Appeals court upholds law that lets charter schools buy buildings for $1

Three Indiana school corporations have failed to convince the Court of Appeals of Indiana to overturn a law requiring them to sell vacant public school buildings to charter schools for $1.

The appeals court agreed with a lower court that the corporations are prohibited from pursuing “takings clause claims,” which can prevent private property from being taken for public use without just compensation.

Between 2018 and 2020, Lake Ridge School Corp., the School City of Hammond and West Lafayette Community School Corp. each closed public school buildings in their respective communities.

None of the school corporations wanted to part with the vacant buildings despite being required to do so per Indiana statutes that require school corporations to make a closed public school building available for sale or lease to any interested charter school or state educational institution for $1.

If no interest is expressed, then the governing body may otherwise dispose of the building in accordance with Indiana law.

Lake Ridge and Hammond eventually sued the Indiana governor and attorney general in their official capacities, as well as the Indiana State Board of Education and the Indiana Department of Education, alleging the statutes violate the takings clauses of the Fifth Amendment to the United States Constitution and Article 1, Section 21 of the Indiana Constitution.

West Lafayette intervened in that case after previously suing the state over a vacant elementary school building that had closed in 2018.

At the time of West Lafayette’s suit, the vacant building at issue was being used as a city hall for West Lafayette for $1.5 million, according to The Associated Press.

Unlike Lake Ridge and Hammond, West Lafayette did notify the Department of Education of the school’s closing, but no charter school or state educational institution had expressed interest in the building.

The school corporations collectively sought declaratory and injunctive relief from the state parties, while the state argued in part that the school corporations could not assert takings claims against it.

The Lake Superior Court ultimately granted the state’s motion for summary judgment, ruling that the statutes do not constitute a taking without just compensation in violation of the state or federal constitution.

In affirming the trial court, the Court of Appeals concluded that the school corporations, as political subdivisions, could not sue the state under the takings clauses because “the U.S. Supreme Court has long held that the Takings Clause has no role to play in intragovernmental disputes between a State and one of its agencies or political subdivisions.”

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8 thoughts on “Appeals court upholds law that lets charter schools buy buildings for $1

  1. If these charter schools close are they able to then turn around and sell the schools for more than they paid for them? Or do they have to sell them back to the schools corporations from which they got them for a dollar?

    1. Best I can tell from reading what I think was a bill (SB 358) passed in 2021, they can sell the building but now have to give the proceeds back to the school? Looks like this was a loophole that was closed.

      SECTION 5. IC 20-26-7.1-5, AS ADDED BY P.L.270-2019,
      SECTION 13, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2021]: Sec. 5. (a) If a school building is sold to a charter
      school
      or state educational institution
      under section 3 or 4 of this chapter and the charter school
      or the state educational institution,
      or
      any subsequent owner, subsequently sells or transfers the school
      building to a third party, the charter school
      or state educational
      institution,
      or subsequent owner, must transfer an amount equal to the
      gain in the property minus the adjusted basis (including costs of
      improvements to the school building) to the school corporation that
      initially sold the vacant school building to the charter school
      or the
      state educational institution.
      Gain and adjusted basis shall be
      determined in the manner prescribed by the Internal Revenue Code and
      the applicable Internal Revenue Service regulations and guidelines.
      (b) A charter school
      or state educational institution
      that purchases
      a school building assumes total control of the school building and must
      maintain the school building, including utilities, insurance,
      maintenance, and repairs. In the event a:
      (1) charter school does not use the school building for classroom
      instruction;
      or
      (2) state educational institution does not use the school building for an academic purpose; within two (2) years after acquiring the school building, the school building shall revert to the school corporation, which may sell or otherwise dispose of the school building under IC 36-1-11

      (Line formatting is trash thanks to the Legislature’s website.)

  2. It is astounding that Republican legislators passed the “Buck for a Building” scheme while also harping about the benefits of the free market system which they allege is under attack by “socialist” Democrats. Lo and behold, the GOP in this instance supplants the Democrats when it comes to picking winners and losers in the public-vs-charter schools battle.

    1. It’s a massive dis-incentive for school systems to right size their infrastructure, and another massive government handout to charter schools.

    2. Base charter school should have to operate under the same constraints regarding buildings that public schools do in the fact that they should have to pay market value for the schools. They can afford to pay teachers more if they don’t have to invest in infrastructure like a building

  3. These charter schools should have to operate under the same constraints regarding buildings that public schools do in the fact that they should have to pay market value for the schools. They can afford to pay teachers more if they don’t have to invest in infrastructure like a building

  4. I’m not sure if any other state has a law like this one. Some states require public school districts to accept the highest bid, even if it is a charter school that can draw students and make the district’s attempt to maximize financial efficiency unsuccessful.

    Indiana is an extreme outlier in requiring buildings worth millions to be given away for the token sum of $1.

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