Manufactured Crisis: A Joint Venture After All?

In order to clear up some of the confusion surrounding the recent school system fiasco, I’d like to expound upon my characterization of it as a “manufactured crisis.” I will first provide a brief summary and then, for those who are interested in the details, I will elaborate. I will conclude with my suggestion for moving forward.

In brief, the schools were never in danger of shutting down because our Board of Education (BOE) does not, nor did it ever, have the authority to close them. The so-called crisis originates two years ago with their decision to renege on their obligation to pay for the high school mortgage and was ignited by their choice this year to change how they accounted for the monies meant specifically for that debt. Had they continued to record those funds as they had every year in the past, the Maintenance of Effort (MOE) formula would not have been a problem. However, with the recent vote by council, both bodies have created a secondary problem that has set the stage for a property tax increase. More on that in a moment.

To recap recent events: On September 9, 2013, BOE chair, Keys Fillauer, spoke to council at our regular meeting and stated that the school system would close down if the City Council did not give them $250,000 by October 1^st.  It is worth noting that the schools did not submit a written request to council until September 16^th. On September 17^th, council voted to give the schools the funds they demanded with absolutely no stipulations or binding commitments to resolve the high school mortgage issue.

Both council and the BOE have acknowledged this problem began when the BOE announced that they would no longer pay their portion of the high school mortgage. This fact is a matter of public record and is irrefutable.

The crux of their argument, as stated by BOE treasurer, Angi Agle and re-stated by Dr. Bruce Borchers in his recent press release, is a “gentleman’s agreement” as well as a handshake agreement. To directly quote Ms. Agle, the gentleman’s agreement was “between the mayor of Oak Ridge (at that time, David Bradshaw) and the Anderson County mayor (at that time, Rex Lynch) about when or if the County planned to supersede the sales tax…That particular gentleman’s agreement was that the County would not do  so for at least five years….if the County superseded the sales tax rate before five years elapsed, that the school system would remit it’s portion of the new dollars from the County share of sales taxes to the City, to go toward bond repayment on the high school.  But only until the five year period was up, when the City had assumed they’d lose that money anyway.  This too, was a handshake deal — there was never a Board vote, nothing signed.”

As unbelievable as that sounds, it remains posted on the front page of Ms. Agle’s website to date at citizennetmom.com (about nine posts down, entitled “About the sales tax….”) This claim is easily refuted based on three simple points.

First, the gentlemen in question, have NEVER affirmed these claims. Both men are still here in the area, are very aware of this problem and yet, since Ms. Agle first attributed this agreement to them two years ago, neither have verified her claim.

The reason these men have not spoken up is clear: the agreement is a total fabrication. According to the Oak Ridger article dated June 5, 2006, entitled ‘Schools won’t lose money?’, the schools fully expected the county to supersede: “Oak Ridge schools won’t really lose money – at least not from the general operating budget – because of the county’s newly-increased sales tax. ‘I really don’t see that money coming into the school’s general operating fund,’ Superintendent Tom Bailey said last week. ‘Most of the money that would have been designated for schools has been deferred,’ Bailey said, to help pay off debt incurred by the city and its financial plan for the Oak Ridge High School project. City and school officials knew the county sales tax might someday increase, Oak Ridge Board of Education Chairman John Smith Jr. said Wednesday, but they thought it would happen a few years down the road. ‘We knew they’d supersede us eventually. We just didn’t think it would be this soon,’ Smith said of last Tuesday’s voter approval of a half-cent sales tax increase in rural parts of Anderson County.’

Finally, no gentleman’s agreement will hold up in a court of law nor will it trump the expressed, legally binding will of the people, who, in 2004 generously voted to increase the local sales tax rate to fund the high school project. That referendum states “…the revenue from such increase shall be appropriated and expended for the purpose of funding and paying for construction, renovation, purchase of capital equipment, and/or retirement of school construction debt service for the Oak Ridge High School, and at such time as the high school debt service is paid in full, the sales tax proceeds collected as a result of this increase shall be distributed as prescribed by state law, except as modified or limited by statute become operative”

Eleven years later, the BOE asserts that they are out of compliance with state laws and that the city is at fault.  What they did not address is how things got out of kilter. Anderson County turns the sales tax revenue (that is meant for the high school debt), directly over to the schools. Until this year, the schools had been recording those monies in a liability account that is not factored into the MOE equation. This year, however, the schools chose to record those monies in their revenue stream. The result artificially impacted the MOE formula, which provided the spark needed to send our community into a state of panic.

Still, the schools created the situation and council was forced to deal with it. The question remained, however, were their threats legitimate? Would the school system shut down if council did not concede? The answer is no. The BOE has no authority to close our schools, as was confirmed by state representative John Ragan. The letter from the Department of Education (dated September 11, 2013 and found here) stated that if a balanced budget was not presented by October 1st that they would withhold funds. The letter did not say that if council didn’t provide the equivalent of $25,000 per month that they would withhold $1.87 million per month nor did it authorize a shutdown of any kind.

I wrestled with my vote up until the last day. It certainly would have been easy for me to support turning over the money given that I have to answer to parents and teachers daily when I pick up my child from school. What’s more, Mayor Tom Beehan made it clear that council’s vote was predetermined when he said, just prior to the vote, “We will allocate this money.”

But turning over $250,000 of your money to the schools did not avert a crisis and it did not bring us any closer to resolving the high school debt mess. In fact, because of MOE laws, it further obligated the taxpayers to an indefinite increase in funding and, thus, provided the perfect excuse for council to increase your property taxes next year. It will be further justified, and probably increased more than necessary, by the fact that we’ve gone so long without an increase and we haven’t been keeping up with inflation.

You are going to pay so much more for that new high school than anyone ever dreamed. I’m not just talking about the millions of dollars that the schools are determined to hold on to and the millions more that council will have to collect to cover their deficiency. Remember, the first total cost estimate was around $30 million. Once momentum had been achieved, and with the convenient excuse that hurricane Katrina had caused material costs to rise, it was voted in at $58 million. To date, the principal cost has exceeded $66.5 million and the interest has grown by untold millions since the debt was refinanced from a 20 year term to nearly 40 years.

Think about that for a minute. Your high school mortgage will outlive most of the people who are deciding its fate. Why should they really care if this gets resolved now, after next year’s election or ever?

Oak Ridgers are generous people to a fault. You have been paying for the highest-funded school system in the entire state for decades and yet, for the BOE, there is never enough money to get the job done. The end result is that you pay one of the highest property taxes in the area and have nearly $200 million in debt. And they aren’t done yet. Just around the corner, they will ask you to front up to $12 million to subsidize the mall project.

Compared to Farragut, who has no property tax and no debt and one-third fewer residents, what do we have to show for all of this money? What has it bought us that we didn’t already have?

Many of you have shared with me your outrage and feelings of helplessness. You’ve been taken advantage of and no one is willing to accept responsibility. Even sadder is that some have even expressed concerns that we may have issues of corruption in our fair town.

We must restore trust. If we can’t get accountability at the local level, then we need to appeal up the chain of command. Contact the state comptroller along with your state representatives and ask them to intervene on your behalf. Invite them to come to Oak Ridge and facilitate audits of both the city and the school finances. While you are at it, copy the Tennessean. Let’s shine a light on our problems so bright that we remove all confusion and all concerns about transparency in Oak Ridge!

Comptroller of the Treasury
Justin P. Wilson
First Floor, State Capitol
Nashville, TN 37243-9034
(615) 741-2775

Senator Randy McNally
94 Royal Troon Circle
Oak Ridge, TN 37830
Phone (865) 483-5544
sen.randy.mcnally@capitol.tn.gov

Rep John Ragan
119 Morningside Drive
Oak Ridge, TN 37830
615.741.4400
rep.john.ragan@capitol.tn.gov