THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Monday, February 17, 1997 TAG: 9702170039
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY JON GLASS, STAFF WRITER
DATELINE: NORFOLK LENGTH: 148 lines
PARENTS ASK: WITH SO MANY AGING SCHOOLS, WHY IS NORFOLK SO COMMITTED TO
INVESTING IN CITY PROJECTS SUCH AS THE MACARTHUR CENTER MALL. ANSWER: OFFICIALS PREDICT THAT REVENUE-PRODUCING PROJECTS WILL INCREASE THE
TAX BASE, WHICH WILL BENEFIT SCHOOLS IN THE LONG RUN.
City officials envision a renaissance of commerce and culture downtown, and they're spending millions of dollars to make that dream a reality.
But many parents see a different picture: They see children sitting in aging school buildings that leak when it rains and lack basic technology they believe is essential for their children's success.
As the city embarks on its latest downtown venture - a $100 million commitment to construct the $300 million MacArthur Center mall, the largest economic development project in Norfolk's history - the condition of the school system has become a flashpoint in a growing debate over the city's spending choices.
How, parents ask, can the city spend millions on a shopping mall while their children go lacking?
``Our school buildings are falling apart,'' said Mike Harkins, president of the Norfolk Council of PTAs. ``We're tired of hearing that there's not enough money.''
City officials, who defend their record of spending on education, respond by saying that the effort to revive downtown is not diverting money from the schools.
In fact, officials say, projects such as the MacArthur Center mall will generate money that can be used to improve schools.
In its first year of operation, the mall is projected to generate about $1.5 million in taxes and fees for the city, above and beyond debt payments on the $100 million investment, Mayor Paul D. Fraim said. In addition, 3,000 permanent jobs will be created, he said.
``You have to have an aggressive development policy in order to raise revenue for schools and public safety and all the other things the city wants to do,'' Fraim said.
Besides that, financial experts say, the city must weigh carefully the type of debt it incurs or risk its AA credit rating - a critical measure that determines the city's cost of borrowing money.
While new schools might benefit children and draw residents and businesses, the bottom line is that they don't produce any money to pay for the cost of building them, officials said.
On the other hand, revenue-producing projects such as MacArthur Center can help carry the debt load and boost the city's financial standing with agencies that rate local governments' credit, such as Standard & Poors, experts said.
``It's a very important issue,'' said Lloyd Chew, senior managing consultant with Public Financial Management Inc. in Philadelphia, the city's financial adviser for more than a decade. ``Obviously, what drives a city's economy is its revenue base - without that, you have nothing creating a source of payment.''
Otherwise, the only alternative is to raise taxes, a tough prospect in Norfolk, which has the highest real property tax in the region and may already be scaring people away.
``Once you have a certain tax base,'' Chew said, ``crucial to what draws people to a city and keeps them there, and what makes it attractive to companies, is such things as schools, recreation and a park system. It's really a balancing act that must take place.''
The magnitude of Norfolk's school needs was revealed earlier this month. The school board handed the City Council a five-year list of building needs that topped $144 million - more than the $108 million the city spent on school construction over the previous 15 years, documents show.
In return, council members pulled out a wish list of capital needs of their own, outlining $276 million in requests from city department heads. The city would be lucky to finance a quarter of them during the next five years, the council said.
There was no way the city could fund the schools' list, Fraim said.
In 1994, city and school officials agreed on a budget of about $25 million for capital spending on schools through 1999. But that was later bumped up to $31 million, largely to accommodate higher costs associated with the Granby High School renovation.
Last month, the School Board asked for an additional $11 million to make up shortfalls that threaten the renovation of Granby's gym and could delay two construction projects at Taylor and Bay View elementary schools.
Council members have called on school officials to be more frugal.
``They get a large slice of the pie right now,'' Vice Mayor Herbert M. Collins Sr. said. About 42 percent of the city's annual operating budget is spent on education. ``Money isn't always the answer, either. You have to look at the programs. The School Board has to produce, too.''
The dilemma facing Norfolk is being felt across Virginia and the nation. Chesapeake and Suffolk, for example, are grappling with school construction needs created by explosive growth. In Norfolk, an older city with a limited tax base and little land left to develop, old schools pose the problem. The average building age of is 42 years.
``Not only can we not keep up with technology, many of our buildings can't handle the technology because the wiring is so old,'' the PTA council's Harkins said.
Local governments also are being forced to deal with recent cutbacks in state and federal funding. Beyond a relatively small pool of money available for low-interest loans, Virginia does not provide money for school construction.
``The state has to take on some responsibility to help local districts meet the needs,'' Norfolk School Board Chairman Ulysses Turner said.
Norfolk's strategy of pumping money downtown to increase the city's tax base is a sound one, and is being pursued nationwide by cities that are competing for business and industry, said Christopher B. Colburn, associate professor of economics at Old Dominion University.
``If you look around the country, almost every city has a festival marketplace or a downtown sports facility or other public attractions,'' Colburn said.
But there are downsides, Colburn said. With more cities doing similar things, eventually there may not be enough of a difference to matter to the industry looking to locate, he said. As a result, the gains a city might expect from such public investments could drop.
Also, to win over public backing, Norfolk council members are going to have to make good on pledges to funnel revenue produced from the downtown investments back to the schools and neighborhoods, he said.
``If people knew the returns would be spent on school improvements or on roads, they'd be more likely to support investment downtown,'' Colburn said. ``But who knows whether that's going to happen?''
Local real estate agents say the condition of many Norfolk schools, particularly on the inside, turn off many potential home buyers, highlighting the key role schools play in attracting new residents.
``The schools are everything,'' said Claudia Mackintosh, a real estate agent with Nancy Chandler Associates in Ghent. ``Over and over again, when these families call, schools are No. 1. Capital improvements to the schools are so important.''
City Manager Oliver acknowledges the importance of schools, saying Norfolk's top three priorities for funding are education, public safety and economic development. He also concedes that trying to explain why the city's credit rating drives some of the decision-making on capital spending doesn't resonate with a public looking for instant results.
But most important, Oliver said, is for people to realize that much of the money Norfolk is spending downtown, such as on MacArthur Center, can't be used to build schools, even if the city wanted to.
For example, the largest chunk the city is spending, $54 million to construct parking garages, will be raised from parking fees paid by mall customers and downtown visitors.
``People want to take this money we're spending on non-school things downtown, but the hard thing for people to understand is that this $54 million only exists if we do the parking,'' Oliver said.
The same is true for the second largest piece - $30 million in bank loans secured in a deal with anchor store Nordstrom, Oliver said. Taxes and fees from the mall's operation are raising the money, he said.
Much of the remainder, about $13 million in street and utility improvements, will come from regular fees paid by utility customers, he said.
Oliver said he hopes the mall project is the catalyst that will enable the city to scale back its pump-priming approach.
``We really hope we've reached the point of critical mass that's going to allow more and more of our economic initiatives to be driven by the private sector and not by city initiatives,'' Oliver said.