Rhodes: ‘No intent to forgive’ EAA debt

Shawn D. Lewis
The Detroit News

The emergency manager of the Detroit Public Schools Community District is disputing the idea that the state will forgive $12 million in unpaid building rent the Education Achievement Authority owes the district.

In an email exchange Thursday with former Highland Park school board member Robert Davis, former bankruptcy judge Steven Rhodes wrote that there is no deal to waive the rent due for the use of DPS buildings in 2015 and 2016.

EAA Chancellor Veronica Conforme said this week that Gov. Rick Snyder had agreed to relieve the state-run recovery district of $12 million in lease payments as part of a $617 million rescue package approved for DPS in June.

“I have no intent to forgive or waive any debt that EAA owes to DPS or DPSCD,” Rhodes said in the email exchange obtained by The Detroit News. “That is not in the best interest of the students of DPSCD. Also, I have seen no evidence that my predecessor agreed to do that. In addition, the governor’s office has assured me that they take no position on this matter and that is strictly between EAA and us.”

At an event Thursday in East Lansing, Snyder told The News he had not given the EAA any assurance that the lease payments would be waived.

“No,” the governor said. “Again, I think one of the challenges is, it’s a very complicated situation and what I’d say is, those comments about something being done some time ago, the legislation wasn’t even passed.”

The governor noted that under the rescue legislation, the EAA and its 15 schools will be folded back into DPS next summer.

“And I think a lot still needs to be worked out,” Snyder said. “And I hope DPS and EAA can sit down and work out the issues, because eventually, they’re going together, from a legal perspective.”

Anna Heaton, a spokeswoman for Snyder, added later in an emailed statement: “The Governor and Chancellor Conforme discussed that the legislation as it went through the process could affect the EAA and he encouraged her to seek resolution of any outstanding issues between the two entities with Judge Rhodes. Those details are still being worked out and the Governor has full faith they will be resolved soon.”

In his email exchange with Davis, Rhodes concluded by saying he wants the debt resolved as soon as possible.

“We are in intense negotiations with EAA for a repayment agreement. I want this done as promptly as possible,” he wrote in the email. “We will make a public announcement when the agreement is done.”

EAA spokesman Robert Guttersohn said Thursday in a statement that the state-run recovery district believes “that legislation solved the operating debt for DPS. Our lease agreements are 100 percent based on DPS carrying operating debt. It was our share of the burden of operating debt.”

“We drafted a new lease agreement amendment in anticipation that the House Bill 5384 would go through and with the understanding that the debt issue would be resolved for all of us and eventually there would be a consolidation of the entities.”

The EAA’s unpaid rent became public this week after Davis obtained an email Chief Deputy State Treasurer Thomas Saxton sent Detroit school officials in April about Conforme’s request for debt relief from former DPS Emergency Manager Darnell Earley.

Saxton said he advised Earley against signing an agreement to forgive the debt before he left the district in February. Rhodes became emergency manager of DPS March 1.

Beside the unpaid rent, the email showed EAA owed DPS $2.8 million for information technology and public safety services.

In a statement Monday, Conforme said the EAA would pay the full amount owed for IT and police services and was negotiating with DPS over the rent payments.

Davis, who has a son attending the Detroit school district, said if the matter is not resolved soon, he will take the EAA to court.

In his email to Rhodes, he said, “Accordingly, if this matter is not resolved with the EAA within the next 7 days, my newly formed nonprofit organization will file litigation against the EAA and the State to prevent the unlawful expenditure of state funds and the unlawful attempt to authorize the EAA to forgive the debt it owes to DPS, which is now owed to the ‘new’ Community District.

“I have the up most confidence in your ability to bring closure to this matter in an expeditious fashion, which would alleviate the need for me to initiate legal proceedings. I look forward to you bringing a positive resolution to this matter in the days ahead.”

Davis, who has filed numerous lawsuits against public entities, served prison time for embezzling from the Highland Park schools. Asked why he is going to such lengths to force the EAA to make the lease payments, Davis responded, “I want to assist Judge Rhodes in getting the EAA to pay its debt, especially since … it is in need of those funds.

“Mind you, the EAA, when it was created, took millions of dollars out of DPS’s coffers. They were a competing school district, and that’s going out of the world backwards, not only to allow the EAA to take your students, but now you’re paying their debts.”

Detroit News Staff Writer Michael Gerstein contributed.