- (female announcer) Production funding for Behind the Headlines is made possible in part by the WKNO Production Fund, the WKNO Endowment Fund, and by viewers like you, thank you.

- County Mayor Lee Harris and Germantown Mayor Mike Palazzolo on the deal for the Germantown Schools.

Tonight on Behind the Headlines.

[intense orchestral music] I'm Eric Barnes with the Daily Memphian, and thanks for joining us.

I am joined tonight by two mayors.

Mayor Lee Harris, Shelby County.

Thanks for being here again.

- Sure.

- Mike Palazzolo, Mayor of Germantown.

Thank you for being here.

- Good to be here.

Along with two reporters, Bill Dries from the Daily Memphian, and Abigail Warren from the Daily Memphian.

So thank you all for being here.

I'm gonna start with the reporters.

This is a very complicated deal that we are all very close to and know a lot about.

You all have lived, you all have reported, not everyone has, or understand some of the history behind these three schools in Germantown.

The relationship to the county school or county/city school system.

I'll start with Bill and then Abigail, and just give people a primer of how this started and what has been proposed, and then we'll go through all the details with the two mayors.

- All right, well, we're almost 10 years of the merger and slightly more than that for the de-merger that followed the following school year in the 2014-2015 school year.

As part of the de-merger into the six suburban school systems, there had to be some kind of resolution of what happens to the schools that are in the six towns and cities.

And what happened was there was an agreement between those towns and cities, each one of those towns and cities, and what was then Shelby County Schools for how those buildings would be dealt with.

In most cases, not all cases, which is why we're here today, but in most cases, those schools that were within Collierville, Arlington, Lakeland, and Bartlett, went to the new school systems.

And that agreement was taken before a federal judge and approved by a federal judge and the County Commission signed off on it too.

In the case of Germantown, the agreement was different.

The 3Gs, as we've called them a lot, Germantown Elementary, Germantown Middle School, and Germantown High School, remained with Shelby County Schools in the de-merger.

The school system said that it needed those schools because of the population growth in southeast Memphis.

Also, Lucy Elementary School, which is within Millington, remained with Shelby County Schools what is today Memphis and Shelby County Schools.

- And those three Germantown schools that you'll see us do headlines and others do headlines referring to the 3Gs.

And people are like, why are we talking about cell phone coverage?

But it is the three Germantown schools.

Abigail, anything to add on that history and where we are?

- Nothing really to add, but it has been in the last two years, there's been even more discussion about it as Germantown sought to look at possibly regaining those schools and even asking the state legislature to step in.

I mean, four or five years ago, there was an offer to purchase them.

The county-- - An offer from Germantown.

- An offer from Germantown to purchase them for 25 million.

The county said no.

And so in the past two years, the state legislatures looked at how they can help resolve the issue.

- Or force the issue.

I mean, I'm not taking a side on this, but a law passed in the last legislation session said that really the arrangement that it existed for some eight, nine years is no longer valid, which forced these negotiations.

And again, I'm gonna get the mayors in here in a second.

Any other background before we get them in, Bill?

- Yeah, the legislation basically gave both sides in this until the end of the year just in a couple of weeks now to work this out or the legislature would do it.

And the principle behind the legislation was that the schools within the school system should be within the boundaries of that school system.

- And so come to y'all.

Thanks for your patience 'cause you all have lived this obviously for quite some time.

But I think for people who aren't as close, it's good to walk through what's going on and why.

And right now the deal is it came out, and you all are gonna fill us in, and it's probably to some degree a moving and fast moving target as we record this on Thursday.

The offer right now is that the City of Germantown will pay $5 million for the 3 properties in the schools.

The County Commission has agreed to put up $72 million for the county school system, Memphis-Shelby County School system, to build a new high school in Cordova down the road.

And the transition of ownership, for lack of a better word or control, will be over nine years for all three schools.

And then the other big question is, will all three of these schools at this point continue as schools or will they be demolished?

Will they be repurposed and what will happen there?

I'll go to you county mayor, what did I miss?

Anything else that we got wrong or that has even changed since we last reported on this?

- So the only missing piece is the Germantown High School.

So Germantown High School, under the framework that we've all worked so hard on, would remain in Memphis-Shelby County School's hands to be sold.

And the City of Germantown is gonna work in collaboration with the school system to sell the property.

We've currently pegged the value of the property at around $22.5 million.

So the Germantown piece is 22.5 because of the value of that property, plus 5 million in cash, 27.5.

Plus 72 from the county.

The total investment in kids from Memphis-Shelby County Schools to have a first rate high school in Cordova, the total investment is expected to be at least $100 million.

And I say at least $100 million because as you say, there's a long ramping period here.

And over the course of that long ramping period, it is conceivable that the Germantown High School property may even fetch higher than $22.5 million.

That's a possibility.

But the point is, is we are dealing with or have targeted around a $100 million to be invested in the Memphis-Shelby County School system to make sure that they bring a new high school to market, which will be the first time they have a new high school for their kids, for our kids in more than 10 years.

- Okay, so that big piece I left out, apologies.

The 22.5 million is the target for selling, for the county selling the Germantown High School.

And you all then I'm gonna segue to you, you all are on board with this deal?

- Sure.

- Anything you wanna add, change, adjust?

- Sure, and the mayor did a good job of giving an overview, and I'd be remiss if I didn't thank him for, in essence, mediating and leading all the parties together to come around a table and try to come up with a solution and a compromise.

And yeah, one of the linchpins is exactly the high school property itself because it will be marketed, and the free market could come in aggressively and buy that particular property and that can go toward the funding of a new high school and kind of make everyone whole.

And we're excited about it because it's a solution that takes care of families and students and faculty, and it ends, various bill mentioned it, it ends a very long unsustainable saga of having an LEA operate in another LEA's jurisdiction.

And the only thing I would take, not exception to, on Bill's reporting, but, you know, literally the state legislation made it legal to do that, but all sides have to come to an agreement or make some type of an accord.

So it's actually this kind of benefited, you know, moving the ball down the field, so to speak.

- An LEA is?

- A local education agency.

- Oh, I thought I had it, but I didn't.

Questions, Abigail?

- I know you talked about the agreement.

The discussions have been ongoing for two years, maybe longer.

And I've heard, what was the turning point?

There have been conversations and conversations.

I know Mayor Harris that you stepped in maybe more recently, I'm not quite sure.

But what was the turning point when it was finally the parties came together and said, oh, this is a compromise that we're all comfortable with?

- Well, I think obviously operation of state law.

I mean, that's one of the things that played a factor here.

From my piece, I'll say that state law is obviously a challenge for all of us at the table, but I'd like to view it as an opportunity.

Certainly it boxed us in into a deadline and a schedule, and that's the challenge piece.

But the opportunity piece was Memphis-Shelby County Schools has a lot of deferred maintenance.

And even these buildings, as the Germantown Mayor can tell you, have a lot of deferred maintenance packed in them.

And the one way you get out of that, having kids go to buildings that need a lot of maintenance, is to bring new product to market.

And so that's what I view as an opportunity here is that we can build a new high school for the kids in Cordova.

It can be a first rate high school, the first high school in more than 10 years.

And so, you know, the political will is sometimes hard to summon.

But you put a deadline out there and we get in a place where people are summoning the political will, and we still got a long way to go, right?

That's why we're here today 'cause we got four different bodies that we've gotta get approvals from and we're hopeful we'll get there.

That people will see this as an opportunity, not just a challenge.

- Yeah, and I would just add, I mean, not to play on the school card but, you know, I always waited to the last minute on my term papers in college.

And it's amazing what urgency and a deadline will do to a transaction or an agreement.

And again, the mayor's done a great job of bringing all those parties together.

- Bill.

- So Mayor Harris, where is the $72.5 million that the county is putting up here going to come from?

I don't have to tell you, but maybe the viewers need to know that in the coming budget season, that they're gonna be some other issues like funding for Regional One, I believe further funding of a Frayser Comprehensive High School.

Is there $72.5 million there currently?

- There's absolutely $72.5 million to make sure kids are able to get a first rate learning environment.

And so if we can get the Commission's approval and the other legislative bodies that have gotta get a word in on this, then I think we're gonna make it happen.

The good thing on the county side, we've really been budget conscious over these last four or five years.

So each one of our capital improvement budgets have been limited to $75 million.

And because of that, we've created some room, capacity to do projects like this if the political will is there.

Our credit rating is stellar.

We've just gone before the credit rating agencies, and received our credit rating for the year.

And so this is another reason why this is a good time, and we've just gone out to market for new debt on the county side.

And so our interest rate came in at a very low four percent, which is remarkable.

And so we have actual cash on hand or access to cash on hand if the political will is there to get this done.

- And again, this would not be $72.5 million in a single year.

This would be, oh, would this be over probably a nine-year period?

- If the County Commission approves the plan as currently set out, they would amend this year's budget right now for half of the money, 36.25, and I would put another 36.25 in the next budget that I present to the County Commission in the spring.

- And that's part of the capital budget, not the operating budget?

- That's exactly right.

Construction capital budget.

- Mayor Palazzolo, are there any restrictions on the use of the Germantown High School property?

If you wipe the school off of that property now, demolish it, are you limited to just something that is educational or could it be any use?

- Well, the state statute really pins those three properties for educational use.

Now if they're an agreement is reached before the state statute before January 1, there can be some, a little bit more flexibility.

Those properties, Germantown Elementary, Middle, and High School are all zoned residential right now.

So they'd have to go through a rezoning process.

And, you know, that pretty much looks the same in all of America.

It's a step and it has to go through vetting and regulatory bodies, but it's something that cities do all the time.

- Does the municipal school district need the space at this current time?

Because my impression was that several years ago, this reached kind of a choke point, and Jason Manuel, the superintendent of the Germantown Schools, said we either expand Riverdale, do an elementary school, or we get the 3Gs.

If we don't get the 3Gs, then we do this.

- Sure.

Well, as Abigail alluded to earlier, we made an offer for all three schools for 25 million in 2017.

That was designed because we had pressure points at the elementary school level.

When that proposed agreement did not come to fruition, we moved forward with building in elementary.

And right now we project that we're pretty good shape for 10 years.

We want to acquire property for 20 or 25 years down the road.

We do a lot of long-term planning and are a little bit more strategic, but those buildings would be used for educational purposes eventually.

- So after the current students transition out, if there's not a need for 'em, do the buildings just sit vacant until there is a need for them?

- Well, that would be a determination between our friends at Germantown Municipal School District and the City of Germantown.

It's part of an agreement that continues to go back and forth right now.

We tend to go back and look at the statute that was passed because that helps us be grounded in state law, and we want to follow that because that's the right thing to do.

And so it'll be determined later on.

- So just to go back through that, 'cause there's a lot of moving pieces here.

So the high school specifically, which is gonna continue to be owned, if this agreement goes through and we'll talk about those steps also, but that is now valued at $22 million.

I took that as a fair market value that some private developer might put up $22 million.

They're not gonna wanna build a school or an educational facility for $22 million.

I mean, ostensible unless there's some college going on in there.

So it could, am I just missing it?

I mean, it could very much part of built into this plan is the assumption that that high school gets repurposed.

- Well, the market and we know the market bears whatever the market bears.

And so, you know, a developer or a prospective developer could come in and put something there that could be residential or they could ask for rezoning.

It has an institutional use now in a school.

But yeah, it's subject to what the market bears.

- Right.

Methodist, Methodist Hospital Group, has been talked about as a use or going, there was a talk of a cancer center.

Are you talking to Methodist?

Are they very interested in that property?

- Well, you guys have reported a lot about that.

Of course we've got a great relationship with Methodist Le Bonheur Germantown.

They're an anchor healthcare provider in our city.

We talk to them, but it has not moved anything.

There's no application, none of that has occurred.

- Am I right though that Methodist, either because it's a nonprofit or because it's religious affiliated, it does not pay taxes or does not pay the tax that a other type of development would do that?

- Yeah, but that's not always the case in healthcare.

We have a major rehabilitation hospital that someone else owns the land, and they pay taxes, and they lease, so it can be complicated.

- Because that's heavy on your mind though, right?

I mean, Germantown is land locked.

It has no more growth area and you've got over many decades, a limit, I mean, you've talked about this before.

A limited set of developable land.

- Well, our biggest industry, if you wanna call that, in our community is healthcare.

And so those things bring, you know, even though they may not pay property taxes, some of them, they bring a lot of other ancillary benefits.

- Let's go to this question of kind of two part question of what has to happen next.

You've talked, Mayor Harris, about County Commission has to approve this.

One, has the County Commission or is leadership at County Commission been involved in these negotiations?

And two, what in the world, this may be inside baseball, but what in the world happened when the press release came out and a whole lot of county commissioners said, "I had no idea this was happening."

Was that just a miscommunication?

Was that a necessity?

And what are you doing to get County Commission educated on the deal?

- So I talk to commissioners every day.

There's no doubt about it.

The Mayor of Germantown is also engaged in that process and we're hopeful that we'll get them to see the opportunity here.

And in terms of working through the deal, there's no doubt about it.

Commissioners were involved as we worked through the deal.

So on my end at the administration level, I deal primarily with the chairman of the Commission.

So everything I know he knows.

As we've gone through every milestone involved in the negotiation process.

At the same time, we brought in many commissioners for one-on-one briefings including the commissioner that is involved in Cordova, the commissioner who chairs the Education Commission Committee, the commissioner who chairs the budget committee all along the way.

So we deal with them often and make sure they're apprised.

With respect to the release, remember, these things are hard, fragile, and complex.

So there's one milestone when we get all the parties in the room and we actually reach a framework that everyone can live with.

Another milestone is how you report out what the group agreed to.

And my sentiment, just speaking for myself, is as soon as I get all four of these parties agreeable that they're ready to give public notice, so this is different from framework, but agreeable to public notice, the public has to know.

And so that's all on my end.

We were moving toward this.

As soon as all four sides agree, four people, four legislative bodies agree, then we're gonna send this thing out.

So it had nothing to do with the commissioner anyway.

It's about that the public has to know, you can't hide anything from the public.

And the second, you know, you get some agreement around the public notice, the public has a right to know, and we're not gonna hide anything on the administrative end.

- The other entities, when you- I'm sorry I cut you off there.

The four entities are Germantown City, Germantown Schools... - Memphis-Shelby County Schools, Shelby County government.

- And Shelby County Government.

And in that scenario, you're saying Shelby County government is both you the mayor and the County Commission?

- I'm saying the statement- - Because it sounds like five entities.

I'm not to be ticky, but it sounds like five.

- Well, I guess you could go up to eight if you were to do it.

Administrative, legislative sides of each one of those.

I just meant the negotiating parties.

There were four negotiating parties, and those four negotiating parties have an obligation, in my opinion, to reveal the product and negotiate to the public and that's what we're all about.

- Who all really quickly, and I'll go back to them, who all has to take a vote for this to be approved?

County Commission?

- Yes.

- City of Germantown.

- The board of alderman.

- Germantown Municipal School District.

- And the school board?

And Memphis-Shelby County Schools.

And you've been in communication with them as well?

They've been party to this?

- Everyone.

- Yes, okay.

I'm sorry, go back to you guys.

- There's been in the statute, it talks about the land transferring to the city or the LEA.

Who owns the land when it's transferred, the campuses, the elementary and middle school campuses?

- And I'll take that question.

You know, and again, we're trying to follow the statute that was passed and stay true to the statute.

And so it says either/or.

We're working through that with our school district, and at the end of the day, we're one community.

So we'll work through that piece of things.

- Either/or being the City of Germantown or the school system?

- Yes.

- Germantown Municipal schools?

- Yeah.

Back.

- Mayor Harris, I believe this budget year had some preliminary funding for the design of a new comprehensive high school in Frayser.

Am I right on that?

- Let's keep going.

Maybe.

Go ahead.

- All right.

Is this an either/or situation that the county is involved in a high school for Cordova or one for Frayser, but not both?

Can they both coexist?

- Absolutely.

So in terms of background there, the only reason I say I hesitated a little bit because there's been some action on the part of the county side and some action on part of Memphis-Shelby County School system with respect to Frayser High School.

And without getting into every detail of that process, we would love for there to be investment in the Frayser area.

And we think that it is ripe for there to be investment in the Frayser area with a new high school.

There's no one in this community that is talked about investment in Frayser or a new high school more than yours truly, other than Stephanie Love on the school board.

So I've been beating the drum and raising the profile of this issue for the last several years.

The important piece to remember is the last Commission voted to take out the money for the Frayser High School.

I'm not trying to besmirch them, but that's what happened.

We had money for Frayser High School.

They took it out.

Edmond Ford, who's a commissioner, made an amendment to remove the money for the Frayser High School.

And so that kind of, you know, put us back a little bit on one of the administration priorities, but that is still a priority of this administration.

And I believe we can get it done.

Right now, what we are all focused on, the four bodies that everybody's been talking about today, we're focused on the state law, which has an expiration, right?

If we don't get something done at the end of the year, then we're likely to be in litigation.

And this community has seen too much of that us versus them, suburban versus urban core, black versus white, wealthy versus hopeful.

And I for one am tired of it, and I would love to see us with an ability in this community to reach some sort of consensus and to go forward together.

So that's what this is about is we've got a state law, which has an expiration.

How do you get something done?

And the county is always willing, right?

Frayser, Cordova, South Memphis, wherever to invest in kids.

There is no shortage of resources in my mind, under my administration for opportunities to invest in kids.

- Let me- - Three minutes left here.

- Okay, let me stray just a little bit further then.

What about Lucy Elementary?

- So that's not something I've actually worked on very closely.

I mean, I've talked a little bit with the superintendent of Millington Schools.

I've mentioned this a time or two to the county attorney's office.

What has happened with this, with the 3Gs situation, obviously it's persisted for a very long time and there's, you know, and for.

I got the feeling, I'm not gonna speak for anybody.

I got the feeling that there wasn't as much high level communication around how to resolve those issues.

And so for whatever reason we said, well, let's try to get that done.

All the parties, right?

Let's try to take one last stab at that.

And so momentum picked up, but maybe there's a solution there.

That they aren't talking or that there is not a path forward with respect to other schools, I have not heard that.

So I have not worked on that.

- I did talk to Millington Superintendent Bo Griffin before we stepped in here and he said, "There's not a date to sit down and talk with Shelby County Schools at this point."

So there was a lot of... communication regarding Germantown.

There's not been a...

They've had conversations, they've gone and they've toured Lucy Elementary, but it's not been they haven't moved as quickly or as maybe aggressively as Germantown has.

But Millington has said if they acquire Lucy, that they do plan to continue to use it as a school because they do need that facility due to the growth out there.

- The nature of the state law that if you all do nothing, it's gonna go to the Millington School District?

I mean, you're also a former law professor, right?

I mean, just taking your seat out.

Like, the way the law is structured, it's gonna go.

- And potentially there's no controversy there because if it goes to Millington School District and the students don't have to move out of there, and there is some sentiment that the students might not have to move out of there, then it's just a status quo.

- And they have four years to operate so they actually have some time to work through this.

- I'm glad you mentioned that because just with two minutes here, the transition with the students and the students who are going to school in Germantown Elementary right now and the high school and so on.

How does this, I don't even know which of you to ask, but what about them?

- Well, I will only answer that the children, and the students, and the families are very important to me and my community.

And so the nine years that they'll be able to stay at the elementary and middle school are important for them to conclude their education where they started.

And that's been important for us from day one, but that's more of a Memphis-Shelby County schools question.

But we're committed to that.

- The transition period of nine years, as far as I can tell from all my conversations, it's plenty of time for all the parties to, you know, start a construction project to give a path forward to all the affected families and to make sure that, you know, every eye is dyed and so forth.

- Yeah, and we're looking to have the interim superintendent Tony Williams from Memphis-Shelby County Schools on very soon to talk about that and all kinds of other things with the schools.

Any last questions from y'all?

We got 40 seconds here.

- Yeah, with... [Bill laughs] - Yeah.

No, that's fine.

Fast ball.

- With 40 seconds left, mayor, technically you didn't have to get involved in this, did you?

- No, no, I don't have to get involved in this, but, you know, long-standing problems, persistent problems, yeah, I don't like to see that in our community.

So these parties wanted to try to work it out.

They really wanted to try to, you know, get the long-term planning activity going in Germantown, get a path forward for displaced families.

So they had some real objectives that squared really well with Shelby County's objectives.

- I'll spend my five seconds to tell Mayor Harris thank you, because county mayors can lead and this is an example of leadership.

- All right, we'll leave it there.

We'll obviously be doing a whole lot more reporting from these folks and others on this as it goes forward.

We'll probably do another show after the Christmas break.

But thank you for joining us.

Join us again next week.

District Attorney Steve Mulroy is on talking about all kinds of things about crime, and changes he's making in that office.

If you missed any of the show today, you can get it at wkno.org, or you can look for it on YouTube, or you can get the full podcast of the show on the Daily Memphian site, WKNO, iTunes, Spotify, or wherever you get your podcast.

Thanks, we'll see you next week.

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