Residents question financial agreements between city, school board

During a June 25 meeting of the Enterprise Board of Education, former superintendents Aaron Milner and Jim Reese dropped a bomb about the financial agreements between the school board and the city of Enterprise following the destruction of Enterprise High School and Hillcrest Elementary in 2007.

Reese, at his own expense, also released a detailed letter in The Southeast Sun and the Enterprise Ledger this week detailing some of the figures involved in the controversy.

Following the aftermath, the city, via a Citizens Committee appointed by Mayor Kenneth Boswell, used three sources to fund the $30,000,000 bond used to construct EHS and Hillcrest Elementary.

Those sources were a ½ cent sales tax, the repurposing of 3.5 mils of ad valorem tax from the Enterprise Nursing Authority and an agreement the school board would pay $550,000 annually to the city ($7.7 million over 13 years) beginning in 2016.

The sales tax increase was discussed at a town meeting and eventually approved by the Enterprise City Council, however, the repurposing of the ad valorem mils was approved via a referendum vote on Dec. 10, 2008.

According Jim Reese and sales tax receipts from the city of Enterprise, the ½ cent sales tax had generated $8,109,042 by the end of the 2011 fiscal year, but debt-service on the bond was only $5,147,766.

That equated to nearly $3 million in profit for the city.

With the addition of the 3.5 mils, which was pitched as necessary to pay the debt-service, the city stands to profit a minimum of $25 million by the year 2029.

School officials, both past and current, have expressed concern with why the city would need $7.7 million from the school system beginning in 2016, when it is already profiting substantially from the two other funding mechanisms.

During the meeting, Reese said the school system had very little negotiating power when the original agreement was discussed.

The board at the time authorized Reese to sign the agreement, but after discussing the issue with attorney Alan Zeigler, Reese never signed it.  

“At the time this agreement was presented, the citizens approved the continuation of a 3.5 mil tax and allowed said tax to be redirected to the city from its original recipient,” said former board member Joe Paul Stewart. “Although not surprising or unusual, by the manner in which it was promoted, many might have erroneously concluded the revenue would be passed to the school system. Not so.”

Accountant Bill Carr, who served on the Citizens Committee in 2008, defended the city.

“(Carr, Riggs and Ingram) represent(s) about 15 cities in Alabama and some outside of the state,” Carr said. “I would put the financial position and the way Enterprise is ran by the mayor and council against any city we represent.”

Carr said the Citizens Committee was asked to bring the two entities together to organize funds for the school’s construction, as the two had reached an impasse.

“Dr. Reese said (the board) couldn’t afford any additional funds. They were subject to proration,” Carr said. “I asked Dr. Reese about the (Enterprise Early Education Center) bond and he said it would be paid off in 2016.”

Carr said the payment to the city was discussed as $550,000 per year because that amount was already budgeted for the EEEC bond payments.

He also said a significant amount of sales tax is contributed to the school system each year.

“It was approved in a board meeting and the council made the same approval,” Carr said. “Basically, it says the board will pay $550,000 annually to the City of Enterprise for the remainder of the bond issue.”

Carr said there was no requirement to have an agreement.

“I urge everyone to come together, let’s get past this issue and move forward,” he said. “I support the school board, the council and the mayor.”

Carr also defended board chairman Ross Cotter, saying he would look after the financial aspects of the school system better than anyone.

“When I first took office (Milner) had mentioned the $550,000 and tried to go to the (Alabama State Board of Education) to find a way out of it,” Cotter said. “I said, ‘Aaron, let’s not get into that.’ The goal was to provide harmony until 2015.”

Cotter said he’d been consistent and vocal about the factors determining the school board’s payment to the city, and added the decision would be based on the state of the local economy, the funds of the school board and the funds of the city.

He went on to criticize the way certain financial areas were handled prior to his appointment to the school board.

“When I was appointed there was approximately $18 million we were drawing zero interest on,” Cotter said. “On one hand we were doing nothing to draw interest on millions of dollars, and on the other hand we’re talking about $550,000. It didn’t seem consistent to me.”

Milner said he had been instructed by a former school financial officer to keep those assets liquid to help finalize the payments for the construction of EHS.

“I inherited this position, and I went to the state department because the name at the bottom of that check would have been Aaron Milner’s,” he said. “The Department Examiners has also questioned the legality of that transfer. It shouldn’t be up to the board and it shouldn’t be up to the city. The taxpayers are the ones who should determine if $7.7 million is to be withdrawn from their children’s education.”

Milner listed the tax revenues for the past few years and cited articles from newspapers at the time, which showed city officials stating the money was necessary for the construction of EHS.

“I don’t know if that’s what you said, but that’s what the media told the voters,” Milner said. “When we met at the community college these figures were called negligible. They aren’t. These figures are from someone much more educated in finance than I.”

Boswell said he had heard from the people in the room that night and went on to call some of the comments hurtful.

 “I am restricted by some things I can and can’t do, but I, too, work hard Dr. Milner,” Boswell said. “I have consciously tried to work with you in good faith. I think the decisions of our city do not exclude the school system. It’s just as much a part of the city as anything else.”

Boswell pleaded with the audience to come together as a community and said he had always and will continue to stand behind the board of education.

 “There is no one in the world who is a perfect person,’ he said. “We will continue to make conscience efforts to do everything we can possibly do to make this city a great place to live in.”

Following Boswell’s remarks, Cotter adjourned the meeting.