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By Laura Colby, Bloomberg

At Success Academy Union Square, a charter school in Manhattan, parents dropping off kindergartners one frigid morning include a radiologist with a Louis Vuitton bag slung over one shoulder and a fashion designer married to an investment banker. Some arrive in taxis.

Four of every 10 students at the school are poor enough to qualify for the federal lunch program, about half the New York City average. “This is a mixed-income school, which makes me happy,” said Paola Zalkind, Union Square’s principal, who greets each child with a handshake.

New York state law requires charter schools — publicly funded but privately run — to improve student achievement, especially among those “at risk of academic failure.” Still, Success Academy, the nonprofit that is the city’s biggest charter chain, is opening schools in wealthier neighborhoods like Union Square, where the median household income was $103,198 in 2012, about twice the city median, according to U.S. Census Bureau data.

The evolution of Success Academy illustrates a growing debate nationwide over charters serving higher-income families. California’s Bullis Charter School educates children of Silicon Valley entrepreneurs. High Tech High, based in San Diego, has created schools whose students come from diverse economic backgrounds, as do those at Rhode Island’s Blackstone Valley Prep Mayoral Academy, said Priscilla Wohlstetter, a research professor at Columbia University’s Teachers College.

Upscale Areas

As Success Academy opens in more upscale areas, the non-union chain has become a lightning rod for critics including the new mayor of New York, Bill de Blasio, touching off a battle that threatens the growth of Success and the charter movement in the city.

“They’re trying to find ways to increase test scores; that’s why they go into the wealthier neighborhoods,” said Jonathan Westin, executive director of New York Communities for Change, a membership and union-funded nonprofit that advocates for low-income families. “It’s a false premise and it gets away from what charter schools were supposed to be used for. Charter schools were supposed to help low-income communities.”

Founded by former city councilwoman Eva Moskowitz in 2006, the Success Academy group has outstripped traditional public schools on standardized tests. In mathematics, it says its schools delivered rates of student proficiency on state tests of 82 percent last year — versus 30 percent for all of New York City. Success gets five applications for every open seat, with students chosen by lottery. Donations from Wall Street hedge funds and others almost doubled last year to $23 million.

Space Denied

Mixing people from different economic backgrounds is essential to meeting her goal of excellence for all, Moskowitz said in an interview in her Harlem office, decorated with children’s artwork. “Thousands of kids are now going to failing schools,” she said. “It’s not as if New York is this high-performing educational system and is using its resources effectively.”

The most damaging blows to the charter schools and Success have come from de Blasio, a Democrat who served together on the city council with Moskowitz and took over as mayor in January. De Blasio had previously taken the position that charters with rich donors shouldn’t get space from taxpayers without paying.

“There’s no way Eva Moskowitz should get free rent, OK?” de Blasio said during his mayoral campaign.

In one of the new administration’s first actions, de Blasio’s schools chancellor Carmen Farina said she would move $210 million of funds that had been earmarked for charter school facilities to the mayor’s program to create universal pre-kindergarten.

Charter Suit

On Feb. 27, the city’s education department said it wouldn’t provide space for three of Success Academy’s proposed schools after reviewing previously approved expansion plans. No other charter schools among the 17 under review were denied accommodations. Success has appealed the decision to the state board of education.

Parents at one of the Success schools denied space sued the city this month, asking a federal judge to block the de Blasio administration’s action. Space can be a make-or-break issue for charter schools in New York, since their public funding doesn’t include money to buy or rent facilities.

“You can’t educate kids without real estate,” Moskowitz said. “We’re not going to allow anyone to throw our families off a cliff without a fight.”

Albany Rally

She responded to the mayor’s space decision by closing her schools for a day and busing children and parents to a pro-charter rally in Albany on March 4 in what she called a civics lesson. New York Governor Andrew Cuomo promised state support for charters at the rally.

Success Academy benefits from donations from hedge-fund managers including Third Point LLC’s Dan Loeb, who’s also chairman of the chain. In addition, Success gets money from the government for each student equal to about 70 percent of the roughly $20,000 allocated to regular public schools. Its 22 schools enrolled 6,700 students this year, up from 14 schools and 4,500 students a year earlier.

Five of the 22 schools, four of which opened in the last three years, are located in U.S. Census tracts with incomes above the city median. One is on the Upper West Side, where the median household made $109,313 in 2012.

Three of the nine new elementary and middle schools that Success planned for next year were to be located in affluent areas, before de Blasio’s real estate actions. Success also plans to open its first high school, in midtown Manhattan. Applications to charter schools are allowed from outside their neighborhoods.

Broken Shades

Success Union Square shares its building with Washington Irving High School, a traditional public school that has twice the percentage of students qualifying for the federal lunch program, a common measure of scholastic poverty. Success has bright, newly equipped classrooms, while many rooms in the high school have broken window shades and just one electrical outlet, according to Gregg Lundahl, a social studies teacher at Washington Irving.

“There’s a kind of bifurcation,” said Lundahl, a 25-year teaching veteran and leader of the local chapter of the United Federation of Teachers union. “It’s separate and unequal.”

“Nothing has changed” in Success’s mission, which is “to provide world-class education for kids at scale and improve public education at large so that all kids gain access to educational excellence,” Moskowitz said.

Success’s moves into affluent areas are part of an overall expansion of charter schools in New York, where their number grew from 17 to 183 during the 12-year administration of former Mayor Michael Bloomberg, founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

Charitable Returns

Charter backers include Wall Streeters like Carl Icahn, who has started his own charter chain, and hedge-fund manager Stanley Druckenmiller.

“When it comes to return on a philanthropic dollar, few things beat supporting a high-performing charter school,” said John Petry, co-founder of Success Academy and the managing member of Sessa Capital, a New York hedge fund. “Unlike cancer research, where it’s hard to measure the impact of a donation, with education you can look at objective metrics such as test scores and see how well you’re doing.”

Charters are allowed in 42 states. They educated 2.3 million U.S. children in the 2012-13 academic year, tripling from a decade earlier. The average waiting list increased to 277 students per school from 233 in 2009, according to the Center for Education Reform, a Washington-area advocacy group.
Proficient Scores

Nationwide, the average charter school student gains the equivalent of eight more days’ worth of learning in reading over traditional public schools each year, according to a 2013 study from Stanford University’s Center for Research on Education Outcomes. In mathematics, there was no difference.

At the National Education Policy Center at the University of Colorado, director Kevin Welner said the overall results of the study showed charters and regular schools to be about the same. The eight days’ reading advantage, he said, wasn’t practically significant.

Success Academy says it is an outperformer. Its seven schools in Harlem and the Bronx that took state tests last year turned in scores well above their citywide peers. At its Bronx 2 academy, 97 percent of third-graders scored proficient in math, compared with 14 percent in the local city school district. On the English test, 77 percent were proficient at the Bronx 2 school, versus 12 percent in the local district.

Skimming Students

Some researchers say charters in New York skim the most motivated students because only the most involved parents care enough to apply — and because they have fewer troubled children. Success says its special-needs children are 15 percent of its enrollment, versus the 18 percent that the city reports for all schools.

English language learners, often students from immigrant families, are 11 percent, compared with 14 percent. Overall, Success says about three-quarters of its students qualify for the school lunch program, about the same as the traditional public schools, indicating similar levels of poverty.

Student suspension rates range from 14 to 22 percent at four Success schools in Harlem. The suspension rates are 6 and 7 percent in the two regular public school districts that include Harlem. Critics say Success weeds out the children who might bring down test scores.

High Attrition

Moskowitz “is able to push out kids she doesn’t want,” said Diane Ravitch, a New York University education researcher and author. “Her schools have a high attrition rate.”

Moskowitz has called the suspensions a school’s version of “time out,” conveying minimum standards of conduct.

Charters that share buildings with traditional public schools — as all 22 Success academies do — sometimes take resources from them, according to a report published last year by Westin’s Communities for Change. Public School 149 in Harlem lost a music room, a computer lab and a parent room to a Success Academy school in its building, said Barbara Darrigo, P.S. 149’s principal.

Ann Powell, a Success spokeswoman, said P.S. 149 “has 19 sections of students and 33 classrooms, so they have plenty of extra room.”

Moskowitz, who holds a doctorate in American history from Johns Hopkins University, founded the schools with Petry and Gotham Asset Management LLC’s Joel Greenblatt. The three met shortly after Moskowitz, a Democrat, lost a bid to become Manhattan borough president in 2005. The winner, Scott Stringer, was backed by the UFT union.

Moving Teachers

Success Academy students wear uniforms and attend school for extended days. The schools emphasize math, science and writing and require that parents read to their children each night. Turnover among the non-unionized teachers can be more than 50 percent a year, according to state reports on the individual schools. Success says that’s in part because it moves its teachers among its own network of schools.

In a news conference, de Blasio said his decision to deny Success space didn’t represent an anti-charter stance: Two of the proposed elementary schools would have been located in high schools, something that often makes parents of younger children uncomfortable. The third charter, a middle school, would have taken space from a public school in Harlem that serves special needs children.
Taking Space

“Why would you take space from some of the neediest kids in the city?” asked Principal Barry Daub, who said 36 special-education students would have been dispersed throughout the city, some needing long bus rides, if Success had been allowed to take over classrooms in his Mickey Mantle elementary and middle school in Harlem. A statement from Success said the student transfers would have occurred gradually.

The building, which also includes P.S. 149, already shares space with another branch of Success Academy, and Daub said he has had to shrink lunchtime at Mickey Mantle to 25 minutes to accommodate the charter school. Success has its own art room, while the art teacher at Mickey Mantle has none and must push an “art cart” from room to room, Daub said.

De Blasio has said last year in his campaign that he may charge rent on a sliding scale to charters that have the funds to pay. That position was backed in a paper released last month by the University of Colorado’s policy center, which cited Success Academy as a group with millions of dollars in assets.
Left Behind

While an economically diverse charter school can benefit students, it could also harm those left behind in regular public schools, said Erica Frankenberg, an assistant professor in the Department of Education Policy at Pennsylvania State University.

“It’s taking away the best and most advantaged,” Frankenberg said.

Success Union Square’s Zalkind sees it differently. “If you really want to close the achievement gap, you have to do socioeconomic integration,” she said. “Because to be successful, you have to be able to communicate with people who are not like you.”

Some of Success’s well-to-do board members and managers — including Moskowitz — send their own children to the schools. Moskowitz, a mother of three, earned $475,244 in the year ended June 2012, according a 990 tax filing — more than twice Mayor de Blasio’s $225,000 pay.

Much of Success’s philanthropy money goes to support an educational institute to train personnel, the creation of a proprietary school management software system and developing a curriculum for the new high school, according to Powell.
Knee Slapping

Some of it covers the schools’ first three years of operations, during which they generally have a loss, Powell said. Success’s schools each pay Success Academy Charter Schools Inc. a management fee. In the school year ended June 30, that sum was $2,029 per student, according to the schools’ independent auditor’s report.

Back in Union Square, Success kindergarten teacher Samantha Crane slaps her knees rhythmically, leading five-year-olds as they chant out the letters to spell “because,” ending with a fist-pump on the final “e.” In science class, the students learn about yeast and chemical reactions, bake bread and take a field trip to local bakeries.

When one child is called on, she has to wait to speak until all of her classmates show they are paying attention. “Lock and look at Rachel.” Crane says. “Three, two, one, go!”

In a science classroom in one of Success’s schools in the Bedford Stuyvesant neighborhood, a teacher tells two boys, “Stand still, hands at your sides. This is your warning.” When they don’t move quickly, principal Javeria Khan, a former compliance officer at Goldman Sachs Group Inc., has them stand by themselves for about half a minute, while the rest of the students move quietly to their desks. Children get rewards, in the form of smiley-face stickers, for good behavior, Khan said.

Some parents say they don’t mind the rules. “I went to Catholic school myself,” said Marina Eliasi, a stay-at-home mom whose daughter has done well at Union Square. “We chose it for the academics.”