Consolidation? Bankruptcy? What is the solution to PISD finances?

Posted on Aug 21, 2012 in Paris ISD by Jeff Parish

By Jeff Parish
eParis Extra!

Finding a long-term solution for Paris Independent School District’s financial woes may well require some serious outside-the-box thinking.

“In the long term, if it were up to me, we would start talking about county-wide consolidation,” school board President George Fisher said during Monday’s hearing on a proposed 3-cent tax increase.

Paris ISD may even need to consider something like bankruptcy, Realtor Jim Bell said. Bankruptcy would require another district to pick up the district’s debt, he said. Consolidation would mean sharing revenue, resources and debt in the new, larger district.

“Folks, y’all are in trouble,” Bell told the board.

Trustees tabled action on the tax rate until after a Sept. 5 session in which the trustees plan to take a look at long-term needs for the district. Action on the tax rate should take place on Sept. 10 or 17, depending on when all the board members can get together.

The increase is for debt service, what is called interest and sinking. If the proposed rate of $1.455 per $100 of appraised property value, $1.17 is for maintenance and operations.

PISD can raise revenue by increasing taxes or increasing its tax base, Trustee Jenny Wilson said. She noted there are only about 100 districts with a higher rate than Paris ISD, and tax hikes didn’t seem to present a long-term solution

“Aren’t we going to keep creeping up our tax rates?” she asked. “That drives out businesses and drives away home buyers.”Looking at real estate transactions, most of the sales and development is north of Paris, not in the city, Bell said.

“You’re priced out of the market. It’s as simple as that,” he said. “Your business is going out of the district. Your business is going out of the city in most cases.”

Paris has an open school district, which means students an live anywhere and go to school there if they want, Bell said. Others, such as North Lamar, are closed and require students to reside in the district. He said a lot of families choose to live somewhere with a lower rate, like North Lamar, and send their children to Paris.

“We’ve all seen the math. All the businesses and industry are located outside our district. It’s not bad luck, and it’s not coincidence,” Wilson said. “We’re basically pushing those businesses away.”

Most major industries are outside PISD’s boundaries, including Kimberly-Clark, Campbell Soup, the old Sara Lee plant, We Pack and Daisy Dairy, Superintendent Paul Trull said. Paris Regional Medical Center is moving most of its operations to the north campus – which is in North Lamar’s district – and minimizing south campus.

“I would entertain any suggestions about how we get industry in, but we’ve got to pay our bills,” he said.

Not that PISD has any room for industry even if one decided to move here, Bell said. The landlocked district lacks the space required for a major manufacturer. Its best bet is likely commercial projects.
PISD’s tax rates hurt multifamily development, as well, Bell said. He said he’s invested in apartments, but there hasn’t been a new one built in some time.

“This tax increase is one unit I can count on being empty one month,” he said.

Another rental property owner, former Mayor Michael Pfiester said the various taxes in Lamar County mean he no longer makes any money on his properties. He added that many taxpayers can’t afford any more, either. He said he’s seen tenants have to choose between rent and electricity.

“These are the same people you are talking about when you say, ‘It’s only $30,’” Pfiester said. “I don’t think you grasp what $30 or $40 or $50 means to some of these people.”

Wilson said the board should have spent more time looking at spending cuts rather than tax increases. For example, why not look at selling the administration building and moving the offices to the junior high?

“We have a junior high with two grades that was built for four. Don’t tell me there’s not room over there,” she said. “We have not talked about big spending cuts.”

There’s no guaranty it would save money given the costs involved with such a move, said Dr. Bert Strom, board vice president. Even if it did save money, PISD has to make sure it can pay its bills the next year, he said.

Wilson also suggested looking at efficiency improvements in busing and other areas. Robert High, assistant superintendent for human resources, said PISD has looked at outsourcing buses and food services like it has custodial services, but the contractors couldn’t do it as efficiently as the district could.

“Eighty percent of our expense is people,” he said. “The only way you’re going to reduce spending the way you’re saying is to reduce people.”

Prior to the 2007 bond election, PISD conducted an extensive facilities study, said Mark Hudson, deputy superintendent of curriculum and student services. It helped to maximize the use of the district’s buildings.

Paris gets an average of $4,940 per student for its $1.17 operational tax rate. Some districts with rates as low as $1.01 get more than $8,000 per student.

Fisher said the funding system “discriminates” against school districts compared with other taxing entities, such as cities or counties. Which is why PISD is one of the leading school districts in a lawsuit against the state seeking a more balanced approach to school funding. Trial is set for Oct. 22.

Historically, PISD’s tax rate has been much higher than it is today. The district hit the state’s tax cap in 2001 and remained there for five years. The rate reached its high point in the 2003-2004 school year at $1.605. Revenue was frozen in 2005 and dropped 13 cents to $1.452 the next year. It fell to $1.325 by 2009, then jumped 10 cents the next year. It’s proposed to go up 3 cents for the 2012-2013 year to $1.455.