Short-sited: How Horizon Charter School’s $800,000 investment went wrong
CHARTER SCHOOLS SERIES
The midyear closure of a popular Horizon Charter Schools program in Placer County, displaced hundreds of students, angered parents and sparked questions about what led to the sudden problems with one of the longest standing charters in California.
The Journal and its Gold Country Media partners launched an effort to shed light on the state of Horizon and charter schools in general.
Part 1: How Horizon’s $800,000 investment, other facilities went awry
Part 4: A charter success story
Part 5: Comparing charter schools to traditional public schools
CHARTER SCHOOLS BY THE NUMBERS
HORIZON CHARTER SCHOOLS
$137,640,667 – Public funding received from July 2004 through June 2011, amounting to 99.4 percent of total revenue during that time
$19,029,057 – Total revenue in fiscal year 2010-11
$814,455 – Tenant improvements paid for in 2011 related to Rocklin site that is now being reclaimed by bank
2,700 – Total enrollment
305 – Students that left Horizon when Accelerated Learning Academy closed
15 – Only 14 charters had been authorized prior to Horizon, which began under the name of Home Independent Study in 1993, making it the state’s 15th charter
6 – Number of counties in which school has a presence
484,000 – Students in charter schools
70,000 – Students on charter school waiting lists
10,000 – Students on charter waitlists in Los Angeles Unified School District
1,063 – Charter schools, the most of any state in the country
$395 – Average amount less general purpose per-student funding charters receive than their school district counterparts, per Legislative Analyst Office 2012 study
110 – New charter schools opened in 2012-13
Source: Horizon Charter Schools, California Charter Schools Association
No school children, no Horizon Charter Schools sign, no teachers, no cars – nothing.
On a sunny day in mid February outside 290 Technology Way in Rocklin, the only indication the office suite hosted hundreds of students just a few months earlier was a child’s broken pencil on the ground along the sidewalk to the entrance.
Its eraser was still intact. Perhaps that’s fitting, as the Horizon administration wiped the Accelerated Learning Academy program housed there clean from its lineup.
But this blemish on one of the state’s longest running charter schools, one of the largest nonprofits in Placer County – its $19 million revenue stream funded by more than 99 percent of public money – is still fresh in the minds of some parents and teachers who invested themselves in one of Horizon’s more popular programs.
The 20,000-square-foot building that Horizon spent more than $800,000 on tenant improvements in 2011 is in the process of being reclaimed by Wells Fargo, Horizon attorney Glenn Peterson said.
“It means we’re out of the space,” Peterson said.
Now its floor-to-ceiling windows are blacked out with all the shades drawn. The only distinguishing mark is a flower drawn by a wax pencil on the interior of the glass – a faint memory darkened by the present.
Horizon CEO Craig Heimbichner said shutting down the site in October was due to imminent traffic safety concerns, a problem that arose from higher attendance than the site allowed.
Heimbichner said he learned the use limitations for the first time when meeting with Placer County this school year, and he claims Group Access, which Horizon subleases the site from, had misrepresented its use when obtaining the business license.
Group Access denies those claims.
But the dispute between the charter and its third-party management company is just one part of the complex current state of affairs for Horizon, which is up for reauthorization by Western Placer Unified School District in June.
The midyear closure of ALA will “most definitely” be factored into the board’s review of Horizon’s petition, said district superintendent Scott Leaman. So, too, will the internal fiscal investigation performed by an outside analyst ordered by Horizon in January, Leaman said.
“At this time, we don’t have direct evidence that they violated the charter around the ALA issue,” he said. “(Horizon has) a fiscal analysis going on … so we’re looking at that aspect of it.
“We really do want to see that prior to the charter being authorized.”
Heimbichner said he “fully” anticipates reauthorization by Western Placer.
“I would say we’re looking for a bright future,” he said.
ALA was just one of many programs Horizon offers, and the charter’s current enrollment remains around 2,700 – the recent loss of hundreds of students offset by a boost in independent study students, Heimbichner said.
It has two growing programs in Auburn, with about 250 students meeting for class on Blocker Drive three days a week.
Parents rave about the educational options Horizon presents. Even those parents who formerly had students in ALA, whether K-2 in Lincoln or third-through-eighth grade in Rocklin, sang its praises.
Meeting the demands of what had been an increasingly popular program ultimately proved to be a challenge too great to handle, for a variety of reasons.
So, what led to the downfall of ALA, and what does that say about Horizon and where it is headed?
The Journal set out to answer those questions as part of its series on charter schools.
Rocklin site repossessed
Horizon signed the lease agreement for 290 Technology Way with Group Access in June 2011, the same month it signed off on $704,982.93 in tenant improvements for the site. The following month, Horizon signed off on an amended improvement plan that included an additional $109,472.29 in construction charges, bringing the total to $814,455.22.
Those decisions had been made without knowing the true limitations of the business license, because the school’s administration trusted Group Access, Peterson said.
The limitations became a problem when neighbor complaints led to Placer County reviewing the site and ultimately determining Horizon had been running an elementary school there, which was not a permitted use.
It had been permitted as a “distance learning resource center” where students met one to three times a week, and limited the number of students to no more than 75 at one time and 200 per day. However, 391 students had been taking classes there between the ALA classes and a Horizon high-school level Rocklin Academy of Math, Science and Engineering.
The reason Wells Fargo is repossessing the property is because rent had not been paid, Peterson said.
Horizon says it is current in its payments to Group Access, but it is disputing additional fees that were not in the contract; Group Access says Horizon has selectively been paying its bill, so, in turn, it could not pay Wells Fargo.
Wells Fargo attorney Patricia Elliott did not return several messages seeking comment.
In January, the bank administered a notice to “any occupants” saying one month’s base rent of $10,457, plus $3,000 in common-area charges, had not been paid, Peterson said.
Horizon had been paying Group Access $20,000 a month for facilities and services at 290 Technology Way, Peterson said. He requested to see the master lease numerous times prior to that, but upon receiving it in December 2012, the base rent had been redacted, he said.
So, when the Wells Fargo notice showed Horizon had been paying nearly double the base rent to Group Access, it came as a shock, Peterson said.
Horizon in the dark
Not only had Horizon been unaware of the limitations of the site it had invested more than $800,000 in, it also lacked a complete understanding of where the rent money it handed over to Group Access went.
“No one ever questioned it,” Peterson said. “Group Access was so deeply involved in Horizon’s affairs providing all the IT services, consultation services and interfacing with the county, preparing documents to be filed with the county to get the appropriate permission in that space.
“That’s how this situation was created. They were just writing checks to Group Access as the landlord. Eventually, we learned that Group Access didn’t own the premises. It rented the premises from Wells Fargo.”
Group Access attorney David Durrett told the Journal in January his client has been “forthright” in dealings with Horizon, and regarding the rent markup, “they should have known, because they should have asked,” but instead they wanted a “turn key” deal where Group Access took all the risk.
“I’m just really kind of disturbed that Horizon always seems to blame third parties, whether it be the parents, teachers or Group Access,” Durrett said. “And I really think that since we’re talking about taxpayer money, someone really has to investigate this.”
The Journal asked why Horizon would not have reviewed the business license for 290 Technology Way before signing its lease with Group Access or investing in significant tenant improvements.
“Why would anybody give their life savings to Bernie Madoff?” said Peterson, referring to a notorious Ponzi scheme. “It’s easy to say in retrospect with the benefit of hindsight that it was foolhardy for people to give their pension money to Bernie Madoff, but at the time it was done, people trusted Bernie Madoff and they relied on his word and in good faith.
“And Horizon, that’s what happened here. … Horizon relied on (Group Access CEO William) Brockmeyer just as many smart business investors relied on Bernie Madoff.”
Durrett called that statement “ironic.”
“If Horizon’s counsel chooses to portray my client as Bernie Madoff, my answer is that is a sack of s---. I mean, who has lied time and time again to the government? It has been Horizon,” he said. “If my client is guilty of anything, it is naiveté.”
History of facility crises
Heimbichner said Horizon faced an even bigger crisis than the ALA closure just before it hired him as a curriculum instructor in the summer of 2010.
In April 2010, Horizon had to shut down the site of a Sacramento program a few weeks before the end of the school year, and media reports around that time featured shocked parental reaction that echoed the comments of ALA parents faced by a similar situation 2 1/2 years later.
Different reasons, the same outcome: hundreds of students displaced in the middle of a school year. From April to December 2010, Horizon lost 362 students from its total ADA.
Again, the sudden change had to deal with problems related to the site Horizon had chosen for independent study students to meet a few days weekly.
Since Horizon was chartered in Placer County through Western Placer, running the program outside of county lines became an issue. The California Education Code states a charter school must provide, “its primary educational services in … the county in which the school is authorized.”
Creating Horizon’s second charter, Partnerships for Student-Centered Learning, or PaSCL, in July 2010 cleared up the problem entirely, Heimbichner said.
That South Sacramento program eventually relocated to an Elk Grove location Horizon subleases through Group Access, and the program is under the auspices of PaSCL, which is also authorized by Western Placer.
When the next set of site issues cropped up, Heimbichner would have to address them in his new role as CEO that he assumed in October 2011. It started with the fire marshal showing up at a small Rocklin site that ultimately had to be vacated after neighboring tenants had complained.
“Within a matter of days of gaining this chair, there was a facility crisis, and the students were moved out of it at an elementary level,” Heimbichner said, referring to a site that housed third-grade ALA classes in the same complex as 290 Technology Way. “I started probing the relationship between this external middleman (Group Access).”
Heimbichner said Horizon is working to extract itself from its affiliations with Group Access. For example, Peterson said payments for the Auburn site now go directly to the property owner, bypassing Group Access. Both contracts for Auburn and Rocklin were 10-year sublease agreements.
Horizon also asked twice to be released from contracts at the Lincoln Christian Life Center.
K-2 ALA classes had been held there this past school year, and on Nov. 26 Horizon emailed Pastor Kenneth Rowley saying the program was closing, and starting January 2013 it would no longer be using the facility. There had also been permitting issues with Placer County, the email noted.
Horizon still owed $21,000 on the lease agreement it signed with the church in August 2012 to rent it through May 2013, and, upon notifying Rowley of the program closure, it offered to pay a $5,000 termination fee.
The church declined the offer, but since then a different charter program started renting it for a lower rate, Rowley said, adding that the church “lost significant income” because of Horizon reneging on its contract.
In January 2012, Horizon had been renting the church one day per week for a different program, and it asked to be released from its contract through May 2012 because the school’s budget was “drastically reduced” due to the state’s financial problems, according to an email from Horizon facilities director Mike Basile to Rowley.
“The first year they reneged on their contract, it surprised me. I said, ‘What’s the value of signing a contract?’ I don’t understand that,” Rowley said. “The following year, the church board said, ‘What is going on?’ They don’t believe in contracts apparently. There is no validity in that.”
Heimbichner said the church had been in talks with a former ALA parent group about continuing classes there under a new charter program, so the $5,000 offer was “being nice.”
“The other group was coming in and wanted Horizon to fund their school. No way. So I then said here’s our offer,” Heimbichner said. “And what I was looking at was either generously giving them some money or just going strictly by what’s going on here – there’s a lease violation we don’t technically owe them anything.”
Horizon and the church have had a 10-year relationship, and through their history they worked through issues “very well,” Rowley said. He has tried to keep himself out of the situation, but he feels empathetic to those hurt in the fallout of the ALA closure, he said.
“Some of the people that work with Horizon, they’re very good friends and they’re lovely people,” he said. “It’s very grievous to me that these things have evolved as they have.”
Jon Schultz can be reached at firstname.lastname@example.org. Follow him on Twitter @Jon_AJNews