s negative evaluation of its original application. The new application was only marginally revised.

Franklin Towne’s CEO Joseph Venditti also runs the holding company that became the high school’s landlord. The high school purchased the building with bonds and transferred ownership of it to Franklin Towne Holdings LLC – created by Venditti, who made himself CEO. This practice was first called out by former City Controller Alan Butkovitz as early as 2010, who found the practice at other Philly charters as well.

Venditti did not return a request for comment.

Franklin Towne’s boards for its two existing schools are chaired by the chief of staff for Lt. Gov. Mike Stack.

Despite being criticized by the charter office for the overlapping board structure and conflicts of interest for the CEO/landlord relationship, the revised application did not remedy those problems. So the SRC approved the application, but imposed what it calls “conditions” that the company must meet to open the school and retain the charter.

The school has many ties to the Northeast faction of the Philadelphia Democratic party, and at least one Republican from the area. The local leader of the Democratic Party, retiring U.S. Rep. Bob Brady, along with Democratic State Sen. John Sabatina Jr., Democratic City Councilman Bobby Henon, and Republican State Rep. John Taylor all signed letters of support for the school and all represent Northeast Philadelphia, where Franklin Towne is located.

Additional conditions focus on remedying “numerous concerns” of evaluators at the charter office regarding overlapping board members, and clarifying exactly what services contractors are being paid for. One contract is with Franklin Towne High School, proposed to act as the management company for the new middle school, as it does for the elementary school. The other is with Omnivest Properties Management LLC, which also has a contract with the high school.

Other conditions require Franklin Towne to follow state laws such as the School Code, Charter School Law, and the Pennsylvania Sunshine Act that requires transparency from public institutions. It would also reduce the enrollment from the 450 originally requested to 300 students.

To make the new school more diverse, the SRC’s conditions require the middle school give admissions preference to additional Northeast zip codes with large black, Latino and Asian populations.

The charter law requires applicants to demonstrate community support. Franklin Towne’s original application was criticized by evaluators for providing “insufficient” evidence of this, such as letters from parents intending to enroll their children, though the school did submit quite a few letters of support from local politicians. Despite this criticism, the school’s resubmitted application did not include additional evidence of community support, according to the charter schools office.

Under the conditions, the new school must submit the names of all its board members and demonstrate that they are different from current board members. The charter office included this condition because Franklin Towne kept Cynthia Marelia, Lt. Gov. Stack’s chief of staff, as the chair of the new school’s board even after the organization was told that there should be no overlapping board members.

The conditions also require that the school submit a new lease with a new landlord demonstrating an “arm’s-length transaction without evidence of conflicts of interest,” citing the conflict presented by Franklin Towne CEO Venditti also being the landlord.

Through the various restrictions, the SRC effectively demands that Venditti not be appointed CEO of the middle school by requiring that its CEO not also serve as the CEO of any other charter school or charter school company. Venditti is both.

Approving charter schools with conditions is a fairly new practice in Philadelphia. Susan DeJarnatt, a professor at Temple Law School and expert in state education law, said the practice first emerged here after Mayor Kenney’s cigarette tax legislation, in which state Republican lawmakers inserted a provision that gave the state’s Charter Appeals Board jurisdiction over Philadelphia, along with a requirement that the SRC authorize new charter schools each year. In the original charter law, the SRC, a state agency, was exempt from appeals board review. Philadelphia has about half the charters in the state.

One of the lawmakers instrumental in inserting this provision into the cigarette tax legislation was State Rep. Taylor. He was among those who submitted letters of support to the SRC backing Franklin Towne’s application to open a new middle school.

Since that legislation passed, the SRC has approved a number of charter schools with conditions, most likely because the Charter Appeals Board hears cases of denial, revocation, and non-renewal of a charter. But when the SRC votes to approve a charter, the appeals board has no jurisdiction.

“They’re pretty blunt about that reasoning,” DeJarnatt said, referring to a 2017 SRC meeting where Commissioner Estelle Richman justified approving an otherwise insufficient charter school with conditions by saying that a case before the appeals board, if the charter were denied, would divert the SRC’s attention from settling the teachers’ contract. The contract has since been resolved, but the approvals with conditions have continued.

“Members of the SRC seem to believe that they don’t have the authority under the charter law to deny charters based on their financial impact on the District,” making them assume the District would lose on appeal, DeJarnatt said. “Personally I think they’re wrong, but they’re convinced of that. So in their minds, they’re between a rock and a hard place.”

This practice of approving charter school applications but then demanding changes in them, instead of denying them due to their inadequacies, has angered activists with the SRC watchdog group Alliance for Philadelphia Public Schools. The Alliance sent an open letter to the SRC on May 10, asking for an explanation of why Franklin Towne was approved, but did not receive further clarification.

Diane Payne is a member of the Alliance who researched Franklin Towne. She was outraged at the notion that Franklin Towne, with over $30 million in debt between two schools and balloon mortgages maturing this summer, could be granted even more state dollars in the form of a new school.

“The SRC voted to approve another school of that company… despite the detailed news reports of the pyramid scheme that Franklin Towne is perpetrating,” Payne said referring to Franklin Towne’s debt. “Despite the company’s precarious financial situation; despite the fact that they showed almost no community support; despite the fact that Franklin Towne basically blew off the Charter Schools Office’s over 30 instances in which Franklin Towne failed to address concerns in the second application that were raised after the first one.”

The Alliance claims the strategy is a short-sighted way of trying to keep the SRC’s decisions from getting reversed by the appeals board. And it could backfire.

“Rather than fulfill its obligation to represent the stakeholders of the district, the SRC has tried to justify its approval of new charter applications including [the middle school] by saying it can maintain control by imposing conditions,” said Payne.

Referring to Franklin Towne’s appeal, she said that it shows the SRC shouldn’t be “trying to make deals” with charters and their “investors” because “it isn’t working.”

Decisions of the state appeals board can always be challenged in court, and these challenges could set new precedents throughout the state.

According to sources, Franklin Towne will argue that the conditions imposed are so onerous that they effectively amount to creating an entirely new charter different than the charter Franklin Towne applied for – an action that the appeals board could decide was effectively a denial, or a failure to act on the proposed charter.

DeJarnatt said that she thinks the specific conditions placed on Franklin Towne’s charter do not substantiate that argument. But she was not confident that the appeals board would agree on something so open to interpretation.

“I think it’s really hard to predict,” she said.

In April, a charter advocacy group, Excellent Schools PA, sued the SRC over Policy 406, which would further regulate charter schools, however modestly, while also allowing for charter amendments mid-term as requested by a number of charter school representatives.

The policy, originally drafted last fall, was finally approved by the SRC in March after several public hearings at which representatives of charter schools appeared and offered testimony. However, they had sought private negotiations and the formation of a task force to jointly work out the policy. The request for private meetings was denied by the former chair of the SRC’s policy committee, Christopher McGinley.

“The SRC is going the extra mile with Policy 406 to provide a process for those mid-term amendments, but the lawsuit argues that charters weren’t given any choice and weren’t listened to,” DeJarnatt said. “This argument keeps coming up — that districts are only allowed to consider exactly what we asked for, and we’re entitled to receive exactly what we asked for.”