If EAI takes cut, it wants longer deal Company proposes adding 2 to 4 years to its city contract

November 19, 1995|By Eric Siegel | Eric Siegel,SUN STAFF

In an eleventh-hour attempt to salvage its Baltimore school privatization contract, Education Alternatives Inc. said yesterday that it's willing to meet the city's demand for a $7 million fee reduction in exchange for an extension of its pact to run nine city schools.

EAI, facing cancellation of its "Tesseract" contract over its failure to meet the demand, called for a meeting with Mayor Kurt L. Schmoke to discuss its latest proposition.

Mr. Schmoke said yesterday that he was not aware of the EAI proposal and thus would not comment on it.

"The only meeting I'm planning at this point is a meeting with parents and principals" tomorrow, the mayor said through his spokesman, Clinton R. Coleman.

EAI's proposal comes as city officials have begun moving to terminate its agreement with the Minneapolis-based company, which calls for payments of $44 million to be made this year. The agreement has drawn national attention and a storm of controversy, raising issues of whether private management can, or should, be the salvation of troubled urban school systems.

On Friday, EAI did not respond to a 5 p.m. ultimatum from the city that it agree to reduce its fee to $37 million with no strings attached or face termination of its contract. The city wants to cut EAI's fees to help cope with a $32 million deficit in the school system budget.

Baltimore's pact does not expire until June 1997, but it can be canceled by the city with 90 days' notice and a majority vote of members of the school board, which is scheduled to meet Tuesday night.

Yesterday, EAI representatives said the company would be willing to take the cut from the city if the city would extend its contract for between two and four years beyond 1997.

"How long will it take us to recoup, to in effect bankroll the city? The bottom line is there will have to be some kind of extension beyond this year and the next to come up with the savings," said Clyde H. "Rocky" Sorrell, a Maryland-based attorney for the company.

EAI would not cut programs at the schools it manages to come up with the money, Mr. Sorrell said, but would instead borrow the money. It would hope to earn enough to repay the money from profits made beyond 1997.

Mr. Sorrell said the company could not take the money out of its profits, because there are none.

Another EAI representative, spokesman Garry R. Curtis, said the company lost $200,000 in Baltimore last year and hopes to break even this year.

"If you're already in a no-profit situation, you can't cut profits," Mr. Sorrell said.

If EAI accepted the city's Friday ultimatum to cut $7 million from the contract, Mr. Sorrell said, it would "destroy the core" of EAI's program, which relies heavily on computerized instruction, individualized curriculum and aides who assist classroom teachers.

"We won't do it. We have our reputation to maintain," said Mr. Sorrell. "It's going to be an issue of maintaining a credible presence in the market while pursuing other contracts."

Besides Baltimore, the only other contract EAI has to manage city schools is with Hartford, Conn.

Mr. Sorrell and Mr. Curtis complained that the city was asking EAI-managed schools to make up a disproportionate share of the school system's deficit, the result in large part of larger-than-budgeted pay raises for teachers and court-ordered expenses in a lawsuit over special education.

"Tesseract" schools have just 6 percent of the school system's 113,000 students, they said, but the administration is asking those schools to make up more than 20 percent of the system's deficit.

"They are really out of proportion," Mr. Sorrell said of the cuts being asked of EAI-run schools.

Yesterday's proposal by EAI is the second made by the company this week in an attempt to meet the city's demands for reductions.

On Thursday, EAI suggested that it make monthly reductions in its fee but be immediately reimbursed for the cuts by identifying sources of savings throughout the school system, whether or not those savings were realized. City officials dismissed the suggestion "outright," terming it a "shell game."

The day before, Mr. Schmoke expressed his frustration with EAI, complaining that the company had failed to cooperate in dealing with the city. He said the city would no longer negotiate with the company and would consider ending the relationship.

Yesterday, EAI pleaded for a chance to make the case for its latest proposal directly to the mayor.

"If he gets to a point where he doesn't feel he has a choice, then that is it. At least give us a hearing," said Mr. Sorrell.

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