The City of Owensboro and Daviess County Public Schools have had ongoing negotiations since the first reading of a set of ordinances that would forcibly annex six schools and three facilities. Should the ordinances pass at Tuesday’s City Commission meeting, DCPS employees would be subject to city occupational tax rates, an automatic 1.43 percent pay cut.
Although negotiations have been ongoing, no agreement has been made between the two parties. City Manager Nate Pagan said he understands the two goals of DCPS during negotiations to be: making teachers whole, or offsetting the loss DCPS employees would incur with a higher occupational tax, and to benefit financially.
“We have made multiple offers to that effect, to which this point have not been accepted,” he said. “But negotiations have continued.”
Pagan said those offers have involved sharing the revenue that the City takes in from the occupation taxes of employees at the nine DCPS facilities as well as a portion of TIF funding from Gateway Commons, the site of the new Daviess County Middle School and potential site of Highland Elementary School. Pagan would not comment on specifics of those plans.
TIF — or tax increment financing — is a financing and development tool that enables city governments to self-finance redevelopment programs using the increased property tax revenue those improvements generate over time. But TIF reimbursements can only be used on public infrastructure, like a school, Pagan said.
Negotiations have not been confrontational, Pagan said, and said a lot of good discussions have been had over the last couple of weeks. But he said he is unsure if an agreement can be reached before 5 p.m. Tuesday when the second reading and a subsequent vote on the annexation ordinances will take place.
DCPS Superintendent Matt Robbins said he still has a lot of unanswered questions before he feels comfortable striking a deal with the City.
“The TIF is foreign to the board of education because we don’t deal in TIFs,” Robbins said. “It’s not something in our normal course of business we would encounter.”
Because the future DCMS site only partially sits in the Gateway Commons TIF district, Robbins questions if that determines the percentage of TIF money available to DCPS. Robbins also questions if TIF money passed to DCPS could even be used on a payroll subsidy, or would it come with the same restrictions that it does to the City of Owensboro, which can only use the funds on public infrastructure. He also worries about a cash flow issue should the state take an extended period of time to reimburse TIF dollars after construction of the new school.
“All of those things could be worked out,” Robbins said. “Theoretically, I think there are some prospects here, but if the answer to any of those questions become adverse to the board, at that point we could be in a bad spot financially, which burdens our taxpayers.”
Robbins said that initial discussions did not involve TIF reimbursement and before that was laid on the table it was difficult to make employees whole while also providing some incentive for the board to annex.
“Normally in these situations [annexations], there is some advantage to the taxpayer or property owner,” Robbins said. “Normally that’s not done at a zero return.”
Robbins said the last offer he received from the City offered a net gain to DCPS of $177,761 over 10 years as well the option to consensually annex Audubon, Deer Park and Meadow Lands Elementary Schools and College View Middle School. He countered with splitting the TIF revenue equally, offering DCPS a net gain of $1,027,500 over 10 years, keeping the option to annex the four additional schools. As of the close of business Monday, Robbins had not heard a response.
“It all comes down to how we share the TIF revenue,” he said.
In an email sent late Monday to City attorney Steve Lynn, board of education attorney Sean Land stated, “the City has failed to comply with the terms of its own ordinances and, should the annexation ordinances be enacted following second reading tomorrow, would deprive DCPS of basic due process.”
According to Land’s letter, the City cited KRS 81A.060, which states “any city of the first class proposing annexation shall hold at least two public hearings on the proposed annexation prior to the enactment of the first ordinance.”
“Regardless of whether the reference to KRS 81A.060 was intended (or simply may be claimed to be an innocent typographical error committed six different times), the City provided DCPS, its employees and the general public with notice of ordinances invoking statutes that reflect a need for a report required by KRS 81A.050 and multiple public hearings before adopting the ordinances at issue—none of which has occurred. The City should be held to the terms of its own ordinances,” Land wrote.
DCPS has retained Stites & Harbison for its potential litigation against the City should the annexation ordinances pass at Tuesday’s meeting.
