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VOL. 124 | NO. 44 | Thursday, March 5, 2009

School Systems Still Struggle To Reach Compromise

By Bill Dries

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By now Shelby County Board of Commissioners Chairwoman Deidre Malone had hoped to be holding public hearings on two options for changing the way the Memphis and Shelby County public school systems are funded.

“Plan A” is a long-term plan for a single-source school funding district that would give both school boards taxing authority with oversight by the Tennessee Legislature.

“Plan B” is a short-term plan for making Shelby County government the sole local funder of both school systems with terms for a three- to four-year transition to a Memphis government exit. There would be a gradual withdrawal of city funds and continuing city obligations on existing bond debt, but not on any new school-related bond debt.

Today, the ad hoc committee addressing the two plans will meet again to talk more about some controversial details that surfaced two weeks ago.

Plan A has been endorsed by the Memphis and Shelby County school boards, and it is now a bill that has been filed in Nashville. The bill would authorize a set of referenda to be held on the idea of giving taxing authority to the two school boards. It would have to be approved by a majority of voters in the city of Memphis and by a majority of voters in Shelby County.

If approved by both majorities, a private act containing details of the education tax rate as well as the terms of setting the rate would have to be approved by the Legislature.

But there are several surprises in Plan A. As it is now written, it would allow for no tax abatement at all in the form of PILOTs (payments in lieu of taxes) on the half of the Shelby County property tax rate that goes to education. Currently, 25 percent of the education tax rate is paid by businesses granted the tax breaks by the city-county Industrial Development Board.

Shelby County Mayor A C Wharton Jr. said the change “causes me a great amount of concern.”

Changes to the terms of PILOTs just cleared the Shelby County Board of Commissioners as well as the Tennessee Legislature. These changes would make Shelby County more competitive in economic development.

“We’re at a place now where the Legislature is happy with the accord we’ve reached,” Wharton told the ad hoc committee two weeks ago. “And I just hope we don’t have to pull the scab off that thing and start all over again.”

Shelby County school board chairman David Pickler said he realizes such incentives are a “balancing act.”

“It is a common practice in most other communities,” he said of abolishing any PILOT on education tax rates.

Memphis school board member Jeff Warren said no PILOTs would “show this community we value education.” He also said it would give the two school boards some stability in their funding source.

But Commissioner Mike Carpenter said the PILOTs are surfacing as an issue suddenly and very late in the process. He also said creating jobs will provide more funding for schools.

“Our real issue is more about work force than where people are going to send their kids to school,” Carpenter said.

Real estate developer Ron Belz argued the PILOT ban in the education tax rate would kill economic development in Shelby County, which is already struggling to compete with the better tax incentives offered in DeSoto County.

Belz is the most outspoken critic of the entire Plan A, including the provision to give taxing authority to the two school boards.

“I don’t see anything here that would make me feel comfortable that there would be any coordination about where this kind of structure would leave our county in terms of our indebtedness,” Belz said.

The county’s bond debt peaked at $1.8 billion with Wharton continuing a slow but steady bond reduction effort. School construction for the city and county systems is the major factor in the debt.

“This would undo that in and of itself,” Belz told other members of the ad hoc committee as he said Plan A is “full of holes” and reads like a “poorly written novel.”

Pickler said it’s the best plan for success with voters outside Memphis.

“We are asking the people who live outside the city of Memphis to absorb what could be a very significant tax increase, and if they do not feel there are measurable benefits in it for them, it will not go anywhere,” he told the panel.

Pickler also pointed to the absence of any of the county’s six suburban mayors on the committee.

Malone, who is a non-voting member, said she has tried to encourage the mayors to join her as non-voting members, meeting with Germantown leaders recently.

“They did ask some very pointed questions when it comes to the funding piece,” Malone said. “That’s what people want to know: ‘If you go single-source funding, either Plan A or Plan B, what’s it going to cost me at the end of the day?’”

But Pickler said it’s not a matter of single-source funding by one of the two methods. If Plan A doesn’t pass, he said his board might not support any kind of alternative single-source funding plan.

He pushed for a 2009 pair of referenda on Plan A in May or August of this year. Pickler said the complex proposal might get lost among other issues and political contests on a 2010 ballot.

That drew criticism from other panel members who cited the cost of a special election in what is an off election year for Memphians and most other Shelby County voters.

“I think a lot of people are going to be confused,” Malone said. “I just think it might be a mistake if you have a special election and not that many people are going to come out when 2010 is going to be a big election year.”

Commissioner Mike Ritz said the push for a 2009 referendum is “less than transparent.”

“It’s not the fair way to go,” he told Pickler.

Some panel members who are critics of the single-source funding district are willing to go along with the plan getting a chance in the Legislature to keep county school board members involved.

Republican State Rep. Jim Coley, a county school teacher, told The Daily News the referenda might clear the Legislature.

“A lot of people are going to be turned off and they’ll look at it as consolidation. And they’ll look at it as another taxing entity. I think it faces a lot of hurdles,” Coley said.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 57 280 1,209
MORTGAGES 55 244 916
FORECLOSURE NOTICES 8 52 151
BUILDING PERMITS 158 699 2,751
BANKRUPTCIES 37 157 618
BUSINESS LICENSES 12 77 276
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0