Private School Bond Vote Should be Postponed

By Fergal Mullaly.

As a resident of Towson, and the parent of two students attending Baltimore County Public Schools, I was concerned to learn about Resolution 145-19 introduced at the Council Work Session last Tuesday.

Briefly, this bill would grant the ability to McDonogh School, a private fee-paying institution, to issue a 16 million dollar tax free bond (see page 9 of the Notes to the Legislative Session). This bond would enable them to finance new construction at their campus, at the expense of lower tax revenue to the county and the state. To be clear, the county will neither issue nor underwrite the loan; it simply declares the work to be of public benefit, and the loan is exempt from taxation.

I am concerned about the legality and the advisability of this bill.

A fee-paying private school may not be a permissible beneficiary of the proposed tax exemption. The Council’s Agenda Packet for the work session (page 9) lists Title 12, Subtitle 1, Sections 12-101 to 12-118 of the Annotated Code of Maryland as the authority for the county to issue economic development bonds.

Now, I am not a lawyer, but a bare reading of this statute does not suggest to me these powers are in fact granted.

Section 12-103 of that act gives the purpose of the act as to

  • Relieve conditions of unemployment
  • Encourage industry and economic development
  • Develop ports
  • Abate pollution
  • Promote the health, welfare and safety of residents of the State

The Council packet is clear that the new development will result in no more than three new persons employed. The site is neither a center of industry, a port, nor a major economic center.  There is no evidence given that the site is heavily polluted — which I’m sure is a relief to students and parents alike. Finally as a private, fee-paying school, this development will not improve the  welfare of any state residents other than the small number already paying the considerable tuition fees.

Independent of the law, I do not feel this tax exemption is a good choice for the county. This council is rightly concerned with both fully funding our public schools, as well as keeping our tax rates low. The inevitable tension between these two goals will only increase as the recommendations of the Kirwan commission are phased in over the coming years. Any effort by the county to increase revenue is met with considerable skepticism, and I argue that equal skepticism should be exercised when a group applies to be exempted from contributing their fair share.

A tax exemption means money that should accrue to the county and state does not accrue. And every dollar of revenue lost to the county represents approximately 40 cents not available to our schools (Fiscal Briefing, Overview of the Proposed FY 2020 Operating and Capital Budgets, page 8). There is therefore a genuine cost to the welfare of the residents of the county arising from this resolution that must be carefully balanced against any potential benefits to us.

I am no more a tax accountant than I am a lawyer and I do not know how much tax revenue could normally accrue to the county –  or the state – from such a bond issue. But I know that our public schools do need more funding.

For example, at my children’s elementary school, the PTA raises funds to provide teachers with essential supplies for their classroom — crayons, scissors, light cardboard and the like. I’m told that in many county schools, teachers pay for such supplies out of their own paychecks. The needs of our public school teachers must take precedence over those of area private schools.

Reviewing the video of last week’s work session, I noticed the discussion of Resolution 145-19 made no effort to ascertain the costs to the county or the state (discussion starts at 22:10). The council’s agenda is long and detailed, and it is inevitable that some issues will slip through the cracks. Please do not let this issue be such a case. I ask the Council to postpone a vote on this resolution until the legality, costs, and benefits of this resolution can be properly reviewed.

One thought on “Private School Bond Vote Should be Postponed

  1. Several of our Council representatives expressed concerns at last Tuesday’s Work Session about the County’s involvement in a $16M middle school project for a private school when the County’s schools are struggling. They were right to anticipate some backlash from their constituents – Resolution 145-19 raises many questions in the minds of county residents, including the author of this open letter by Fergal Mullally, Ph.D..

    One thing that surprised me during the work session was the so-called “public hearing”. Normally, I believe, public meetings and hearings are posted on the County website; not in this case. The notice was posted once in “The Baltimore Sun” on November 1, 2019, according to the Department of Economic and Workforce Development. Is that the appropriate procedure these days, when more people have internet access than do those with access to the “Sun”? There were no speakers; not even the school chose to speak on behalf of the Resolution. So the “public hearing” was was called to order and adjourned within minutes.

    The agency’s representatives made is sound as though this kind of deal is routine. If that is the case, I’d be interested to know of other instances when Industrial Revenue Bonds have been used in Baltimore County for private schools.

    Providing a financing pass-through for a private school may be more than a stretch. Creative financing, yes; but perhaps beyond the intent of the enabling legislation?

    “The Maryland Economic Development Revenue Bond Act (Annotated Code of Maryland, Economic Development Article, Title 12, Subtitle 1, Sections 12-101 to 12-118) allows counties to issue economic development revenue bonds for various purposes including encouraging the increase of industry, relieving unemployment, and promoting economic development. The bond proceeds may be used to finance or refinance the costs of acquiring a facility or to refund outstanding bonds. The proceeds may also be used to pay expenses related to the sale and issuance of the bonds, to fund reserves, and to pay interest with respect to the financing. The Act provides that a legislative body of any county may adopt a resolution to authorize the issuance of
    bonds by the county.”

    Dr. Mullally questions whether a private school is a permissible beneficiary of the proposed tax exemption. It’s a good question.


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