To facilitate building a high school in Lakeland, PFM (Public Financial Management) suggested to officials tonight (4.30.19) the City tax rate would have to increase by .57, perhaps to .63, depending on parameters selected.
Two financial advisors from PFM spoke at a special BOC (Board of Commissioners) meeting at City Hall to provide due diligence on a CON (Capital Outlay Note) of $35 million to build a school.
Link to agenda: https://tn-lakeland.civicplus.com/ArchiveCenter/ViewFile/Item/838
In less than an hour, Lauren Lowe and Ricardo Callender presented their findings to the BOC and residents attending the meeting.
Link to Google album of PFM slides: https://photos.app.goo.gl/q4xiJuTeS6ob1aik7
As the meeting began, Commissioner Richard Gonzales, Jr. asked for a motion to adjourn the meeting, noting parameters which were presented at a March 20th meeting. He said he was advised by various counsels that meeting should not have happened. The motion was seconded by Mayor Mike Cunningham and in a roll call vote, failed 2-3.
The PFM tag team took turns reviewing 11 slides and explaining the findings.
Among assumptions presented: A change to City Hall expenditures of $700K annually and no reserves used or needed at this time for New Canada Road (NCR); All general reserve funds not already committed to projects or the debt policy are available to pay off other debt obligations whereby freeing up additional revenue for CON payments; A four-year agreement with the Lakeland School Board (LSB) would contribute $700K annually.
The numbers were then presented starting with the note amount needed ($35 million) minus the general fund debt capacity, the money from LSB and the use of unsigned general fund balance. What remained was a funding gap of $20.7 million with a debt service of -$2,030,000. The property tax rate equivalent to fund that debt service is .57.
If the funding gap was to increase, the property tax increase could be .63. There were other suggestions on tax rates which would be impacted by an 8-10 call or callable any time.
Commissioner Gonzales asked what impact the loss of LSB funding after four years would have. Ms. Lowe said that was factored into the numbers.
He also asked about protecting Lakeland and its citizens. Kyle Wright, finance and human resources director for the City and former employee with PFM, immediately came to the podium to defend his former co-workers. He said they have no intent to deceive and their reputation is respected as providers of the information. Ultimately, said Mr. Wright, you (elected officials) are responsible for making the best decision.
Ms. Lowe said PFM has a fiduciary obligation to serve Lakeland and as a registered business and registered financial advisors, they represent not just one citizen or one official. She added this is a clear and transparent process.
Commissioner Wesley Wright suggested that using 50% of the unassigned general fund balance over the policy would give the City a lower risk and be a smarter choice. He said this would allow the City to move forward on other projects. The tax rate in that scenario could be .63.
The Mayor asked about removing the reserves for the NCR project. Mr. Wright said there is an obligation to TDOT (Tennessee Department of Transportation) and City staff is cognizant of that obligation. However, there is uncertainty of when those funds are due.
The Mayor also noted that originally there was discussion that the tax rate might increase by $1.05 over the current $1.25.
There were four speakers from the audience: Susan Richardson, Heather Adams, Jeremy Burnett and Gary Johnson. Ms. Richardson spoke of not rushing into debt for a high school; Mrs. Adams referenced school vouchers under consideration in Nashville for Shelby County; Mr. Burnett, a member of the Economic Development Commission and Industrial Development Board, said the assumptions are based on no growth and additional revenue for the City; Mr. Johnson said he didn’t feel the City could be run on 15% of generated revenue with 84% going to debt service.
Mr. Wright agreed with Mr. Burnett but said progress and growth tend to be slow. The Mayor said full build out on The Lake District (at I-40 and Canada Road) is to take five to seven years, even though the first tenants are to open by November 2020.
Kevin Floyd, chair of the LSB, said there are two very different voucher bills in the House and Senate. However, they both relate to districts (like Shelby County) and municipal districts will not be impacted.
The BOC meets for a business meeting at 5:30 p.m. Thursday (5.2.19).
Link to Livestream: https://livestream.com/lakeland/events/8663088
… Photos by Jim Willis, Lakeland Currents
