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Weighing risks: County to consider school lease

Update: The Washington County Commission has received the lease agreement from the Town of Jonesborough. A called meeting for the county commission to consider the lease will be held on Thursday, Oct. 17, at 6 p.m. at the justice center in Jonesborough.


Staff Writer

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This week, the Washington County Commission will have a lease agreement from the Town of Jonesborough, ready for a signature and approval for the next step towards a new Jonesborough K-8 school.

The county was slated to receive the proposed lease agreement from the town on Tuesday. The agreement includes two leases, one for the school building and the other for the athletic and recreational facilities. As of press time for the Herald & Tribune, the town and its legal counsel were still working on the details of the lease.

“I do feel good that the lease that we’re going to put before (the county) will be something that the commissioners are going to like,” Jonesborough Mayor Chuck Vest said. “It might (include the same annual lease payment amount) we’re talking about or it might have some savings in there. We’ve just got to see how that turns out.”

Vest said the town is aiming to lock in the lower interest rate, which has now been set to three percent as of Oct. 1, but is subject to change by the first of the year.

“We need to take advantage of (the lower rate) because what goes down can go up,” Vest said. “The sooner we can get our application in and lock that rate down, the more we’re able to capture those savings we’re talking about.”

First, the commission has to approve of the lease.

The county commission held a workshop on Monday, Oct. 1, to hear from CPA and audit partner, Melissa Steagall-Jones with Blackburn, Childers and Steagall as well as the county’s legal counsel for the project, Culver Schmid of Baker Donelson.

The county, according to Tennessee Code Annotated 49-3-315(a), is required to share tax funds for operation and maintenance purposes with the city school system. But because the school project would be financed by the town, which has no such requirement, the plan does not include shelling out shared funds to the city school system.

Schmid told the commission there is a risk that the county could be sued over the project, but that a case within the past five years in the Tennessee Court of Appeals provided a guideline for this type of issue.

“The Tennessee Court of Appeals ruled on the statute and created some pretty good guidelines as to how to comply with the obligations related to apportionment,” Schmid said. “Every case is different and supreme courts change, but from a legal standpoint, that’s pretty good guidance on what you can do as it relates to that issue.”

Schmid also said as long as the county’s lease payment dollars are used for capital improvement needs and not for operation and maintenance purposes, the county should be able to legally move forward with the plan.

“The apportionment of tax levies required by law can be avoided so long as the county’s rent is used to directly or indirectly pay only for the cost of the school capital improvements, such as the purchase of the land or the construction of the building,” Schmid said. “In working on this lease, we have tried to very clearly state that rent coming from the county is going towards capital improvements. There still may be some parts in the facilities lease that won’t be all capital improvements. Those monies would be subject to apportionment if they go to operation of maintenance.”

Commissioners Suzy Williams and Larry England asked if there was a way to extend the amount of years in the county’s lease agreement with the town, as England explained, “to share some of (those dollars) with the city.”  The 20-year lease, when proposed by the town, was set at $2,362,000 a year, but Stegall-Jones said if the lease is extended out to 25 or 30 years at the current rate, there could be more available dollars.

Town and county officials have maintained that the plan would not include a tax increase, but Commissioner Kent Harris asked if that could change in order to aid Johnson City Schools in their school project needs.

“It’s been said we can fund this without a tax increase if we move forward on what Jonesborough has presented. That’s been one of the points for me,” Harris said. “There’s no way we can (give Johnson City money for a school project) without a tax increase. What I’m trying to do is look at what’s best for the taxpayers. I don’t like the idea of tying these (projects) together. Can we come up with a figure without a tax increase?”

Washington County Mayor Joe Grandy said a tax increase is one possible risk.

“You’ve listened to almost an hour of potential risks in the project. The first of which is if we wind up sharing money, essentially $30 million for Johnson City Schools, which is roughly the same amount of money we intend to pay with this Jonesborough School. If you wanted to put that in the form of tax revenue, it would create a tax increase of about seven cents, roughly, in order to furnish that money to the city of Johnson City — whether or not it’s upfront and we just do it or whether or not it’s deemed required by the courts.

“If we double the money, it’s going to have to come from some place and it’s not within our budgetary means to do that.”

The county is planning to schedule a called meeting on or before Oct. 17 to decide on the lease. That meeting is yet to be set.

Meanwhile, the county school board, which also had a meeting on Monday, Oct. 1, voiced its concerns about not seeing the lease again before it could be approved by the commission.

In the lease agreement, the town gets the final say on the total cost of the project and the design, which will be created by a committee comprised of members from all three bodies. Vest said he wanted to ensure all three entities that those voices are crucial in the process.

“We really want to make sure the school board and the county commission, especially the school board, realize this needs to be a true partnership” Vest said. “We want to make sure the school that gets built that they’re 100 percent comfortable with it. I want them to know we want them to be included in that decision of how well that school’s built.

“We think it’s going to end up being a good process. We talked about there needing to be some trust between the school board and the county. I think once it’s all said and done, they’ll realize the trust that we gave each other has been worth it.”