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After $50 million deal, District finances still precarious

By Dale Mezzacappa on Oct 31, 2013 04:52 PM

Wednesday was a rare sight in City Hall: Mayor Nutter and City Council President Darrell Clarke standing next to each other and agreeing on something.

The something was a deal for the city and District to work together to get $50 million in promised revenue to the School District through the sale of empty school buildings.

However, when all the self-congratulation was over, the District's financial position was at least as precarious as ever, if not more so.

For one thing, the city isn't actually giving the District the funds. Several steps are still required for any money from property sales to show up in its coffers. Second, the District has already budgeted and committed the $50 million; it won't help restore any personnel or programs. Third, essential disagreements between Nutter and Clarke continue, and the city has yet to enact legislation that would provide the District with more long-term funding stability.

Although outwardly grateful for the gesture, people inside District headquarters at 440 N. Broad St. were apoplectic.

"We are dealing with an emergency in public education," fumed one. "Our schools are doing without right now." 

Doing without, as in 8th graders not having counselors to help them with high school applications, special education students not getting services to which they are legally entitled, and more than a thousand students in "split classes," which require teachers to work with children in two different grades in the same classroom.

Nobody in Philadelphia, including Clarke and Nutter, is happy about the hand dealt to them by Harrisburg on the school funding front. Faced with a request for $120 million to help close a $304 million budget gap, Harrisburg essentially said in June that it would allow the city to extend its soon-to-expire 1 percent surcharge on the sales tax and call that the state's share.

Because money raised through the sales-tax extension wouldn't come to the District until next year, Harrisburg worked out a complicated scheme through which the city would borrow $50 million against the future revenue and give it to the District this year.

Nutter essentially decided to go along with this, while Clarke commenced to dig in his heels. The Council president was miffed that Harrisburg, unwilling to pony up more money of its own when the city schools asked for help, appropriated a funding source that he and others had been eyeing to help reduce the city's ballooning pension liability. Clarke and his Council colleagues have said they will not consider the sales tax extension unless the money is split between the schools and the city pension fund

Clarke also objected to the idea that the city would borrow money to give to the District. He said that was not fair to saddle city taxpayers with borrowing costs. So to raise the $50 million this year, he instead proposed, at first, that the city buy the District's surplus properties and raise the money that way.

Nutter was adamantly opposed to the city buying the buildings.

What happened Wednesday was an agreement for the city to help the District sell the properties with the hopes that it can realize $61 million this year -- $11 million of which the District had already budgeted for, along with the $50 million that originally was going to come through the city loan pegged to the sales tax.  

The mayor realizes that the deal doesn't put the $50 million in the District's coffers, so he also announced that he was advancing $60 million to the District to help with its cash flow -- money that it would not normally have received until the spring.  

The bottom line: None of this brings new money to the District.

Plus, it cuts into future revenues: The District put $28 million in money raised through property sales into its five-year plan.  

"Before the deal," said one miffed District official, "the District had access to $50 million this year through the 1 percent sales tax. This $50 million is not connected to the sales tax, but pegged to the sale of real estate. So, we're paying for our own $50 million."

Clarke and his supporters don't see it that way, arguing that the agreement with the city for the sale of the school buildings will bring in more money and sell the buildings faster than if the District did it by itself. 

Under Wednesday's agreement, the Philadelphia Industrial Development Corporation (PIDC) will work with the District to market and sell the properties. Both Clarke and Nutter said that there were credible offers for all the District's vacant buildings in the neighborhood of $100 million.

"While it is City Council’s preference to give the School District $50 million in exchange for vacant properties up front, Council members are confident the goal of $61 million in property sales this fiscal year will be met given the significant interest in vacant properties from potential buyers,” said Clarke's chief of staff, Jane Roh.

One way of looking at this is that the District now is under pressure to prioritize the building sales. But Nutter already promised, in the middle of the tug-of-war with Clarke, that the city would give the District $50 million this year one way or the other. So the District could theoretically drag its feet, selling only the $11 million it had originally budgeted for and letting the city cover the rest.

And then there is the matter of the sales tax and the $120 million in recurring city revenue, the linchpin of the state's "rescue" plan. Clarke wants to split any sales tax revenue between the District and the city's pension fund. But this would likely require new legislation in Harrisburg, which is already losing patience with the city's refusal to do its bidding.

Nutter said Wednesday that he is OK with splitting the sales tax revenue -- but only if Harrisburg also allows the city to enact a cigarette tax.

"He can only support that if at the same time the parties pass the cigarette tax, a bill that is before them," said Mark McDonald, Nutter's spokesman. "Otherwise, it would be a net loss to the School District." 

McDonald said that the mayor remained optimistic that the cigarette tax would pass the General Assembly, which has so far shown no inclination to do so. "We still have hopes it might happen," he said. If both taxes pass, they would provide enough money to the District to cover the $120 million annually that the District is counting on in future years.

As for Clarke, he remains adamant that his position is the principled one. According to Roh, City Council will continue to press for the cigarette tax and for an amendment to the legislation authorizing the sales tax extension so that some of its revenue can be diverted to pensions. Council will also lobby for restoration of a state budget line item that would reimburse the District for some of its charter costs. 

"The Commonwealth of Pennsylvania has a constitutional obligation to adequately fund public schools," said Roh, "and City Council has a fiduciary obligation to Philadelphia taxpayers as well as to the School District."  

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Comments (17)

Submitted by Wry (not verified) on November 1, 2013 6:51 am
I'm pretty sure that last week I read there was a $100 million dollar offer for the district buildings. How was it negotiated down to $50 million? That's genius for union busting. Of course, it's all those Philadelphia teachers' faults, working with those kids and getting those paid summer vacations. Damn them. They have it made in the shade. They should work hard, like their suburban counterparts who are paid much more than them with materials to teach. I never begrudge them a living. I only hate public school teachers in Philadelphia because that makes perfect sense.
Submitted by Anonymous (not verified) on November 1, 2013 10:05 am
Public School Teachers, whether working in the city or in the suburbs DO NOT GET PAID FOR SUMMERS OFF. Teachers are 10 month employees and get paid for ten months of work during each school year. Most teachers have an amount taken out of each pay check during the school year, so that they do get a pay check during the some. HOWEVER, this is for work they have already done during the school year, it is NOT a paid summer vacation. Many teachers work other jobs during the summer, as teaching jobs do not pay the same amount as corporate ones. Why doesn't anyone get this??? I am so tired of hearing about how teachers get paid for summers off, when in fact they are ONLY PAID FOR 10 MONTHS OUT OF THE YEAR!! Please people get this straight and learn this fact!!
Submitted by Anonymous (not verified) on November 1, 2013 11:15 am
I think you are missing Wry's sarcasm
Submitted by Anonymous (not verified) on November 1, 2013 6:19 pm
Submitted by Anonymous (not verified) on November 1, 2013 10:38 pm
Lol! Now There's A Sense Of Humor. Good Luck With The paycuts.
Submitted by linda (not verified) on November 1, 2013 3:32 pm
WRY, to quote the late Michael Jackson, "you are not alone" did we go from 100 million to 50 million?....was something lost in translation? Linda K. counting the cash with you
Submitted by anon (not verified) on November 1, 2013 6:06 pm
darrell clarke's broker's fee?
Submitted by Wry (not verified) on November 1, 2013 8:20 pm
They just must - MUST - make is possible to insist that there be concessions from the PFT. That's the only way that the system is going to work. They must make the PFT (I'm not including Jerry Jordan because he doesn't give a shit about our members; what would he be doing if he wasn't making lame speeches every other week about the rights of our members and our students' education? I believe he LOVES the situation we're in) the villains. They must make PFT members suffer (didn't get my raise after attaining another educational milestone; they approved the upgrade and then reneged because of "negotiations" and the PFT mentioned "status quo" during this time) and call for "shared sacrifice" (I did not see Hite or any of his cronies take any paycuts). They must mismanage money with weakling Nutter so that more charters could open and money could be funneled there...and people like Kenny Gamble could get richer in the process. It's like a typical fascist state.
Submitted by Anonymous (not verified) on November 3, 2013 4:17 am
Whether it's $50 or $100mm, it is a one time hit and there will be a budget hole next year. So regardless of the amount, the PFT needs to make some concessions. The taxpayers here have taken it on the chin for the last three years.
Submitted by Helen Gym on November 1, 2013 8:50 pm

A really important story - but less so in terms of fiscal matters and more so in terms of revealing the leadership blunders that get us into a deeper fiscal hole. My biggest question: Why at any point in the last three months did NO ONE from the District say, Hey you can do the land deal but then the dollar amount has to be $89 million? This is what we mean when we feel the district does not have the sense to draw boundaries, to establish protections - even when it deals with their bottom line. Since August, City Council has publicly stated its intent to do the land deal for $50 million. At NO POINT, did anyone from the SRC, the District, the District's multiple financial consultants, the District's finance office, the District's legal office, the District's PR office, etc. - at no point did anyone mention the $28 million listed in the five year plan, and if they did, it was done so feebly as to be rendered unnoticeable despite a gazillion news stories on the subject. The District failed to make this a central issue. If there are complaints that they got the short end of the stick, the people to blame are inside 440. 

Submitted by Education Grad ... on November 2, 2013 12:02 pm
Helen, The bigger issue is that the District, City Council, and the Mayor have been trying to raise revenue for schools. The City has some responsibility for this obviously. However, the current fiscal situation is the Commonwealth's doing, not the City's. $50 million really is just chump change. City Council and the Mayor are squabbling about these issues but the reality is that they should be uniting to play hardball with the Commonwealth for funding cuts. Where's the lawsuit against the Commonwealth? Stop trying to fix the funding problems locally when the funding problems begin with the Commonwealth. The City and SDP should do what Chester Upland SD did: SUE the COMMONWEALTH!!! EGS
Submitted by Joe K. (not verified) on November 4, 2013 8:06 am
EGS----AGAIN, you guys are falling for the line that they're "squabbling" over money allocations. This infers that they care and NOT complicit which they clearly are. Until we STOP making excuses for them or looking for the silver lining of hope which doesn't exist, the corruption and abuse will continue. You're no longer in my will !!
Submitted by Headstart teacher (not verified) on November 1, 2013 8:24 pm
And once these properties are sold then we are back to where we are now but without our most valuable assests to bargain with. The district has allowed, even welcomed, itself to be stripped to the bone and now the vultures are picking away. It's just a disgusting feeding frenzy. I can't stand to watch it but have no other option.
Submitted by anon (not verified) on November 3, 2013 2:55 pm
hey, there's always the art. that oughta fund a day or two.
Submitted by Anonymous (not verified) on November 1, 2013 9:18 pm
We all have another option a couple. Show up at the polls to vote This time just to show um we will. And the union needs to stop fooling around and get into court with the best lawyers in the country. Members need to all act like it matters by showing up at the rally's and at the polls.
Submitted by Anonymous (not verified) on November 2, 2013 2:19 am
Email the top 4 leaders in the PFT: Jordan,Kempin,Harris and Phillips The PFT leaders should have already filed the legal papers way back to take some action in the courts, particularly on ACT 46.The District makes them look like a fool everyday by violating more of the contract daily with no repercussions but a worthless grievance filed that won't be executed by PFT leaders. That's why the PFT have no bargaining chip. They seem to be waiting for a savior but that savior isn't coming.The officials at the PFT got too comfortable in their undemocratic jobs over the many,many years they been at PFT headquarters.Term limits on them ought to be 5 years max. and back to the schools,classrooms-out of those cushy jobs. Another recent development that is breaching the contract and I am sure many don't know. After leveling and the chaos occurred with getting shuffled around and schedules, rosters changed for many students and teachers some teachers were not appointed that were advised earlier they were being forced transferred- due to leveling but weren't. They were told to just hang at your current school on Oct. 28th.with no assignemnt. Since this all happened after the schools rearranged everything the teachers are just showing up at their current school basically doing nothing or doing work a secretary should be doing-like filing and other office duties that a laid off secretary should be doing. These teachers were not giving any date when they will get an assignment.Could be months for the incompentent District. I disagree with this because our job descriptions will get blurred and then the SDP will require we do these duties on our prep period becomming the norm plus there are furloughed secretaries who should be doing these duties. Tell the top 4 leaders in the PFT to make a expeditous move (legal most likely) and stop being passive and enabling the District.Nothing nowadays will get accomplished with the District with those dated strategies.They need to be forced to do things and that means legally and they even try to resist that.You can talk to those people at the SDP until you are blue in the face but it's worse than talking to the wall. Email addresses above at the PFT.
Submitted by anon (not verified) on November 3, 2013 2:27 pm
it's the democrats whose feet you have to hold to the fire. the republicans are tony soprano would say on network reruns...forget 'em. the democrats need to know that they will be held accountable if they expect continued support. the only way to get that message across is to reward any candidate who has the right frame of reference with your vote, regardless of whether he can win or not. otherwise we're going to have the next governor (a democrat) who thinks it's a fine idea to sell off wilson middle school's art to the vultures for peanuts to provide a day or two of nonrenewable funding for the district (if it even comes to that, once the charters finish taking their cut of the proceeds).

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