Steve Yarbrough, landlord

by David Safier
I've posted about the many ways Steve Yarbrough makes money from his Student Tuition Organization, ACSTO, each year. As Executive Director, he brings in $96,000. As legal counsel, he brings in upwards to $60,000 (That's the total ACSTO spends on legal fees, some or all of which goes to Yarbrough). And his company, HY Processing, charges ACSTO about $400,000.

Yarbrough is a man with many pockets, each one of which fills up with sizable quantities of private school tax credit cash courtesy of his nonprofit organization.

Now meet Steve Yarbrough, owner of 2241 E. Pecos, Suite 3, a condo in the Suntan Crossing Professional Plaza in Chandler.

Yarbrough bought the property in January, 2007, for $275,504. It's one of three suites in that building, occupying about 1150 square feet.

The suite houses ACSTO, School Choice Arizona (another STO) and Yarbrough's law offices. The other business whose name is on the door, Boyd W. Dunn, P.C., occupies a different suite in the building.

But wait, there's more. According to Yarbrough's 2008 and 2009 State Financial Disclosure Statements (required of "Public Officers and Candidates of the State of Arizona"), the address of HY Processing is also 2241 E. Pecos, Suite 3, even though HY's name isn't stenciled on the door.

To recap: Two STOs, a law office and an information processing corporation all occupy 1150 square feet of office space owned by Steve Yarbrough.

In 2007, the most recent tax return I have, ACSTO paid $44,981 in occupancy expenses, which I assume is rent on the space in Yarbrough's condo. School Choice Arizona paid $4,000 occupancy that same year. Because Yarbrough's law practice and HY Processing are both private, I don't have information about the rent they pay.

I know nothing about the going rate for office space in Chandler, and I don't know what portion of the condo ACSTO occupies. But a little simple math tells me its yearly occupancy expenses are 16% of Yarbrough's purchase price for the entire condo. If we suppose ACSTO occupies half the condo and Yarbrough charges on the basis of square footage, the STO is paying closer to a third of the buying price of that portion of the condo every year. Utilities and other expenses may be rolled in, which would mean the entire occupancy figure wouldn't reflect rent, but with a total monthly rent of $3,750, I don't imagine utilties make a large dent in that figure.

But does ACSTO occupy half the space? In a recent article in the Republic, Yarbrough said HY Processing pays salaries to "a dozen or so" employees. How many of those employees would be in the building at one time, and how much space would the corporation need to run a business that charges a single customer $400,000 per year? Then, of course, there are School Choice Arizona and Yarbrough's law office taking up the remainder of the space.

Rent isn't all the money ACSTO plows into Yarbrough's condo. According to ACSTO's 2007 tax return, it spent $124,653 for Leasehold Improvements. Since Yarbrough bought the condo in 2007, those are probably one time expenses to convert the generic office space into something suitable for doing business.

I know renters often enter into agreements with their building owners to make improvements, but I also know this generally happens as part of a good old capitalist bargaining session, where the owner tries to get as much as he can in the way of improvements and the renter tries to cut a less expensive deal. Here, however, good old capitalism doesn't come into play, because ACSTO is Yarbrough's left pocket, and the condo is his right pocket. It's to his advantage to have the nonprofit STO shoulder as much expense as possible for improving the property, which increases the value of Yarbrough's for profit condo.

The $124,653 in Leasehold Improvements amounts to 45% of Yarbrough's purchase price. Do renters often boost the value of the owner's property by almost 50%?

This post is filled with unanswered questions. I'm not an investigative reporter, tax lawyer or businessman, so I can't come up with definitive answers. But Steve Yarbrough is both a public servant who is supposed to be looking out for Arizona's best interests — not to mention a conservative Republican who wants to cut back on governmental waste — and he's also a businessman making a very good living from an Arizona state government program. Those are two reasons why he should come forward and open up his books so we can lay all this speculation to rest.