GULF SHORES, Ala. (WALA) – A new city school system officially came to life here this month, but a law that also took effect at the same time may make future breakaway school systems a bit harder.
The Gulf Shores City School System did not get settled until Gulf Shores and Baldwin County Public School System officials worked out the financial terms following much haggling – and a lawsuit. State Sen. Chris Elliott (R-Daphne) wrote the Baldwin-only law in an effort to make the terms of school splits in the county more predictable.
The key provision closes what Baldwin officials described as a loophole – legal requirements that new systems assume the debt on school buildings they take over. The newer the building, typically, the higher the debt. That makes forming a new school system with newly constructed schools a bit less attractive.
The Baldwin County school system has been on construction frenzy, financed mostly with short-term loans backed by a 1 percent sales tax. That has resulted in brand-new buildings with little or no debt, making them potentially juicy targets for cities mulling the creation of their own school systems.
“The problem with that is that that debt was the only thing protecting those assets under current law,” said Elliott, who represents the Eastern Shore and south Baldwin. “Now, with the passage of this bill, there’s a clear delineation of what the depreciated value remains on those structures, and that is specifically what they … have to pay for if they choose to leave the system.”
The law Elliott wrote requires new Baldwin school systems in the future of pay the Baldwin system the assessed value of the schools. The law likely would not have been a substantial factor for Gulf Shores, where the school buildings were older, but it could make a big difference for cities with newer construction.
Baldwin schools Superintendent Eddie Tyler said he does not expect the new law to stop cities from considering the creation of their own systems, but he added it might make them think twice.
“Yes, there are going to be breaks, or attempt,” he said. “But if you’re gonna break now in Baldwin County, you’re gonna pay a heavy financial price. Are the citizens willing to take that on?”
Beyond requiring the Baldwin school system to be compensated, Elliott said he hopes the new law provides a measure of stability. Usually in Alabama, it falls to the state superintendent of education to set the terms for new systems, and Elliott said superintendents make those decisions “on almost a case-by-case basis, which means there’s a wide variety of outcomes, and you, really, are kind of spinning the wheel.”
Under the deal brokered earlier this year, the Baldwin system will continue to collect sales taxes in Gulf Shores until Oct. 1 and shoulder debt on the buildings until December 2024, when Gulf Shores will take it over.
John Wilson, the chief financial officer of the Baldwin school system, pointed out that the county system’s current construction model saves tons of money. He estimated that if the county keeps up its current pace over a decade, it will spend about $220 million on new schools and new additions to existing ones.
At an average interest rate of about 3 percent on those short-term loans, the total borrowing cost will come to about $18 million, perhaps less, Wilson said. Compare that to borrowing $220 with a 30-year bond to pay for the same amount of construction. Wilson said the projected interest rate in the current market would be about 4 percent.
Over 30 years, that interest would total roughly $180 million. That is about $162 million more than the borrowing costs associated with the pay-as-you-go model.
Wilson said basic fairness dictates that the school system be compensated if another city takes over those debt-free buildings.
“The last thing we wanted is to be penalized, and for the board to have increased liability, because of a loophole in the state law,” he said.
Wilson said school splits create additional costs for Baldwin, as well. He noted that more than 580 students who attended school in Gulf Shores live outside the city limits. Other than those in higher grades who were allowed to finish their school careers in Gulf Shores, the Baldwin system had to find places for them in other schools.
“We immediately had to build the new school in Orange Beach as a result of that,” he said.
Elliott had a second major provision in his bill – to require a vote of the people in any Baldwin city that wanted to break away from the county system. Voters in Orange Beach and Gulf Shores in 2007 voted down a proposal to create a separate joint school system on Pleasure Island. Orange Beach voters in 2014 also rejected a proposed city school system there.
But the Gulf Shores City Council approved its split in 2017 without a referendum. Elliott’s bill would have prevented that in the future, but the state House of Representatives stripped out that provision.
“That’s fairly frustrating,” he said. “The goal was to make sure that people were involved in the discussion to start their own school system.”