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Originally published Sunday, June 5, 2011 at 10:01 PM

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State investigates Seattle district's sale of MLK School

Cash-strapped Seattle Public Schools passed up millions of dollars to favor First AME Church, the low bidder in the sale of MLK School. The state auditor is examining what went on behind the scenes.

Seattle Times staff reporters

An examination of records

To try to get to the bottom of the controversial sale of Martin Luther King Elementary School, The Seattle Times obtained hundreds of documents and more than 1,000 of Fred Stephens' emails from the Seattle school district. Officials said they could retrieve emails only back to January 2009.

The state auditor's staff, however, can cast a wider net. It is sweeping up and reviewing emails for School Board members, former Superintendent Maria Goodloe-Johnson and all employees in the facilities department. The auditor's efforts do not require the district to individually review each email for possible redactions, as it did over the past two months with The Times' public-records requests.

A report is expected this month.

Seattle Times staff

quotes Clearly this deal ought to be overturned, if legally possible.The rationale for the bid... Read more
quotes Smells very fishy. We left $7M on the table. Further investigation needs to see who... Read more
quotes "Then-Superintendent Maria Goodloe-Johnson shot down The Bush School's high offer... Read more

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When an affluent private school in Madison Valley offered to pay as much as $9.7 million for an empty public school in 2009, the choice for the cash-strapped Seattle school district seemed obvious: Sign the papers.

But what could have been a straightforward real-estate deal turned into an elaborate chess game that ended with a well-connected church buying the closed Martin Luther King Elementary School with $2.4 million in taxpayer dollars.

The school district bent over backward to get the school into the hands of First African Methodist Episcopal Church:

• The district staff changed the way it handled and evaluated offers for the building, which pushed the church's proposal to the head of the pack.

• Then-Superintendent Maria Goodloe-Johnson shot down The Bush School's high offer, at the same time urging voters to pass a $48 million levy.

• One former district employee told The Seattle Times that her boss, Fred Stephens, director of the district's property division and an influential First AME congregant, was determined as early as 2007 to help the church get the school property.

• The district did little to investigate the accuracy of the church's proposal — while closely scrutinizing and ultimately rejecting a similar, competing bid from another community group.

Meanwhile, First AME made grand claims about its plans for the 1.9-acre site.

Today, seven months after the School Board's vote, First AME has one tenant lined up for the building — the church's Head Start administrative offices — and no firm plans for its promised youth services beyond a two-month summer day-care program run by another agency. A church leader also said groups can book the gym as long as they provide supervision.

Church leaders recently hedged on making the playground accessible to neighborhood children — a requirement from the city when it changed the property's use permit. The church said it has liability concerns about someone getting hurt there.

Questions continue to be raised publicly about whether the church pulled strings to get the building.

"It just doesn't smell right," said longtime Madison Park resident John Brian Losh, who heads a real-estate firm. "It was a done deal. That part is clear. The question is: When did it get to be a done deal? And who made the decision?"

Such complaints have reached the state Auditor's Office, which recently opened an investigation to answer those questions, spokeswoman Mindy Chambers said.

"We're looking at conflicts of interest and how the selection process was conducted," she said.

A report is expected this month.

Neighboring schools

The highly prized MLK school site, opened in 1913, isn't much to look at these days. Weeds sprout across the grounds. The inside bears the hallmarks of a place that hasn't been updated in decades — worn linoleum floors, a windowless "book room" and musty carpet residue.

Yet, many Seattleites hold fond memories of childhood days spent there (it was called Harrison School before 1974), learning behind desks and running on the playground. Some teachers in the community began their careers there during the civil-rights era, which gave the MLK name a particular note of pride.

Next door sits The Bush School.

Founded in 1924, the private K-12 school has become one of the city's most prestigious, attracting a competitive pool of applicants willing to pay more than $19,000 in tuition a year — and that's just for kindergarten through fifth grade. As the school has grown, so has its need for space, Bush officials say. After MLK closed in 2006 because of declining enrollment, Bush saw a rare opportunity to expand in the close-quartered residential neighborhood.

The district asked for bids on MLK in 2009, and Bush offered top dollar — a cash purchase of $3.75 million or a long-term lease valued at $9.7 million. Bush wanted to tear down the building to make way for athletic fields and a playground, ensuring free access on weekends and in the summer.

First AME, however, had other ideas.

The Capitol Hill church — among Seattle's oldest predominantly African-American congregations and a key player in the civil-rights movement — has a loyal membership that includes some of the city's most prominent leaders.

Emotional ties to MLK run deep. Many church elders were principals and teachers there. Others sent their children to the school.

Church members are passionate about using the building to grow the church's service mission, which already includes senior and low-income housing, scholarships and child care.

"If we can save youth — keep them and help them look at their goals as productive citizens — it's certainly worth it for the community and the church," said T. Marie Floyd, a First AME member and a former interim principal at the school who helped put together the church's winning bid.

But First AME faced competition, and not only from Bush. Another group, made up of longtime residents with a community vision, wanted the school, too.

CCC@MLK — CCC stands for Citizens for a Community Center — formed with the sole mission of keeping the school as a hub of neighborhood activity.

For nearly 20 years, locals held spaghetti dinners and dances there, along with meetings, potlucks and rummage sales. When the playground needed renovation, their community council helped manage the project.

Leading CCC's effort to buy the building was Adrienne Bailey, a no-nonsense dynamo who attended the school and whose family roots in the Central Area span 50 years. Bailey has a special passion for preserving the area's African-American heritage, even as the neighborhood has become increasingly white and rich.

Bailey felt so strongly about her vision for MLK that she lobbied state legislators about it, prompting them eventually to set aside $2.5 million for a nonprofit group to buy the building.

Little did she know this eventually would benefit First AME.

Taxpayer money

In spring 2009, the Legislature budgeted $1 million to help a nonprofit buy the school. The district then began a lengthy process to solicit bids.

The sale of MLK was the first test of a revised School Board policy, one that allowed it to sell an empty school to the low bidder if the bidder agreed to set aside at least 50 percent of the building to support youth education or social services.

Bailey of CCC was worried about Fred Stephens, head of district facilities at the time. He not only oversaw the selling of surplus properties, but had personal ties to the church.

Stephens' father, an AME minister, was head pastor of the Seattle church from 1977 to 1983. In early 2007, months after the school was shut, Stephens called a meeting with two employees, telling them, "We have to get that property into the hands of the church," according to Eleanor Trainor, a former capital-projects community liaison who was at the meeting.

Stephens would become a public face in the recent Seattle Public Schools scandal involving its minority and small-business contracting office, which he supervised. A state audit released this year found that $1.8 million in district funds had been misspent in a program rife with cronyism.

Inside help?

Stephens had some involvement with the sale that summer. On Aug. 6, 2009, he received an email from district lawyer Ron English, who was overseeing the bidding process.

"I got this email today from Bush School," English wrote. "Apparently they will be making a proposal for the property, although it likely will include community use. Please give me a call to discuss."

It was immediately after this exchange, English recently told The Times, that he asked Stephens to recuse himself from the MLK sale. English said no record of the request exists because it was made verbally.

Stephens has declined, for months, repeated interview requests from Times reporters. He currently works at the U.S. Department of Commerce in Washington, D.C., which he joined after the district shut down its troubled minority business program.

In an email to The Times last week, Stephens said he was "instructed not to have anything to do with the sale of MLK School by my former supervisor. ... This I followed to the letter."

The supervisor, Don Kennedy, did not respond to requests for an interview. He was fired, along with Goodloe-Johnson, after this year's release of the contracting-scandal audit. She did not reply to requests for an interview, either.

Initially, Bailey and her group, CCC, were concerned that The Bush School would walk away with the building. So she and First AME officials talked about a joint proposal. Nothing came of it.

Both groups ended up submitting separate bids for $2.4 million by an October 2009 deadline. In an unprecedented move, English posted the bids online for anyone to see. English then invited all the bidders to "refine" their proposals.

CCC made no changes, but First AME beefed up its proposal. It eventually included cooking classes and a computer lab, which mirrored CCC's proposal.

Bailey believed the church simply was copying CCC's proposal. "There were too many similarities ... ," she said later. "It was eerie."

In November 2009, Bailey noted that several emails about the MLK sale were copied to Stephens, who months earlier had been asked to recuse himself. Bailey asked that he be removed from the process. English said the information in those emails was public so it was OK to include Stephens.

The next month, English concluded that CCC and First AME, as low bidders, did not meet the requirement to provide 50 percent of the space for youth programs or social services. Therefore, The Bush School's high bid was the best choice, according to a draft analysis, which he prepared.

But Bush never got the building. English said he can't remember why.

Bush officials told The Times they didn't care to revisit the issue.

Confident bidder

Meanwhile in Olympia, state Sen. Adam Kline, D-Seattle, was determined that Madison Valley have a neighborhood center. By spring 2010, he and two other legislators secured an additional $1.5 million in state funds to be used by a nonprofit group to buy MLK.

So the district put the vacant school up for bid a second time, setting a June 30, 2010, deadline.

Kline wanted First AME and CCC to join forces against The Bush School bid. But he was taken aback after contacting a church member with that suggestion.

"The answer was a flat no," Kline said, causing him to wonder: "Why were they so extremely confident in their ability to get this done on their own?"

Frances Stephens, a church leader who is not related to Fred Stephens, said the congregation was far from confident. "I prayed every night we should get it," she said.

When the bids came in a second time, Bush lowered its price but still offered the most money — $3 million cash or a long-term lease worth $5.6 million.

This time, however, English went by a different formula and determined that First AME's proposal offered the most support for youth education, even though the church was the lowest bidder.

Asked by The Times how he made that call, English said some of his analysis involved guesswork. He couldn't explain how he verified the accuracy of the groups' claims of support for youth education.

Yet, English challenged the CCC proposal and held it to different standards. For example, he questioned the group about some youth programs it planned to offer — and disqualified one that included helping adults. English acknowledged he did not fact-check key components of the First AME proposal.

But The Times did. For one: The church claimed in its bid that it had a "verbal agreement" with Seattle's parks and recreation department for "youth activities."

That's not true, according to parks spokeswoman Dewey Potter. The church requested a meeting with the department two months ago. Any help from the city would likely only come as advice, she said.

The church also claimed it would expand its Head Start program into MLK.

But a senior manager for the federal office that administers Head Start said the church's program has not been approved for any expansion. Further, no Head Start services are allowed at the MLK building because it does not meet federal safety standards, said Leroy Gooding, the manager.

Told of the church's misrepresentations, English said it wouldn't have made any difference.

The sales agreement requires the owner to use half the property to support youth education for 40 years or risk financial penalties. English said the district does not keep tabs on property owners, such as First AME, to see if they use the buildings as promised.

Last September, Goodloe-Johnson recommended to the School Board that First AME get the school. A month later, at a crowded meeting, the board voted yes, igniting cheers and applause by First AME members. In the lobby of district headquarters, the congregants and their pastor, the Rev. Dr. Carey Anderson, formed a prayer circle and clasped hands.

"This," the pastor intoned, "is a monument of what God can do."

They responded with a chorus of "amens."

Susan Kelleher: 206-464-2508

or skelleher@seattletimes.com.

Sonia Krishnan: 206-515-5546

or skrishnan@seattletimes.com.

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