Milwaukee schools cut ties with developer, but still owe $500,000

By Adam Tobias | Wisconsin Reporter

MILWAUKEE, Wis. — State Rep. Joe Sanfelippo, R-New Berlin, is feeling more optimistic about a bill, introduced last year, which makes MPS buildings available for sale if designated as surplus, underused or vacant for 12 consecutive months.

Milwaukee Public Schools and a private developer have severed their partnership on a controversial renovation project, which, some say, was rushed to block a choice school from buying the vacant Malcolm X Academy.

By terminating the agreement — which, earlier this year Sanfelippo said stunk to high heaven — MPS is responsible for paying 2760 Holdings LLC close to $500,000 for work already done on the former academy, a site shuttered since July 2007.

Sanfelippo hopes MPS’ latest actions will help gain more traction for his Assembly Bill 417.

A Wisconsin Reporter investigation in December found taxpayers are spending about $711,000 annually to maintain 15 empty Milwaukee school facilities, some of which the district refuses to sell to choice school operators. Most of the structures have stood vacant for more than five years.

Even though AB 417 didn’t make it to the Senate floor for a vote in April, Sanfelippo predicts things will turn out differently in the next session because of an expected philosophical shift in that legislative body.

Sanfelippo said some Senate members realize that he and Sen. Alberta Darling, R-River Hills, were not exaggerating the issues with empty MPS buildings when the Republican lawmakers first introduced the legislation a year ago.

“They have seen it over and over again, and they are mad as all get-out themselves because they hear it from their own school districts how they are struggling to make ends meet, and then they turn around and watch MPS leaking money left and right,” Sanfelippo told Wisconsin Reporter. “They are just fed up with it.

But Michael Bonds, Milwaukee Board of School Directors president, argues MPS isn’t wasting taxpayer dollars by cutting its partnership with 2760 Holdings because the $500,000 is going for needed work.

“It’s not like you’re paying for a product that you won’t use and need,” Bonds said.

The school board decided to nullify the contract — which former MPS Superintendent Gregory Thornton called “probably the best deal in town” in October — because the developer made an inappropriate request regarding a fundraiser for an annual school conference, according to Bonds.

James Phelps, a principal with 2760 Holdings, did not return calls from Wisconsin Reporter seeking comment. Dennis Klein, another principal with the company, directed all questions to Phelps.

The school district is looking to hire a construction manager and will handle the renovations internally, Bonds said. With the addition of an air-conditioning system, the projected cost of the work is about $13 million.

The property will include housing and retail space, which, Bonds says, the school district won’t operate.

Initial plans called for MPS to sell the vacant Malcolm X site to 2760 Holdings for $2.1 million and lease a portion of the facility for 50 months for $4.2 million. The thought was the school district would fund the renovations with the lease payments and buy back the school portion of the building for $1.

Around that same time, St. Marcus School, the gold standard in Milwaukee’s school choice program, offered cash to buy Malcolm X Academy for its fair market value, which Superintendent Henry Tyson told Wisconsin Reporter is more than $1 million. The choice school was also planning to spend up to $8 million in privately funded renovations.

“It was a complete farce,” Sanfelippo said of the original development deal. “It was only done to stop St. Marcus from expanding and (MPS) should be ashamed of themselves. It defies logic.”

But St. Marcus is hardly alone.

MPS blocked several charter and private schools in the choice program from buying nearly every one of its unused facilities, an investigation conducted by the Wisconsin Institute for Law and Liberty revealed.

“It’s a fight over market share, like these kids are commodities,” Sanfelippo said. “Their first and primary objective should be to provide the best education for kids possible, but they are wasting money keeping these buildings empty.”

Bonds indicated in a 2011 interview with the Milwaukee Journal Sentinel that MPS was unwilling to sell some of its vacant properties to choice schools because the district would likely lose students and state funding.

“It’s like asking the Coca-Cola Company to turn over its facilities to Pepsi so Pepsi can expand and compete with the Coca-Cola Company,” Bonds told the newspaper.