Clarke's plan aims to raise $50M while getting District out of real estate business
By Paul Socolar on Aug 9, 2013 06:35 PM
City Council President Darrell Clarke responded Thursday to Superintendent William Hite's urgent plea for $50 million in aid from the city by laying out a new proposal for generating city funds for schools through the purchase and then sale of vacant District properties by the city.
Clarke came out in opposition to Mayor Nutter's plan to raise funds for the schools by borrowing against a proposed 1 percent city sales tax extension that has been authorized by the state legislature.
Mayor Nutter has said that the sales tax and borrowing plan is currently the only viable way to ensure a $50 million contribution to the District by next week's deadline. Clarke has argued that if the sales tax is extended, the additional revenues must be divided between the schools and the city's underfunded pension plans. He has also said that the sales tax is regressive and bad for the city. The mayor met with Clarke and other lawmakers today but did not reach a resolution on how to move forward.
The Notebook received answers from Council President Clarke's office to a series of questions about Clarke's new proposal.
How does the Council President propose to raise $50 million for the schools?
Dr. Hite asked for a guarantee from Council by Aug. 16 that $50 million is coming to the School District of Philadelphia. He has said repeatedly he does not care where the $50 million comes from. The Council President proposes to guarantee the $50 million by Aug. 16 by entering into an agreement to purchase and sell surplus District properties via the Philadelphia Authority for Industrial Development (PAID).
How would the properties to be purchased from the School District be determined and valued?
The School District had already planned to sell surplus properties, and anticipated revenue of $28 million over five years (per its 5-Year Plan). The District does not have the staff or resources to dedicate to aggressively unloading surplus properties, however. We believe PAID can manage this process much more quickly and efficiently than the District, which would raise more than the District anticipated. There are a number of closed school buildings that have recently been reassessed by the Office of Property Assessment (OPA) and are valued at more than $150 million. City Council expects that guidance from the District, PAID, the administration and the community will be a part of this process.
Is there any estimate of how many properties would be involved?
The Council President’s office has identified 27 shuttered schools that have recently been assessed by OPA. Which properties are involved in this process will presumably be determined in concert with the District.
Does the plan also include selling tax liens?
Yes. Because property tax revenues are split between the City and the District, one way to quickly raise revenues for the schools is to purchase the District’s share of tax liens. This sends them funds up front while the Department of Revenue collects on these liens, as it does on the both the City’s and the District’s behalf.
Hite says they need a guarantee of the funds by next Friday; is that possible with this approach?
What are the advantages of this approach, and why are you opposed to borrowing against the proposed sales tax increase?
This approach allows Council to send the guarantee of $50 million requested by Dr. Hite while Council, the administration, and state lawmakers continue discussions on the sales tax increase legislation – which must be amended regardless. The administration is seeking a change in language so the flow of funds goes first to debt service on borrowing against the sales tax, then to the schools, with the rest to go to the city.
Council President Clarke strongly believes that his 5-Year Plan both sends critical new dollars to the schools while putting the City of Philadelphia on sound fiscal footing by helping it pay down pension fund obligations. It is worth noting here that credit ratings agencies recently downgraded the Commonwealth of Pennsylvania, citing “large and growing pension liabilities and moderate economic growth will challenge [Pennsylvania's] return to structural balance."
Some say the city needs to come up with more than $50 million for schools ... is that your goal?
This is what’s currently on the table to fill the District’s $304 million deficit (the emergency ask) in Fiscal Year 2014: $78 million from the city (out of requested $60 million), less than $2 million from Harrisburg (out of requested $120 million), $45 million from the federal government (no ask), and TBD from the Philadelphia Federation of Teachers (more than $100 million). Council President Clarke has worked all summer to help the District fill its structural deficit, and he has no plans to rest until it does.
What steps are you taking to get City Council and the mayor on the same page about how to move forward?
Council President Clarke will continue to work with his colleagues on Council, the mayor, and state lawmakers toward a resolution on the schools funding crisis.
Holly Otterbein of NewsWorks contributed reporting.