Developments Could Stall If County, Cities and District Can’t Agree on School Construction Payments

The issue has been festering for months, triggered by an unusually belligerent stance by the county toward the school board, starting with a confrontation over impact fees almost a year ago. A new point of contention emerged this morning: county and city officials were suggesting that the district could borrow money for school construction by bonding revenue from property taxes, rather than from impact fees.

That would shift the burden of new school construction from developers and homebuilders of new homes–and therefore, mostly new residents–to all existing residents and businesses, some of whom would end up being double-taxed since they’d have already paid their share of passed-down impact fees in the past for schools their children attend today.

School officials pushed back hard against that shift at a meeting this morning of elected officials from all four governments. That meeting did not alter fundamental disagreements–either about the source of bonds or about how to collect money from developers.

If the Aug. 31 deadline passes, a joint agreement between the district and local governments that has delineated financial “concurrency” rules between development and school construction will expire, because the county, pushed in large part by Commissioner Joe Mullins, a staunch ally of developers, wants out. Concurrency–the regulation that ensures there’s enough space in schools to absorb new students generated by new development–would end.




If that happens, the district is warning that local governments would have to withhold approval of some new developments, creating a cascade of delays–or litigation.

Officials agreed, however, to direct a working group of administrative level representatives to address questions that could help break the impasse. The group meets on July 20.

Currently, the district and the local governments are operating under an “inter-local agreement,” or ILA (which just means joint agreement) that sets out if and when developers must pay the district so-called mitigation or “proportionate fair share” fees before new developments are built. Those fees are payable only if the district is out of space. The money is then directed to building the school that alleviates that space. Whatever the developers pay is then credited to the impact fees builders owe. In other words, the proportionate fair share money is an advance on those impact fees, which must be paid one way or another. But they are generally paid when the house goes up, not when it’s planned. The district needs the “proportionate fair share” money ahead of time because planning for its schools takes a long time, and it must have enough money set aside to back up its bonded money.

In a proportionate fair share scenario, the district wants to charge developers 40 percent of the money owed up front, 30 percent the second year, and 30 percent the third year. It’s already doing so, based on different percentages, but negotiating separate arrangements every time. Developers want a more standard approach. The district is willing. So it proposed the 40-30-30 approach.




Developers, speaking through the Flagler Home Builders Association, oppose that approach. They want to pay no more than 20 percent up front, with a five to 10 year window to pay another share, or with the rest, in impact fees, coming in when the houses are built. The 20 percent figure was literally pulled “out of thin air” by Assistant County Attorney Sean Moylan, in his words. He is leading the county’s side of the working group. The 20 percent, he said, was to be a starting point of discussion, not a final proposal. (He had actually initially proposed 50 percent to the school board, with the rest payable within six years or 66 percent of a project’s build-out, but the district refused that offer, it’s not clear why.)

But the 20 percent figure stuck with Flagler County, Palm Coast and Bunnell government. Only Flagler Beach still favors the district’s approach. The three other governments are calling their approach “capacity reservation.” (Flagler Beach was not at the table. Flagler Beach Commission Chairman Ken Bryan joined by phone to lay out the city’s position, but did not stay on the line for the rest of the meeting.)

The 20 percent approach is not concurrency, the district says, and the math wouldn’t work with mere capacity reservation: the district would not stack up enough money that way to back up its bonds.

“By paying me 20 percent of what that cost is,” says Patty Bott, the district’s coordinator of planning and inter-governmental relations, “I have a difficult time doing that. So it’s not concurrency, whatever you’re coming up with. If it’s not totally 100 percent, it is not concurrency. You’re doing away with concurrency, and basically giving a hall pass to all new development, because that’s what we’re doing to the public.” She said none of the surrounding counties do the 20 percent approach. “This is not something that we’re trying to stand out or be different. All the developers know that, they’re used to doing that.” It is, in fact, what’s in place now, if with less standard rules.




Further, if the district doesn’t have space in its schools, it cannot tell a developer that it is reserving seats that don’t exist. Otherwise, “it’s like a Ponzi scheme almost,” says Trevor Tucker, chairman of the school board.

School Board member Colleen Conklin said the school board does not have the autonomy to levy an additional property tax. “Our millage is set by the state, period,” Conklin said. “Development is here. It’s not coming. It’s here, and it’s only going to grow, and developers are already paying proportionate fair share.” She said that’s the “legal way forward for the district.”

Annamaria Long, executive director of the Flagler Homebuilders Association, said her association is behind the 20 percent approach. “So to have so many folks in agreement with the 20 percent, I would hate to see all of this hard work blow up into non agreement,” she said. “On a builders’ perspective, the builders are having to purchase and pay for materials far in advance, which may not be a big deal for the D.R. Hortons of the world, and the Marondas. But the reality is the majority of my 57 builder members are local, Flagler-owned and operated companies. They don’t have unlimited funds to put out ahead of time, and the bank loans that people build off of are not paying those any earlier.” She also cited the needed certainty in payments owed, as opposed to the unpredictability of a project-by-project negotiation.

Palm Coast Mayor David Alfin, who chaired today’s meeting, and County Commissioner Dave Sullivan, who participated, along with Commissioner Andy Dance–a former school board member–were skeptical of the district’s insistence on having to have 40 percent of the money up front, and of the district’s claims about bonding. But in what turned out to be new information for all those at the table, School Board attorney Kristy Gavin then produced the numbers that spell out the district’s future needs, current debt obligations, and current commitments.

The district is looking to build a middle school for $70 million. It would open in August 2026. It is also looking to build a high school for $90 million. It needs to have enough money stacked up to secure the bonds that would finance the schools. The 20 percent–or reservation approach–would not yield enough money for the district to bond what it needs to bond, because it’s limited to bonding 75 percent of what it generates. It could not do so even if it bonded through its capital improvement tax, which is generating nearly $16 million this year. Of that, $9 is spent on annual maintenance of school buildings, leaving little for construction.




“That’s one of the reasons we really need proportionate share,” Tucker said.

But Bunnell, Palm Coast and county officials stuck to their respective boards’ consensus: the 20 percent “reservation” approach. Moylan said “concurrency” must still be the guiding principle, whether it’s applied by paying 20 percent up front of 40 percent up front. But Chris Wilson, the attorney representing the school board on the issue, disagreed: “The 20 percent that everybody is talking about is not concurrency. If there’s no capacity to reserve, how are we reserving anything?”

School Board member Janet McDonald bristled at the suggestion that property tax money could be bonded to pay for new schools. “What hasn’t been mentioned yet,” McDonald said, “is that this is going to go on the backs of the ad valorem tax payers. It’s not going to be where it needs to be. This is going to be spread out across the community rather than on the reservation requirements that the developers have.”

Alfin pointed out that the district is already in possession of impact fee revenue.

“We’re not sitting on a whole lot of money,” School Board member Colleen Conklin told him.

“Well, you’re sitting on $30 million,” Alfin said.

“But it’s committed,” she said. Some $1.2 million has been spent on planning for the Matanzas High School expansion, $5 million is committed to debt service. That expansion is not going to be bonded. It will be paid outright. The budget is $18 million (“but we believe we’re going to come in slightly under that,” Schools Facilities Director Mike Freeman said.)

So it went, with school officials at various points aghast at the degree to which other governments were encroaching on district procedures, down to bonding mechanism. “Who does the bonding?” Conklin asked at one point. “School district does the bonding. So that’s on our side of the house.”

In the end, the officials agreed to direct three questions at the working group: reconsider the 20 percent figure in favor of a “sweet spot,” though that does not mean altering the governments’ favor of a “reservation” system, as opposed to a proportionate fair share approach. The officials also want clarity about the legality of taking a “capacity reservation” approach. And they want a more precise analysis about bonding possibilities.

But Sullivan, the county commissioner, said the Aug. 31 deadline is still in effect.




“One last thing I have a real issue with is, why are we rushing based upon an arbitrary deadline?” Conklin asked toward the end of the 90-minute meeting. “This is too important to rush through it, because an arbitrary deadline does not make any sense to me. This Outlasts every one of us probably, and we’ve got to make sure we do it right.”

Sullivan seemed to imply that the deadline may not be as hard as suggested, if the working group returns with some work done, but more yet to do and have it vetted by every local government before Aug. 31. “We’ll work on it, we’ll fix it,” Sullivan said.

The working group meets July 20, at 9 a.m., in Training Room 3 on the third floor of the Government Services Building in Bunnell. The elected officials’ oversight group meets again on Aug. 4 at 9 a.m. in the same place.