In for a Penny, In for a Pound?

The Manatee County School District’s prospects for preserving its fiscal solvency got a little worse this week. On Tuesday night, the board said out loud what had only been inferred and most people already suspected. The half-off impact fees for developers was a quid-pro-quo with them funding a campaign to help pass the half-cent sales tax. Earlier that day, the Manatee County Commission indicated that it too might be looking for a sales tax hike and floated the idea of "partnering“ with the school district, which could be the kiss of death for both initiatives.

Rather than re-hash how the school board wound up talking about this issue yet again, for those who haven’t been following along, here is a link to part 1 of the saga, and here’s one to part 2. None of it matters much, because the board voted 4-1 to stay the course, and Dave Miner’s nay vote smacks of little more than election-year posturing. Miner missed the boat for showing political courage when it set sail last fall.

What was different, however, was that superintendent Diana Greene and several board members said aloud what they’d only been hinting at previously. In exchange for having saved what will wind up being upward of a hundred million dollars in school impact fees, developers are expected (and one would infer have already pledged) to fund a political action committee (PAC) to encourage Manatee County voters to pass an extension of the half-cent sales tax set to expire in 2017.

What’s more, by providing cover to board members who said they were reluctant not to support their superintendent, Dr. Greene took ownership of the strategy, which means she’ll also take the blame if it backfires and sends the district into a financial swirl that circles the bathtub drain before swirling off into the abyss. Before the first vote on the matter, Greene gave a dispassionate recommendation for a plan to reinstate the fees at only half of what had been prescribed in a long-delayed impact fee study after developers went on building homes without paying them for more than five years. Greene wanted to phase the fees in over three years, but board members went one step further and tied them to the sales tax referendum, with the caveat that if that passed, the 50 percent would be permanent.

At that meeting, it was the board and the developers who did all of the talking, defending the plan to an angry public before unanimously approving it. But by articulating a strong preference to leave the board’s recommendation to the BOCC at Tuesday’s meeting (the vote was whether to go back to her recommendation of phasing them in), Greene gave the board cover, while absorbing even more responsibility for the outcome. Clearly, she thinks that’s the best way to get the school district the most amount of funding.

Greene reiterated concern with the prospect of passing the referendum without the financial support of developers and seems to think that getting the bigger of the two revenue streams is worth turning half of the smaller one away. That’s a big gamble, the outcome of which will likely determine whether or not the second-year superintendent has a future in the district. Personally, I think it seems like a bad bet. Here’s why:

Manatee County taxpayers are already furious that developers have not been paying school impact fees for all this time, and that no matter what level impact fees are re-instituted at, they are already going to have to pay for some of the costs of building new schools that would have come from that lost money, whether through a new tax or more debt. By telling them that the big campaign you are about to see urging you to "invest in public education“ and "support teachers and students in our county“ is nothing more than a pennies on the dollar deal made by developers to save themselves tens of millions of dollars, it seems far less likely that voters will be swayed.

Also, Greene and others have been quick to point out that 100 percent impact fees would only bring in about half as much as the sales tax (about $23 million for the latter vs. $12 million for the former). She also noted on Tuesday that only 5 of the 60 construction projects the district has done since the impact fees were suspended in 2009 could have utilized them (impact fees can only be used to build new schools or for construction on existing ones that is specifically tied to increasing needed capacity).

Those statements don't do justice to the big picture. The school district says it needs three new schools in the northeast corridor of the county, which has been booming with growth over that same time. The fees that the district did not collect over that time could have paid for one of them. Now, the district will have to build all three without that $60 million or so, and it’s going to give up around $6 million a year going forward, which means that should the sales tax pass, they’ll be using much of that money–which doesn’t have the same restrictions–to subsidize the cost of constructing new schools. If they don’t get the sales tax passed, the impact fees go to 100 percent going forward, but it would still mean the schools won’t get built at all unless they could raise property taxes and do a lot more bonding.

More importantly, Dr. Greene should already know that the district can’t get by on the revenue from the sales tax and half of the impact fees. It can’t even get by on the sales tax and 100 percent of the fees. She was present when her deputy superintendent Don Hall and former boss Rick Mills presented the media with the district’s Long Range Financial Plan last March. It noted that the district would need all available funding sources. It called for a full restitution of impact fees, an extension of the sales tax, a referendum to ask voters to raise the school property tax beyond the current maximum limit that can be set without voter approval, and $150 million in additional bond debt to help pay for new school construction.

The report stressed that all of these sources would be required to get the district on even somewhat firm financial footing after years of gutting the budget to overcome the huge financial hole left by the McGonegal administration, which hid a giant deficit from voters and the board until late 2012. The report emphasized that the district had been deferring millions of dollars in maintenance and couldn’t continue to spend only a quarter to a third of what was scheduled each year, while pushing more and more maintenance costs down the road.

It should also be noted–and I haven’t heard this mentioned at one meeting–that the Florida legislature went after the ability of counties to use the half cent local tax for new schools in this year’s legislative session. That bill died on the vine but is almost certain to return in 2017. If the main income stream is less than stable, don’t the other ones become even more vital?

The district is also sitting on more than $500 million in bond debt, which much of its current money goes toward servicing the interest on. Most of those bonds mature in 2031 and will almost definitely have to be refinanced. If the district’s bond rating is downgraded–an increasingly likely possibility–restructuring the debt will likely come at a steep hike in interest. That will happen right before a sales tax extension (if passed) would expire, meaning the district would again be giving the "fiscal cliff" speech in order to continue to service the debt.

Interestingly, it was Greene herself who first used the term "fiscal cliff" to talk about where the district would be if an all-of-the-above funding plan were not achieved during the Long Range Financial Plan briefing last March. Then Mills’ deputy superintendent of curriculum, she said that without the funding, the district would not even be able to provide the basic services expected by taxpayers. The trio emphasized that even with all of the funding, they wouldn’t be able to get to "wishlist" items, like leveraging new technologies to improve classroom performance.

The idea that the school district can suddenly get by with only part of that revenue just doesn’t seem to hold water. What’s more, the county’s assertion that it needs a new funding source and would like to pitch a half-penny referendum of its own makes the school district’s chances look even slimmer. In June of 2013, the county wasted $260,000 running a special election to try and pass an ill-advised and deceitfully-marketed half-cent sales tax for indigent care (or for reducing property taxes, depending on which version you got). Voters saw it as a boondoggle for a multi-billion dollar private health care company and turned it away nearly 2-1.

Guess what–that company and other related special interests also paid for an expensive PAC campaign to convince voters to pass the referendum, complete with shiny direct mail pieces, robo-calls and radio ads. It cost a couple of hundred grand to potentially net them tens of millions each year by keeping the status quo in place (sound familiar?). When it failed, the county thwarted the will of the voters and simply kept maintaining it anyway, dipping into dwindling reserves to maintain the inefficient status quo.