Little Rock School District's Plan B rouses tax foes who sank 1st try

Critics of takeover in LR fight use of 2nd-lien bonds

Little Rock School District Superintendent Michael Poore.
Little Rock School District Superintendent Michael Poore.

Leaders of an organization that successfully opposed a 14-year tax extension in the Little Rock School District in May are now fighting the district's proposed Plan B for constructing a southwest Little Rock high school and updating other campuses.

Citizens Against Taxation Without Representation is using social media to ask people to add their names to a Change.org online petition that objects to the district's plan to issue second-lien bonds to raise $92,055,000 for school construction and repairs.

"I oppose the unaccountable use of power in your decision to approve $90 million of second-lien bonds against the clear wishes of voters in the recent election," states the petition that is addressed to Arkansas Education Commissioner Johnny Key and Little Rock School District Superintendent Mike Poore.

"The LRSD needs a comprehensive plan that focuses on providing a world class education for all, not sports facilities and risky debt. Please stop gambling with our children's future," said the petition that had been signed by 192 people as of Tuesday evening.

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Jim Ross, a leader of the grass-roots citizens group and a member of the Little Rock School Board when it was disbanded by the Arkansas Board of Education in January 2015, said the petition will be the subject of a news conference at noon Friday at the Pulaski County Courthouse.

"We are going to deliver these [signatures] to the courthouse and just make our point that we want to slow down on this," Ross said about the proposed bond issue. He called for the district to do a revenue study and a building plan as prerequisites to any bond issues.

"We need to show what we are going to do with our buildings in, one, five and 10 years down the road. We all know we are going to have to close buildings," he said.

Poore and his staff last month took the first steps toward issuing second-lien bonds, which would by definition be paid off over time with existing district revenue. Second-lien bonds do not require voter approval of a funding source.

The district's proposal on the second-lien bonds was approved by Key, who acts in place of a locally elected school board in the district.

Key's approval and the legal notice on the bond plan, which was published last month in the Arkansas Democrat-Gazette, clears the way for the second-lien bond application to go to the state Board of Education for action in August.

If the application is approved by the Education Board at that time, the district would offer the bonds to investors later this year.

The plan for the second-lien bonds comes just weeks after voters on May 9 overwhelmingly defeated a more ambitious fund-raising proposal.

The district, the largest in the state, asked voters to approve extending the levy of 12.4 existing existing debt service mills by 14 years, from 2033 when the 12.4 mills are due to expire to 2047 to support a $202 million bond issue.

A total of $160 million of that $202 million was to be used for the construction projects, including the new high school, a remodeled middle school and new roofs, windows, floors and heating/air conditioning systems throughout the district. The remainder of the money was to be used to pay off already existing debt but at a lower interest rate.

The Committee Against Taxation Without Representation organized to fight extending the existing tax levy and raising the district's debt at a time when there was no locally elected school board to be held accountable for how the money would be spent.

The extended tax levy would not have increased annual school taxes paid by property owners but would have increased the number of years for paying the taxes.

The vote on tax extension was 7,184 against and 3,941 for.

The district included in its latest package of information to Key a process for obtaining state approval for the second-lien bond issue.

That process calls for the publication of the legal notice in the newspaper and a 14-day waiting period for any objections to be raised to the proposal. At the end of the 14 days, the Pulaski County clerk would certify no petitions had been filed.

Ross and Lori Freno, general counsel for the Arkansas Department of Education, said Friday that the process has its origins in the minutes from a June 21, 1982, state Board of Education meeting.

Those 1982 minutes showed that the Education Board unanimously approved a resolution calling for the published notice of a potential second-lien bond issue in a school district and a 14-day waiting period for any petitions of opposition.

The 1982 minutes also note that the board held "a lengthy discussion" on the number of signatures that would be necessary to show significant opposition to a bond issue. Twenty percent of the number of people voting in the last general election or in the last school election was talked about. But no number or percentage was included in the actual resolution.

There are no other state laws or Education Department rules that refer to petitions in opposition or the involvement of county governments in school district bond issues, Freno said.

A petition in opposition to a bond issue would not stop the Arkansas Department of Education's Loans and Bonds Committee or the state Board of Education from approving the district's application to issue the bonds, she also said.

"If there is a petition, it would be something considered by our Loans and Bond Committee and the committee would make a recommendation to the state board," Freno said. "So, it also could be considered by the state board. But I can see no legal bar in the statute. There is nothing in there that would [make the petition] an absolute bar."

Ross agreed.

"It appears to me that there is no way to stop this," he said about the second-lien bonds, calling the situation both "bizarre" and "shady."

Kelsey Bailey, the chief financial officer for the Little Rock School District, said Friday that the district has little choice but to exercise its option of issuing second-lien bonds to raise money.

"Our buildings still have the same needs," Bailey said. "The first plan failed, so we have to pare back what we planned on doing -- just do the highest priority projects. Maybe later on we can come back with an opportunity to do an extension, or second-lien or a millage increase -- whatever is available."

Ross and other signers of the online petition have argued that the district is going against the will of the May 9 voters by pursuing the second-lien bonds that will increase the district's annual debt payments to investors.

But Bailey said that the district is neither raising taxes nor extending current tax rates for additional years. The debt from the second-lien bonds would have to be paid in full by 2033, he said, which is the same maturity date as that for the district's already existing bond debt.

"It doesn't really affect voters at all," Bailey said of second-lien bonds.. "That's why they are not required to go to a vote."

Bailey and Poore have both said the district can afford to make higher annual debt payments in the coming years because of growth in property values in the Little Rock district. Increased property values generate greater tax revenue for the school system.

An anticipated 5.4 percent growth in assessed value in the district could generate close to $5 million in additional revenue next year, Bailey said.

The district's bond debt payment, as it stands, will be about $14.2 million each year starting in 2018 and going through 2033. With the issue of the $92,055,000 in second-lien bonds, the district's annual debt payment would be about $18.4 million each year, beginning in 2018 and going through 2033.

Ross said Friday that before increasing its debt, the district's leaders should develop financial and school building plans for both the short and long terms. A five- and 10- year plan should take into account the potential closure of district schools and the loss of Little Rock district students to a growing number of public charter schools, he said.

Charter schools and traditional schools compete for both students and state funding.

Regardless of charter schools, the district must improve the condition of its buildings, Bailey said.

Even with second-lien bond money, a new high school planned for southwest Little Rock as a replacement for McClellan and J.A. Fair high schools will not open until the fall of 2020. That is a year later than was planned at the time of the election on the millage extension.

Metro on 07/05/2017

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Arkansas Department of Education Commissioner Johnny Key is shown in this photo.

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Democrat-Gazette file photo

Jim Ross is shown in this file photo.

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