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An economist, student of scholarships discuss merits of issues Akron voters will face next week
By Carl Chancellor
and John Higgins
Beacon Journal staff writers
Published on Wednesday, Oct 29, 2008
The proposed Akron city charter amendment that would free up millions of dollars from the public sewer system to finance college scholarships has generated a flood of competing claims.
Introduced to the public by Mayor Don Plusquellic in his February State of the City address, the proposal attempts to address the community's low level of education, which lags the national average, and the $40,000 cost of a four-year degree at a state-supported Ohio university.
There are two related issues facing voters.
Opponents of Plusquellic's plan placed Issue 9 on the ballot to require voter approval of any sale or lease of major city assets.
The mayor and council responded with Issue 8, which allows the city to move forward.
Approval of Issue 8 would do the following: Allow for a lump-sum payment to the city in exchange for the lease of the sanitary sewers, pay off existing sewer debt, deposit the remaining funds into a scholarship account and define the basics of who will receive the scholarships.
A special oversight panel would be created to iron out logistics.
The scholarship portion of the amendment would provide tuition for an Akron resident who graduates from a public or private high school, is home schooled or has a general education diploma to attend the University of Akron or a trade school in the city.
In an effort to remove the rhetoric, the Beacon Journal turned to some outside third parties for their observations on the pros and cons. Here are some of their thoughts, accompanied by basic questions and answers on how the program would work.
Leasing the sewers
There are two issues wrapped into one charter change, according to William Peirce, professor emeritus and former economics department head at Case Western Reserve University.
''There are really two proposals. One is about leasing the sewer system and the other is a scholarship plan tied to the lease of the sewers,'' said Peirce. ''You can argue the case for or against either of them.''
''The sewer lease is the tool for financing the scholarships,'' Peirce said.
Plusquellic was inspired by the Kalamazoo Promise, in which the Michigan city offered public-school graduates a full ride at any of the state's public universities.
After inception in 2005, Kalamazoo Public Schools enrollment increased 10 percent in 2006 and 2.3 percent in 2007, drawing students from 32 states and reversing a 35-year decline.
Those gains have been tied to economic development in the district, which includes the urban core and adjoining suburban areas, which showed initial boosts in home sales and home prices until the real estate market flattened in 2007.
However, Kalamazoo has something Akron doesn't — anonymous donors to fund the program.
In Akron, ''there was no magic source of money, no private donations like in Kalamazoo. So the mayor went to the sewers,'' said Peirce.
Plusquellic's hope is that the ''value of the city sewer system will generate the upfront infusion of cash'' to fund the scholarship program, Peirce said.
The city estimates that the lease would generate between $200 million and $300 million from large investors. The city would first be obligated to pay off existing sewer-system debt of about $90 million, then deposit the rest into the scholarship fund.
Peirce said he believes the estimates on the upfront payment are optimistic, considering that the system generated only $3 million in profit in 2006.
''I don't know who would pay $250 million for a system that generates $3 million in profit,'' he said. That's a ''pretty thin margin'' and a private firm will have to ''save big'' in operating expenses to make it attractive.
''One thing a private company can do is operate with fewer employees and pay them less,'' Peirce said.
To ensure reliable service and competitive prices, a privatized sewer system requires a ''very carefully'' drawn lease agreement, Peirce said.
''A sewer system is a monopoly. I can't choose to disconnect and put in a septic tank. Citizens are stuck with whatever service cost a private company chooses to set,'' said Peirce.
The charter amendment would cap sewer rates at a 3.9 percent average rate over 10 years for normal operations and capital expenses.
''However, that means your rates could double approximately every 20 years,'' said Peirce.
Still, he said he applauds the mayor for thinking creatively about funding post-secondary education.
''His heart is in the right place. . . . The idea of a scholarship program is very attractive, the way of funding it is not,'' he said.
The scholarship plan
The Kalamazoo Promise has inspired spinoffs in several cities using a variety of funding sources including oil revenues, endowments and casino taxes.
The Kalamazoo program pays up to 100 percent tuition and mandatory fees for Kalamazoo school district graduates to attend any public Michigan university or community college for up to four years.
Akron could hope for population and economic gains similar to those in Kalamazoo, according to Michelle Miller-Adams, an assistant professor of political science at Grand Valley State University. She is writing a book on the Kalamazoo Promise and its impact on the community.
She said she admires many details of the Akron plan, but the provision requiring recipients to pay Akron city income tax for 30 years or repay the scholarship could undermine its appeal and blunt its economic impact.
''I think this is a terrible idea. It's going to seriously undercut usage,'' said Miller-Adams, a visiting scholar at the W.E. Upjohn Institute.
''Given the mobility of families these days, almost nobody stays anywhere for 30 years. This makes it almost punitive,'' she said.
She said a commitment of a few years might make sense.
The mayor said the 80 percent of the city's families that do not have children in school should receive some return from the program, thus the requirement that scholarship recipients pay taxes for 30 years.
Miller-Adams said there can be benefits without the 30-year requirement.
Families would move into Akron to take advantage of an attractive scholarship and the students would be in the community, at least for the duration of their college education, she said. And after they find success outside of Akron, they might return to raise families and take advantage of the scholarship for their children.
However the plan is accomplished, tuition help can't come too soon for Akron's students.
Tuition at the University of Akron has nearly quadrupled since 1990. Costs for commuter students rose from $2,672 to $9,503 (not adjusted for inflation) from 1989-90 to 2007: a 256 percent increase.
During the same time, the median income in the state rose only 54 percent.
Miller-Adams especially likes Plusquellic's ''last-dollar'' approach, requiring students to apply for federal and state financial aid and use the plan to pay the remaining tuition.
''The last-dollar thing is absolutely great,'' Miller-Adams said. ''That's the simplest way relative to the Kalamazoo Promise to save money.''
Kalamazoo is a ''first-dollar'' plan, which means the program pays tuition and whatever other financial aid the student receives can be applied toward other costs such as room and board.
And students don't have to report the tuition assistance as income on their financial aid forms because the program sends the money directly to the college. It never passes through the hands of the students, Miller-Adams said.
The Kalamazoo plan also allows students to attend any public institution in Michigan, including the University of Michigan, which makes the scholarship appealing.
Beacon Journal staff writer David Knox contributed to this story. Carl Chancellor can be reached at 330-996-3725 or cchancellor@thebeaconjournal.com. John Higgins can be reached at 330-996-3792, or jhiggins@thebeaconjournal.com.
The proposed Akron city charter amendment that would free up millions of dollars from the public sewer system to finance college scholarships has generated a flood of competing claims.
Get the full article here.
Comments
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Posted 04:28 AM, 10/29/2008
An increase from $2672 to $9503 represents 356%.
Akron, OH
Posted 04:40 AM, 10/29/2008
Hate on 8.
9 is fine.
Posted 05:27 AM, 10/29/2008
ron your reading the ABJ...when did facts ever count ? Vote no on, 8 maintaining the sewers is why we have local govt, not to pay for college
Posted 05:40 AM, 10/29/2008
this is the stupidist idea ever, the mayor should be in the sewer, pay to graduate?, what is next pay to wake up in time to go to school, these politicians become experts when elected at ideas to stay elected, but leave the taxpayers in their wake
Posted 06:01 AM, 10/29/2008
The city estimates that the lease would generate between $200 million and $300 million from large investors. The city would first be obligated to pay off existing sewer-system debt of about $90 million, then deposit the rest into the scholarship fund.
Excuse me, where did William Pierce get his amount of 90 million as the existing sewer-system debt. It is to my understanding there is over 300 million needed to remediate the system per a federal mandate of U.S. EPA. I would like to see the documents that show they have taken care of the problem and only owe 90 million more. Why is everyone ignoring the fact the sewers have to have a quick fix in fifteen years time or someone will answer federally for the problem? I for one will be contacting the journal to find out where this guy received his economic data from. This sounds way off base for the same system that is still overflowing.
Tallmadge, OH
Posted 06:15 AM, 10/29/2008
Akron should vote NO on 8 and YES on 9. Tell Mayor Donny Boy where his idea can go - into the sewers. Why pay more for sewer bills in these tough economic times like all other cities have done under the sewer leasing programs.
Posted 06:57 AM, 10/29/2008
90 million is the bad debt that Mayor Don has rung up. He has proved he and his cronies can't run anything except run it in the ground. The recycle plant is an example. So is the compost plant. Companies who manage sewers aren't going to do it for anything but to make a profit. Try telling the citizens the truth for a change. This is to bail your ass out from all the bad debt you have created.
Posted 07:07 AM, 10/29/2008
Why are my comments not being posted???
Posted 07:12 AM, 10/29/2008
This proposal is nothing more than a sham to get the city out of debt. Debt ran up by a mayor who has no idea what he is doing. I cite the recycle energy plant as a failed operation. Now we also have the old Young's Restaurant being bought by the city. What for?
akron, oh
Posted 07:31 AM, 10/29/2008
Keep in mind that the capped rate is 3.9% over a 10 year period.That is a general increase, it does not include major overhauls and repairs.
Posted 07:42 AM, 10/29/2008
I wonder what bitter comments we can look forward to when this crazy issue is defeated?
Posted 07:58 AM, 10/29/2008
Don's heart is really where he uses his toilet paper...
The county needs to Eminant domain the systems and run it Countywide.....same as the reervoirs. Akron demonstartates they cannot "Manage" anything.
Who will be responsible for all the lawsuits? The terrible infastructure,and when employees are deleted...who deals with the UNION BS
Akron is voting to confirm another big Loser idea.
Posted 08:02 AM, 10/29/2008
I am no expert on the 2 proposals, but I will vote no on both them....the proposals appear very irregular to me, and indicate that that high up people are in financial trouble and want to pay off debts...
...so without gurentees of the proposals they are saying take our word....when in the past has that stopped the stealing in high up governemnt..
the existing sewer system is excellent...why destroy a good thing...
Akron, OH
Posted 08:11 AM, 10/29/2008
This has to be the best unbiased story written by the ABJ on this issue. The comentary in the editorial section was even better.
The sewer lease plan is a sham devised by the city hall hero to channel funds into his promises to Goodyear and Firestone. Nuthin' more.
Iff'n folks have read all of todays articles, they will learn that we will also be responsible for the federal epa upgrade, of which we've been assessed a for a couple of times now, to the tune of Approx. $370 million. The folks that lease the sewers won't be payin' that, we will.
Akron, OH
Posted 08:35 AM, 10/29/2008
If issue 8 gets voted down, that will mean thousands of lower-income children in Akron will probably never go to college. Shame on you if you are the ones whining about your sewer bills going up a few dollars a month. Do you really think this city is going to survive without college graduates to pull it into the future? Face it, people, Akron is on the bubble.
And the only reason tuition had to be raised that high at UA was because the state pulled back drastically on its funding for public universities. Put the blame where it belongs - short-sighted government, and now voters, who think it's not important to have an educated workforce.
My Heart Is In K-Town, .
Posted 08:41 AM, 10/29/2008
@ Karen - these low income children you refer to, will get all the financial aid they need, if they are qualified academically, without issue 8 passing. There is so much money out there it would make your head spin.
Akron, OH
Posted 08:56 AM, 10/29/2008
Paul, there is money available to low-income students, but very often they do not receive a full ride. the tuition figure at UA does not include fees and books. Let's say their tuition, fees and books run $12,000 a year. Pell grants are a maximum of $4,731 a year. FSEOG grants pay from $100 to $4000 a year. There are more grant programs, but many have strict academic standards. So if a student maxes out on the Pell and FSEOG, but doesn't have a 3.0 in high school, they may have $8,731 in grants per year. They are still short over $3,000. I don't think many low-income students here in Akron have parents that can foot that bill.
I have two kids almost ready for college, and I worry about this constantly. In today's world, college is a necessity. I think anything to get these kids off the streets and in college is a great thing.
Posted 09:02 AM, 10/29/2008
No it doesn't Ron. It's a 256% increase, meaning the starting value doesn't get included in the percentage.
Posted 09:20 AM, 10/29/2008
Its not that I am against the education of our children, I compare this to when a month ago George Bush sent congress 3 pages for $750 billion to save our economy. Mayor Don has put up 3 pages of city charter with "Trust Me" attached? I think the mayor has other higher political aspirations and wants his resume as clean as possible.
My Heart Is In K-Town, .
Posted 10:02 AM, 10/29/2008
@ Karen - Good luck with your situation and your children's education. It appears you are already looking ahead. Don't forget to include 'work study' while crunching numbers.
Posted 10:12 AM, 10/29/2008
Lessons from around the world!
http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2004&month=04
Akron, Oh
Posted 10:12 AM, 10/29/2008
Annual tuition rates in Ohio among the following public universities:
Cincinnati: $9,399
OSU: $8,676
KSU: $8,430
UA: $8,383
Stop whining, Akron. Flush 9. 8 is great!
Tallmadge, OH
Posted 10:13 AM, 10/29/2008
Karen - your children will be saddled with paying Akron income tax for the next 30 years of their lives if they take Donny Boy's scholarship. Is that what you what them to do when money is available from all kinds of free sources for those with real financial need? Stuck in Akron or paying income taxes wherever they move to back to Akron? Not to mention a sewer bill up 75%? Bad for your kids and bad for Akron sewer bill payers.
Akron, OH
Posted 10:24 AM, 10/29/2008
The mayor could have bought a university with the money he gave away to his cronies! Remember when we paid top dollar (including the utility bills for the whole time he owned it) for the dilapidated buildings Brennan had on S Main St. How about the land in Bath Twp we financed for InfoCision (for free) for twenty years. Isn't this the same company that paid millions for the naming rights to the new U of A stadium? InfoCision buys luxury naming rights while we finance the land for their new building, not even in Akron. Or how about all the buildings (O’Neil’s, Goodrich world headquarters and other Goodrich buildings, old post office on E Market, Citicenter, etc..) that we paid for, removed the asbestos, and then sold to profitable companies for pennies on the dollar. Even this article states only an idiot would pay $300 million for a sewer system that generates $3 million a year. I wonder what crony he has lined up waiting in the wings that knows they will need to increase the sewer rates to the max every year until they can make a huge profit at our expense. Once again (remember the income tax hike he tried to mask as more safety forces while it was really more money for his cronies) the mayor wants us to believe he has our best interests at heart. We will find out where his heart really is when he finally gets defeated (what deal did he make with Arshinkoff to make it so there is no republican mayoral candidate to oppose him?) and takes a cushy job with a six figure salary at the business of one of the cronies he helped make millions of dollars. I am sorry mayor, your legacy will be that you were a backroom deal maker for all your cronies, not that you are a champion for the poor and working class.
Posted 10:25 AM, 10/29/2008
last dollar plan, most people are getting it done as is, without this plan. For giggles assume a 4 year degree costs 40K, if Akron were able to generate 200 million that provides for 500 students. If it's last dollar say the fund paid out 10K per student to complete the financing, that's only 2000 students. That 200 million is a HUGE "if". Only making 3 mill per year as is, the numbers just don't add up do they?
Akron, Oh
Posted 10:34 AM, 10/29/2008
Mark, seriously you need to talk to someone about your issues with anger, wow!
Akron, OH
Posted 10:39 AM, 10/29/2008
Jan, apathy is a terrible thing. You like to be taken advantage of? Maybe if more people got mad instead of just sitting there watching the rich get richer at the expense of the working class, things could be turned around.
Posted 10:56 AM, 10/29/2008
Karen--please go to www.akronnewsnow.com and read "Akron's No Kazoo". There you can learn how Kalamzaoo's scholarship plan works, though NOT at the expense of its citizens, especially the working class. Plusquellic's plan, on the other hand, will INDEED burden all of us, especially the least among us.
Karen--don't forget to pay attention to who comprises the VAST majority of the mayor's supporters: Akron's wealthy and powerful. That's NOT a coincidence. How ironic! If we REALLY followed the Kalamazoo Plan, it is they (the rich and powerful) who the mayor would be hitting up for money, not Everyman.
Posted 11:45 AM, 10/29/2008
Karen et al-
Scholarships are good, but indentured servitude is not. Do you real want your kids provided only one choice in universities and saddled with live your life in Akron or pay our tax? This was the fairest article the Beacon has done one the issue, and unless I completely misread it, even the experts think the lease idea and the strings attached to students are BAD ideas.
akron, oh
Posted 01:14 PM, 10/29/2008
Karen and others - I am an Akron resident homeowner and also an older adult (over 25) student at the University of Akron.
I plan to vote no to both of these... as much as students need help for an education, raising the sewer costs for everyone is not the way to do it. There are plenty of grants, scholorships, work/study programs, etc. for those who need help. At worst, it may mean your kids (like me), go to work and attend school part time until they get done. And the reality is, if they work hard for to pay for their education, they will probably work harder to get good grades and value the degree even more.
akron, oh
Posted 01:17 PM, 10/29/2008
P.S. I have noticed that the kids who get their full way paid are SOMETIMES the ones who party the MOST - they don't realize the value. The ones who have to bust their buns to pay for their used books more often understand how important it is to get an education.
Wheaton, IL
Posted 01:47 PM, 10/29/2008
If it's not the sewer idea, I hope SOMETHING is done to train Akron and Ohio's workers.
We are behind the pack in education and slipping behind the rest of the world economically. We didn't invest 30 years ago and look what's happened to us. The good jobs of tomorrow require training beyond high school.
If this doesn't pass, I think Ohio should create a revolutionary student loan program. Give any applicant a loan up to the cost of education for any training program (e.g., college, vocational school) up to the cost of the program. Of course it will be "last dollar", requiring students to first apply for other forms of financial aid.
After the student gets their training, credit 50% of recipients' Ohio state incomes taxes to pay off the loan. If they don't pay Ohio income taxes, they owe the loan back as in other loans.
This will:
1) Encourage people to stay in Ohio. If not, they owe the whole loan. People who are unsure of staying in Ohio will still take the loan, because otherwise it's just like any other loan program, BUT if they find a good job in Ohio after graduation, they're set.
2) Be a great investment for Ohio. Trained workers making $50k/year pay MUCH more in Ohio income taxes than workers making, say, $25k/year. In fact, most low-earners do NOT pay ANY income tax, after exemptions, deductions, credits, etc. Ohio will become richer by making this wise investment.
3) We might even be able to get some good out-of-state students to settle in Ohio. This would cost Ohio nothing, because we'll either get extra income tax revenue, OR they'll move after graduation, but then have to pay back the loan.
Education expenses are hurting everyone across the country. If we're smart, we can use this fact strategically to improve Ohio's economy.
akron, oh
Posted 03:11 PM, 10/29/2008
karen, as a homeowner in akron with no kids, i feel it is my duty to society to pay my taxes to educate the future generations so that we may live in a better society. however, i don't feel that anyone is guaranteed a college education. one of the reasons our country is going down the tubes is that a bachelors degree is worth about as much as a high school diploma in the 60s. now one must get a masters to be 'educated' and get the better jobs. grade inflation is a reality and a nightmare.
as to the sewers, vote no on 8 and 9.
Posted 06:48 PM, 10/29/2008
One can care without foaming at the mouth Mark
Posted 09:13 PM, 11/01/2008
@Sam and Peter:I don't think people are still commenting here, however, to those who say they are voting NO on issues 8 and 9, I have to wonder if they read the language of the issues. Issue 9 states that we (the voters) will vote for future issues regarding the leasing of public utilities. So,
NO in 8 and YES on 9 ("hate 8 but 9 is fine")
