This report examines the second and third years of the Chelsea-Boston University (BU) partnership in which BU manages the Chelsea, Massachusetts, school system. The report summarizes the activities of the partnership (begun in 1989), examines the impact of key players and events, and evaluates BU's impact on Chelsea to date. The partnership's success has been mixed. One of BU's most notable achievements is reducing the dropout rate among Chelsea high school students. Considerable attention and activity was paid to the areas of professional development and salary increases for teachers and Chelsea staff, although more professional development opportunities and further salary increases are deemed necessary. Despite these successes, however, almost across the board, student test scores have actually declined since BU's arrival in Chelsea. The fiscal crisis of 1991 severely reduced Chelsea's budget as specified in the original agreement, forcing BU into a crisis-management situation while it tried to provide more with less. Ultimately, the Chelsea-BU partnership's success will be measured on the ability of the Chelesa community to administer its own schools. BU's ability to mentor community leaders could prove to be the single most important factor determining the project's long-term impact. The appendix provides a list of persons interviewed during site visits in the second and third years. (Contains four references.) (GLR)