Dolla, Dolla Bill, Y’all: Who Controls the Cash?
I was born and raised in a small town on Massachusetts’ South Shore. Miramar, in nearby Duxbury, was a retreat center for decades and part of my own Catholic upbringing. I went there for retreats in higxh school, sponsored by both my school and my parish. Only a few years ago, during Easter week, I took my goddaughter there to walk the Stations of the Cross while she was preparing for her First Communion.
I wrote recently about my old high school, Sacred Heart, which has also been sold to a developer. I understand that its future may include residential redevelopment. Miramar and Sacred Heart are part of a larger pattern I have watched close to home: Catholic institutions, including religious orders and dioceses, giving up properties that once anchored schools, retreats, and community life. The reasons are complicated, and some are of the Church’s own making. I am not trying to settle that history here. It is part of why I care what happens to these places, and why the public questions that follow their sale feel less abstract to me.
The former retreat center is now the subject of a proposed housing development. Christine Hill of The Account has followed it closely. Her earlier reporting on the people behind the developer and her new piece on related parties raise a question that travels well beyond this one project: How much should the government know about the people and companies behind a private enterprise when it grants that enterprise a public advantage?
My memories give me a reason to pay attention, but no basis to judge the Miramar developers or their intentions. Linked LLCs are common, and there are legitimate reasons to use them: separate financing, different investors, liability management, or keeping the risks and reputation of one venture from spilling into another. Owners may reasonably regard some of those relationships as private business matters. A connection between companies is not evidence of misconduct, and a reporter finding one does not mean a required disclosure was withheld from the state. It does, however, give a regulator a reason to understand who controls the entities and how money moves among them.
The proposal is being pursued under Massachusetts Chapter 40B, which allows qualifying affordable housing developments to seek a comprehensive permit and relief from local zoning and other requirements. That relief is a public benefit, even when it does not take the form of a check from the treasury. Massachusetts also limits developer returns in relevant 40B projects. MassHousing’s cost certification guidance requires disclosure of related-party transactions affecting project costs or revenue and defines related parties to include those under common control. One LLC need not own another for that definition to matter.
The timing matters. Cost certification generally comes later in the life of a project, and a journalist’s inability to see a relationship in public filings does not establish what the developer has told regulators privately or what disclosure was due at this point. Hill’s work gives the reviewing agencies reason to ask concrete questions: Who owns and controls the entities? Have they done business with one another? Could those transactions affect the costs or returns the state will eventually review? If an answer reveals an omission in a required filing, the agency can seek a clarification or correction. None of those steps requires a finding that somebody lied.
I spent years overseeing charter schools in Nevada, where a different version of this problem has been on my mind for a long time. Charter schools are public schools whose governing bodies are public bodies with broad statutory powers and considerable autonomy under Nevada charter law. A school may separately incorporate as a nonprofit, but that optional status is not the source of its governing authority. Some schools contract with outside organizations for substantial parts of their operations. Those organizations may be for-profit or nonprofit; neither label tells us whether the arrangement is sound. Public education dollars can pass from the school to a management organization and then to other businesses. The important questions are familiar: Who controls each entity? Who else is getting paid? Are any of those businesses controlled by the same people? Who is actually making the school’s decisions?
Nevada law is not silent about EMOs. NRS 388A.354 requires schools to disclose information about management agreements, expenditures, and transactions connected to the agreement; it allows a sponsor to request more information or investigate. Other provisions restrict terms that may appear in EMO contracts. Yet these provisions do not amount to a clear, routine system for examining the people who own and control an EMO and its affiliates, judging their qualifications and integrity, compelling records directly from them, and acting on findings about the company itself.
Management organizations are only one part of the picture. A charter school’s landlord may receive more money than any other outside party. The landlord might be an LLC, perhaps one controlled through other entities by someone connected to the school. That is a question to examine, not an allegation about any particular lease. A school board should be able to learn who ultimately owns a company from which it leases a building and whether a board member, principal, other employee, or management organization has a financial interest in it. The law is much less clear about what an authorizer can require directly from a landlord, what relationships it must investigate, and what remedy follows if a troubling connection comes to light. A connection is not automatically illegal; leaving the people responsible for public money unable to find out about it is still a problem.
Nevada’s board membership rule offers a smaller example of the same difficulty. NAC 388A.525 generally excludes someone who owns, operates, works for, or receives compensation from an organization contracting with the school, but permits the relationship when the contract provides goods or services “without profit or at no cost.” That wording concerns the transaction; merely calling the contractor a nonprofit does not establish that the particular contract is without profit. But how is profit measured? Can a provider include overhead in its charge, and who verifies the allocation? A nonprofit can collect more than the direct cost of a service and use the difference to support its other operations without distributing earnings to shareholders. The regulation requires documentation of the contract terms, but does not explain how to answer those questions. It points to NRS 332.800, which states a general prohibition on board members’ interests in contracts and a limited exception for small purchases of supplies. The relationship between those provisions deserves a clearer answer than the phrase “without profit” provides.
That distinction is especially important in light of Nevada’s recent audit of procurement standards. The audit examined Clark County School District, Washoe County School District, and the State Public Charter School Authority, the state’s three largest local education agencies by enrollment. But the legal positions of the agencies differ. District trustees have a broad grant of powers to govern their schools and can establish relevant criteria when buying services. Charter school governing bodies also have broad statutory powers over their own schools. The charter authority is a state agency overseeing those separate public bodies. Its rulemaking authority addresses specified subjects, including application and investigation procedures. It cannot simply assume every power a school district or charter school governing body has over its own vendors. Nevada’s Administrative Procedure Act limits agency regulations to the authority the Legislature has granted.
Districts can run into the same problem when they act as charter school sponsors rather than buying services for their own schools. I recall Clark County School District officials trying to ask questions about charter schools in their portfolio and encountering a response from attorneys that the statute did not clearly authorize those inquiries. My recollection does not settle the legal question. It does show the practical stakes of leaving a sponsor’s information rights ambiguous. There are good reasons to constrain a regulator’s discretion: an official should not be able to reject a vendor simply because of a personal grudge or disagreement with its owner’s views. But a fair standard, stated in law and applied consistently, can guard against arbitrary decisions while allowing the public to learn who receives its money.
A finding that the Authority should have looked harder at EMO relationships may be fair. It also invites a second question: Did the Legislature give the Authority the information rights, decision standards, hearing process, and remedies needed to do that job well? A school might itself be harmed by an unscrupulous management company. If the only effective response threatens the school’s charter, the children and families served by that school bear the risk while the company may move on.
This is not a newly discovered problem in charter authorizing. I remember sitting in a session at the National Association of Charter School Authorizers’ 2014 conference in Miami where veteran authorizer Bob Bellafiore and my former colleague Paul O’Neill discussed related-party transactions and the potential for abuse when vendors are connected to school employees, board members, or one another. One example they raised was New York City’s vendor review system, then known as VENDEX. I recall thinking that authorizers needed a way to see beyond the name on a management agreement.
Today the city uses PASSPort in place of the old paper VENDEX process. Its vendor enrollment identifies principal owners and officers, asks them to complete questionnaires, and identifies parent and controlling entities. The details of a city procurement system cannot simply be copied into charter law. But the basic idea is useful: government can ask who stands behind a company before it entrusts that company with significant public business, and it can revisit the answer when ownership or control changes.
Nor was this merely an abstract recommendation I took away from that 2014 session. During my tenure, the Authority asked the Legislature in multiple sessions for broader regulatory authority to respond as vendors and other participants in the sector changed their practices. We also tried to put elements of the approach now embodied in PASSPort, including a clearer look at the people behind significant contractors, into Nevada statute. To my recollection, those provisions were not enacted. I remember Pearson/Connections and K12 resisting our proposed changes, along with other vendors. I can describe the opposition we encountered; I cannot speak to anyone’s private motives. The objections also came from a different direction. In 2019 Senate testimony on AB 78, after I had left the Authority, NSEA’s Chris Daly opposed letting the SPCSA adopt its own regulations until the union was sure it could hold charter schools appropriately accountable. To me, that risks becoming a circular argument: if an authorizer lacks the legal tools to act, requiring it to prove it can hold schools accountable before granting those tools may preserve the very weakness being cited. That disagreement does not make NSEA a villain in this story. I remember Ruben Murillo Jr., an exceptional leader who served for years as the union’s president, testifying on the Authority’s behalf on another legislative proposal. He had built strong relationships with thoughtful NEA and AFT leaders around the country who, at least then, were willing to make common cause when they saw a benefit for kids, even if they disagreed with charter schools as a sector. The Legislature still needs to decide which powers and safeguards would make that oversight effective.
Some of the arrangements that most troubled us did not involve conventional for-profit EMOs at all. They involved nonprofits formed by existing schools that appeared to provide a way around state rules on teacher compensation, retirement, or purchasing. Whether any particular arrangement violated the law is a separate question. The experience taught me that a nonprofit label does not establish independence, and the absence of distributed profits does not tell an authorizer who controls decisions or where public money goes.
For charter schools, a workable version would be proportional and would reach major landlords as well as management organizations. A company receiving a substantial share of a school’s public funds could disclose its principal owners, if it has them, its officers and controlling persons, affiliates, relevant prior performance, and transactions with other entities connected to the school. The level of review should then depend on the amount at stake, both in dollars and as a share of the school’s revenue, and on who actually controls the decisions.
Consider two contracts with a vendor connected to an EMO. In one, the school board awards a modest contract after an open, competitive process run by school employees who are independent of the EMO. The relationship is disclosed, discussed in public, and considered before the board votes. In the other, the EMO chooses its own affiliate to supply a major service, negotiates the price, and presents the resulting expense to the school with little independent review. Both relationships warrant disclosure. They do not call for identical scrutiny. The second creates a much greater risk that public money is being allocated among related businesses without a meaningful check.
The org chart matters as much as the contract. If school employees independently control purchasing, finance, and evaluation, they can question invoices and compare alternatives. If the people nominally supervising an EMO are themselves employed by it, or the school has too few independent staff to examine its work, a governing board may have legal responsibility without the practical means to exercise it. A responsible review would ask who makes the decisions, who can say no, and whether the school has enough independent capacity to know what it is buying.
The law should say what the school board must review, what the authorizer can independently verify, what information can be kept confidential, and what happens if an organization refuses to cooperate or provides a materially false answer. It should also permit a school to replace a problematic management organization without making closure the default consequence for its students.
Miramar and Nevada are not the same kind of case. One concerns a development seeking relief from local rules; the other concerns private contractors paid to help run public schools. The common principle is modest: when government grants a valuable public advantage, it needs enough visibility to know who receives it and enough authority to act on what it learns. Good reporting can bring a question into view. The law must give the responsible agency a fair way to answer it.