I mean… the guy sort of had a point… To an extent anyway.

The place was a mess, with students disrespecting teachers and abandoning class. The teachers themselves losing track of their students. And the place nearly gets demolished. And since it was an unorthodox school, obviously both he and the EEA wouldn't understand that their standards and method of teaching wouldn't work with the subject matter. Since it's much less academia and more just building social skills.

That said, yeah, the racism shouldn't have been tolerated. It's actually kind of weirdly put into the plot too. Like, we've had situations like Zecora and Iron Will (to an extent) where there's clear racism, but the show's never really addressed it as a thing. But here, it's so blatant and the show acknowledges that yeah, there's racism in MLP now between the different sentient species. It seems to just suddenly exist in the world.

It's because Equestria is filled to the brim with ponies, so they never interacted with other species that much. Suddenly, there's an sizable influx of new species coming in into a small town, so most people got worried.