City Sues MCS For $152 Million In Debt Service Bonds There appears to be a dilemma where one lawsuit deserves another.
About a month ago Memphis City Schools issued a lawsuit to recoup $66.2 million in money they proposed to Memphis City Government.
Now the city is suing MCS for $152 million in debt service bonds that the city had to give funds to the local school district. The debt was initially $217 million and was reduced to $68 million based on what MCS has paid to clear the debt.
City Council Attorney Allan Wade filed the lawsuit. The debt includes money that was used to build schools as well as install air conditioning in other schools. The city would withhold tax revenues it gives to MCS to cover the debt unless the school district wants to pay more than $152 million in cash.
Wade said that the MCS charter states that the school system can borrow money from the city for capital projects as long as the school district pays off the loan. The result of nonpayment gives Memphis the authority to withhold money from MCS via a tax levy at 85 cents per $100 of assessed property value.
"What their charter says is they can borrow money for capital purposes from the city,” said Wade. “But they must repay those loans and if they don't, the city has the authority to withhold it from any tax levy that we levied on their behalf."
The two local entities already were expected to be in Shelby County Chancery Court on Thursday in regards to the lawsuit filed by MCS.
In May 2008 the Memphis City Council pulled the plug on giving tens of millions of dollars to Memphis City Schools. For more than two decades the City of Memphis has given a sizeable amount of money to MCS. The proposed amount has escalated from millions of dollars to tens of millions of dollars.
This year MCS officials proposed the city give more than $93 million to the school district budget.
Majority of the city council during its final budget plans opposed giving the full amount, believing the city is not required to fund the school system. The council voted 10-3 to give MCS $27.3 million; $15 million in debt forgiveness; and $7.1 million in other city government resources.
Council members voting for the ordinance a couple of weeks ago were: Bill Boyd, Harold Collins, Shea Flinn, Edmund Ford Jr., Janis Fullilove, Wanda Halbert, Reid Hedgepeth, Myron Lowery, Scott McCormick and Morrison. Joe Brown, Jim Strickland and Barbara Swearengen Ware voted against the measure.
The overall proposed budget for MCS is $931, including $38 million from the school district’s reserve funds.
According to state law each county is responsible for public school funding. That would mean Shelby County government is the primary source to oversee public schools throughout the entire county, including the Memphis school district.
The Tennessee Department of Education has said it would withhold $423 million earmarked for Memphis City Schools if city funds for education are not restored. The state said that the city’s approval of reduced school funding would violate Tennessee’s “Maintenance of Effort” requirement, eliminating the hundreds of millions of dollars in education funding from the state.
State department officials in Nashville said they have marked October 1, 2008, as the deadline to withdraw the funds.
Students, parents, MCS administrators and others have made their way to City Hall to make pleas, urging the city council to recant it plans to reduce funding to MCS. The MCS Board of Commissioners have conducted special meetings to discuss legalities and losing a combined total of more than $480 million if the state chooses to hold on to its bigger share of the funds.
Based on the current issue MCS has developed an emergency operations plan, which accounts for the $66 million in funding. All school district department budgets would be cut by 10 percent.
MCS board officials said that “learning will be impacted by the reduction or elimination of new classroom computers, textbooks for social studies classes, district-funded Early Childhood programs, Driver’s Education and Adult Education programs. The number of instructional support personnel, counselors, social workers, psychologists, librarians, school clerical substitutes and hall monitors would also decrease.”
