Council members respond to concerns over $110 million bond for schools, parks
Edit: Updated Dec. 5 with additional comments from Homewood City Schools and information about an upcoming work session on the topic.
The city council approved a one-cent sales tax increase and a $110 million bond in October to pay for expansion projects in the school system and parks. Since then, in public meetings and on Facebook community pages, several residents have expressed concerns or dissatisfaction with the process of making these financial decisions, the lack of clarity over how the money will be spent and the use of a sales tax rather than ad valorem property tax.
The Homewood Star sat down with Council President Bruce Limbaugh and Ward 5 Representative Peter Wright to discuss a few of these concerns and the overall status of the bond.
Current Allocation Status
As of right now, Limbaugh said final allocation amounts for the bond have not been determined. Rough estimates have been set at $55 million for school expansion projects, $35 million for parks and recreation improvements and about $20 million for the construction of a new public safety building on Barber Court. Limbaugh said they are waiting for more information from Homewood City Schools before making final decisions on exactly how to divide the bond money.
Wright said the public safety building had not been part of the original plans for the bond, but the council had already planned on beginning that project this year. If the new building costs less than $20 million to complete, Wright said he expects remaining money would be put toward the ongoing street paving throughout the city or other capital projects.
“It makes all the sense in the world to bring that [public safety building project] into this package,” Wright said, calling the building an “overdue” need for the city.
The school system plans to have its strategic plan, which will include details on the proposed additions and potential new high school, completed by summer 2017. However, both Wright and Limbaugh said they would like to have firm numbers to share with the public earlier than that.
“We’re not there yet,” Limbaugh said.
Limbaugh said the city is also welcoming input from residents on how to allocate the money. He encouraged residents to email their council representatives, whose contact information is available at homewoodal.net.
“We really want to hear what people’s thoughts are,” Limbaugh said.
Homewood City Schools superintendent Bill Cleveland said conversations are also underway on how to pay for extra teachers, staff and classroom resources after the expansion project is complete.
With the distinct possibility that the cost of expansion will exceed $55 million, Cleveland said Corporate Reality has been engaged to determine the financial value of the current Homewood High School property and the possibility of new development there, as well as find interested parties.
"It would be ideal to build a new high school with a campus, however, the value of the current high school will determine if that is an option," Cleveland said in an email.
Sales vs. Property Tax
At the Oct. 24 meeting, where the council approved a one-cent sales tax increase, several residents spoke up in disagreement with the proposed funding, which would generate about $7.6 million per year toward paying off the bond. Limbaugh said the $110 million amount was chosen both because it fits the estimated need of the schools and parks, and because it does not change the city’s AA credit rating.
Residents said the tax is regressive and will affect lower-income families more harshly than higher-income households. They also expressed reservations because the tax is applied to anyone who shops in Homewood, not just homeowners who are part of the school system.
Limbaugh and Wright said they absolutely agree and would have preferred to hold a referendum to raise the city’s ad valorem property tax rates to pay for the bond instead, but that it would be difficult to do so.
Wright said that while a property tax increase would have been more “appropriate,” Homewood is constrained by the state "Lid Bill" and cannot raise property taxes any further. Neighboring communities Mountain Brook and Vestavia Hills are exempt from the Lid Bill, and Wright said the city has been working with state legislators for five years or more to get a similar exemption.
“It is so much out of our control,” Wright said.
With no progress on that front, Wright said he felt it would be “irresponsible” to wait for a legislation change when the school system has an immediate need, though he is hopeful for support from state representatives in the near future. Should Homewood be exempted from the Lid Bill, Wright said he would favor holding a referendum to raise property tax to pay for the bond instead of sales tax.
Rushed decision?
Some Homewood residents said at the Oct. 24 meeting and in online discussions, particularly on the Homewood Voters Facebook page, that the city council moved too quickly in deciding to take on a debt of such significant size.
The first presentation of the proposed schools and parks expansion was held in mid-September, and HCS Superintendent Bill Cleveland and Parks and Recreation Superintendent Berkley Squires came to the council on Oct. 10 to request funding. The bond was approved at the Oct. 24 meeting, meaning the whole process took little more than a month.
Limbaugh said that the timeline was compressed, but he believes it was for a good reason and ultimately saved the city money on the projects because of happenings outside of the city's control.
The city council consulted broker Mike Dunn of Stifel public finance in October to learn more about the bond options they had.
At that time, Dunn outlined three reasons to secure the bond prior to Thanksgiving: low interest rates in October were likely to rise, the bond market tends to be worse in December and the then-upcoming presidential election would have unpredictable effects on the market.
“We were fighting a timeline,” Limbaugh said.
Waiting until December would have also meant the city could not retire a bond it had previously taken out, Limbaugh said. Retiring the bond gave the city around $4.2 million, Limbaugh said, which has also not been allocated. He said one possible option is using the money to pay down some of the city’s other debts. Passing up that opportunity, he added, would not have been “responsible governance.”
But the need for quick decision-making was not only about dollars and cents. With HCS elementary classrooms already at max capacity and Parks and Recreation capping youth league size due to lack of playing fields, Limbaugh said the need for more space is already pressing. Despite the lack of hard numbers from the school system for project costs, the council didn’t feel that waiting for that information was the best option.
“If we kick this around for six months, we’re sort of guaranteeing this problem sticks around for a year,” Limbaugh said.
Wright said under normal circumstances, he would have preferred more time for public input.
“I wish there was more time,” Wright said. “If we waited until 2017, we would be increasing the chance of that [growth and capacity] problem.”
In response to concerns from residents on social media about transparency of the process, Limbaugh said that estimated price tags of the projects, along with the possibility of a sales tax increase to pay for them, were included in the first presentation of the expansion proposal in September, and all discussions of the bond details and tax increase were held at public meetings. He said there are still opportunities for residents to share their thoughts with the council on how the money will be used.
Project management
There are still questions to be answered about the long-term needs of the school system and parks department. Limbaugh said he would have preferred to have those answers before taking the bond had there not been time pressures, but he intends to have those answers before the money is spent.
“We have so many questions in Homewood that we need to seek expert advice,” he said.
Those questions include future demographics of the city, long-term usability of current school facilities, what assets Homewood City Schools can use to help fund their expansion and more. Some of these are beyond the scope of what experts in the city and school system can answer, and Limbaugh and Wright said they would like to see a project manager hired who could provide that information.
Cleveland said the school system has its own unanswered questions over the multiple expansion options they have discussed, so HCS is working with the city to hire a project manager.
Limbaugh said a task force made of school board and city officials is being put together to develop that list of questions and seek out the expert who can answer them. He noted that the public should have input on what questions to ask. Ideally, he would like to see a request for proposals sent out to project management firms before Christmas.
The project manager could continue to oversee the schools and parks expansion throughout the process, as a separate role from the construction manager, Limbaugh said.
Limbaugh and Wright said they want to have answers to both financial and practical questions available “sooner rather than later” so that construction work can begin. Though there has been disagreement about the way funding came about, they feel the project itself will benefit Homewood's children in the classroom and in athletic teams.
Find your city council representative’s contact information to share your opinions on the City of Homewood website.
There will be a work session on Dec. 19 at 5 p.m. to discuss the use of bond funds and hiring a project manager. The work session is open to the public and will be in the council work chambers on the second floor of Rosewood Hall.