Opinion: Avossa Misleads Public on Charter Funding Law

This article is an opinion piece.

Superintendent Robert Avossa of the Palm Beach County School District; image copyright Warren Redlich

A few days ago the Palm Beach County School District issued a misleading press release. The release falsely suggested that recent state legislation could negatively affect the district’s credit.
It led with this big headline:

HB 7069 Could Result in Credit Downgrade

This headline was followed by this opening sentence:

Stable credit ratings for the School District of Palm Beach County and other large school districts could be at risk …

Referring to a recent statement by Moody’s, a credit rating agency, Superintendent Avossa was quoted in the press release:

“This independent analysis by Moody’s highlights one of our real concerns with this new law – the financial effect that it will have on our District, and on school districts throughout Florida,” said Dr. Robert Avossa, Palm Beach County Schools Superintendent.

These scary statements are objectively false when it comes to our school district. Even if the claims are true that the district would lose $230 million to charter schools over the next 10 years, that number is dwarfed by the $1.3 billion the district claims will be raised by the so-called Penny Tax that was approved by voters in November.
Moody’s most recent rating of the district was in September of 2016, meaning any reevaluation of the district’s credit would take into account a net gain of over $1 billion.
It is true that Moody’s suggested the charter funding law could affect credit ratings for some districts. But that statement did not take the Penny Tax into account. Avossa and the district staff all know about that tax increase and that there is no credit rating risk for our district.
We contacted the district to give them a chance to explain and defend this. The response from Leanne Evans, Treasurer is below. We do not find this satisfactory but readers can form their own conclusions.

HB 7069 requires the District to share the capital outlay tax revenue on a per student basis. The calculation takes the full amount of the capital tax revenue then deducts the amount the District needs for debt service (principal, interest and fees) based on debt outstanding on 3/1/17. The District’s capital plan assumes the taxable values will increase annually at an average of 4.5%, so the base amount to be shared will increase annually. At the same time, the District is paying off debt so the amount of debt service will decline. With those two variables, the amount we expect to provide to charters will range from $10.6 million in FY18 up to $32.7 million in FY27. The expected loss of $230 million over ten years assumes the percentage of students attending charters in Palm Beach County remains constant. If that percentage changes, the amount transferred to charters will also change.
The sales tax is dedicated to specific projects over the next ten years. Most of the sales tax money will be used for deferred maintenance and school buses. It will allow us to catch up on work that was postponed during the financial downturn and when the legislature reduced the District’s taxing authority by 25%. There is other work in the District’s capital plan that was to be funded with other funds, mainly local property taxes. This includes ongoing maintenance work so the sales tax would not be needed at the end of 10 years. The loss of $230 million is significant and will jeopardize that plan. The District is working to revise the capital plan and clearly identify the reductions that will be needed due to HB 7069.
Moody’s Investor Service issued the comment to advise investors of the challenges that all Florida School Districts will face due to HB 7069. The revenue stream used to make debt service payments is now less predictable. Additionally, they are concerned about the ability to provide the ongoing maintenance, technology and transportation for students. As revenues are reduced, they consider this to be “credit negative” just as an individual’s credit score may be reduced if they experience a pay cut. However, in a similar way an individual could use financial companies similar to Nova Credit (learn more here) to help build their credit, there are ways for us to build our own so we are not affected by any negative credit that may come our way. The School District of Palm Beach County is fortunate to have the support of the community, as demonstrated by the approval of the sales tax. We expect Moody’s and the other rating agencies will take that into account when they review our credit rating later this year but also expect they will question our ability to properly maintain our buildings when the sales tax expires in 2026.

We also reached out to West Boca’s school board representative, Frank Barbieri. We were told he was unavailable for comment.

Sales Tax Increase? Avossa and Berger Speak

Superintendent Robert Avossa of the Palm Beach County School District; all images copyright Warren Redlich, free to use by crediting West Boca News.
Superintendent Robert Avossa of the Palm Beach County School District; all images copyright Warren Redlich, free to use by crediting West Boca News.

School Superintendent Robert Avossa called for increasing the sales tax at the West Boca Community Council meeting on Tuesday. He drew one of the biggest crowds we’ve seen to one of these events. It was standing room only and we were told 120 people came out, though that number was inflated a bit by the number of school district employees present.
Avossa was introduced by West Boca school board member Frank Barbieri, who invited us to the event and spoke with us at some length.
The idea of increasing sales tax at the county level hit the news about a week ago, covered best by the Palm Beach Post a week ago and also yesterday. Avossa described it as a half-a-penny tax, but in reality the proposal being worked on is to increase the sales tax rate from 6% to 7% in Palm Beach County. If you spend $10,000 a year it’s another $100 out of your pocket, or $200 on a $20,000 car. Half of the increase would go to the school district and the other half would go to other governments in the county, but mainly to the county commission.
According to Avossa this would generate an additional $900 million in revenue over the next 10 years. He spoke generally about where the money would go, including infrastructure improvements and technology in the schools. In particular he mentioned the idea of providing a tablet device to every kid with their school materials on it so they wouldn’t have to carry around heavy backpacks. However, there is no detailed plan yet for the money. We asked him directly after the event was over and he hopes to have a plan released sometime in March.
Avossa stayed around and talked to a variety of people, including this reporter. He had a delightful moment with a boy from Eagles Landing Middle School and also chatted with several adults.
After Avossa, we heard from Mary Lou Berger, who serves as both the county commissioner for West Boca and as mayor of the county. She also spoke in favor of the sales tax increase. Her numbers were a bit different, saying it would generate roughly $750 million over 10 years rather than the $900 million Avossa said.
Mary Lou Berger
Mary Lou Berger

Asked why voters should trust that the money would be spent as they say it would, both Avossa and Berger seemed offended and insisted that there would be processes in place to ensure it. Berger said there is a detailed plan on the county website but we haven’t found it yet. There is a discussion of spending plans in the Sun-Sentinel.

Update: Thanks to a reader we can point to this page on the county website, though we don’t think it provides clear answers. We did ask Avossa, Berger and others for comments on this article but have not heard from them as of this writing.

One big contrast between the two is what happens if voters do not approve the increase. Berger said the county would just raise property tax rates instead, and that would not require voter approval. Avossa does not have the power to do that for the school district and he did not have much of an answer as to how the district would handle such a defeat.
We did not get a chance to ask Berger whether sales tax is a better way to raise revenue than property tax. Economic theory would suggest that sales tax falls harder on the poor and lower middle class than sales taxes, especially because the poor tend not to own real estate. One might think a liberal Democrat would prefer property tax but again we didn’t have a chance to discuss that with her.
The audience was very receptive to all the speakers and seemed supportive of the sales tax increase. We were told that polling data indicates the county voters would vote for an increase. It also seems like good timing. The vote would be at the same time as the presidential election in November, which usually means a strong Democratic voter turnout.
Update: The school district responded and suggested reading the following pdf, which is what Avossa presented at the meeting:
[gview file=”https://westbocanews.com/wp-content/uploads/2016/02/Referendum-and-FCA-Presentation_2_3_16.pdf”]
They also suggested watching the video of the school board discussion from February 3rd. It’s at this link for recorded school board meetings, labelled February 3, Special Meeting 3.
Screen Shot 2016-02-11 at 5.02.09 PM
Avossa’s strategic plan for the district is below:
[gview file=”https://westbocanews.com/wp-content/uploads/2016/02/FINAL_ENTRYPLAN11-5-15.pdf”]