The MCN Report

by Mark Scaramella, December 20, 2010

The history and highly unusual arrangement of Mendocino Community Network owned and operated by Mendocino Unified School District has come up for discussion recently among certain limited circles on the Coast. Since some people continue to believe that there’s nothing wrong with a school district operating and subsidizing a private business, we’re re-posting our original investigative report of MCN which was originally published in late 2000 when the question of MCN’s legitimacy first arose.

Following our report is a lengthy, and somewhat convoluted, response to it from then-MCN Manager Rennie Innis, which is then followed by my concluding remarks on the subject.

(Some of the particulars from our 2000 report and Innis’s reply are dated now, and no longer applicable, but the rest of the report stands up pretty well.)

This re-post was necessitated by recent complaints from a few MCN apologists who continue to believe that MCN gets no public subsidies and was begun with the purest public spirit.

— ms

==========

(AVA, December 13, 2000)

Mendocino Community Network

School for Scammers

by Mark Scaramella

Mendocino County Business License Number 050578 is assigned to “Mendocino Unified School District.” Address: Mendocino Community Network, 10700 Ford St., Mendocino, CA 95460.

Mendocino Unified School District is a business — technically a non-profit business called Mendocino Community Network (MCN.org). MCN.org provides ordinary internet services to thousands of northcoast computer customers which are virtually indistinguishable from its local commercial competitors, Saber.net and Pacific.net.

* * *

MCN is the brainchild of Rennie Innis, a former elementary school teacher in Sacramento who quit teaching to open a gas station in Santa Barbara. Innis learned a little about computers on his own at the gas station and then, in the early 90s, moved to Mendocino and joined with Manuel Martinez to open the “Computer Business Center.” Innis soon realized that his budding computer business was being undercut by the local school district’s ROP (vocational training) center where for the bargain price of $40 a year cyber-short residents of the upper Mendocino Coast could get computer access, laser printing and tech support using school equipment. Innis decided to apply the old adage: If you can’t beat ’em join ’em. Following a leisurely skein of presentations, meetings and a couple of white papers prepared by school staffers, the Mendocino School Board put Innis on the payroll as the school district’s very own internet service business. “The school put me out of business,” Innis chortled to friends, “so now I’ll make the school my business.”

Mendocino County’s ROP (Regional Occupational Program) connection was and continues to be an important part of MCN’s justification for a school district running a commercial internet service business. In 1993 Mendo Unified got a three-year NASA edu-grant to pay for internet connections under the guise of vocational education. To keep the NASA-supplied connection MCN was subsequently formed so that users could be billed when the grant ran out. Users were made into customers. Student “interns” would “learn” about computers by providing youthful techno-exuberance to Mendocino’s on-campus school-run for-profit business. Although some say MCN’s whiz kids get modest wages for their work, there’s no reference to kids as paid staffers in MCN’s budget.

According to a source familiar with the early days of MCN, Innis began by convincing Mendocino and County school administrators to pay him to develop an attendance program with a simple file-management program. The deal reportedly involved Innis being paid $1,800 a month for 2-3 months while he worked on the program. But the program crashed after Mendocino Unified committed $8-$10,000 on it. While Innis was applying his alleged expertise to this independent software contract he was also receiving a $3,600/month salary from the County via the County’s ROP program which he joined after shutting down his own modest and uncompetitive computer-service company.

Seeing that the District had virtually inexhaustible funds if one simply used the words “it’s for the kids” and “internet” in the request, Innis reportedly told several individuals that he was going to build his new business using the school district's computer equipment, expecting that he could ride the “computers in the classroom” wave that has seen billions of dollars wasted on internet connections and computers in the last few years. Innis effectively merged his new school-business with the school district’s computer equipment, software and staffers who willingly participated in the public/private venture. After all, it had been given the enthusiastic blessings of the Mendo school board.

Innis then leveraged his new computer operation to launch a private Internet business called InnAccess, selling commercial internet ads to B&Bs on the Coast, and it was off to the non-profit races. InnAccess has since morphed into MCN’s commercial “Site Index” with hundreds of listings including “Business Pages,” “Food and Restaurants,” “Lodging,” “Real Estate,” and “Promotional Offers and Reciprocal Links.” Exactly what these services have to do with education is unclear to everyone but, apparently, the Mendocino school board.

Needless to say, the merger of the school’s computer activities with a commercial internet business allows Innis and Associates to benefit greatly — and some say unfairly — from the school’s financial backing — especially since the school board (with one occasional exception) is a big cheerleader for Innis’s private business operating as an educational enterprise. Free rent, free power, student labor, lots of free equipment, loans that don’t have to be paid back — hard to miss in free enterprise with public backing like this.

* * *

MCN is not a separate business with a separate board and independent budget. MCN’s board of directors is the school board itself. When MCN needs working capital, the school board is obligated to provide it. If they don’t, they risk not getting a return on their prior investment of public money, equipment and facilities.

MCN’s budget for 2000-2001 has grown to almost $1.5 million dollars. In the introduction to a recent MCN budget report to the School board, MCN Assistant Manager Mitch Sprague brags in pure business terms that “MCN is meeting sales goals,” and makes vague reference to his captive “student interns.” Typical of the convenient blending of commercial and educational finances are MCN’s “business expenses” for school staffers: $635K in “certficated and classified salaries.”

According to the MCN budget, ten adult-type people work for MCN earning $635K, for an average of some $63.5k per staffer. They also get school-supplied benefits. But if the salaries are distributed in the usual school way, most of the credentialed staffers would be getting teacher level salaries in the $50k range, the classified staff would get in the $30k range which adds up to around $400k. The two  top guys — Innis and Sprague — could be raking in over $100k each. Not bad for a school job in rural Mendocino County. And these fat figures don’t include the income from Innis and Sprague’s side businesses such as InnAccess.

These same “certficated and classified” salary categories are also listed in the school’s own budget. Which is which? Who pays for who? … Don’t ask. MCN and school district time cards aren’t available to critics or, it seems, anybody else..

MCN’s budget also includes a lump sum of $75,000 for “consulting” from the County’s ubiquitous “Netcetera” — a husband and wife team that provides nebulous but expensive computer services such as “formulating a suitable network architecture, and recommending appropriate hardware and software solutions” and “remote system and network administration, custom programming, and troubleshooting of performance and reliability problems” to any school district that can afford their exorbitant fees.

A number of expense categories are conspicuously missing from the MCN budget, indications of the kinds of invisible subsidies the school district provides over and above the student interns, property, operating capital, and other overhead costs. MCN’s utilities budget, for example, makes no reference to PG&E expenses. Nor is there any reference to insurance costs, accounting and auditing, or legal expenses. No reference to equipment or facility maintenance. No copier costs. No water, sewer, heating, trash disposal, admin staff… Only expenses which can be directly attributed to MCN are shown in MCN’s highly selective “budget.” The school district’s general fund picks up the rest with edu-dollars which taxpayers might assume are being used for “education,” not a heavily subsidized private business.

The school district’s own budget lists all these costly overhead and expense categories but makes almost no reference to MCN. MUSD’s typically impenetrable 60-page 2000 budget allocates over $3.2 million for certificated salaries and over $1.2 million in classified salaries. One can only speculate on how much the MCN and MUSD staffers overlap since the “business” and the “school” are the same entity.

* * *

Can a school be a business? Technically, yes, according to Michael Hersher, an attorney with the California Department of Education. Surprisingly, California State law does not expressly prohibit governmental agencies from competing in the private sector, even when the government agency appears to have various unfair advantages, such as captive staff, free use of school buildings, equipment and software, taxpayer-supplied working capital and overhead, and immunity from certain kinds of liability. CDOE attorney Hersher says the state has legally challenged school districts from engaging in commercial activity in the past — “Dawson v. Eastside High School District” — and lost.

“In that case the court held that a school district could engage in commercial activity,” Hersher explains, “if they determined that the commercial activity was reasonably related to their overall educational mission and that the kinds of activity involved didn’t fundamentally interfere with education. … It’s not illegal for a school district to sell something.”

Hersher says that he will continue to challenge the legality of school districts operating as for-profit operations if they are “inconsistent with the educational purposes of the school district.”

Back in 1994 MUSD staffers Jim Tobin and Yolanda Tate told then-Superintendent Ken Matheson that the state Department of Education had “raised some concerns about a school district operating a commercial business,” and recommended that MCN be set up as a separate non-profit with a separate budget and board of directors. Tobin and Tate’s analysis asserted that “the courts have implied that the authority [for government agencies to compete in the private sector] does exist,” and that “other states have specifically held that ‘a governmental agency may, in the absence of some prohibitory statutory or constitutional provision, engage in lawful competition with private concerns’.” Tobin and Tate concluded, however, with a recommendation that the School District set up a separate non-profit, adding, “the District can circumvent or avoid [state Department of Education objections] entirely.” Which it did.

When I asked Hersher recently why a school board would even want to operate a commercial business, he replied, “Well, that way there wouldn’t be a separate board to deal with. It’s simpler. As long as you’re only dealing with one board, you don’t have to worry about disagreements which would inevitably arise as board members on the different boards come and go.”

So as long as you call yourself “non-profit” and you can convince the school board that your commercial business is somehow good for the kids, you’re legal.

* * *

MCN of course has become adept at shrouding itself in edu-bafflegab to convince a credulous school board and community members that Innis’s commercial business is a boon to the kids. Excerpts from MCN’s own website are a veritable fountain of “for the kids” feel-good techno-gibberish:

“Our mission is to provide high-quality, personal Internet Services to our school district, our customers, and the communities that we serve” … “Connecting kids to their education and our community to the world” … “Schools must model support and an entrepreneurial ethics for their students and community” … “Digital technologies and entrepreneurial community engagement have become increasingly important teaching and learning tools” … “MUSD has built a telecommunications-based infrastructure that has had a positive impact on our schools, community, and the local economy” … “Teachers and staff have free dial up accounts from home” … “The technology planning process for MUSD is led by a Technology Committee composed of teachers and administrators and school board members” … “We believe in multiple intelligences” … “Teaching less content and more skills is better” … “Active learning increases decision making” … “Students need to create projects, important projects that they help develop — they'll feel better about themselves,” “[MCN] helps foster the relationship between the community and the school,” and on and on.

MCN has effectively parlayed meaningless edu-rhetoric to justify an enormous array of tangible equipment and technical expertise at school district expense. From MCN’s website we learn that:

“MCN houses two SUN SPARC systems, one of which functions as the DNS and mail server. The second is available for backup. These servers host email, newsgroups, and websites for over 270 local teachers and 3,800 other statewide dialup subscribers. A Macintosh Power PC uses AppleTalk protocols and functions as a web and file server, and high school mail server for students. A second Macintosh Power PC located at the high school office, is used as a separate server by office staff for school information and records and is not available for general access. … There are currently 240 modems in Mendocino, and 192 modems at PacWest in Oakland, with more being added as use warrants. Dial-in accounts are cost-free to teachers and student assistants, and are available for a fee through (MCN) to other students, parents, community members, businesses, and organizations. … We have chosen to house our NOC [Network Operations Center] near the MTC [Mendocino Tech Center] (which itself is housed on the high school campus). The NOC is located in a separate building adjacent to the Computer Lab at the MTC. … The NOC is staffed by the staff of the Mendocino Community Network, the district run Internet Service Provider. MCN staff includes 7 support personnel, and 3 administrative personnel.  MCN is supported on a consulting basis by professional networking consultants from the Netcetera company. Rapid growth of the system has created the need for a full time District Network Support technician. This position is funded through a partnership between the district and MCN.”

The lines between MCN and the school district are blurred, to say the least.

Sources familiar with MCN’s finances point out that the operation spends all of its budget and hasn’t returned *any* money back to the District’s general fund, yet comparably-sized commercial ISPs like Pacific Internet in Ukiah are reporting profits in the hundreds of thousands of dollars per year. Since MCN is charging rates comparable to other ISPs while being heavily subsidized by the school district, where is MCN’s “profit” going? High salaries for Innis and Associates? More and more equipment for a commercial business?

* * *

Mendocino County has two legitimate commercial internet service providers (ISPs): Pacific Internet and Sabernet, both based in Ukiah. Jim Sohn, Sabernet’s president, says he doesn’t comment on other internet service providers and doesn’t know anything about MCN.

But Jim Persky, president of Pacific Internet in Ukiah, said he has mixed feelings about MCN, with its government-subsidized advantages, as a legitimate competitor. “My libertarian politics compel me to oppose the government going into business on principle,” Persky said recently. “I fought them at first, but now that they’re there, I don’t have any problem with them. We share some resources and help each other out with technical problems. In fact, I’m glad they’re there. It’s bizarre, but we’re better off because of them.”

Sounds like Persky’s getting some indirect benefit from those edu-dollars, too. Hey, why not? Wouldn’t you? But if Persky’s not careful he might find himself becoming a target of a future hostile takeover by the Mendocino School District.

Persky notes as an aside that he used to be a big supporter of computers in the classroom himself, but now that he’s seen how they’re being used, “I think they should limit them to study halls and libraries. You don’t need them in the classroom. The teachers don’t know how to use them.”

Persky said he’s irritated that some people subscribe to MCN rather than Pacific Internet because they think MCN is somehow “community-related.” “People tell me ‘I want to support the school. I want the money to go to the kids’,” complained Persky. “But I’m community related. I employ people just like them and provide the same service.”

But then, Persky shifts gears again, adding, “But teachers are a pain in the ass anyway, so maybe it’s not really a loss. We get teachers calling for tech support who are real know-it-alls. They won’t listen to directions. They become a support nightmare for us. I think a lot of teachers are forced to use computers by their districts, but they’re not really into it so they need a lot of handholding.”

* * *

Suspicious as MCN may be, however, at this point it’s a fait accompli. Apparently its commercial customers are satisfied with the service, the school board is happy to be a business even though they’re not getting much out of it — even the commercial competition isn’t complaining.

But that’s not all — not by a long shot. MCN is exploding into the dot.com world.

MCN recently got a large donation of some land and a building when a neighboring property owner died and left some of his property to the school. The school board gave it to Innis’s MCN and MCN immediately announced ambitious plans to use the school and the new building to set up a large-scale business incubator for net-head entrepreneurs.

Using Annenberg Foundation edu-grant funding for starters, MCN has already hired an incubator director and has drawn as many coastal business heavies as they can into their new venture. The names of those on-board the MCBI (Mendocino Coast Business Incubator) Express are a virtual who’s who of the area’s business, computer and educational movers and shakers: MUSD Superintendent Mark Iacueniello, ROP counselor Dennis Guido, College of the Redwoods’ Barbara Rice, former superintendent and present Annenberg Grant administrator Ken Matheson and his son Mike (MUSD’s high school principal), County School Superintendent Paul Tichinin, Barbara Azad and Jim Hay of the Coast Chamber of Commerce, County Director of Economic Development and Finance Madelin Holtkamp, Rick Moon of the Small Business Development Corporation, Eric Schmidt from the Savings Bank of Mendocino County, and a collection of “Business Consultants/Entrepreneurs” — Bob Bushansky, Rob Cohen, Jerry Greenberg, Jim Heid (of KZYX’s “Point and Click” radio show), Lee Livezey, Jim Marquardt, Jim Palmer, Michael Potts, Wendy Roberts, Tim Standing, Larry Wagner… All of whom stand to personally benefit from the public-private partnership subsidized by large infusions of taxpayer edu-dollars.

Inevitably, Assemblymember Virginia Strom-Martin and state senator Wes Chesbro have clambered on board Innis’s public/private express. They’re important funding conduits.

“MCBI Capital Requirements and Partnership Opportunities: MCBI is currently seeking start-up funding from public funds with the support of Assemblymember Virginia Strom-Martin and through foundation, corporate, and individual philanthropy. Private investments in the project through Mendocino Unified School District are tax-deductible to the extent of current IRS regulations.”

But isn’t MCBI getting pretty far afield from “the kids”?

“MCBI will operate under the guidelines and mission of MUSD,” insists MCN’s website promotion of MCBI. “MCBI will [provide] affordable resources [i.e., tax dollars] to promising IT [information technology] start-ups and introducing local students to careers that will serve them well and help to transform the region's collapsing resource-based economy by harvesting its intellectual potential instead of its trees.”

Leave it to educrats to justify their “inappropriate” spending by claiming to save trees!

Pacific Internet’s Jim Persky wasn’t aware of MCN’s latest venture into business incubators. To Persky, MCBI “sounds like it’s getting pretty far afield from school-related activities.”

But, you might ask, isn’t MCBI just a scheme for commercial start-up businesses to get their hands on the school district’s general educational funds and school equipment?

“MCBI will not negatively impact the general fund,” insists Innis and Associates.

“I don’t see how MCBI can help but impact the general fund,” replies the Mendocino School Board’s lone MCBI skeptic, Chuck Wilcher, who happens to earn his living as a computer consultant, “but I’m only one person.”

The Board has voted 4-1 to enthusiastically endorse MCBI. Wilcher worries that MCN and MCBI will get priority access to increasingly tight conventional school district revenues and that the costs for such a speculative operation are going to be much larger than Innis and Associates think.

Conscious of the possibility that using general fund edu-tax dollars for risky business start-ups, MCN adds, “The owner of MCBI is the MUSD. MUSD is responsible for hiring and evaluation of all MCBI personnel, and the approval and auditing of all expenditures and income. MUSD requires that MCBI will not negatively impact the MUSD general fund and that all decisions and practices of MCBI be consistent with the District mission, policies, and procedures.”

But that “requirement” has no teeth. How could the school board refuse money to MCBI once it gets going?

Muddying the funding water further, MCN adds, “Funding [for MCBI] will come from private companies, individuals, government, or philanthropic sources. Funds must come without stipulations in conflict with the business plan and be on-going.” Translation: MCBI plans to be a financial sinkhole. Remember that most “successful” dot.commers have yet to turn a profit — they operate on ad revenue and continuous infusions of venture capital.

MCBI is supposed to have its own board of directors, but that board will operate within the school district, not as a separate entity, making it nothing but a figurehead — and a scapegoat if the entrepreneurial dot.com start-ups take a nosedive.

Superintendent Mark Iacueniello recently told his school board that MCBI would become “a school for entrepreneurs and would enrich the educational program with ROP, MCN, and the High School working together.”

But since when is it a school district’s business to train and fund entrepreneurs? It’s more likely to enrich Rennie Innis and his fellow high-tech high rollers, with all the risk assumed by the taxpayers and studetns of the Mendocino Unified School District. ¥¥

== 30 ==

[Innis’s reply and our comments…]

(AVA, January 24, 2001)

mcnScam.org

Bilking the Kids II

by Mark Scaramella

On December 13 we ran an extensive story about the internent service provider business on the Coast called Mendocino Coast Network. MCN is run within and heavily subsidized by the Mendocino Unified School District.

MCN's Business Manager, Rennie Innis finally got around to responding to the article a couple of weeks ago by sending an almost incomprehensible annotation of the story which assigned paragraph numbers to my article and commented on each. Without the original article, Innis's comments make very little sense, therefore I've merged Mr. Innis's comments with the relevant parts or sum­maries of the original article for reference [in bold brackets].

* * *

[MCN business license/address]. Correct.

[Mendocino Unified School District is a business — technically a non-profit business…] Correct, except “technically non-profit,” we are actually part of the school, which is not technically non-profit.

[MCN is the brainchild of Rennie Innis, a former elementary school teacher in Sacramento…] Incorrect. I am a former Sacramento secondary school teacher.]

[…who quit teaching to open a gas station in Santa Barbara.] Incorrect. Although I have worked in service stations while working my way through college, I have never “opened” or owned a service station. Maybe Mark is referring to a business that I partially owned — a cabinet shop in Santa Barbara. It was while running this business that I first became involved in computers in 1983.

[Innis learned a little about computers on his own at the gas station and then, in the early 90s, moved to Mendocino and joined with Manuel Martinez to open the “Computer Business Center.”] Mostly correct.

[Innis soon realized that his budding computer business was being undercut by the local school dis­trict’s ROP (vocational training) center…] Actually, the impetus for starting the CBC was in response to ROP's intention to tighten up its policy regarding local businesses using the ROP Center as a business resource (using the computers, laser printers, etc.) instead of as a learning resource. CBC was formed to provide a place where these former ROP business users could continue to use the machines that they needed — hence the name Computer Business Center.

[Referring to his decision to close CBC and join the school district: If you can’t beat ’em join ’em.] Once I found out that ROP in fact WAS going to allow continued use of the Center by business people, the financial model and purpose of why I had started CBC changed. It became clear that CBC would not support two partners financially, so I sold my share to my partner (at that time), Manuel Martinez.

[Following a leisurely skein of presentations, meetings and a couple of white papers prepared by school staffers, the Mendocino School Board put Innis on the payroll as the school district’s very own inter­net service business. “The school put me out of busin­ess,” Innis chortled to friends, “so now I’ll make the school my business.”] In my conversation with Bob Blick, I did mention something to this effect. I love working with computers. Prior to CBC, I was a substitute at the ROP Computer Center. When I sold CBC, I returned to substitute again at ROP as often as possible (meaning as often as they needed me). Soon, one of the evening computer instructors quit and I was hired into this part time position. Over time, this position was increased to a full-time position, but at a wage scale that I could not afford to live on. During this time, I aug­mented my wages by cabinet work and computer consulting.

[Mendocino County’s ROP (Regional Occupational Program) connection was and continues to be an important part of MCN’s justification for a school district running a commercial internet service business.] True.

[In 1993 Mendo Unified got a three-year NASA edu-grant to pay for internet connections under the guise of vocational education.] False, it had nothing to do with vocational education. The grant was to the MUSD, and not to the ROP, although ROP certainly benefited greatly from NASA Internet services which were provided to ROP without charge.

[To keep the NASA-supplied connection…] Actually, MCN was formed in order to provide MUSD with an Internet connection AFTER the NASA grant's 3-year term would have expired. Recall that MUSD did not have an option of choosing a local provider at that time, as there was no local ISP available. The Superintendent asked me if I would be interested in creating a school-owned business to accomplish this and I readily agreed.

[… MCN was subsequently formed so that users could be billed when the grant ran out. Users were made into customers.] True. And willing, happy cus­tomers they were!

[Student “interns” would “learn” about comput­ers by providing youthful techno-exuberance to Mendocino’s on-campus school-run for-profit busin­ess.] True, students learned — a good thing in my opin­ion. Some of them worked at MCN, and were paid minimum wage or better, some volunteered time. The intention of MCN is to charge for the commercial and residential services that it provides in order to take the profits and provide free and low-cost services to our local schools and non-profit organizations.

[Although some say MCN’s whiz kids get modest wages for their work, there’s no reference to kids as paid staffers in MCN’s budget.] False, Intern payroll is included in the MCN Payroll spreadsheet each year and is approved by the MUSD School Board. These are a matter of public record.

[According to a source familiar with the early days of MCN, Innis began by convincing Mendocino and County school administrators to pay him to develop an attendance program with a simple file-management program. The deal reportedly involved Innis being paid $1,800 a month for 2-3 months while he worked on the program. But the program crashed after Mendocino Unified committed $8-$10,000 on it. While Innis was applying his alleged expertise to this independent software contract he was also receiving a $3,600/month salary from the County via the County’s ROP program which he joined after shut­ting down his own modest and uncompetitive com­puter-service company.] Although the dollar amounts are very incorrect (too high by far), the experience was definite a disaster. I acknowledge that the system that I attempted to implement was too complicated for the software at that time. However, as of September 2000, some of that software was still being used to log attend­ance for the ROP Computer Lab.

[Seeing that the District had virtually inexhaust­ible funds if one simply used the words “it’s for the kids” and “internet” in the request…] Mark, you obviously have not been paying attention. The MUSD is hardly a supply of inexhaustible funds. In fact, no District funds have been used to operate MCN. For the most of the first year of operation, MCN did not have the funds to pay my $15 per hour wages, as funds were not available from the MUSD General Fund.  I did not receive these accrued wages until a year or so later.

[Innis reportedly told several individuals that he was going to build his new business using the school district's computer equipment, expecting that he could ride the “computers in the classroom” wave that has seen billions of dollars wasted on internet connections and computers in the last few years. Innis effectively merged his new school-business with the school district’s computer equipment, software and staffers who willingly participated in the pub­lic/private venture. After all, it had been given the enthusiastic blessings of the Mendo school board.] Other than your opinions about whether computers and the Internet are a waste of money, the rest is mostly cor­rect. I WAS confident that using the integrity of MUSD to establish a local ISP that donated ALL of the profits to local schools would be a successful venture. Yes, the MUSD Board enthusiastically backed this idea.

[Innis then leveraged his new computer operation to launch a private Internet business called InnAccess, selling commercial internet ads to B&Bs on the Coast, and it was off to the non-profit races. InnAccess has since morphed into MCN’s commercial “Site Index” with hundreds of listings including “Business Pages,” “Food and Restaurants,” “Lodging,” “Real Estate,” and “Promotional Offers and Reciprocal Links.” Exactly what these services have to do with education is unclear to everyone but, apparently, the Mendocino school board.] MCN is a COMMERCIAL business! It is intended to make money. For the school district. Commercial web sites are an appropriate part of MCN's commercial services. MCN has never had a complaint that suggests that we remove commercial content from our servers.

[Needless to say, the merger of the school’s com­puter activities with a commercial internet business allows Innis and Associates to benefit greatly — and some say unfairly — from the school’s financial backing — especially since the school board (with one occasional exception) is a big cheerleader for Innis’s private business operating as an educational enter­prise.] Before starting MCN, the MUSD requested and received assurances from the CA Department of Education that MUSD was within its rights to a) own a business (including a Chevron station or a Taco Bell stand, if it chose), and b) to compete on the open market.

[Free rent…] Yes in return for over $100,000 in free services per year. Remember, MUSD owns MCN, why would it charge MCN rent? […free power…] See above. […student labor] See above. […lots of free equipment…] MCN purchases its own equipment from yearly proceeds, and provides some free equipment to MUSD. Last year, MCN provided over $15,000 in equipment to MUSD for non-MCN purposes.[…loans that don’t have to be paid back…] False.

* * *

[MCN is not a separate business with a separate board and independent budget. MCN’s board of directors is the school board itself. When MCN needs working capital, the school board is obligated to pro­vide it. If they don’t, they risk not getting a return on their prior investment of public money, equipment and facilities.] True, although MCN does maintain, and is held to, a separate budget, its budget is encapsulated [sic] by the larger MUSD budget.

[MCN’s budget for 2000-2001 has grown to almost $1.5 million dollars. In the introduction to a recent MCN budget report to the School board, MCN Assistant Manager Mitch Sprague brags in pure business terms that “MCN is meeting sales goals,” and makes vague reference to his captive “student interns.” Typical of the convenient blending of com­mercial and educational finances are MCN’s “business expenses” for school staffers: $635K in “certficated and classified salaries.”] Actually, MCN has a waiting list of students who would like to be cap­tured by MCN. They think that it is a great place to earn money and an education. Other than the tone, the dollar figures are correct.

[According to the MCN budget, ten adult-type people work for MCN earning $635K, for an average of some $63.5k per staffer. They also get school-sup­plied benefits. But if the salaries are distributed in the usual school way, most of the credentialed staffers would be getting teacher level salaries in the $50k range, the classified staff would get in the $30k range which adds up to around $400k. The two  top guys — Innis and Sprague — could be raking in over $100k each. Not bad for a school job in rural Mendocino County. And these fat figures don’t include the income from Innis and Sprague’s side businesses such as InnAccess.] Salary figures are not correct. InnAccess is not owned by Innis or Sprague, but by MCN.

[These same “certficated and classified” salary categories are also listed in the school’s own budget. Which is which? Who pays for who? … Don’t ask. MCN and school district time cards aren’t available to critics or, it seems, anybody else.] Ask MCN, you can see the time cards here at our office.

[MCN’s budget also includes a lump sum of $75,000 for “consulting” from the County’s ubiqui­tous “Netcetera” — a husband and wife team that provides nebulous but expensive computer services such as “formulating a suitable network architecture, and recommending appropriate hardware and soft­ware solutions” and “remote system and network administration, custom programming, and trouble­shooting of performance and reliability problems” to any school district that can afford their exorbitant fees.]. Their fees are very reasonable for the services that they provide, which are Unix, telecommunications, rout­ing, etc. equipment configuration and remote manage­ment. We pay them $60 per hour, similar services pro­vided by their competitors cost in excess of $100 per hour.

[A number of expense categories are conspicuous­ly missing from the MCN budget, indications of the kinds of invisible subsidies the school district provides over and above the student interns, property, operat­ing capital, and other overhead costs. MCN’s utilities budget, for example, makes no reference to PG&E expenses. Nor is there any reference to insurance costs, accounting and auditing, or legal expenses. No reference to equipment or facility maintenance. No copier costs. No water, sewer, heating, trash disposal, admin staff… Only expenses which can be directly attributed to MCN are shown in MCN’s highly select­ive “budget.” The school district’s general fund picks up the rest with edu-dollars which taxpayers might assume are being used for “education,” not a heavily subsidized private business.] True, many of the indirect expenses like PG&E, insurance, accounting, auditing, legal expenses, etc. are lumped in to the MUSD budget. However, all equipment costs, facility improvements, copier costs, sewer, heating (propane), admin staff, etc. are included specifically in the MCN budget, contrary to AVA's claim.

[The school district’s own budget lists all these costly overhead and expense categories but makes almost no reference to MCN. MUSD’s typically impenetrable 60-page 2000 budget allocates over $3.2 million for certificated salaries and over $1.2 million in classified salaries. One can only speculate on how much the MCN and MUSD staffers overlap since the “business” and the “school” are the same entity.] MCN's personnel expenses are in a separate budget that is incorporated into the overall MUSD budget.

(Innis agrees that California Department of Education attorney Michael Hersher said a school run­ning a business was technically legal, although ill-advised…)

[The School District set up a separate non-profit, according to an internal district memo “to circum­vent or avoid [state Department of Education objec­tions] entirely.” Which it did.] MUSD did not set up a separate non-profit (as stated by AVA).

(Innis agrees with CDOE attorney Hersher about keeping MCN part of the District, not a separate non-profit because “you don’t have to worry about disagree­ments which would inevitably arise as board members on the different boards come and go.”)

[MCN of course has become adept at shrouding itself in edu-bafflegab to convince a credulous school board and community members that Innis’s commer­cial business is a boon to the kids. Excerpts from MCN’s own website are a veritable fountain of “for the kids” feel-good techno-gibberish: “Our mission is to provide high-quality, personal Internet Services to our school district, our customers, and the communi­ties that we serve” … “Connecting kids to their edu­cation and our community to the world” … “Schools must model support and an entrepreneurial ethics for their students and community” … “Digital technolo­gies and entrepreneurial community engagement have become increasingly important teaching and learning tools” … “MUSD has built a telecommunica­tions-based infrastructure that has had a positive impact on our schools, community, and the local economy” … “Teachers and staff have free dial up accounts from home” … “The technology planning process for MUSD is led by a Technology Committee composed of teachers and administrators and school board members” … “We believe in multiple intelli­gences” … “Teaching less content and more skills is better” … “Active learning increases decision mak­ing” … “Students need to create projects, important projects that they help develop — they'll feel better about themselves,” “[MCN] helps foster the relation­ship between the community and the school,” and on and on.] I agree with the excerpted quotes. They are a good reflection of what we are about.

[MCN has effectively parlayed meaningless edu-rhetoric to justify an enormous array of tangible equipment and technical expertise at school district expense.] None of the equipment used to operate MCN has cost MUSD any money.

(Innis says that the technical info about MCN obtained from the MCN website is out of date.)

[The lines between MCN and the school district are blurred, to say the least.] Says you.

[Sources familiar with MCN’s finances point out that the operation spends all of its budget and hasn’t returned any money back to the District’s general fund, yet comparably-sized commercial ISPs like Pacific Internet in Ukiah are reporting profits in the hundreds of thousands of dollars per year. Since MCN is charging rates comparable to other ISPs while being heavily subsidized by the school district, where is MCN’s “profit” going? High salaries for Innis and Associates? More and more equipment for a commercial business?] There are a number of factors that make MCN different from normal, commercially operated ISPs:

a) MCN did show a profit of $71,000+ last year. This is held in a bank deposit for contingency purposes. MCN does not have access to this money as it can only be spent at the discretion of the MUSD BOD.

b) In addition to the cash profit, MCN gave away over $195,000 worth of otherwise billable services to MUSD, other Mendocino County school districts, and local non-profits such as the local libraries, environmen­tal centers, shelters, etc. Although I do not have informa­tion regarding the extent of donations made by other ISPs, I am sure that MCN must be near the top of the list regarding the donation of profit to Gross Revenue ratio.

c) MCN was not set up to create a profit. It is true that much of the revenue generated is reinvested into state of the art equipment each year. It is my opinion that MCN owes its customers the best quality service that it can afford to provide to our community.

(Innis says he refers customers to Pacific Internet “when the fit is better or when customers are unhappy with MCN.”)

[(Among other things) Pacific Internet owner Jim Persky says that “teachers are a pain in the ass any­way, so maybe it’s not really a loss. We get teachers calling for tech support who are real know-it-alls. They won’t listen to directions. They become a sup­port nightmare for us. I think a lot of teachers are forced to use computers by their districts, but they’re not really into it so they need a lot of handholding.”] Teachers need tech support. That's what we are here for. They DO take a lot of tech support!

[MCN is exploding into the dot.com world. MCN recently got a large donation of some land and a building when a neighboring property owner died and left some of his property to the school. The school board gave it to Innis’s MCN and MCN immediately announced ambitious plans to use the school and the new building to set up a large-scale business incuba­tor for net-head entrepreneurs.] True, the building and land were donated to the MUSD. As MCN was in severe need of larger space, and the building was not capable of becoming a classroom, MCN was asked to move into the current “MCN building.” MCN is a “peer” to the Incubator, MCBI is operated by MUSD in conjunction with MCN. MCBI has it's own budget and will succeed or fail on its own. MCN will offer subsidized services as appropriate in a similar manner to the other sub-entities of the MUSD. Yes, the plans are ambitious — we are excited by the possibilities that MCBI provides for our area.

[Using Annenberg Foundation edu-grant funding for starters, MCN has already hired an incubator director…] Unfortunately, untrue. MUSD has not been able to hire a director at this time.

[…and has drawn as many coastal business heav­ies as they can into their new venture. The names of those on-board the MCBI (Mendocino Coast Business Incubator) Express are a virtual who’s who of the area’s business, computer and educational movers and shakers … All of whom stand to personally ben­efit from the public-private partnership subsidized by large infusions of taxpayer edu-dollars.] How are the people on the advisory board going to personally benefit from MCBI? Only in that MCBI will benefit the com­munity that they live in. The people listed have donated their time to this project.

[Inevitably, Assemblymember Virginia Strom-Martin and state senator Wes Chesbro have clam­bered on board Innis’s public/private express. They’re important funding conduits.] Hurray!

[But, you might ask, isn’t MCBI just a scheme for commercial start-up businesses to get their hands on the school district’s general educational funds and school equipment?] The project has a School to Career component and an ROP Adult Ed component. The pur­pose is to help local business grow, and thrive.

[But that “requirement” (that MCN not impact the general fund) has no teeth. How could the school board refuse money to MCBI once it gets going?] By not approving its budget. MCBI will be operated like other sub-entities of MUSD in accordance with Generally Accepted Accounting Practices, just like MCN.

[Muddying the funding water further, MCN adds, “Funding [for MCBI] will come from private comp­anies, individuals, government, or philanthropic sources. Funds must come without stipulations in conflict with the business plan and be on-going.” Translation: MCBI plans to be a financial sinkhole. Remember that most “successful” dot.commers have yet to turn a profit — they operate on ad revenue and continuous infusions of venture capital.] Granted, there is currently a need for MCBI to obtain “outside funding” beyond its projected revenue for the foreseeable future — but it will not come from MUSD.

[But since when is it a school district’s business to train and fund entrepreneurs?] Do your research. It's done all the time.

[It’s more likely to enrich Rennie Innis and his fellow high-tech high rollers, with all the risk assumed by the taxpayers and studetns of the Mendocino Unified School District.] MCBI will not be funding them. They will be paying MCBI for the services that MCBI provides to them. MCBI will assist the entre­preneurs to find funding of their own as a component part of the instructional package.

* * *

Mr. Innis sent the above comments to selected email addresses of people who had expressed concern about MCN based on my December 13 article. He did NOT send it to the AVA — apparently hoping to avoid a response to his non-refutation. Based on these comments, Mr. Innis then claims in his email intro that my article “has many inaccuracies,” using this ridiculous annotation as proof.

But Mr. Innis’s annotation is obviously nothing but a pathetic combination of confirmations, vague denials, info-free self-serving assertions, irrelevant nitpicks, and outright misrepresentations.

In focusing on a few irrelevant trees, Innis conveniently and intentionally ignores the forest. The point is: MCN is operating a for-profit commercial business under the guise of a school district, taking advantage of numerous direct and indirect school subsidies, and marketing it as “good for the kids,” giving MCN and Innis an enormous unfair advantage over anyone else on the coast who tries to enter the internet service business. I know of at least three people who were unable to start or expand internet businesses because they couldn’t compete with Innis’s publicly subsidized scam. In fact the subsidies are much larger than I described in the original article — besides paying no overhead expenses, MCN pays no taxes! None! No property tax, no income tax, no corporate tax.

This, however, did not prevent Innis from claiming credit on KZYX a couple weeks ago for NOT lowering his monthly internet hook-up fee ($19.95/mo.) as a favor to the two other ISP’s in the County, which might complain if Innis undercut them. This cozy ISP cartel maintains artificially high, uncompetitive prices, and blocks competition from entering the market by offering selective discounts to people who complain or threaten to jump ship. This would be bad enough if all of Mendocino’s ISPs were commercial operations, but MCN is heavily subsidized, so the “profits” which flow from MCN’s monopoly-cartel go directly to MCN and Innis. Innis then turns around and claims that some vague “services” are provided “free” to certain subscribers. How generous.

Regarding Mr. Innis’s few marginally substantive comments:

• Mr. Innis says that the fact that “There is no mention of students as paid staffers in MCN's budget” is “False,” because the “Intern payroll is included in the MCN Payroll spreadsheet” blah-blah-blah… They’re NOT in the budget.

• “No district funds have been used to operate MCN.”

Please. Much of the initial equipment was school district equipment. The labor to start it up was school staff. And, according to the MUSD audit for 1999, hundreds of thousands of dollars which were advanced to MCN were paid back only last year. And MCN’s relatively small fake “surplus” for 2000 didn’t go to the school district’s general fund, it was held for MCN by the school board — without objection from Innis. The audit indicates that MCN is routinely advanced money from the District’s general fund: “These amounts actually represent a temporary cash advance from the General Fund to the MCN Fund that has been made to facilitate the purchase of the electronic equipment required for the MCN operation. For the 1998-99 year, this advance has been recorded as amount due to the General Fund.”

• “Virtually inexhaustible funds…”

Has Mr. Innis been turned down for any funding or school resources? Has his budget ever been turned down. (Are any school budgets turned down?) Isn’t the school district being used as gaurantor and banker of loans and grants applied for and received by MCN? Compared to commercial ISPs, the school/MCN being a public entity backed by taxpayer dollars does indeed give MCN virtually inexhaustible funds.

• Innis claims that MCN provides $100,000 in free services per year in exchange for rent.

How convenient. 1. Let’s have a list of those “free services.” 2. Whatever the “free services” are, they can’t be compared to the rent that must be paid by commercial ISPs. 3. If the “free services” weren’t provided would the school district charge rent? Of course not. It’s all the same entity.

Mr. Innis says that my assertion that the District gives MCN loans that don’t have to be paid back is “False.”

According to the school district’s most recent audit (page 66) they obviously don’t have to be paid back, because big school district advances have been floating for quite a few years. Even if the advance happens to be paid back, they don’t have to be — they’re not like a serious bank loan. There’s certainly no collateral. If MCN had felt like spending more money on equipment or staff and further delayed the payback or increased the advance, there’s no indication that the District or Board would have balked.

• Mr. Innis says that the “salary figures are not correct.”

In the original story I said they were estimates, because they are not broken down in the MCN budget, but individual teacher salaries are shown in the School District budget. So, what are the correct MCN salaries, Mr. Innis?

• Mr. Innis says “all equipment costs, facility improvements, copier costs, sewer, heating (propane), admin staff, etc. are included specifically in the MCN budget, contrary to AVA's claim.

The fact that MCN pays less than $2,000 annually for sewer and propane hardly changes the point. The admin staff I was referring to is free overhead admin not the MCN direct admin Innis is referring to. Copier costs are not in the MCN budget, nor are facility improvements or equipment maintenance.

• Mr. Innis says that MCN “gave away $195,000 of services.”

This is more funny money, since MCN itself doesn’t have any money to “give away” in the first place — it’s all mushed together with the school district. And the value is whatever MCN claims it’s worth. Unless there’s a detailed and public accounting of who’s getting what free services so that the public can judge if the handouts are based on board-approved criteria and done even-handedly — not to persons and organizations of Mr. Innis’s personal choosing — this claim is not credible. A number of MCN critics on the Coast say that Innis gives “free service” to 1. his friends, 2. persons who complain and threaten to jump to other internet service providers, 3. persons who promise to give something back to MCN in exchange for the “free services.”

• Mr. Innis says that MCBI’s hiring of a director is “unfortunately untrue.”

The “unfortunately untrue” news that a director had been hired came directly from the MCN website.

• How will the business people benefit? By having MCBI operate as a recruiting and screening operation at no cost or risk to them. They’d be able to pick and choose from the incubator graduates after they’re weeded out and trained; in some cases they’d be able to buy entire businesses on the cheap and absorb them into their own operations. They’ll also be able to influence the naive high school kids and the kinds of incubators that will be focus on to their own advantage.

• According to Innis, school districts training entrepreneurs is “done all the time.”

Whether it’s “done all the time” or not, (and it’s not) the purpose of a public high school is not to train entrepreneurs.

Innis says that “MCBI will not be funding” entrepreneurs. “They will be paying MCBI for the services that MCBI provides to them. MCBI will assist the entrepreneurs to find funding of their own as a component part of the instructional package.”

Conventional small business incubators are designed to be cut-rate facilities to help start-ups. The cut-rate and the “assistance” is the way the entrepreneurs are funded or “subsidized.” And what happens if the “entrepreneurs” are unable to “find funding of their own”?

The fact that Mendo Unified’s board accepts this kind of drivel and dissembling from Innis as justification for MCN may be the only real reason they should be recalled, but too many people in Mendo Unified’s district are benefiting too much from MCN for a serious recall to be mounted on that basis. ¥¥

3 Responses to The MCN Report

  1. Charlie Reply

    December 20, 2010 at 5:09 pm

    What a sorry excuse for reporting this is! You reprint stuff from a 10 year old article about MCN, a computer service that was only 7 years old when the article was written. Now it’s 17 years old. Very little was true in the article 10 years ago. Virtually nothing is true now.

    This whole piece smells like nothing more than newspaper jealousy about the Internet that has made newspapers obsolete. It’s lazy jealousy too. Get out there and do a fresh investigation about the current status of MCN instead of rehashing your error-filled BS from 10 years ago.

    • Bruce Anderson Reply

      December 21, 2010 at 6:54 am

      Typical supper songs from the self-interested and, just as typically lacking in specifics. The point, obviously, is that a private for-profit business subsidized by a public school has enormous advantages over a private business operating with no public subsidies. Incidentally, the windbag who says we’re merely jealous because print papers can’t compete with the internet might be interested in knowing that we’re doing just fine. There are still lots of people who like to read the old fashioned way. Of course they tend to be people Who Know How To Read.

      • Eli Reply

        December 21, 2010 at 4:20 pm

        Not only is reprinting articles from the past informative, its necessary for those who wish to have objective information. Thank you for this glimpse at the past. Its interesting to note that this has now been going on 17 years, not just 7.

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