How public charter schools in Nevada can become private when building their facilities

Charter schools are using a loophole to bypass Nevada prevailing wage laws, allege an alliance of building trades unions and one state lawmaker, who says he wants the state agency tasked with overseeing the majority of the charter schools to crack down on the practice.

But the Nevada State Public Charter School Authority and Academica Nevada, the largest educational management organization in the state, argue prevailing wage laws don’t apply to construction projects included within lease agreements that charter schools enter into with private companies.

The differing interpretations of state law raises questions about just how public charter schools are. Proponents of charter schools often stress they are public entities subject to many of the same requirements of traditional district schools, but opponents argue charters see themselves as public only when it is convenient to their bottom line, which they see as making profit for their out-of-state for-profit operators.

In Nevada, any public project with a contract price of $100,000 or greater that is wholly or partially funded by public dollars is subject to prevailing wage law. Rates for prevailing wage are set annually by the Nevada Office of the Labor Commissioner, which compares similar projects in the region.

Prior to 2019, charter schools were explicitly exempt from prevailing wage requirements. That exemption was put into place by the Republican-controlled Nevada State Legislature in 2015. After Democrats regained control of the Legislature and secured the governorship, the charter school exemption was removed.

Since 2019, charter schools that have directly built or renovated their own facilities using public dollars have been subject to prevailing wage law and have adhered to it, says Charter School Authority Executive Director Melissa Mackedon. That includes major construction projects undertaken by Beacon Academy in Southern Nevada, Oasis Academy in Northern Nevada, and Elko Institute for Academic Achievement in Elko.

But not all charter schools directly own their buildings. Many, if not most, lease privately owned space, especially in their first few years of operation.

The charter schools who fall under this category aren’t confined to those renting space inside an existing recreation center or church, as some do. It also includes charter schools who have standalone buildings that were essentially built for them.

Mackedon confirmed it is the Charter School Authority’s position that the state cannot force the construction of those charter school buildings to pay prevailing wage.

“The Nevada and U.S. constitutions guarantee private actors contracts without government interference,” she told the Nevada Current. “We cannot infringe or coerce the private actors’ right to contract.”

Democratic state Sen. Skip Daly of Reno believes this is willful evasion of state law by the charter schools and the companies they lease from, which they typically call “facility partners.”

“They say, ‘No, no, no, we’ll magically just build a building on a piece of land that will match your needs. We’ll build it to your specifications — right down to the flagpole out front — meeting all your requirements. Miraculously we’ll have this building on spec right here for your school and we’ll lease it to you.”

Academica Nevada, the educational management organization associated with more than half of all charter school students across the state, disagrees with Daly’s characterization.

“In order to obtain a facility to open a charter school, most Nevada charter schools find it necessary to enter into rental or lease agreements with a private property owner, who constructs and owns the facility, and then rents the facility to the school on a standard, long-term facility lease,” Academica Nevada Chief Operating Officer Ryan Reeves said in a lengthy statement to the Current. “Since these are private dollars, developing private property, with the school having a standard lease agreement … there is no applicable law requiring the payment of prevailing wage on the construction.  The selection of contractors is the purview of the private developer of the property.”

Often, the lease agreements include a provision allowing the charter school to purchase the building after a set number of years. Reeves noted these provisions “are not rent-to-own contracts where monthly payments apply to the purchase price” and therefore don’t change the applicability of prevailing wage law.

Daly points to Senate Bill 226 of the 2023 Legislative Session which put into law that “careful scrutiny of novel leasing and financing arrangements” is necessary to ensure prevailing wage is paid on public works projects. That bill was sponsored by Senate Majority Leader Nicole Cannizzaro, passed on party lines and was signed by Gov. Joe Lombardo.

Daly also pointed to another law, passed as Assembly Bill 190 in 2019, which clarified that prevailing wage laws apply not just to the public body itself but also to the contractors and subcontractors acting on their behalf. Daly, a retired building trades union member, sponsored that legislation.

The charter schools and their private facilities partners are not following the spirit of the state’s prevailing wage laws, argues Daly, though he acknowledged the matter has not been litigated in court.

Mackedon suggested the issue might best be decided by a judge.

“If the trade unions want to talk, if they think the private actors are doing something wrong and out of the confines of (Nevada Revised Statute), I think they should absolutely file a complaint with the Labor Commissioner,” she said. “There are entities that are in the position to deal with this and make judgments, but it’s not the SPCSA.”

When asked about the legality of these types of agreements between public charter schools and private facility partners, Labor Commissioner Brett Harris referenced last year’s SB226, saying it closed such loopholes.

“Prevailing wage, the apprenticeship and payroll requirements, those all apply,” she said.

Harris noted that, in 2020, Laborers International Union Local 169 — then headed by Daly — sued the City of Sparks over prevailing wage issues stemming from the below-market-value transfer of land from its redevelopment agency to a private developer. The Office of the Labor Commissioner determined the workers on that parking garage-condominium project should have been paid prevailing wage. The city and developer appealed.

That case is still awaiting a decision from the Nevada Supreme Court.

“In the meantime, SB226 explicitly says purchase property lease agreements and there is some agreement with the land,” she said. “This applies to all of them.”

Academica Nevada disagrees, saying SB226 revised a portion of the law (NRS Chapter 354, on local government finance) that charter schools are exempt from by NRS 388A.366(1)(n). Furthermore, Reeves argues, the legislative intent of last year’s law was to address situations “where public resources contributed directly to a private development.”

“Standard charter school development involves a private developer purchasing land at market value, developing a building with private dollars, and then renting it to the school with no certainty whether the school will eventually be in a financial position to purchase the project,” he said. “This type of project does not fit within the intent or language of SB226.”

Who’s supposed to be watching?

Prevailing wage and other labor violations are not confined to the charter schools, and Daly acknowledges there have been cases of university foundations and redevelopment areas attempting to skirt prevailing wage laws under similar grounds.

“It’s a lease paid for nearly 100% by public funds,” said Daly. “Liars are gonna lie, that’s what they do. Cheaters are going to cheat.”

For building trades professionals, the skirting of prevailing wage requirements by a charter school is uniquely egregious because many of them approach unions for guidance inside the classroom.

“They ask us for pre-apprenticeship curriculum,” said Southern Nevada Building Trades Union Executive Secretary-Treasurer Vince Saavedra. “You want us to train your students to be pre-apprentices, to get them ready. You want our curriculum to use; but you don’t want us to build your schools.”

Charter schools are granted wide autonomy by the state, and the nature of their oversight in Nevada lends itself to increased confusion, says the labor commissioner.

“There tends to be confusion because (charter schools) are individually operated,” Harris said. “It seems like the (Authority) is confused about being a central body because they are not fronting the money for a project.”

But the labor commissioner says oversight is the responsibility of the Charter School Authority and “they should be driving the compliance portion.”

State agencies overseeing qualified public works projects are supposed to collect payroll breakdowns from contractors and subcontractors and review for potential violations. If they find them, they are supposed to submit a complaint to the Labor Commissioner, which conducts their own investigation.

But in reality, state agencies across the board are understaffed when it comes to compliance officers, says Harris. Most complaints about prevailing wage violations are initiated by third-party observers — typically labor unions who fund their own compliance officers to seek out bad actors.

SNBTU notes they have found prevailing wage violations on projects that are clearly subject to public works laws, including at Clark County School District.

“If it happens on CCSD projects, it’s likely happening on charter schools that aren’t subject to the same scrutiny,” said Aaron Ibarra, chief of staff at SNBTU.

Robert Diaz is one of those union reps who has been looking into the prevailing wage violations at charter schools. He says the Charter School Authority and individual charter school operators have outright ignored him or shuffled him around to different people in hopes he drops the issue.

“The intent seems willful but nobody will tell me that outloud,” he said. “You get the vibe of it when you get told, ‘Oh, visit this office, or this office.’ Then you’ve visited every office. Then, it’s, ‘Speak to our attorneys.’”

Diaz and half a dozen representatives of building trade unions appeared before the interim Sunset Committee on Legislative Commission in April to urge lawmakers to investigate the matter and potentially take action.

“We support charter schools but we want to make sure they are following the law when building new schools,” Saavedra told the subcommittee, which Daly chairs. “We’re calling for more transparency.”

Studies have shown that skirting prevailing wage law typically results in the developer making a bigger profit, said Saavedra. Labor cost savings aren’t passed onto the public.

Harris acknowledges the enforcement of prevailing wage issues is reactive and says her office is currently considering sponsoring legislation in the 2025 session to move away from being complaint driven and become proactive with compliance. One idea being floated is to create a centralized reporting system for prevailing wage projects and add additional compliance officers, which could be funded through a small fee charged to contractors.

“If they could set up projects in the same place, the Labor Commissioner can audit,” said Harris. “We can pull data and do compliance ourselves and not rely on these awarding bodies.”

In the meantime, agencies across the state may be confused about what labor laws apply and when. Harris emphasized she’s seen nothing nefarious from the Charter School Authority.

Daly is less forgiving.

“In my view, they are intentionally ignoring (the issue), failing to put (charter schools) on notice, and allowing them to continue skirting, if not flat out violating, requirements,” he said.

Mackedon told the Current the Charter School Authority doesn’t get updated of schools’ maintenance projects, regardless of how costly they might be.

“Obviously, if they’re building a brand new school and location, we would know,” she said of the authority’s role, “but if something happens with the HVAC and it’s over $100,000 and hits that threshold, they don’t notify us of all their maintenance everytime they do it.”

The longstanding facilities funding debate

“It’s important to understand that charter schools not receiving the same funding that traditional schools are is the root cause of this entire problem and argument,” said Mackedon, who was appointed executive director of the Charter School Authority in October.

Charter schools would prefer to own their own buildings because it would save them money, she said. That they can’t is a byproduct of the lack of dedicated facilities funding, which Mackedon says is an estimated $1,200 per pupil that traditional school districts receive from counties on top of the base per pupil funding they receive from the state.

“If charter schools were getting facilities funding, this would be a non-issue,” she added.

Reeves in Academica Nevada’s statement agreed with that sentiment, saying the company “would welcome” paying prevailing wage with dedicated facility funding.

“Instead of providing equal funding to charter schools, discrepancies in funding between school districts and public charter schools have been expanded,” he added.

Reeves pointed to the exclusion of charter school teachers in a bill designed to fund educator pay raises: “You can’t oppose equal funding for charter school teachers and facilities, while simultaneously demanding that charter schools incur the costs that would be applicable only if they received equal public funding.”

The Nevada Facilities Fund, which is partially seeded by the Nevada State Infrastructure Bank and administered by the non-profit Opportunity 180, is designed to provide a below-market rate financing option for charter schools. According to the State Treasurer’s Office and Opportunity 180, any charter school borrowing from the fund will be subject to prevailing wage.

Opportunity 180 declined to speak to the Current more broadly about charter schools and prevailing wage laws, sending only this statement: “The Nevada Facilities Fund is a public-private partnership and does not play a role in the construction or contracting process for school buildings; it is a loan fund dedicated to helping charter schools access low-cost capital for their campuses, providing opportunities for more students to have access to an education that fits their needs.

Reeves noted in his statement that the funds available through the facilities fund are limited “and ultimately the schools are still using operations and instruction funding to pay those loans.”

Diaz of SNBTU said union representatives have spoken to charter school advocates about the facilities funding issue, but he remains unconvinced that it matters.

“We’ve heard them,” he said. “My answer is, once you know the rules of engagement, the laws you have to abide by, the rules are there and prevailing wage is in place, then you can choose to build the school or not. I don’t know any other way to understand it.”