“This plan will help with the school’s cash flow until 2019, providing time to become financially healthy again.”
The statement above, included in the approved minutes from the Grand Traverse Academy board's February 2, 2016 special meeting and attributed to Mark Noss, is his apparent rationale, lamely offered to justify an above-market, 20-year lease for one building that could cost taxpayers upwards of $8.5 million dollars in monthly lease payments over its term.
Yes, $8.5 million dollars!
And that's on top of an easement granted Noss in 2015 by the Grand Traverse Academy that doesn't charge him a nickel to construct his school building on Academy land.
Yet that ludicrous statement (akin to someone going to the bank to borrow just enough money to get out of debt) acknowledges the school is currently in an unhealthy financial position.
And if anyone should know about the school's 'unhealthy' financial straights, it would be one of characters who helped put it there, including Ingersoll, Brad Habermehl and Lake Superior State University's former charter office head, Bruce Harger.
As I reported yesterday, the Grand Traverse Academy signed a lease agreement on February 2, 2016 with MDN Development, LLC, a private, affiliated property development company owned by Mark Noss. Full Spectrum Management, LLC, another entity owned by Noss, is the Grand Traverse Academy's education management company.
The school will make $30,000 lease payments during the first year, rising to $38,000 in the second year. (The lease payments rise along with every increase in the mortgage interest rate.)
Noss, former president of the Academy's board of directors, took control of the Grand Traverse Academy when he signed a multi-year contract during an early-morning March 19, 2014 special board meeting. Although Noss resigned from the board at the meeting, his resignation was not effectively immediately. Noss served in a dual role as a board member and head of the Academy's management company for nearly two months. Noss assumed control of the Grand Traverse Academy shortly after his business associate, Steven Ingersoll, stepped aside in anticipation of a federal fraud indictment. (Ingersoll was convicted on March 10, 2015 of three counts of fraud and tax evasion, and is still walking the streets and pulling strings.)
Does anyone really believe this lease-to-own scheme was done to make the Grand Traverse Academy financially healthy again?
Like a long-term OxyContin prescription, a public money jones is a tough addiction to kick.
THE CONSTRUCTION BUDGET
Although I attempted to obtain MDN Development's construction bid history from the Grand Traverse Academy, along with the lease and easement agreements, my Freedom of Information Act (FOIA) request was partially rebuffed:
“You have asked for public records, i.e., “Building bid specifications/package, all bids received, project budgets” and "Final budget and construction schedule." Your request is denied. There are no public records of GTA responsive to your request. Such records are simply not public records.”
I have submitted a FOIA to the State of Michigan's Department of Construction Codes requesting building permit records, seeking the bid, specs, and cost information.
In the meantime, I used State of Michigan Department of Treasury construction benchmarks to determine that the $3.9 million dollar purchase price shown in the lease, compared with a construction estimate of $2,340,000 per the Treasury benchmark, is $1,590,000 above what it should cost to build that new 12,000 square foot classroom building on the grounds of the Grand Traverse Academy.
So why the big difference...and who are the investors that helped bankroll Noss in this venture?
“Mark Noss explained to the Board that the purpose of this meeting is to approve the new Lease which reflects the increase in the cost of the new building. After initial bids came in over budget, plans were reviewed and pared down, but items removed are all things that can be added at a later time, i.e. student lockers, cabinetry, roofing and flooring, projection screens, blinds, etc.”
It appears from this excerpt of the February 2 meeting minutes that Noss needed the Academy board to kick in a little more money, and recalculate the lease payment so that profits wouldn't suffer.
So, how much will those lockers, cabinetry, roofing and flooring cost after the new building's open?
Wait, 'roofing and flooring'? Seems to me those are not options.
Noss likely financed the construction of the new building on the strength of that blue chip, triple-net, single tenant 20-year lease with the Grand Traverse Academy.
A newly-formed shell company, MDN Development lacks the assets required to borrow enough money to build that expansion, except for the $8.5 million dollar taxpayer promise signed on February 2, 2016 by four members of the Academy's board.
Like Steven Ingersoll's Bay City Academy loan, the new MDN Development loan includes two distinct phases: a twelve-month construction loan (interest only) that would convert to a post-construction mortgage with payments including principal and interest.
And like Ingersoll's Bay City loan, rental income from the management company running the school will fund the mortgage payments. The Grand Traverse Academy would pay rent to either Full Spectrum Management, LLC or MDN Development, LLC (come on, it's really the same person), one of which would use the revenue to pay the loan.
And we come to the third, and final, act of our seamy little play. Just where did Noss and his shell company find the down payment and seed money for those interest-only monthly construction costs?
I seem to remember an excerpt from the December 8, 2015 testimony of Grand Traverse Academy board president Brad Habermehl, taken directly from the official transcript of Steven Ingersoll's sentencing hearing:
A November 24, 2014 email from Habermehl to a business associate proposed terms, stating that “my friend and colleague, Dr. Steve Ingersoll, is looking for a $300,000 loan to be paid back annually over a 3 year period which will include interest.”
Habermehl also claimed in the email that "Steve single handedly built Grand Traverse Academy Charter School in Traverse City."
I wonder...could that school project Habermehl described have instead been the Grand Traverse Academy expansion? Habermehl hitting up his associates for money is a lot easier than scuttling the streets, going with hat in hand, hondling for a loan.
Ingersoll clearly wanted to borrow at least $300,000, and described a three-year repayment plan for that so-called loan in the email shown at left.
During his December 8, 2015 testimony, Habermehl made a shocking revelation: that former Lake Superior State University Charter Office head Bruce Harger was one of the project's five partners. Could Harger be an investor, along with Noss, Habermehl and Ingersoll, in this new building?
Even after Ingersoll was convicted, Habermehl was still touting the project as a "very good investment with a good return".
Habermehl's March 15, 2015 email was sent less than three months before Noss successfully closed on his easement agreement with the Grand Traverse Academy, securing the right (in perpetuity) to build on the Academy's grounds...at no cost.
There's a meeting of the full board at noon tomorrow, March 19, at the Grand Traverse Academy.
If you're interested, here's a few questions I'd like to have answered:
1) How much is Comstock Construction charging MDN Development, LLC to build the new building?
2) How much did Mark Noss borrow, and where did he borrow it?
3) Who are his investor partners?
4) What happens if the school misses its new student target?