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VOL. 133 | NO. 60 | Friday, March 23, 2018

Plan to Expand Pre-K Would Leverage Private Funds

By Bill Dries

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After voters defeated two ballot questions in two years for sales tax increases – city and county – to fund an expansion of prekindergarten classrooms primarily in Memphis, the effort is back with a momentum that seemed unlikely five years ago.

The $16 million prekindergarten effort is part of a larger early childhood system locally that includes $23.5 million in private funding for programs that essentially cover prenatal care to the third grade for children and their families.

(Daily News File/Houston Cofield)

The Memphis City Council approved on the first of three readings this week a pre-K fund for its $6 million part of a $16 million pre-K plan and two funding sources for it. County government leaders are talking about what their share would look like and when it would be due.

The resulting movement on those fronts could leverage another $23.5 million in private funding for a larger system of early childhood education. It could also make it more difficult for economic development projects to get extensions on tax abatement incentives they get at the outset of expansions and relocations.

Seeding Success, the coalition of education organizations, not-for-profits, and other faith-based, philanthropic and business groups, plans to raise $23.5 million from private sources that combined with the local government funding would amount to a $40 million recurring fund, said Mark Sturgis, the organization’s executive director.

“It’s effective early childhood education system going beyond the boundaries of 4-year-olds all the way back to prenatal care and then really working with the school system around the K-third-grade alignment, which we think is really critical,” Sturgis said.

The broader push also answers an early concern of some council members to the renewed pre-K push. Council member Bill Morrison, who is a teacher, warning that without K-3 improvements, gains in pre-K wouldn’t last.

Seeding Success is working on wrap-around social services for at-risk children and their parents – some that are expansion of existing programs, like a set of home visitation programs over a three-year period used by 1,000 young mothers and their children that builds early positive interactions between parent and child.

“All of these strategies are not just about the child but about connecting the family to resources and services,” Sturgis said. “And there are a lot of promising approaches in that field that we are hoping to leverage and partner on.”

That includes improving the quality of child care in a network Sturgis describes as “a very siloed system with a lot of independent operators and not a lot of resources.”

“What we are trying to do is support a shared-services delivery model to help support things like human resources functions, procurement, curriculum, teacher training and those sort of things at a reduced cost,” he said. “That can help us scale quality across our county in a way that informs the broader approach to quality.”

The $16 million goal of city and county funding for pre-K would preserve, starting in the fiscal year that starts July 1, the 1,000 pre-K spaces now funded by a federal grant, and then fund another 1,000 spaces in fiscal year 2020 toward a goal of 8,500 spaces countywide. There are currently 7,000 pre-K spaces countywide.

The federal grant, secured by the state after the two tax hike ballot questions were defeated was a turning point in the push for pre-K.

“It kind of took all of the politics out of the equation,” Sturgis said. “We were able to cobble together a pretty robust expansion of the program without any additional local commitment.” That is with the notable exception of $3 million a year in county funding over the last four years.

The expansion has created a path forward that doesn’t involve another ballot question for funding.

The city would fund its share with the revenue equivalent of 1 cent on the existing city property tax rate, along with the revenue from the boost in property taxes paid by businesses when their tax abatements through payments-in-lieu-of-taxes agreements, or PILOTs, expire. They expire on average after eight years.

Building those two revenues streams up to $6 million a year will take eight fiscal years. And during that ramp-up period, the city also is adding $3 million in one-time money from its reserve fund.

That $3 million combined with the $1.2 million in the current fiscal year from the penny on the property tax rate and another $662,181 the city estimates it will get in additional tax income as PILOTs expire creates a city pre-K fund of $4.8 million to get it through the next eight fiscal years.

The city would draw from that to make up the shortfall in the annual increment from both streams as they each build to $6 million from the PILOT expirations alone in fiscal year 2027. Any revenue over $6 million from those sources goes into the city’s general fund, said city chief operating officer Doug McGowen.

“We are doing things more efficiently,” McGowen told the council this week in explaining the financing. “We are collecting revenues that are rightfully owed to us in a much more effective way.”

That includes recently putting on notice a group of 150 property owners who had paid county property taxes but not city property taxes that the city was prepared to move to delinquent tax sales if the city didn’t get paid as well. And there is stricter enforcement of alarm fees. Each of those measures brings in an additional $500,000 of revenue by McGowen’s calculations.

City Council member Martavius Jones, who is the council’s representative on the Economic Development Growth Engine board – the city-county board that grants PILOTs – said the organization needs to prepare now to give more careful consideration to requests for extensions of the tax abatements.

“I think that EDGE needs to know now – it may not have been the case in the past – we need this money coming forward,” he said. “So we can’t be, in my opinion, as generous with some of these tax breaks.”

Jones said that should also apply to retention PILOTs that go to existing businesses that say they will consider relocating someplace else if they don’t get additional tax breaks.

County Mayor Mark Luttrell has said the county’s funding commitment may wait on the election of a new county mayor and county commission in August. At least seven of the 13 seats on the commission will be held by new commissioners with the election results.

Commissioner Van Turner has said one possibility is the county agreeing to put its tax revenue from the roll-off of PILOTs toward the pre-K effort as well.

PROPERTY SALES 64 151 1,493
MORTGAGES 45 105 1,152
BUILDING PERMITS 201 410 3,466