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VOL. 11 | NO. 11 | Saturday, March 17, 2018

Strickland Unveils Pre-K Funding Plan Without Tax Hike or Referendum

By Bill Dries

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City council member Kemp Conrad, council chairman Berlin Boyd and Memphis Mayor Jim Strickland in the Hall of Mayors prior to Saturday's City Hall press conference announcing the proposal to provide city funding for a prekindergarten expansion in the city. (Daily News/ Bill Dries) 

The city has a plan to provide $6 million of the $16 million needed to fully fund prekindergarten in Memphis for 8,500 children starting when a federal grant that currently funds 1,000 of the existing 7,000 seats runs out in 2019.

Memphis Mayor Jim Strickland announced the proposal Saturday, March 17, that would allocate the equivalent of a penny from the existing city property tax rate toward “universal needs-based prekindergarten” as well as revenue from property tax increases as the tax abatements companies get through payments in lieu of taxes – or PILOTs --expire goes to the Memphis City Council Tuesday for consideration and possibly a vote on the first of three readings that same day.

“It’s so that every child has a better opportunity to read,” Strickland said. “It’s so that every child has a better opportunity to take advantage of the momentum of city development – so that every child gets a level shot at a better outcome for their life.”

The plan avoids a sales tax hike referendum or similar funding referendums that failed at the polls five years ago in two previous civic bids to fund a prekindergarten expansion.

Strickland said the average duration of a PILOT is eight years and the amount of city property taxes that would go to the prek fund would be the difference between the lower tax rate a company getting the tax abatement pays and the full amount of property taxes they would pay when the PILOT ends.

“Our proposal directs that this new revenue, above the taxes paid during the PILOT, would go to pre-k,” he said. He also said the one cent of revenue from the property tax rate is not a tax hike.

“This is using money from our current property tax rate. We can do this in a more efficient way,” Strickland said. “It’s a creative solution that doesn’t touch what we are doing now with our operating budget. It does not touch what we are doing with core services like police and fire.”

Shelby County Schools, in the aftermath of the two failed attempts to direct sales tax hike revenue to a prekindergarten expansion, has doubled the number of prekindergarten classrooms but the funding for that is not guaranteed to be ongoing.

“I think this is a great first step in what has been a significant strategy that we’ve been trying to implement for the last five years,” said Shelby County Schools superintendent Dorsey Hopson.

The revenue from the two sources proposed by Strickland would go to a fund overseen by the private nonprofit group Seeding Success, which is also raising private money toward the goal of pre-k including out of school programs and support for the children as well as for their parents.

That and the wording that the revenue from “the equivalent of” a penny on the city property tax rate also keeps the city funding from being considered “maintenance of effort” funding by the state that the city would be required to at least maintain indefinitely at that level.

“None of the money is needed until July of 2019,” Strickland said, referring to the end of the federal grant funding for 1,000 prekindergarten slots. “The first dollar to be spent would be July 2019. So we are building up to that date. At that point, I believe we are going to replace the grant that’s expiring. Then in July of 2020 we will expand it to another 1,000 students.”

Shelby County Mayor Mark Luttrell said county leaders are still weighing their options in possibly coming up with county government funding for the initiative.

“Shelby County’s situation is a little bit different. We are going through an election this year and more than half of our county commissioners will be new next year – new mayor in place,” he said. “We have funding that’s in place now for prekindergarten. I’ll be suggesting to our county commission … that this be sustained. … We will have plenty of time to look at what the arrangement is.”

The existing county funding for prekindergarten is $3 million a year.

Shelby County commissioner Van Turner said one possibility would be for the county to contribute its share of the property tax revenue – city and county – that comes when PILOTs expire and companies that get the tax abatements begin paying the full property tax rate – city and county.

“I think the will is there,” he said. “I think you will see bipartisan support for this initiative and I think that we will be able to pass something similar to what they have done as it relates to using some of the money which comes from the payments in lieu to taxes.”

And he said a penny on the county property tax rate is another possibility.

“The timeline is the grant funding will take care of this upcoming year. So we are looking at the next fiscal year. I think we will perhaps show a strong commitment this year and that will sort of be a precursor for the financial commitment in the next budget cycle,” Turner said. “If we need to do something sooner then I’m all for doing something sooner. But I think we should tie into the time schedule that the city is using. We should be partners on this.”

The use of the difference between the city property tax paid by a company getting a tax abatement or PILOT and the full amount of city property taxes paid when the PILOT expires would be a first use of the revenue toward education after years of complaints from critics that the tax breaks take money from public education – either through direct county funding or indirect city funding of programs related to public education but not part of the SCS budget.

“Many times we hear companies say they won’t move into Memphis because of the lack of skill sets,” said council chairman Berlin Boyd. “But we are saying that we are getting serious about finding a way to improve our city’s overall education needs. … We’re stepping up to the plate to fully give our young people, our youth, our future generations, our future leaders here in the city of Memphis an opportunity so that they can become whatever he or she imagines.”

City council member Kemp Conrad called the effort including programs for parents of the children “an unprecedented two-generation approach.”

He cited a recent poverty study by the National Civil Rights Museum and the University of Memphis that shows more than 45 percent of African-American children in Shelby County live in poverty.

“It’s unacceptable and I truly believe this plan will change that,” Conrad said. “This is more than an education initiative. It’s a poverty initiative.”

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