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State sitting out DPS, EAA debt repayment debacle

Aug 12, 2016

Does the Education Achievement Authority still owe the Detroit Public Schools about $12 million?

The two districts seem to have distinctly different ideas about that, in what’s become a very odd dispute between the two state-run school districts.

And for now at least, it seems the state is unwilling to step in and help resolve the dispute.

The EAA took over fifteen former DPS schools when it launched as an attempt at a stateside turnaround school district in 2012.

It also took on responsibility for some of DPS’ historic debt, paying a “rent” of $910 per student to cover the per-pupil share of the now-EAA students.

When the state intervened this year to save Detroit schools from a looming bankruptcy, splitting the “old” DPS in two, it wiped the debt slate clean for the “new” district, formally known as the Detroit Public Schools Community District.

There’s nothing about that in the DPS rescue legislation. But EAA leaders vehemently claim the state led them to believe their repayment obligations would be canceled, too.

The EAA provided Michigan Radio with emails and a detailed timeline laying out their communications with state officials about the debt payments.

In early 2015, EAA chancellor Veronica Conforme began trying to renegotiate the terms of the district’s lease agreement. It apparently fell behind on rent and payment for some other services, like security, and negotiated a payment plan that summer.

In January 2016, the EAA drafted an amended lease agreement that stipulated a “termination of rent obligation if landlord [DPS] is reorganized,” adding: “Any and all fees in excess of $1.00 incurred by the Tenant…starting from July 1, 2014 shall be satisfied for the sum of $1.00.”

That amended agreement was never signed. But State Treasurer Nick Khouri and top aides to Gov. Snyder apparently gave their tacit approval, and indicated to Conforme that DPS transition manager Steven Rhodes would sign off on it—or so Conforme believed.

The EAA, with state officials’ knowledge, approved its budget including those canceled debt assumptions in June.

But if Rhodes was ever on board with that plan, he isn’t now.

The two sides are still talking, but “Judge Rhodes is not obligated to waive debt as the fiduciary overseer of the District,” his spokeswoman Chrystal Wilson said in an email.

And in an email obtained by the Detroit News, Rhodes said: “I have no intent to forgive or waive any debt that EAA owes to DPS or DPSCD. That is not in the best interest of the students of DPSCD…We are in intense negotiations with EAA for a repayment agreement."

Despite the state’s heavy involvement in all stages of this drawn-out process, and EAA leaders clearly feeling blindsided, the state is choosing to sit out those negotiations.

Gov. Snyder also told the Detroit News Thursday that he never gave Conforme any assurance the DPS reorganization would cancel EAA debts.

Snyder said he “hopes DPS and EAA can sit down and work out the issues, because eventually, they’re going together, from a legal perspective.”

The DPS reorganization legislation did effectively kill the EAA after the end of this upcoming school year. The “reform district” was plagued by a slew of problems from the beginning, never expanding beyond Detroit or gaining any support from lawmakers to take it statewide.

It’s expected that most current EAA schools will be returned to the “new” DPS—five years after they were split off to join the EAA experiment.