Why Hedge Funds Love Charter Schools
In April I posted, The Dishonorable Andrew Cuomo Meets the Hedge Fund / Charter School Zombies. In an online comment, Huffington Super User William Occam challenged me to provide "evidence that any of the individuals you have publicly shamed in this essay stand to financially gain from their support." I responded at the time but feel he merits a more detailed answer and I would like to take another shot at the hedge fund / charter school zombies. I also recommend a YouTube satire, the Education News/Comedy Show, by my colleague Mark Naison of Fordham University.
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Obscure laws can have a very big impact on social policy, including obscure changes in the United States federal tax code. The 2001 Consolidated Appropriations Act, passed by Congress and signed into law by President Bill Clinton, included provisions from the Community Renewal Tax Relief Act of 2000. The law provided tax incentives for seven years to businesses that locate and hire residents in economically depressed urban and rural areas. The tax credits were reauthorized for 2008-2009, 2010-2011, and 2012-2013.
As a result of this change to the tax code, banks and equity funds that invest in charter schools in underserved areas can take advantage of a very generous tax credit. They are permitted to combine this tax credit with other tax breaks while they also collect interest on any money they lend out. According to one analyst, the credit allows them to double the money they invested in seven years. Another interesting side note is that foreign investors who put a minimum of $500,000 in charter school companies are eligible to purchase immigration visas for themselves and family members under a federal program called EB-5.
The tax credit may also explain why Facebook CEO Mark Zuckerberg partnered with the former mayor of Newark, New Jersey to promote charter schools, donated a half a million dollars worth of stock to organizations that distribute charter school funding, and opened his own foundation, Startup: Education, to build new charter schools.
The real estate industry, which already receives huge tax breaks as it gentrifies communities, also stands to benefit by promoting charter schools and helping them buy up property, or rent, in inner city communities. One real estate company,Why Hedge Funds Love Charter Schools | Alan Singer: