The HISD Naming Rights Policy
The fix was in a year before
The policy appears to have been written especially for HSPVA Friends, who had the Kinders in mind.
A year before the name sale, Trustee Mike Lunceford proposed a new HISD policy for sales of naming rights. Lunceford sent an unpublished advance copy of the draft policy to his friend Jean Brackendorff, who was on the board of HSPVA Friends. "Look it over and let me know what you think," he wrote. Friends is the tiny non-profit who arranged the sale of the name to Nancy and Richard Kinder, placing themselves as middlemen in the transaction controlling the $7.5 million. As of December 2018, two years into the contract, HSPVA Friends still had the entire $7.5 million. HISD had nothing. Taxpayers had funded all of the upgrades the Kinder contract called for, the school was open, and the Kinder name was on the building—there is not even a reference to HISD on the exterior.
Here are the emails between Lunceford and Brackendorff.
A year before the name sale, Trustee Mike Lunceford proposed a new HISD policy for sales of naming rights. Lunceford sent an unpublished advance copy of the draft policy to his friend Jean Brackendorff, who was on the board of HSPVA Friends. "Look it over and let me know what you think," he wrote. Friends is the tiny non-profit who arranged the sale of the name to Nancy and Richard Kinder, placing themselves as middlemen in the transaction controlling the $7.5 million. As of December 2018, two years into the contract, HSPVA Friends still had the entire $7.5 million. HISD had nothing. Taxpayers had funded all of the upgrades the Kinder contract called for, the school was open, and the Kinder name was on the building—there is not even a reference to HISD on the exterior.
Here are the emails between Lunceford and Brackendorff.
| 975_lunceford_gets_naming_policy_advice_from_hspva_friends_hilited.pdf |
| 678_hspva_friends_writes_naming_rights_policy.pdf |
Brackendorff’s wish list includes third parties selling HISD’s property and controlling disbursement of the funds. "Allowance for charitable organizations to offer naming rights to various component areas and possibly the campus overall" is how she puts it, also referring to control over the sales proceeds "if/when the funds are transferred to HISD."
A policy explicitly incorporating these suggestions would have raised a lot of red flags. Lunceford and David Thompson, HISD board counsel and a significant donor to Friends, wrote a wide-open generalized policy with almost no limitations. No prohibitions on third parties selling names or controlling the money. No limitation on selling whole school names, even of historic well-known schools like HSPVA. No time limitation on the name, that could allow names to be resold when a facility needs to be replaced or renovated. No requirement for a “morals clause” protecting HISD in case the donor’s name fell into disrepute (think Enron Field, renamed Minute Maid Park).
The only requirement was that a donor give “at least” $7.5 million for naming of a “facility,” which was defined elsewhere to include whole schools. The Kinders gave $7.5 million. The most valuable name in the entire district was sold to the richest couple in Houston for the bare minimum. The new building cost $111 million, including its valuable downtown site.
A policy explicitly incorporating these suggestions would have raised a lot of red flags. Lunceford and David Thompson, HISD board counsel and a significant donor to Friends, wrote a wide-open generalized policy with almost no limitations. No prohibitions on third parties selling names or controlling the money. No limitation on selling whole school names, even of historic well-known schools like HSPVA. No time limitation on the name, that could allow names to be resold when a facility needs to be replaced or renovated. No requirement for a “morals clause” protecting HISD in case the donor’s name fell into disrepute (think Enron Field, renamed Minute Maid Park).
The only requirement was that a donor give “at least” $7.5 million for naming of a “facility,” which was defined elsewhere to include whole schools. The Kinders gave $7.5 million. The most valuable name in the entire district was sold to the richest couple in Houston for the bare minimum. The new building cost $111 million, including its valuable downtown site.
| 10-15-15_naming_policy_revised.pdf |
HSPVA Friends is a tiny organization. At the time of the naming rights sale for $7.5 million, their total annual revenues had never exceeded about $880,000. Their largest donor was the Kinder Foundation, who had given $50,000 per year for several years. They don't seem to have many deep-pockets donors capable of giving in the millions. They surely had the Kinders in mind when Brackendorff sent her successful wish list to her insider friends writing policies at HISD.
Other trustees don’t appear to have ever known what they were approving. At a meeting October 10, 2015, just days before approving the final policy, trustees joked around about large donations, but ended by seriously declaring, “you can’t buy a [school] name with $20 million” and specifying the policy would only allow parts of schools to be named. Unhelpfully, neither Lunceford nor Thompson was at that meeting to clarify this for their fellow administrators.
You can see a video of that meeting here. See Note 1 below for a short transcript.
Other trustees don’t appear to have ever known what they were approving. At a meeting October 10, 2015, just days before approving the final policy, trustees joked around about large donations, but ended by seriously declaring, “you can’t buy a [school] name with $20 million” and specifying the policy would only allow parts of schools to be named. Unhelpfully, neither Lunceford nor Thompson was at that meeting to clarify this for their fellow administrators.
You can see a video of that meeting here. See Note 1 below for a short transcript.
Written policy requires public discussion and board voting. Policy set by precedent is less visible. The Kinders wrote a LOT of HISD policy with their precedent-setting contract.
The main objective of the policy update in October 2015 was to provide guidelines for renaming, not naming rights sales. A few months later, many schools named after Confederate officials underwent name changes, following the revised policy, which now included a requirement that names respect cultural differences and values. Other additions were:
- to adopt a resolution that each new name is in the best interest of the district;
- to require a unanimous board vote if the name is of a living person, and a majority vote if deceased; and
- to appoint a committee to include community members, such as school faculty, alumni, students, and other school community members to select the name.
- The definition of “facility” appearing at the beginning of the policy was not changed: “For the purposes of this policy, the term District facility shall apply to new and existing schools, including schools scheduled for consolidation through redirection or closure, sport complexes, athletic facilities, and other office buildings and facilities. A specific area or portion of a facility shall refer to a wing, annex, library, media center, auditorium, performing arts center, gymnasium, athletic field, or common area. A specific area or portion of a school shall not apply to classrooms, school offices, and cafeterias.”
It was Lunceford and Thompson who took the opportunity to add completely new language about naming rights in a separate section at the end of the policy.
“ACCEPTANCE OF FUNDS FOR NAMING RIGHTS OF A SCHOOL OR A SPECIFIC PORTION OF A FACILITY
The Superintendent shall develop regulations for the acceptance of funds to support the construction, renovation, or acquisition of District facilities and specific areas or portions of facilities.
The Board may agree to name a District facility for an individual, family, group, organization, or business entity when a major capital donation has been made to the District for the facility by or on behalf of the nominated individual, family, group, organization, or business entity. A major capital donation is defined as either a monetary gift of, or land with a fair market value of, at least $7,500,000 toward the construction, renovation, or acquisition of the District facility.
The Board may agree to name a specific area or portion of a District facility for an individual, family, group, organization, or business entity when a significant capital contribution has been made to the District for the specific area or portion of a District facility by or on behalf of the nominated individual, family, group, organization, or business entity. A significant capital contribution is defined as a monetary gift of at least $1,000,000 toward the construction, renovation, or acquisition of the specific area or portion of the District facility.
The acceptance of funds and the approval of the name shall require a two-thirds majority vote of the membership of the Board. Funds accepted for the naming of a school or specific area of a school shall be reserved for capital expenditures exclusively for that school.”
It doesn’t sound like it was intended for a school like HSPVA, that already had a name, a reputation, and a community. Even an elementary school costs way more than $7.5 million, so why was the threshold set so low?
The new policy was discussed at four meetings, the September and October 2015 agenda review meetings and the September and October 2015 regular meetings. We know from one discussion that Trustee Lunceford and HISD’s outside attorney David Thompson wrote the policy. Thompson's wife was on the advisory board of HSPVA Friends; the couple were also significant donors to the non-profit. We also know that several trustees did not believe it applied to existing schools, or whole schools. It is very unlikely that Lunceford had shared with all of them, that HSPVA Friends had been consulted, and that the policy would likely be used by Friends sooner rather than later.
It is a bit heartbreaking to read of all the precautions for name changes without money involved, the requirements for community input and so on. And Kinder is the name of two living persons. If money had not been involved, the vote would have had to be unanimous (it was 7 to 2.) Seems like naming for money would require a higher bar, but it doesn't.
The naming-for-funds portion of the policy is dangerously lacking in detail. No superintendent ever developed the regulations required by that first paragraph. This left things wide open for Kinder to write any contract terms it wanted.
If you google “naming rights, non-profit organizations,” the top search hit we got (info.jgacounsel.com) says that “there has been movement toward time limitations on naming opportunities, especially in the arts and culture sector.” Also, “it is appropriate to consider the actual construction or renovation costs related to the facility (often the expected minimum gift is 50% of these costs) and the prominence and public visibility of the space.” (Just a reminder, the total cost of HSPVA’s new prominently located downtown building is $111 million including land, $92 million for construction; Kinder’s $5 million of equipment is about 5%.) Finally, “Another important element of the gift agreement is a morality clause addressing the nonprofit’s rights in regard to donor behavior or values that run contrary to the nonprofit’s mission and values.”
Here is a look at the HISD policy changes Kinder achieved, by setting precedents with its contract.
- HISD will allow an unelected third party such as HSPVA Friends to arrange for the sale of public property (naming rights) without authorization from the District or taxpayers, in secret, and without advance notification to the full board or the public; see also "middlemen" below.
- HISD doesn't actually get the money. It's held by HSPVA Friends, who can invest it, earn and keep interest on it, or even lose it. HISD has no recourse under the contract if that were to happen. HISD cannot touch the money; it can only request reimbursement of expenditures on behalf of the school approved by Kinder. Thanks to KUHF, we know that two years later, HSPVA Friends was still holding the entire $7.5 million.
- The name grant is forever, “in perpetuity.” Related to that, Kinder has specified that even if the school is relocated, the name can never change.
- There is no morals clause to protect HSPVA and HISD in case of a decline in the value of the name Kinder. Think Enron Field, now Minute Maid Park.
- Allowing minimal time for discussion is acceptable. The policy for naming or renaming schools without funds appears to be a relatively time-consuming one, requiring input from various community groups. That standard was not applied to this transaction. Only six days elapsed between the announcement of the proposed name change, and the board vote. Kinder forced the quick vote by saying the offer would "expire" if the board did not vote. The effectiveness of high-stakes deadline pressure and take-it-or-leave-it "offers" is a precedent that may be copied by future "donors."
- HISD will accept the minimum dollar amount stated in the policy, no matter how prominent the building and the institution’s reputation. They will not counter the offer. You ask for it, you get it.
- HISD will require no competitive bidding, even on an informal basis. HISD will not handle names as valuable intellectual property. This is not how museums and universities award names of their most desirable assets.
- HISD will not have the value of the name appraised before selling it. HISD would not sell a piece of real estate in this careless manner, but for intellectual property, they have set an extremely low standard.
- The school did not have a capital need for the full $7.5 million. The policy does specify the funds can only be for capital items, which includes equipment. Kinder's contract says, OK, just use the excess in the future. This is a very important point. If the capital needs can be undefined future needs, then it logically follows that ALL school names are for sale at ALL TIMES for $7.5 million per school. That may be a stretch, but clearly a relatively small capital need, as low as $5 million—in HSPVA’s case a 5% budget shortfall—can trigger a whole-school name change.
- The money is paid to HISD in installments over 13 years. The installments of the first $5 million follow the construction plan through 2018, and make some sense (although a strong policy would have required that HISD get the money up front), but when it came to the extra $2.5 million, Kinder’s attorneys didn’t know what it was for. They can’t know, as there is no specified capital need yet. So they gave Kinder 11 extra years to find a need, and lots of latitude in deciding when and for what capital items the extra money would be spent.
- The extra $2.5 million can only be given by HSPVA Friends to HISD once yearly when HISD presents a detailed budget request, which must be approved by Kinder. If you sold your house, would you let the buyer tell you exactly how to spend the money? What this boils down to is Kinder sits in the HISD driver’s seat. That’s not a good precedent. Did the citizens elect Kinder? Does being wealthy give one person the right to use money to take direct control over certain government operations? We’re all used to money used indirectly for control, to influence elections. This is different.
- There is no penalty in the contract in case of less than the $2.5 million being paid to HISD before July 31, 2029, the end date in the contract. If there’s one thing the policy is clear about, it’s that the name will cost at least $7.5 million. A contract that does not guarantee $7.5 million to the District with enforceable language may not be compliant with the policy. HISD's acceptance of these terms seriously weakens the policy, which is weak already.
- Use of middlemen is acceptable. Kinder doesn’t give the $7.5 million to HISD directly. It could have, but it has used the non-profit HSPVA Friends as a middleman in the transaction. HSPVA Friends secretly arranged for the sale of public property, the name of the school. They gave the name to their top large donor and based on what HSPVA Friends' Chairman has said, did not offer the name to others. The Friends chairman told the HISD board in an open meeting that Kinder itself proposed the name change, and Friends agreed. Friends also agreed to strict confidentiality as the deal progressed. Because Friends is a non-profit (it’s an enhanced PTO / alumni fund-raising org for HSPVA), it publicized the purchase price as "an extraordinary gift.” Kinder was silent and relied on Friends as spokesman throughout. Why? There are many advantages from a PR standpoint. Kinder would not want to emphasize that it was seeking the school name. Imagine Richard Kinder saying at the board meeting, “I think you should give me the name of the school, because if I pay $7.5 million the policy says I can have it.” Or, “You better give me the name of the school, otherwise I won’t give you any money and other rich philanthropists won’t give you any money either.” Or, “you should give me the name because I’m making a wildly generous gift to your new school.” These arguments were all made, multiple times, by people speaking in favor of the Kinder name change at the October 13, 2016 board meeting—and many who spoke in favor were sponsored by and encouraged to be there by Friends or the school principal. A non-profit frontman like HSPVA Friends changes the axis of the debate, diverting attention from the important commercial aspect and an obligation to respect taxpayer property, reducing the transaction to a simple “gift,” as if there were no strings attached; in addition, Friends worked to create the perception it spoke for the entire school community, confusing the trustees, or at least giving them cover to vote for the deal. Allowing a middleman is a very important policy precedent set by this Kinder transaction, and can be copied by future "donors," who will notice the many advantages to themselves.
Trustee Eastman: “I know what the changes are in L-1, but just to indicate it. And also I keep getting emails every day and I don’t think all the public reads Twitter, but people keep thinking that we’re voting to actually change the name of schools right now and we are not voting on that right now. We are updating our policy for direction to campuses that want to move forward and bring forward a name change recommendation. Am I correct in that?”
Unkown male: “That’s correct.”
Trustee Skillern-Jones: “Yes.”
Trustee Rodriguez: “I would also like to clarify that the board has not taken any conversations or discussions in renaming any schools as of this point.”
Trustee Eastman: “No.”
Trustee Rodriguez: “Right. So I just want to clarify that. That discussion has not come to the board table yet.”
Trustee Eastman: “Thank you.”
Trustee Adams: “BUT if there’s somebody out there that want to give us twenty million, we’ll take that—no I’m just (laughter)”
Unknown male: “take that under advisement.”
Trustee Adams: “We’ll take that under advisement.” (more laughter)
Trustee Skillern-Jones: “Any other L items? L-2—“
Trustee Eastman: “Well that’s an interesting—I would like—I have an interesting comment. Like, you don’t get to give us $20 million to request the name change of a school. It’s for renaming a new part of a wing, because I think that might have been confusing, like you show up with 20 mil and you get to change the name--”
Trustee Skillern-Jones (laughing): “you could buy yourself a name--”
Trustee Eastman: “Well you, you can’t change the name with the $20 million--”
Trustee Skillern-Jones (enunciating her understanding of the policy): “No, rename a portion of a school.”
Trustee Adams (?): “I agree.”
Skillern-Jones, Eastman, Adams, and Rodriguez all voted for the Kinder name change a year later.
