A California investment firm is offering at least $400 million to make Rio Salado College the first public community college in the nation to switch to a private, for-profit business.
The firm, SignificantPartners, wants to buy Rio Salado’s online academic operation. That accounts for roughly half of the college’s 62,000 students.
Michael Clifford, the firm’s chairman, said the transaction would provide the Maricopa County Community College District a huge amount of cash at a time when the state is grappling with a billion-dollar deficit.
SignificantPartners would receive an accredited — and growing — local online college that could soon enroll students around the world.
“I’m just a simple entrepreneur,” Clifford said. “When you have an asset that can attract hundreds and hundreds of millions of dollars in capital, why should the taxpayers have to pay?”
Rufus Glasper, chancellor of the Maricopa district, had initially decided to research whether it is even legal to sell Rio Salado.
However, after news reports detailed Clifford’s offer, Glasper reversed course late Wednesday
“Given the publicity that this situation has gained, I feel the need to set the record straight,” Glasper said in a prepared statement. “Rio Salado College is not for sale.”
Glasper advised the district governing board of the offer during a closed-door session Tuesday night.
Clifford said he is also willing to negotiate a partnership with Rio Salado, if an outright sale is rejected.
Rio Salado’s faculty supported the district’s earlier decision to consider to the offer, said Linda Thor, Rio Salado president.
In recent years, investors have bought a number of small private, nonprofit universities and colleges, mainly for the accreditations they hold.
Public higher education institutions, supported by taxpayers and protected from pressure to turn profits, however, have always been off-limits,.
If the Maricopa district sells Rio Salado, part of that barrier will crumble.
“I’m pretty sure that would be a first in the history of community colleges,” said George Boggs, president of the American Association of Community Colleges.
Clifford’s offer was first reported Wednesday on insidehighered.com.
Clifford is an experienced investor in private higher education.
He has already spent heavily to purchase two private schools, including Grand Canyon University in Phoenix. “We’re in the middle of the largest and fastest deregulation of an industry in American history,” Clifford said.
The University of Phoenix has done the most to push higher education toward a for-profit model.
Rio Salado’s privatization, Clifford said, is only the logical next step.
Clifford lives in San Diego, but grew up in Scottsdale and attended Saguaro High School. His family formerly owned KUPD (97.9 FM), a Valley rock radio station.
Rio Salado does a “remarkable” job educating students online, he said.
SignificantPartners intends to market the college nationwide, increase tuition for out-of-state students to generate profits and raise salaries for Rio Salado’s faculty and administrators.
Those details have won Clifford allies within Rio Salado.
Thor said when she first told her employees about the offer, they questioned whether such a deal would threaten their retirement and programs.
“But then you started to watch the wheels turn in their heads as they started thinking about what a large influx of new resources might mean to us in terms of the things we’re able to do,” she said.
The “letter of intent” Clifford sent Glasper last week does not detail how, exactly, SignificantPartners would operate Rio Salado.
In 2004, Significant Education purchased Grand Canyon, a 59-year-old nonprofit Christian university. Clifford is that firm’s vice chairman.
Within a year of the transaction, Grand Canyon fired 17 faculty members, five of them tenured professors.
Clifford said the Rio Salado offer is totally separate from the group that purchased Grand Canyon.
But he also defended the university’s actions and said remaining employees have received several pay raises.
“Grand Canyon didn’t fire any faculty members whatsoever. None whatsoever,” Clifford said. “There were contracts that were not renewed because the faculty were uncomfortable with the direction the school was going.”
The Maricopa district founded Rio Salado in 1978 as a college “without walls.” It leased classroom space throughout the county and has never had a traditional campus.
Today, it operates from a high-rise in Tempe. Faculty members work as department chairpersons, overseeing the work of dozens of part-time instructors.
Nearly all of its academic offerings are online. It is one of only three Maricopa colleges that has increased enrollment the past three years.
Paul Elsner, a former district chancellor, developed the idea for a college that would go to its students.
Rio Salado has become a “public treasure,” like Arizona State University and the other district colleges, Elsner said. Taxpayers built these institutions to serve their communities for decades, he said.
“So I’m puzzled as to why they’d even be thinking about selling it,” Elsner said.
Those taxpayers are now burdened with the cost of operating Rio Salado, Clifford said.
The district relies primarily on local property taxes to pay its bills. Selling the college might reduce those property taxes, Clifford said.
That’s unlikely, according to Kevin McCarthy, president of the Arizona Tax Research Association.
Taxpayers would only benefit if the district spent the $400 million to pay off debt, McCarthy said. Clifford proposes using it to endow scholarships for Rio Salado students.
“It might be my cynicism getting the best of me, but I wonder how much it would lighten the taxpayers’ load rather than the money just going someplace else,” McCarthy said. “We wouldn’t anticipate it ever resulting in a property tax decrease.”