Report on the 2/21/14 Joint Meeting Between Oak Ridge City Council and the BOE

For the first time in two years (and since I joined council), the Oak Ridge Board of Education (BOE) and City Council held a joint meeting. The agenda was heavy and the mayor unilaterally established a time limit of 1 ½ hours at the very beginning. The meeting room was packed and a crowd formed outside but many were unable to hear. I requested that the meeting be audio recorded and will follow up to ensure that it is posted to the city website. The following is a brief summary of the discussion.

Item I. ORPD/OR Schools Partnership

Chief Akagi provided a sampling of initiatives that are ongoing between the police department and the schools to address safety and security concerns. He provided data of incidents at the high school that demonstrated a decreasing trend and was praised by many (including myself) for this trend. He did not address the middle schools. I pointed out that calls to RMS had increased 50% since this time last year and inquired about efforts there. Dr. Borchers (ORS Superintendent) cited a recent change in leadership and stated that the increase in activity was a positive indicator that the leadership change was effective.

For informational purposes, I distributed raids school data details along with comparison data to Knox County School incidents to ours. The data suggests that RMS and the ORHS each have the second highest number of police response calls out of all 16 middle and all 16 high schools.

Item II.  Fiber Optic NW

Jack Suggs, the city’s Electric Department Director provided a briefing on the implementation timeline of the Fiber Optic Network which is a joint effort with the schools. Details are found in the agenda packet located here.

Item III.  High School Debt Resolution

(Read my chronicling of this nearly 3 year long debate here)

Mark Watson and Dr. Borchers talked about moving forward and how they’d spent 100’s of hours crafting this resolution. (found here). I attempted to confirm the following:

  • The BOE has withheld all of the sales tax proceeds meant for the high school debt since announcing they no longer believed they should pay for it in May 2011. In spite of my repeated requests for a total amount, neither the city manager or finance director would provide a total. My best estimate is that it falls in the range of $1.5 – $2.5M
  • This figure is critical because part of the proposed resolution indicates that the schools will turn over 2/3 of that amount to the city and keep the other 1/3
  • The city has had to make up for those captivated funds using general obligation monies  which are, in part, derived from property taxes. This is a direct violation of the 2004 referendum
  • The balance on the high school debt was not to exceed $58M per the 2004 referendum. It has been as high as $66.5M in principal
  • Based on the October 2013 Debt Summary, my calculations show a current approximate Principal Balance for this debt to be $64 Million with a Principal & Interest  Total of $106 Million
  • This Resolution would allow the BOE to retain about 1/3 of the annual sales tax revenue generated specifically for the high school project. That amount will fluctuate, but equates to roughly $284K per year. Simplified over the remaining 27 years left on the life of the loan, equals a principal amount of nearly $8 Million that the city will have to pay in addition to its existing obligated portion.
  • The city manager and mayor Beehan claimed that the future sales tax revenue generated by the UPF and new Kroger would make up the difference

Most of the BOE expressed their support for this resolution as did Mayor Beehan, Council Members Chuck Hope, Jane Miller and Charlie Hensley. Those in support repeatedly stated the need to “move forward.”

NOTE: The BOE will vote on this resolution this Monday night and Council will vote on it one week later on March 3rd.

Item IV. OR Technology Spending

Dr. Borchers discussed a new technology initiative that the BOE will be voting on this Monday night (see details here.) The ORS Agenda (found here) states that this initiative will cost approximately $1.75 Million and will be paid for using undesignated funds. I confirmed that these are the same funds that I’ve inquired about in the past. From the schools most recent audit, released last month, “At year-end, the Schools’ governmental funds reported combined ending fund balances of $6,289,435, of which $5,800,554 is available for spending at the Schools’ discretion.” Karen Gagliano, the schools business director, confirmed that these funds would be used to cover this expense. I expressed my gratitude for the $2-3 million that the schools already spend annually (Annual Technology Spending) on technology alone as both of my children have benefited.

Item V. Blankenship Bleachers

Schools Maintenance Director Allen Thacker gave a brief presentation on the demolition (which has already occurred) and replacement of the visitors bleachers.  The total cost will be $550,000 and he provided a timeline that sends the project out for bid this Monday (February 24th). He did not explain how the project could go out for bid prior to approval of the BOE who has it on their agenda for Monday night.

I asked Mr. Thacker how he planned to pay for it and he referenced CIP monies. I explained to him that the CIP monies he was referring to do not become available until months after his plan to begin construction. He implied that the money may somehow magically appear as it had in the past. I encouraged the schools to use the same funding source that they were tapping for the technology initiative discussed prior. I acknowledged that the state requires the schools to maintain a 3% reserve balance which equals roughly $1.8 million. When deducted from the above $5.8M, that leaves the schools with $4 Million to spend however they so please. After deducting the $1.75 M for technology, they would still have $2.25 Million which would easily cover this expense. No comments were made by the BOE as far as I remember.

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3 thoughts on “Report on the 2/21/14 Joint Meeting Between Oak Ridge City Council and the BOE

  1. Thanks for all your efforts,Trina. The culture in OR is hard for others to understand. It boils down to having been on the federal dole from day one, it is difficult for OR to live and stand on our own two feet. Please keep up the good work. One can only try!!

  2. I want to to thank you for this very good read!!
    I definitely loved every little bit of it. I’ve got you
    saved as a favorite to look at new stuff you
    post…

  3. One of the questions intriguing me is, how much high school Special Option Sales Tax (LOST) revenue will we receive over time as a result of the special sales tax referendum, and how does that compare to the projected annual debt service to amortize the high school bond debt? Will there be an annual deficit or surplus, and by how much for each year until the debt is extinguished? In the Oak Ridge 2013(Cal. Q3) Summary of Outstanding Debt report there was a projection for debt amortization of aggregate debt with a breakdown for the high school debt. It generally indicated around $3-$5 Million per year, more or less, as other debt maturities imposed constraints on the school bonds’ maturities, and the debt was slated for non-uniform amortization. Since money is fungible, this is understandable.

    What I never found was any projection for revenue from the special sales tax. While there have been a number of externalities affecting it, one would still expect some projection over time and revisions when pertinent externalities manifested themselves, such as when Anderson Co. preempted a portion of the LOST money, or updates to the projections need to be made whenever the State of Tennessee changes their mind again over implementation of the Streamlined Sales Tax initiative, or when we enter the next consumer driven recession and we loose more LOST money.

    Using Trina Baughn’s estimate of $284K for a third of the tax revenue, that suggests the school board will apply approximately $568 toward bond amortization per annum, which I estimate should require approximately $4 ($3-$5) Million per year for full amortization of the school bonds, or around 15% of the true annual cost. The general taxpayers will pickup the remainder through other taxes and fees, which will be the lion’s share of the total high school cost. In effect we general taxpayers are paying twice, once through LOST and again through other new taxes, or we will debt finance all or part of it forward by rolling new debt each year, refunding after refunding, and pay double interest to boot.

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