Daphne city leaders received the results of a study for the possible creation of a Daphne city school system Monday evening, which showed the city would likely have to raise additional millage or other tax revenue in order to support its own system.
Whit Colvin and Suzanne Freeman with the Criterion Group presented their findings to the Daphne City Council, who had been eagerly awaiting the results.
The start up budget for a potential Daphne school system one year before enrollment started is estimated to be approximately $5.3 million, which does not include any capital improvement funds or building cost estimates for amenities like a bus garage or a central office building that the system would likely need.
“There’s a lot more leg work and you start bringing people on slowly,” Freeman said. “It’s like a startup. The bulk of the budget is personnel and slowly phasing in a central office.”
Freeman said those projections were somewhat variable in costs, especially in areas like technology.
“Technology is one of those hidden expenses in running your school system,” Freeman said. “A lot of it depends on what technology your students have.”
Freeman warned the council that included in the startup costs would be payroll for the system’s teachers, which would have to occur before the newly created school system would receive funds from the state.
The study showed the Daphne schools would have an average daily membership (ADM) of 4,100 total students, with 3,629 of those being actual Daphne residents. The study projected a total of 3,728 total students for the potential Daphne city system.
The city of Daphne currently has 15 mills, with a value of slightly more than $400,000 per mill. Daphne’s portion of the countywide sales taxes collected could possibly be around $9.2 million per year.
The potential Daphne city school system would also likely inherit a total debt service of more than $43 million, which could be paid back by 2037 based on projections in the study.
In addition to the $5.3 million in potential startup costs, the city would have to raise an additional 9.1 mills to meet basic operational needs for the system and to establish the minimum one month reserve balance required by state law.
“The City of Daphne would need to provide the equivalent of 2 mills of taxation or other revenue source on an ongoing basis to successfully operate a baseline school system and the equivalent of another 7.1 mills to establish the minimum reserve required by law,” the study said.
Though the study said the needed revenue could be raised by a mechanism like additional sales tax, Criterion Group members urged against that source of funding as it could be more susceptible to economic downturns.
The study said the projected costs do not include provisions for an Extended Day program and rising costs for special education programs.
The study recommended a potential Daphne school system keeps a two to three month reserve balance, which would cost an additional $5.7 million.
Also not included in the projected costs are capital projects to address the high levels of growth that are coming into the city, including the newly approved 914-home development of Jubilee Farms recently annexed into the city.
“We believe there will be an expectation from the citizens of Daphne to compete with surrounding communities in terms of facilities, including the eventual expectation of building a new high school and substantially improving athletic facilities,” the study said. “As it stands now, there is no adequate revenue stream with which to do so.”
The study recommends an additional 6 mills of property tax to accomplish that goal, which would generate over $2.3 million per year.
With no additional taxes levied, Daphne would receive $780 per student less than they are currently receiving as a part of the county school system. Students in a potential Daphne school system would be receiving $2,000 to $4,000 less per student as compared to some of the state’s “top performing” city schools.
“Even though Daphne City Schools would be ranked seventh in per pupil revenue, the system would receive less revenue than the schools are currently receiving through BCBE unless the City of Daphne increases taxes and/or creates additional revenue streams to make up for this difference in the half percent sales tax,” a Criterion official said.
With regards to the buildings that Daphne could inherit from the county system, Criterion officials said the schools would like need an additional $1.6 million in upgrades and repairs.
The Criterion Group said the city’s potential school board could have tough decisions to make on the system’s finances from the beginning.
“In order to maintain the level of service currently being provided by Baldwin County, the City must be willing to provide significant funds toward the start-up of operations,” the study said. “In addition, the new school board must be willing to make personnel cuts of almost 10 percent of its certified staff and either additional revenues must be provided or expenses reduced to make up the recurring budget deficit projected each year. To achieve a ‘top ten’ school system, even more will be required.”
Freeman told the council they had to be willing to create the system and wanted to make certain they were aware of what it would take to create a system.
“Once you create a school system, you can’t hand it back to Baldwin County,” Freeman said. “We want you understand the commitment required here. If you’re not all on the same page, there may be trouble.”
Freeman asked the council if there were ways that the city could possibly work with the county system to partner and address issues within the Daphne schools or ways to improve quality within the feeder pattern.
Councilman Douglas Goodlin questioned some of the data used in the study involving approved subdivision lots and new apartments and townhouses that would skew the numbers on residents feeding into the system.
“That’s people that are living here that are sending their children to Daphne schools,” Goodlin said.
“I’m getting the data here, but your demographer didn’t include that data in here. I feel your demographer didn’t do due diligence to really figure out what was going on in Daphne.”
Freeman said the demographer checked over the numbers and they had a conversation about it, but that the new construction was only a part of the ratio used.
“He really uses the history and the birth rate to predict it,” Freeman. “It’s part of his formula.”
Goodlin also questioned about what happened with subdivisions and communities outside of the current city limits that might likely ask to annex into the city.
“The prevalent thought is that you will have subdivisions that will want to come in,” Colvin said. “They’re already zoned to your schools, so they may ask to come in. However, there may be some areas that are zoned to other areas that say they do not want to come in. That complicates matters a bit.”
Goodlin said he felt the lack of considering those items skewed the ADM amount calculated, which could change other portions of the study in a more favorable way for the potential city system.
Goodlin also questioned projected costs for central office support staff, saying using Baldwin County numbers were problematic since the pay scale for a five-school city school system would probably be less than salaries paid to people working in the 43-school Baldwin County system.
Councilman Joel Coleman questioned whether any of the Top 10 systems Daphne was compared to had done any developmental impact fees to help with the schools, with the Criterion Group saying they were not aware of any municipality in the state that had created a mandatory fee.
Councilwoman Tommie Conaway questioned Criterion about the potential loss of 10 percent of the teachers, which the Criterion officials said would be a part of negotiations with the county system during a potential split.
“It’s your responsibility to either pay those extra teachers or you can reduce your force,” Colvin said.
Council President Ron Scott questioned whether a possible millage increase would require a vote of all Daphne residents, which counsel said it would. Goodlin told Scott a simple sales tax increase could also be used to make up the amount needed in lieu of a millage increase.
Davis said he definitely didn’t feel comfortable with any kind of tax increase on the city’s residents.
“I wasn’t put on this council to raise taxes or create a city school system,” Davis said. “There are other ways we can make our schools better without going to this kind of expense.”
Mayor Dane Haygood said there were a lot of variables to deal with on this issue for the council to discuss with Daphne residents.
“There’s going to be a lot of variety of opinions on how to fund this, which I’m going to step away from,” Haygood said. “I think having the people make that decision is going to be critical. I guess I just want to take a little bit of the passion out of that discussion on where the funding is going to come from and just look at the facts and get community input.”
Haygood said the council needed to make a strategic decision going forward that would likely take some time.
“This is going to saddle this body, my office and some of our other staff pretty significantly,” Haygood said. “It’s important we’re reflecting what the community wants and make sure we aren’t making a biased decision.”
Scott said he felt a number of citizens felt the current system was fine.
“The input I’m getting from the people I talk to is that we don’t have a broken system,” Scott said. “They’re happy with the Baldwin County system.”
Scott said the council split 5-2 to even fund the study and that the council would place possible funding for a Phase II study on the council’s agenda for next week.
“I do know this - you’re going to have to raise taxes if we go forward with this,” Scott said.
