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University of nowhere: U of Phx parent bought by private equity

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Rogue Columnist

University of nowhere: U of Phx parent bought by private equity

  • David Rookhuyzen/Cronkite News file photo

So it has come to this: Private equity will buy Apollo Education, the parent of the University of Phoenix. It is "a move," the Wall Street Journal reports, "that would take the beleaguered company out of the eye of public investors."

But perhaps not out of peril from criticism by the White House and investigations by federal and California regulators. Maybe. The "for-profit education" sector is a contributor in politics (see here and here); even better, it fits the ideological bias of the ruling Republican Party (and neoliberal Dems) that the "free market" is the solution to everything.

The former, especially in Arizona, has spent years defunding public institutions of higher education. In other words, real universities, where one received a "universal" education under greater or lesser but real rigorous standards. Where students often had their first real experience with people from different countries, ethnicities and, if they were fortunate, different life paths. Places with real campuses, libraries, and traditions.

Nor will the controversial "business model" of the University of Phoenix likely change much. For all the "free market" triumphalism, the company depended on the U.S. taxpayers for 81 percent of its revenue. Most of this was in the form of federal student loans. The graduation rate is poor. Either way, students are disproportionately on the hook for debt. Since 2010, when the "university" had 477,000 students, it has been bleeding enrollment (See Business Insider's useful primer here).

Of all the hustles and rackets in Arizona that needed a lengthy proctological exam by the press, this is one of the top opportunities not primarily involving water or land use (even more so than public pensions or expense account padding!). Yet it has never, to my knowledge, received it.

I keep waiting.

For the purposes of this blog, I will focus on what Apollo Education and its University of Phoenix meant to the name it appropriated from my city.

John Sperling (1921-2014) embodied many of the traits of the post-Phoenix 40 business moguls in the city. They ranged from the outright criminal in Charles H Keating Jr. to people such as Swift Transportation's Jerry Moyes (2014 fiscal year compensation $2.5 million); Discount Tire's Bruce Halle (richest man in Arizona at $5.9 billion); Mark Shoen of U-Haul/Amerco ($4.6 billion), and pharmaceutical entrepreneur John Kapoor ($3.1 billion).

Sperling was a self-made man, if his biography is to be believed — it has never faced serious scrutiny. He grew up poor in the Ozarks and, thanks to Sen. Ernest McFarland's GI Bill, received a B.A. from Reed College, an M.A. from Cal-Berkeley, and went on to read for his Ph.D. at Kings College, Cambridge. He founded the University of Phoenix in 1973, taking the enchanting name of the city that then unquestionably dominated the Salt River Valley. He turned the humble business college into a multi-billion-dollar enterprise, in no small part thanks to those federal loans for students.

But like all his cohort (and I know everybody loves Halle), he felt no loyalty to the city itself and its well-being (U-Haul's Central Avenue offices go back to the 1950s). Apollo's headquarters sat for years amid the hideous warehouses and distribution centers along the Maricopa Freeway. Once Apollo decided to build a signature headquarters building, it chose not downtown or Midtown, but an isolated site at 32nd Street and the freeway south of Sky Harbor. At the time, the company was worth $14 billion.

For all their flaws and blind spots, Eugene C. Pulliam, the Rosenzweig brothers, Walter Bimson of Valley National Bank, and scores of other earlier business leaders were genuine civic stewards. They saw the health of Phoenix as inextricably entwined with that of their companies. They located their businesses in the Central Corridor and showered arts and charities with money. Not so with most of their successors, with the exception of Jerry Colangelo and, until his misfortunes, Karl Eller.

Sperling reportedly funded liberal politics but he never did a thing for Phoenix, much less to use his wealth to fund urbanism there; even putting the headquarters downtown would have been a huge benefit. Instead, although the company had plenty of downtown offices in cities across America, its "campuses" were in mostly suburban office "parks," in what Jim Kunstler aptly called Geography of Nowhere, or online. In a bit of payback to Glendale's cannibalization of the core, the taxpayer-funded stadium in the cotton field sold naming rights to Apollo. Yes, it's the University of Phoenix Stadium — do they play in the Pac 12?

So Sperling and the University of Phoenix are one of the many profound "might have beens" of recent Phoenix history.

Howard Schultz and Jeff Bezos led and/or founded what became major world corporations in Seattle and their headquarters are responsible for tens of thousands of well-paid jobs downtown. Amazon alone is on track to employ as many as 70,000 in the central core. A relatively modest headquarters is Zillow, which has 1,000 employees downtown.

Meanwhile, one of the biggest headwinds facing Phoenix, and especially its downtown, is that its old headquarters were lost — especially the catastrophic destruction of Dial — and never replaced. This puts Phoenix at an enormous disadvantage against its peer cities.

Now the Apollo employees left in Phoenix are about to get schooled by private equity.

This column first appeared on Rogue Columnist.

Jon Talton is a fourth-generation Arizonan who runs the blog Rogue Columnist. He is a former op-ed and business columnist of the Arizona Republic, and retired as the economics columnist of the Seattle Times in 2019. Talton is also the author of 12 novels, including the David Mapstone Mysteries, which are set in Arizona.

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