A proposal to resolve a dispute over sales tax revenues and high school debt appeared to have majority support during a non-voting joint work session of Oak Ridge City Council and Board of Education on Friday.
Despite opposition from a few residents and municipal officials, the Oak Ridge City Council and Board of Education have resolved a dispute over Anderson County sales tax revenues and debt payments for the $66 million renovation of Oak Ridge High School.
The dispute, which started several years ago, centered on how to use the Oak Ridge school system’s portion of Anderson County sales tax revenues generated by a tax increase approved by county voters in a 2006 referendum. School officials had argued that they could keep their share of the revenues generated in the county outside of Oak Ridge, while city officials had said all the revenues, whether collected inside the city or outside of it, should be used for high school debt payments.
A resolution unanimously approved by the school board in February and the City Council in a 5-2 vote on Monday, March 3, allows the schools to keep its portion of the new Anderson County revenues collected outside the city. However, the resolution spells out how the money has to be spent: on technology enhancements, debt reduction, capital repairs and equipment, and grant matches and innovative educational projects.
The agreement will be in effect until the high school debt is paid or 2041. Most officials have called it a compromise, saying it will allow the two sides to work together.
“We think that this is a good step forward,” Oak Ridge City Manager Mark Watson said Monday.
“I’m not totally happy with this,” Oak Ridge Mayor Tom Beehan said. But, he added, “It’s time to move on. We don’t need to demonize education anymore.”
The amount of money in question is up to about $300,000 annually, although the total varies from year to year.
“That would become a responsibility of the city to find that,” said Watson, who had been directed by the City Council to meet with Schools Superintendent Bruce Borchers and bring back a settlement.
Watson said the additional $300,000 per year that is now the city’s responsibility means there could be a $10 million shift to city accounts for high school debt between now and 2041.
But he and Beehan said the city should soon start collecting new sales tax revenues from the Kroger Marketplace shopping center, which could open this summer, as well as from the proposed mall redevelopment and the planned Uranium Processing Facility at the Y-12 National Security Complex.
“Part of that additional sales tax will go to pay off the debt,” Beehan said. “We’re going to get money here, and it’s going to generate sales tax.”
Watson said city officials still want to avoid a property tax increase to pay the high school debt.
School officials had argued since at least 2012 that they can keep that portion of the new county sales tax revenues that are collected outside the city of Oak Ridge. Previously, all of that money, as well as the revenues collected inside the city, were used for high school debt payments. School officials said the money was forwarded to Oak Ridge under a five-year “gentleman’s agreement” and should now be used for operational expenses.
But municipal officials had disagreed. They said the county sales tax increase in 2006 essentially took away money from the city. They argued that the new county revenues, including the money generated outside the city, should be used for debt repayments.
Oak Ridge voters overwhelmingly approved a half-cent sales tax increase for the high school renovations in an August 2004 referendum, but city officials said the subsequent county referendum less than two years later effectively created a new formula for the distribution of sales tax proceeds to Oak Ridge, Clinton, and Anderson County schools.
There has never been a dispute over how to use the new county sales tax revenues collected inside Oak Ridge after the 2006 county referendum—or how to use the revenues collected under the 2004 municipal referendum. Both sides had agreed that those revenues should be used for high school debt.
But the dispute over the county sales tax revenues collected outside the city led to a City Council decision in May 2012 to withhold $766,000 from the schools.
That May 2012 decision was then later blamed as the cause of a $250,000 shortfall that led to the threat of a school shutdown late last summer after the school system failed a state maintenance of effort test. The threatened shutdown was avoided after the Oak Ridge City Council agreed in September 2013 to give the school system another $250,000.
Last Monday, City Council members Trina Baughn and Anne Garcia Garland suggested that city and school officials were changing the results of—or nullifying—the 2004 Oak Ridge referendum. They suggested that many voters expected that all of the money generated under the half-cent sales tax increase would be used for the high school.
“We had a plan, and now we don’t,” Baughn said.
“I think we’re setting a really bad example in not keeping our own word,” Garcia Garland said.
Both voted “no” on the high school debt resolution.
Voting for it were Beehan, Mayor Pro Tem Jane Miller, and Council members Charlie Hensley, Chuck Hope, and David Mosby.
The joint resolution also allows the City Council and Board of Education to set up an annual joint capital improvements program, or CIP, to establish priorities for repairs and replacements, new services, technology enhancements, and public safety as determined by the superintendent and city manager. It also establishes a joint city/education committee to review city and schools priorities and legislation, anticipate future bonding needs, and coordinate with necessary support entities such as the Oak Ridge Education Foundation or state agencies.
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