"AT THE TAXPAYERS' EXPENSE": Bay City Academy Farragut Schoolhouse Leases Reveal Potential Fiscal Violation; Academy Under Supervision Of Michigan Treasury Department Due To Multi-Year Deficit

 Ah, another day...another scandal?

After reviewing Bay City Academy lease and financial documents obtained from Lake Superior State University's Charter School by a Freedom of Information Act request, I've discovered what I believe could be a significant financial irregularity in the charter school's financials: the payment of nearly $38,000 in "property taxes" for the July 2019-June 2020 fiscal year.

Any idiot knows buildings housing Michigan schools are exempt from (ahem!) property taxes. And I'm betting even that idiot knows you don't pay property taxes on a building you don't actually own.

But, there it is. 

In black and white, big as life and twice as real in a Bay City Academy Profit and Loss statement for the fiscal year that ended on June 2020.

But, you might ask, why is that line item even there? 

A lunar twitch in the atmosphere?

Someone's idea of a joke?

Or could it be that $37,959.47 is just $66.28 short of the Bay County property tax paid on behalf of Steven Ingersoll's Farragut Schoolhouse, LLC building, between Summer 2014-Winter 2019.

Not by Ingersoll, though.

Ah, now you're interested in reading about those damned leases, aren't you?

Grab a drink, while I start at the beginning...way back in 2013.

On March 27, 2013, Wildfire Credit Union entered into a Commercial Loan agreement with Farragut Schoolhouse, LLC, a Michigan business entity formed and controlled by Steven J. Ingersoll, a founder of the Bay City Academy.

(If you've been paying attention, you'll remember Ingersoll was convicted on March 10, 2015 of federal tax evasion charges, and was sentenced to a 41 month prison sentence.)

The $782,828 loan was secured by a mortgage lien on the building located at 301 N. Farragut in Bay City, currently occupied by the Bay City Academy. The formal mortgage agreement was preceded on March 15, 2013 by a 20-year, non-cancellable lease agreement between the Academy and Farragut Schoolhouse.

In June 2016, Ingersoll defaulted on the Farragut Schoolhouse mortgage. (Bet you didn't see that coming!) The default triggered an "Assignment of Rents" agreement with Wildfire that allowed the credit union to negotiate and collect rents, including amounts past due.

Shortly after the default, Wildfire served the Bay City Academy with a "Demand for Possession of Non-Payment of Rent", alleging it was due $169,362.00 in unpaid rent. (Between July 1, 2015-June 30, 2016, the Bay City Academy paid no rent to Ingersoll for the Farragut Schoolhouse property.)

On July 2016, the Bay City Academy board agreed to pay $8,000 monthly rent payments to Wildfire Credit Union for the 2016/2017 fiscal year.

The agreement was authored by (you guessed it!) Steven Ingersoll.

 

In that agreement, shown above, Wildfire Credit Union agreed to assume the responsibility to pay the "real estate taxes which are currently in arrears" and payment of all taxes which were to and payable prior to June 1, 2017.

However, in reviewing the multiple lease agreements between the BCA and Farragut Schoolhouse, LLC, rent payments subsequent to June 30, 2017 would revert to the terms outlined in the original 2013 lease agreement between Ingersoll and the Bay City Academy, shown below.

 

 

Due to the Google Blogger formatting restrictions limiting story length, the rest of the story will follow in a second installment.

That should give you time to find the clause that dictates a publicly-funded charter school will be compelled to reimburse Wildfire for the taxes the credit union shelled out on Ingersoll's behalf, and pick up the taxes going forward from June 2017.

Hint: I couldn't find it, but I did find this pesky line item: