The County Commission's stubborn refusal Monday to release to the county school board $6 million in in-lieu-of-tax-payments (PILOT funds) that are reserved for the county schools under tax abatement agreements leaves the school board no choice but to seek a legal remedy to the commission's wrongful withholding of funds.
Superintendent Jim Scales should initiate such action immediately. There's no sense in wasting any more time in an attempt to reasonably settle the issue outside of court if the myopic commissioners are not willing to acknowledge their fiduciary duties with regard to designated school funds.
Scales should immediately ask the Tennessee School Board Association and the state's Attorney General, Robert E. Cooper Jr., for a legal opinion on the school board's right to receive and apportion the PILOT funds. Even the obvious split on the school board over whether to keep Scales for the balance of his contract should not prevent school board members from coalescing around the need to force the commission, in court if necessary, to surrender the funds that rightly belong to the dedicated school portion of the county's tax and PILOT revenues.
Scales also should consider a Chancery Court lawsuit for a declaratory judgment on the school system's right to obtain these funds for the school system's general budget.
The commission's obduracy on this issue is breathtaking. The PILOT funds in question, like other PILOT funds in this category, were carefully negotiated under the state and local tax abatement agreements for Volkswagen and its supplier industries to preserve school funding.
The abatement agreements generally waive or defer specific city, county and states as an incentive for economic development. But they also acknowledge the public interest in public education and the need to sustain school funding. Thus the county collects the same revenue for schools through the PILOT agreement that it would receive in property taxes for the school fund if there was no abatement. (The school fund portion of the $2.7652 countywide property tax rate is presently fixed at $1.3726 per $100 of assessed valuation.) It is illegal, moreover, for county governments in Tennessee to reduce the school portion of the property tax fund once it is established, and the commission's attempt to control the PILOT funds essentially violates this precept.
The state's "maintenance of effort" mandate for county-based school funding was reasonably established to prevent county commissions from tampering with school funding for political purposes. Commissioners may choose not to raise taxes to help meet school needs, but when they do fix tax rates for the school system, they cannot reverse course and cut them in some future year. It is under that legal umbrella that the PILOT funds at issue are intended to go toward general funding of the county's school system.
Since elected school boards were established under Tennessee's Education Improvement Act of 1992, moreover, Hamilton County's school board members have been elected from the same districts as those established for the County Commission. They and they alone hold authority for overseeing the use of the general funds for schools collected by county government. County commissioners are not authorized to run the school system, nor may they dictate the allocation of funds that they are required to release to the school board.
Yet this commission's members, with the exception of Greg Beck, are wrongly trying to withhold the $6 million in new PILOT funds (they have rightly released previous PILOT fund monies) from Volkswagen and its suppliers in an attempt to allocate that money for half a dozen new school buildings, despite the fact that the school board says it needs the money to help close a projected $7 million shortfall in the new fiscal year's budget.
The commission's presumption of the need to build the schools with funds that should go to operating expenses is wrong on its face for other reasons, as well. County government has traditionally financed the building of schools through bonds that are retired through the county's general fund. Commissioners have no grounds to reverse course on that method: It makes good use of the county's low municipal bond rates, and it also prevents county commissioners from tinkering in school system operations.
The school system, moreover, may be better off using rezoning to make more efficient use of its existing buildings, than to sink more money into buildings. Given the school system's static enrollment figures and some buildings that have been partially vacated due to sprawl, that could make better sense than building new outlying schools.
In any case, the school board, not the County Commission, was elected to run the school system. It's members are charged with pouring over the details of curriculum, personnel and policies, and fixing the school system's budget. County commissioners do not spend the time to know these issues, and they do not have the expertise that school members acquire over time.
County commissioners should accept their responsibility to turn over the PILOT funds, as they have in the past. It's the school board's duty to run the school system. It is also board members' duty to fight for the funding that the school system is due. If they have to do it court because county commissioners are wrongly trying to usurp the school board's duties, they must not shirk from that responsibility.