Hearing probes DPS property spending

Marisa Schultz / The Detroit News

Detroit -- A Detroit Public Schools official said Thursday at a fact-finding hearing that the district's purchase of space in the Fisher Building for a new headquarters was a "grossly overpriced transaction."

Mark Schrupp, who was assistant general counsel at the time when several real estate transactions took place under former DPS CEO Kenneth Burnley, also said the district should not have entered into a no-bid contract for a $17-million renovation of its space in the New Center building.

Schrupp, DPS executive director of facilities, was the first witness in public hearings to examine questionable real estate deals paid for with money generated by a $1.5 billion bond issue in 1994. Emergency Financial Manager Robert Bobb is presiding over the hearings to find out why the district overspent millions in deals to buy space in the Fisher Building, to complete property deals to build Cass Technical High School and the Detroit School of Arts, and to build four schools on property it doesn't own.

The hearings come days before voters will be asked Nov. 3 to approve another $500.5 million bond proposal for school construction and renovation.

In the Fisher Building deal, Schrupp said, the district hired the Farbman Group, a Southfield real estate firm, to act as a broker to find space for a new headquarters. He found it questionable Farbman ultimately sold DPS on its own property in the Fisher building.

"There were multiple options," Schrupp said. "It just seemed kind of odd -- when you obtain a broker to help you find space and then they ultimately sell you something they own."

A spokesman for the Farbman group said Thursday his company did not act as broker for DPS on the sale of the Fisher Building, and the company and its affiliates entered into sound and fair deals with the district.

"As the purchaser, Detroit Public Schools conducted due diligence through internal and external legal counsel and outside consultants," Farbman spokesman Michael Layne said in a statement.

The hearings, which resume next week, are centered around four controversial real estate transactions:

• The Fisher Building condominium acquisition in which DPS paid $24.1 million in 2002 for five floors (130,000 square feet) and 720 parking spaces for its headquarters, even though Farbman Group entities paid about $21 million for the building a year earlier. And DPS paid $17 million in a no-bid contract to Huntington Construction, a Farbman affiliate, for renovations.

• A 99-year lease with the city of Detroit, where DPS spent $13 million up front for the property and built four schools on the land for about $104 million on property it doesn't own.

• The $3.8 million purchase of a parking structure for Detroit School of Arts staff even though school principal Denise Davis-Cotton repeatedly advised leaders -- and again during testimony Thursday -- that it was too far from the school and not needed.

• The property acquisition for Cass Tech and Detroit School of Arts that amounted to spending $4 million more than the value of the land because the property passed through the hands of two agents -- sometimes the same day -- and the price was ratcheted up each time.