EAI agrees to $7 million cut in fee Important details of settlement with city must be worked out

November 16, 1995|By Jean Thompson and Eric Siegel | Jean Thompson and Eric Siegel,SUN STAFF

After a day of brinkmanship in which Mayor Kurt L. Schmoke all but threatened to end Baltimore's experiment in school privatization, Education Alternatives Inc. yesterday tentatively agreed to a $7 million reduction in its fee, city and EAI officials said.

Under the agreement brokered by school Superintendent Walter Amprey, the Minneapolis school-management firm would accept a $1 million-a-month fee cut for managing nine city schools -- or make a lump sum payment of $7 million, city officials said.

The contract settlement hinges on important details that remain to be worked out, both sides said last night. If completed, the agreement would continue the management arrangement only through June, leaving unresolved plans for next year, the final year of the five-year contract, officials said. The possibility also exists that the deal could fall through, ending the EAI-city partnership during this school year.

Mr. Schmoke continued to take a hard line last night, expressing skepticism that a final deal could be reached, hours after suggesting that he had to consider ending the contract.

"Until the mayor sees further evidence that EAI is willing to approach these talks in a more cooperative fashion, he is proceeding as if there is no deal," said spokesman Clinton R. Coleman.

But Lory Sutton, an EAI spokeswoman, was more hopeful.

"We've come to some general conclusions, including discussions of a separate settlement agreement in the $7 million range," she said. "However, the exact terms and conditions have not been defined. Definition of those terms and conditions will be crucial to the settlement."

Yesterday morning, Mr. Schmoke made clear that he was unhappy with EAI's position in talks aimed at cutting the company's $44 million fee -- and said that the city was considering notifying the company that it wanted to end the contract.

"There's not going to be any further negotiation with EAI on this matter," Mr. Schmoke told reporters in an impromptu morning news conference. "Now we have to figure out where we go from here."

At the mayor's request, Dr. Amprey scheduled meetings starting Monday with the school board and a coalition of parents from the nine "Tesseract" schools to inform them of the unresolved status of the EAI contract.

"I am not a happy camper," Mr. Schmoke said early yesterday. "They have not cooperated in the spirit of teamwork and cooperation in helping us resolve a difficult problem."

The mayor said that the city had not yet given EAI the required 90-days notice to end the contract, now in its fourth year, but added: "Obviously, that's an option that we have to consider."

EAI officials here and at the firm's headquarters in Minneapolis declined through the day to comment on the mayor's action, insisting in interviews that they were optimistic the company's role in city schools would continue.

But a company quarterly earnings report -- released by EAI yesterday before Mr. Schmoke's announcement -- warned investors that the company's relationship with the city could end.

"While the company does not currently expect significant changes to the contract with the Baltimore district, there can be no assurance that the negotiation process will not result in significant changes to or termination of these contracts," said the earnings report, which showed a $2.5 million loss.

Fee negotiations, begun early this summer, had by September become linked to officials' scramble to balance the system's budget, which has swollen $32 million beyond the the district's means.

For weeks, the mayor sought $10 million in savings from EAI -- nearly a 25 percent cut for this year. By early this week, EAI had proposed taking a $5 million cut and helping the school system find additional savings elsewhere in its budget.

Yesterday, Mr. Schmoke said he set the figure at $7 million because three months of the school year already have passed.

Yesterday afternoon, a company intermediary contacted Dr. Amprey, who has been the administration's strongest supporter of the company. Dr. Amprey and company officials worked out the tentative agreement in a series of telephone calls during the afternoon, officials said.

EAI's parent coalition, which has followed news of the negotiations closely, yesterday welcomed the opportunity to meet with the mayor and fretted about the undetermined impact of the proposed contract cut.

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