Flagler County schools, county government and Palm Coast are at odds over how to bill builders for new schools made necessary by a ramp-up in new construction.
In a sense, the dispute is insider baseball. It’s about a pending agreement between local governments and what it should say about how to collect school impact fees, the one time fee builders pay for every new house to defray the cost of new schools, roads, fire houses, and so on.
In another sense, the agreement will affect most families with children in public schools, because it will define the timing of the district’s new schools, which in turn may impact whether or not your child will be in a crowded school, a portable classroom, or a decent environment that respects the state’s class-size law.
None of this would have been an issue had the County Commission in May not voted to scrap a long-standing agreement with the school district on how school impact fees are collected. But developers were disenchanted with the agreement, which could require them to make heavier payments of impact fees at the front end of development than they wanted to. And state law has changed over the years, shifting burdens away from developers or reducing regulations that, until 2011, had favored school districts. The developer-friendly Flagler County Commission seized on the developments to rewrite the local school-financing rules, to the extent that it could through a new joint agreement, commonly referred to as an “interlocal agreement,” or ILA for short.
Friday morning, representatives from the school board, the county, Palm Coast, Flagler Beach and Bunnell are meeting in Room 3, on the third floor of the Government Services Building in Bunnell, to try to hash out what, at the moment, is the impasse between the district on one side and the county and Palm Coast on the other.
It sounds complicated, and officials involved speak as if it is, or claim it is. It is not. The only complications are the politics mucking up the otherwise straightforward dispute over details. What follows is an explanation of the dispute, the terms and the dollar figures involved, and each side’s interpretation of where it stands.
Scrapping a Long-Standing Agreement
In March, the county ratified the school board’s new impact fee of $5,450 on each new single-family home built. It was the first increase since 2005, when the impact fee, created at that time, was $3,600. The district wanted more. But a quirk in state law allows the county to stand in the way, preventing any new school impact fees from taking effect without the commission’s approval. The commission did, and forced the district to settle for less. It created some bad blood. That hasn’t gone away.
The new fee was only the first part of the district’s challenge. The second was created when the county scrapped the ILA in effect since 2008. That ILA ends on Sept. 1. The local governments are scrambling to write a new one. Most of it is not controversial, with the exception of one sticking point: when may the school district collect in impact fees: when a developer puts in an application? When a developer pulls a building permit? When the house is completed?
Developers, who have enjoyed an inordinate degree of power at the negotiating table thanks to the commission, want to back-end payments as much as possible. The school district wants to front-end payments as much as possible.
To some extent, the district has state law on its side, under what’s called the “school concurrency” law. School concurrency simply means that school districts and local governments work together to ensure that by the time new homes are built, there’s enough space in schools for the new students who come with those new homes (assuming they do: it’s been a false assumption in Flagler, where a majority of new homes have been bought by retired people without children.)
Concurrency is in place by state law since 2005. Before that, it was optional. The Legislature in 2011 diluted concurrency requirements again, making it easier for developers to go ahead with construction with fewer of the previous regulations enforced. A few years ago it also changed the timing of impact fee payments. Previously, the impact fees were all due up front. Now they may be paid at the time a building permit is issued, or in negotiated timing agreements with individual developers.
When a district has plenty of space in its schools, it’s not an issue. The district isn’t desperate for the money. When space begins to run out, it’s a different matter. Something called “proportionate fair share” payments kick in: a developer must pay up front a share of impact fees to give the district time to plan for new space, and stack up enough money to secure loans or bonds. The district is currently negotiating such proportionate fair share agreements, but there is no uniformity. Developers, for good reason, want uniformity and predictability.
But they still want to pay as little as possible, up front. Palm Coast and the county are proposing a 20 percent payment up front, reviving an old provision of the existing ILA called “capacity reservation.” They would then pay the rest of their impact fees in installments, over several years.
Fairness in Planning
The district is rejecting that approach. It is proposing a proportionate share approach that would have developers pay 40 percent up front, then 30 percent the second year, and 30 percent the third year. Palm Coast and the county have rejected that.
That’s the impasse, down to the way each side is characterizing the other.
“So far our perspective from the county is that we’ve got some resistance to change on the part of the school district,” Adam Mengel, the county’s development director, said, with the district believing that the previous agreement wasn’t broken and didn’t need to be junked, only tweaked.
“I don’t know that we agree that there’s no compromise available,” Chris Wilson, a lawyer representing Orange County schools, and now Flagler schools on the impact fee and ILA issues, says.
“My suggestion is to be a good faith negotiator in this process. We have room to improve on that part,” County Commissioner Andy Dance, a former school board member who will be at the ILA meeting, said toward the end of a special commission meeting on the subject today.
“They have asked for something that gave them a better timeframe so that they would see what the future had, and that’s why we had proposed the 40-30-30, because it’s something they’ve asked for,” says Patty Bott, the district’s coordinator of planning and inter-governmental relations.
Bott said the district has to look ahead three years to ensure capacity. Otherwise, the district would have to install portable classrooms until it had enough money to build a school, defeating the purpose of concurrency. There are current needs ahead for new schools, including projected needs for a middle school and a high school in about four years, plus an expansion of Matanzas High School in the works.
“Currently the total amount for these schools is like $175 million over three years, based upon the developments that are in the pipeline right now,” Bott said. “If we had proportionate share, we would collect $53 million over those three years. If we have the 20 percent capacity reservation, we would collect $13 million. $13 million is not enough for us to guarantee your bonding.” (Those numbers are based on “however many units are proposed over the next three years that could be built out,” she said.)
She added: “Our current ILA says each of the communities will collect 100 percent of the impact fees upfront from a developer, and we haven’t asked that to be done. But that’s what the current ILA says. And we will have proportionate fair share. So the fact that there’s capacity reservation, there’s nothing in statute that says how the school district has to use it. Proportionate fair share is the only thing that really protects you, the developers and the community.”
The County’s Proposal
The alternative proposal was developed by Assistant County Attorney Sean Moylan, a graduate of Flagler County schools and a former teacher in the district who still has genuine sympathies for the district. But he also operates with Cartesian rationalism. Moylan is spearheading the county’s effort to rewrite the ILA.
Moylan is skeptical of the district’s ambitious school-construction plan. “They’re showing the amount of money they need to build two schools and they have a middle school and a high school identified, I believe in year four, or maybe five of their capital plan. Is that realistic? Can we build two schools simultaneously?” he asked. “Is that financially feasible? Is that something that we should be trying to impose on ourselves?”
If that wasn’t standing district officials’ hair on end, this did: “And so we would have a time period of portable classrooms around our schools while there until we hit a critical mass till there’s enough students and enough funding to create that new school that will be needed. That’s just the reality of our local rules and the state statutes.” In fact, the portables are already here, as anyone driving by the Buddy Taylor Middle School campus will have noticed this week.
He stressed that in the end, all the impact fee money will be in the school district’s hands. The issue is timing and method. “Consistency and uniformity, predictability was one of our main goals here,” Moylan said.
Even Dance, the district’s biggest ally on the commission, agrees. “What I’m looking through this process is something that’s more predictable and easily calculated, and there’s trust built into it,” he said. “I’m not stuck on any percentage. I think that needs to continue to be negotiated but the system that Sean’s put in place is viable at this point.”
Dance’s point, favoring capacity reservations: there’s inequity when the district charges developers a proportionate fair share only when the district’s schools are at capacity, a cost that developers who build when the district is not at capacity don’t have to pay. But with a reservation system, all developers pay a share up front, regardless, eliminating that inequity.
Beyond uniformity, clarity and predictability, the reservation system is easy to implement and it removes second-guessing from the equation, as Moylan sees it. “We would not no longer have to look with a skeptical eye at numbers that the school district staff are putting forth when it comes to student generation capacity, whether those numbers are valid or not,” he said.
“The idea of having a 20 percent reservation fee in place is that the schools would be getting a more consistent stream of revenue, instead of waiting until they’re over capacity and at a bit of a crisis to get a larger chunk. That’s the underlying premise,” Moylan said. That would be in place whether the schools are over capacity or not. Either way, the amount the district takes is then credited to the developer’s impact fee bill. “This is rational because we need to prepare for future school facilities. We don’t want to be in a position like we were in the early 2000s and and therefore getting this more consistent stream of revenue is going to help the school system with their long term planning.”
But Kristy Gavin, the school board attorney, sees a misunderstanding of what capacity fees accomplish. “Reservation fees,” she said, “are setting forth that we have capacity at a school. You are reserving your spot to guarantee the prospective homeowners moving into your community that slot at that school. That is what you are reserving. You are not mitigating the overcapacity issue at a school.”
Palm Coast Sides With the County
The school board at a meeting considered the county’s proposal and rejected it. Moylan was at that meeting but was not invited to present the county’s position. “It seems like not a fair presentation to the school board at that meeting,” Dance told Gavin. “I have a problem with that, whether you presented it accurately or not. If they had questions, they should have had somebody who developed that system to be able to present,” meaning Moylan.
But that’s no longer relevant, since the battle lines are drawn. Tuesday evening, the Palm Coast City Council appeared closely aligned around the “capacity reservation” plan. But like county commissioners, there was not as much agreement over the length of time those payments could be stretched–whether across three, five or 10 years.
“I don’t think you should pay for something until you’re at the point where you do have to pay for it,” Council member Ed Danko said, finding the 40-30-30 approach “very steep.” He favored a 20 percent approach spread over five years, or as building permits are issued. But the analogy falls short, as it is closer to letting a merchant pay the supplier for wares only when those wares are sold at retail, not when the merchant gets them wholesale, which (the economic untenability of the analogy aside) then denies the wholesaler the ability plan.
But Dance says the discussion overuses the term upfront–or at least doesn’t define it, creating a false impression. “When a developer submits the site plan and gets a site plan approval, that kick starts a process,” he said. “It takes about two years for that process to go through their site plan approval, their preliminary plat and a lot of the discussion, and these approvals don’t kick in until final plat and they’re eligible to pull a building permit. So that’s about two years of process.” Developers, in short, are not made to pay immediately when their plans are approved.
The different sides could well fail to reach agreement Friday. There’s disagreement between the same two camps over what might happen if the impasse continues and the county just pulls out of the ILA, with no new one in place.
Fears of development coming to an end in the absence of an agreed-upon new joint agreement, or ILA, are somewhat misplaced, Palm Coast City Attorney Neysa Borkert said. “There would need to be a number of things that would have to occur for a complete halt to development to happen across the county,” she said. “It wouldn’t be something that happens immediately with the termination of the ILA on the county’s behalf.”
Moylan agrees, and notes: “If the county does not agree to a form of concurrency, as I read the statute, that means there is no concurrency for schools in all of Flagler County, including within the municipalities,” he said. “The issue of concurrency depends on the county being on board.”
The school district’s Bott disputes that interpretation. “When you have a new development come in, you make sure you have the roads, you make sure you have water and sewer before they can start building. The school board needs the same thing. We need to be able to plan to build, we need to be able to do site prep, we need to find land, buy land and move forward with it. We can’t just wait until the money comes in later.”
Dance said the discussion overuses the term upfront–or at least doesn’t define it, creating a false impression. “When when a developer submits the site plan and gets a site plan approval, that kick starts a process,” he said. “It takes about two years for that process to go through their site plan approval, their preliminary plat and a lot of the discussion, and these approvals don’t kick in until final plat and they’re eligible to pull a building permit. So that’s about two years of process.” Developers, in short, are not made to pay immediately when their plans are approved.
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