Lakeland group petitions state to deny school funding method

Lakeland logo copyA vocal group of Lakelanders who worry about the city’s finances still oppose the compromise choice of building a middle school for $20 million. They are making their feelings known with a petition to the state comptroller.

They are digging in their heels because of the funding burden on a small population, not the concept of a school itself, they say. The petition began on July 17, and as of July 20 it already had about 350 signatures. It will be mailed to the comptroller on July 24.

The middle school — planned to open in the fall of 2018 — was proposed after citizens voted down a $50 million bond issuance in April to design and build a combined middle/high school.

On June 11, the city board instead discussed the use of 12-year capital outlay notes for up to $20 million to build the middle school alone. There was general approval for the funding method except for cmmissioner Randi Nicholson, who strongly recommended using a 20- or 30-year bond issuance because annual payments would be lower. [Editor’s note, July 23, 2015: This version of the story corrects an error in the original. The board discussed but did not vote on the capital outlay notes at the June 11 meeting.]

Taxes explained

The Lakeland city board passed a long-anticipated (or long-dreaded, depending on your point of view) $0.55 property tax at the June meeting. It is being set aside to pay for the middle school’s design and construction. The 55-cent hike lifts the property tax rate to $1.40 per $100 of assessed value in the city’s FY2015-16 general fund budget.

At the interest rate of almost 5 percent as discussed in June, the capital outlay notes would add more than $7 million in interest for a total debt service (principal and interest) of $27,078,500. By comparison, a 30-year bond note for the same $20 million at the same interest rate would cost more than $19 million in interest alone.

At that 5 percent interest rate, the capital outlay notes would be the equivalent of a $0.72 property tax per $100 of a property’s assessed value.

But if the interest rate is instead around 3 percent (as currently estimated), the annual payment of principal and interest would be about $1.96 million. Lakeland finance director Jessica Millspaugh said that’s the equivalent of about $0.63 in property taxes per $100 of assessed value.

Over 12 years, the interest on $20 million at 3 percent would total an estimated $4,516,225 (about a third less than at a 5 percent interest rate).

Millspaugh also explained how the city can afford this:

With the inclusion of the $0.55 property tax increase in this year’s budget (FY 2016), Lakeland increased revenue projections by $1,677,660. Coupled with the $0.10 property tax equivalent that has been set aside for school capital projects (projected as $311,543 annually) and the half-cent local option sales tax increase (the equivalent of an $0.08 property tax and projected as $275,000 annually), that comes to a total of $2,254,203 in projected revenue to satisfy the annual debt service.

“I feel confident that the financial health of the city would not be in jeopardy with the issuance of the capital outlay notes in concurrence with the newly adopted tax rate,” Millspaugh said.

Vice mayor and commissioner Sherri Gallick also said, “The city has done its due diligence by adhering to state guidelines and by using professionals financial consultants. I recently attended a municipal conference, and one of the workshops focused on financial compliance. It was refreshing to know that the city of Lakeland has conducted their finances with integrity and by the book.”

The petition

The cost is what has a group of Lakeland citizens passionately opposed.

Former Lakeland mayor Jim Bomprezzi Sr. is prominent among those circulating the petition that asks the Tennessee Comptroller of the Treasury to deny approval for the city’s proposed capital outlay notes.

Last week, Bomprezzi wrote on Facebook, “This issue will not go away until the mayor and BOC [Board of Commissioners] listens to the people, 60 percent majority that voted said, ‘NO BOND, NO NEW DEBT, NO NEW TAXES.'”

Unlike a bond issuance, capital outlay notes do not require a referendum. Cities can issue such notes as long as the notes are approved by the state’s director of the Office of State and Local Finance (which is under the umbrella of the comptroller’s office).

The comptroller

A petition alone is not a reason for the office to disapprove capital outlay notes, according to John Dunn, public information officer in the comptroller’s administration division. But it could heighten the comptroller’s interest.

“We would certainly read a petition, and it would make us more aware of the discontent in the community,” Dunn said Friday. “However, a petition would not cause our office to reject a financing option.”

There are just two major factors in the decision, he explained:

  • Whether the city has sufficient revenues to cover the debt service, and
  • Whether it also has sufficient funds to handle emergencies that may arise.

If the comptroller decides the city doesn’t have enough revenue, he could deny permission for the capital outlay notes or require the city to raise taxes to ensure there’s enough revenue to cover the debt service, Dunn said.

The opposition

Several citizens have already written the comptroller’s office in advance of the petition.

Charles R. Carroll of Lakeland wrote, “I would respectfully request the Comptroller’s Office reject the premises for the Capital Outlay Note for two reasons: Reason #1, Lakeland cannot afford such a note, and Reason #2, the issuance of this note in effect is in defiance of the will of the people as explicitly voiced through the ballot box in our recent referendum.”

Lakeland resident Lou Melton also wrote to the comptroller, saying that a 30-year bond for the same $20 million amount would be less risky and the payments would be lower. She called for a full-scale independent forensic audit conducted by auditors other than those from the State of Tennessee.

About the capital outlay notes, Melton wrote, “This is too risky, makes Lakeland’s debt ratios too high. This adjusts our tax rates too high and slows our economic growth. The growth is needed because we are building the school before it was actually needed.”

Lakeland resident Connie McCarter also wrote to the comptroller, stating, “Our elected officials think a 12-year capital outlay note with a 55 cent tax increase is a sufficient way to repay the debt. I disagree with their figures and the figures that they say a professional group called PFM provided to them. I ask that you take a good look at the PFM analysis and consider mathematical rebuttal to their analysis by Lakeland citizen taxpayers, referring to Please, in the best interest of Lakeland taxpayers, I ask that you review the Lakeland budget numbers and reject the 12-year capital outlay note and recommend a safer 30-year $20 million bond with much less annual payback and tax increase. In my and many others’ opinion this will be a safer and more economical method to finance a major construction project for such a small populated city.”

In explaining why he opposes paying to build a middle school now, Bomprezzi went back to the proposed agreement for Arlington to educate Lakeland’s middle and high school students for as much as 15 years. He touted it as the most sensible option for Lakeland. He believes that pushing for a middle school and a $20 million debt now is irresponsible and it’s not following the will of the people.

“I’m angry, because that’s not the way you govern,” he said.

He referred to the larger bond issuance that was trounced in a special referendum this April. “The people said no,” he emphasized. “They don’t want debt. They don’t want taxes.”

Bomprezzi expects the comptroller and other governmental agencies to protect the people from having to pay for a capital outlay note he believes is too costly for a city of Lakeland’s size (12,430 at the 2010 Census).

He said, “We want them to look at it and scrutinize it. And if they bless it, what can we say?”

Bomprezzi also said, “We’re trying not to make trouble, but we’re trying to get it in the proper tribunal to get them to take care of it.”

The supporters

Not all of Lakeland wants to stop the middle school funding. Those who support it are optimistic about the city’s growth potential.

“Now is the time to proceed for the best interests of Lakeland on a residential and commercial growth front,” commissioner Gene Torrey said Monday. “No one waits for sales to go off to buy, no one waits for interest rates to rise to borrow, and lastly, successful people know to invest in the future for greater returns on current assets.”

He also noted that all of the local municipal school districts have K-12 schools except for Lakeland.

“The BOC has left no stone unturned in our effort to make the right decision for all of Lakeland’s citizens,” Torrey said. “We are not concerned for just a few, but for all of Lakeland. I believe the capital outlay issue will pass, as we are in dire need of making our municipal school system truly ours. Progress isn’t going to wait for the environment that ‘status quo’ citizens desire.”

City commissioner Clark Plunk is also ready for progress. “Moving a city forward and watching it achieve its full potential sometimes attracts disgruntled people who cannot accept any kind of change,” he said Monday. “Lakeland spoke loudly during the last election looking for the change to bring restaurants, retail growth and leaders with vision.”

School board member Matt Wright spoke Monday in favor of the 12-year capital outlay notes. “Obviously the school board has no influence over the funding process, but to me, it certainly makes sense to pay the loan off sooner rather than later. The funding is in place to do so and it saves the taxpayers millions of dollars. It’s the same reason many people choose 15-year mortgages as opposed to 30-year mortgages. You build equity twice as fast as you tackle debt aggressively.”

School board chair Kevin Floyd said Friday it was premature to comment on the funding opposition, but he noted, “I do feel that the middle school plan has much more support in the community than the high school plan had.”

Dr. Ted Horrell, Lakeland’s school superintendent, said, “We appreciate the support of the Board of Commissioners for our middle school capital plan, and feel like their funding proposal is thoughtful and takes into account the long-term needs of the city and school system.”

What do you think?

Editor’s note: What do you think about Lakeland’s compromise plan to build just a middle school instead of a combined middle/high school, spend $20 million instead of $50 million, and use capital outlay notes to pay for it over a 12-year period instead of using a 20- or 30-year bond issuance that would cost less annually but far more overall? Let us know in a letter to the editor. Send to with “Letter to the Editor” in the subject line.

Written by Carolyn Bahm, Express editor. Contact her at (901) 433-9138 or via email to