City, County leaders at odds over school capital funding

Dan Eldridge, Kathy Hall, and Ralph Van Brocklin

Dan Eldridge, Kathy Hall, and Ralph Van Brocklin

By Collin Brooks

The Washington County and Johnson City governments have been able to iron over their issues in the past, but a big crease in school capital funding seems to be something that the two bodies won’t be able to get over.

In July, the Washington County Commission approved a 40-cent property tax increase with the goal of establishing a Capital Projects Fund for the county to pull from. In that amount, 24 cents was pulled aside for the county to put toward school capital needs. While the projects have changed — Jonesborough will now get a new portion and renovations for their K-8 and a complete renovation of the middle school for a magnet school, instead of just renovations – the 24 cents has stayed the same.

The concern comes in when city leaders see that close to 61 percent of the county property tax ($34.5 million of the $56.9 million collected in 2015) is paid by city residents. Johnson City Board of Education Vice Chairman Kathy Hall said that it doesn’t seem fair that city taxpayers will be paying for a majority of the county projects.

“If the county is building a capital improvements fund and they’re going to use that as cash and not apportion any of that to the city, then the city tax payers are funding the majority of that but they don’t benefit from it,” said Hall, who has been invited to speak at the city-wide PTA meeting, as well as Towne Acres PTA, the Lions Club and she will also speak with the Kiwanis Club in March about the issue. “City residents pay city taxes and county taxes, so it’s important that they get benefits from both taxes that they pay.”

The county’s capital project fund will grow by over $9 million a year, allowing them to build a solid cash base, and possibly eliminating the need to borrow money for school projects. If that were to happen, they would eliminate the opportunity for the city to get their allotted share in bond shares.

“Quite frankly, that is just not relevant to the discussion,” Washington County Mayor Dan Eldridge said. “We are dealing with the here and now. We are dealing with the tax burden on the tax paying citizens we have today. We are dealing with the debt burden in Washington County that we have to contend with today. The needs of the Johnson City School System 30 years from now, quite frankly, it just isn’t a factor in consideration of these other things.”

In the latest Washington County school project cost estimate, which were presented during a joint Washington County Board of Education and Health, Education and Welfare Committee meeting on Feb. 22, the county plans on spending $28.2 million on the Boones Creek School, paying for $17.1 million in cash. They also plan on spending $24.5 million on the Jonesborough projects.

The Jonesborough project will mostly be built by borrowing $21.9 million. Those two projects will mean that Johnson City will receive $29.542 million to spend, simply because the county is deciding to build schools.

The concern for the city enters when they see on the same document, that $6.4 million worth of school capital maintenance projects will be paid for in cash during the same time 2017-2026. Many city leaders see that as the county drying up the refilling monetary resources that the city is use to. By state law, any time the county borrows money to complete schools projects, they must share a percentage defined by school enrollment numbers (currently 54 percent county and 46 percent city).

There are currently two laws that the city has interest in changing, in order to cut out what many city leaders were calling loopholes in the law.

The first — which is in the process of being done — will tweak T.C.A. 49-3-314, the former Public Chapter 315. The city is currently working on closing that loophole by working with the county on an inter-local agreement that will allow the county to pay payments instead of a lump sum amount when they borrow money to build their two new schools — which is currently set at $29.5 million.

The second, and most important, according to Hall and Johnson City Commissioner Ralph Van Brocklin is 49-3-315.

That law allows the county, legally, to cash fund capital projects and not bond them out, eliminating the sharing with the city.

“There is not a legal issue there in my opinion,” said Van Brocklin, who spoke in front of the county commission in favor of the tax increase, because he said the condition of the buildings in the county needed to be improved. “But there is a fairness issue and the municipalities has their own needs as far as schools are concerned.

“If in fact, the county chooses to cash fund a large portion of this project and we don’t have the full municipal contribution coming back to us for future schools then we are going, at some point as the city commission, to have to look at a tax increase that is born strictly by the municipal tax payer.”

Eldridge said that ultimately, by allowing the county to pay cash for these projects allows tax payers to save close to $60 million over the life of the bonds. And he said that the schools lack of needs isn’t overflowing.

“This isn’t about stopping the Johnson City School System from getting anything,” Eldridge said. “This is about being very diligent in our role to be good stewards of the taxpayer dollars. If Johnson City had $60 million worth of needs, maybe this would have been a different discussion over the last year. But they didn’t. Everybody knows what Johnson City’s needs are.

“Now they’re going to make a claim that, ‘Oh, we need new schools, because our enrollment is growing.’ Explain to me, how that enrollment is going to continue to grow, when the school age population in Washington County is steadily declining and is projected to decline significantly in the next 10 years.”

The city school system currently has a plan entitled Project 2030. The plan hasn’t been approved by the Johnson City BOE, although it has been presented with no action. In it, the line total spans from just over $49 million to over $120 million.

The most dyer projects in the document call for a new gym and cafeteria at Liberty Bell. Later on between 2023-2030 the document sets aside $42 million for two new elementary schools on each side of the city and a new middle school on the south side of the city.

But Eldridge said that the city normally has the funds to complete the school projects that they need, because of some of the funding advantages that they have over the county.

One of those funding advantages, according to Eldridge, is the city’s large sales tax advantage over the county. In total, 88 percent of all sales tax from Washington County is collected in Johnson City. The first half of that is shared with the schools based on enrollment, which means that of that 88 percent, Washington County schools gets 26.5 percent of the 88 percent. Johnson City School System receives 23.5 percent and then the Johnson City general fund gets the other 50 percent.

Eldridge said that another advantage that the city system receives is close to $5 million that is shared with them but is not shared with Washington County. Finally, if they city decides to bond money for the new schools, they are not mandated to share any of that money with the county.

“Rural Washington County residents pay more in sales tax in Johnson City, than Johnson City residents pay,” said Eldridge, who adamantly spoke about the cities annexation of county properties through the years. “Johnson City is not this island that is self-supportive, it just isn’t.”

However, Van Brocklin — who admitted a slight funding advantage did exist — said those funds were used for essential things within the city boundaries.

“If he wants to pay for all the roads in Johnson City, they want to pay for Fire Service in Johnson City, they want to pay for public works in Johnson City, if they want to pay for the police department in Johnson City, then maybe there is some cause to have a conversation about changing how sales tax is distributed,” Van Brocklin said. “But we use the sales tax money to support other things within the municipal borders.”

Eldridge admitted that ultimately, under this scenario, the city may not be receiving the $60 million they normal would have, but it also saved the county taxpayer money.

“We just saved the taxpayers $60 million, keeping in mind that half of the taxpayers are in Johnson City and half are in rural Washington County,” Eldridge said. “So they don’t get $60 million, but they don’t have to pay it.

“The Johnson City School System is presenting this as if that money just magically appears and Washington County is just keeping it all for itself. The result is the taxpayers are saving $60 million over the next 20 years.”

Van Brocklin said that he saw it a different way and that the city needs to find a way to make things fair, before the burden falls back on the municipality.

“We’ve got two to three years to try and get those loopholes closed, if we don’t get it closed then this money is going to be building up,” he said. “Otherwise when it comes time to build the elementary school, we may have enough to do that, but when it comes time to do the middle school, it will be totally on the back of the municipal taxpayers.”


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