Paying the school bills
By Matthew Whittle
Published in News on February 3, 2008 2:28 AM
EDITOR'SNOTE: This is the first in a five-part series on the school facilities issue -- the next steps, the costs and
who is going to pay the bills.
Coming this week: School
officials react to the plan.
Late last year, the Wayne County Board of Education approved a $23 million school facility construction plan despite voicing concerns over how it was to be financed.
County officials, however, believe that the plan submitted by County Manager Lee Smith not only addresses the school system's most critical facility needs, but that it does so in the most fiscally responsible way possible.
The $23 million in projects, they explain, is drawn from the $105.1 million facility improvement plan approved by the school board in August. (The plan topped $121 million only when an additional $15.9 million in first-year operating expenses were included.)
And, Smith added, none those projects -- major renovations at Norwayne Middle, Eastern Wayne Middle, Greenwood Middle, Mount Olive Middle and Brogden Primary, and minor improvements at Mount Olive Middle, Carver Heights Elementary, School Street Elementary, Dillard Middle, Goldsboro High and C.B. Aycock High -- involve increases in operating expenses.
"We used their priorities. We look at these as the most serious projects that need to get done," Smith said. "The ones I pulled out of that list are the ones with no operating impact or a positive operating impact.
"And what we looked at first were primarily classrooms. That tended to be the big issue we were hearing about from the public."
Funding
The funds for these projects will come from a variety of sources.
Approximately $16.4 million is scheduled to be financed, possibly through methods such as certificates of participation, with the estimated $1.6 million annual debt service (for 20 years) paid for through existing lottery and sales tax revenues designated for school capital.
Another $4.5 million is planned to come from county and school cash reserves, whether through unrestricted fund balances, lottery or sales tax revenues or other cash sources. But, Smith noted, if the county can find a way to pay straight cash for more, they would like to do so to borrow less.
The final $1.2 million is scheduled to come from the money saved on utility costs as the result of improvements from performance contracting.
The proposal does not, Smith explained, require a property tax increase.
He also explained that it was structured in such a way as to allow the schools the ability to access at least $2.5 million -- the amount school Superintendent Dr. Steve Taylor and the board have requested -- in annual capital funds if needed for routine maintenance, small projects and emergency repairs.
The county has pledged that those funds will be available.
"We worked a long time to come up with the funds," Smith said. "(The schools) really are using surpluses in both those areas (lottery and sales tax funds).
"I understand there may be some issues about the dollars, but I think we've proven the money will be there. Our estimates are they'll be fine."
Lottery revenue
In the county's lottery fund, there is currently $2.4 million -- $1.1 million of which has been collected this fiscal year. Another $1.2 million also is expected to come in by June 30.
That money is restricted to capital improvements and debt service for county school systems, and can only be drawn down with the approval of the county commission.
So far, since the money began accruing in the 2006-07 fiscal year, the school board has only drawn down $370,000, which it put toward property acquisition for a future Grantham Middle School.
Under the $23 million plan, Smith explained, the goal is to use about $800,000 from the lottery fund each year.
"That's kind of the maximum we want to depend on. There are still a lot of questions about the lottery revenue, but that's a very conservative figure so that even if there are some changes, we'll still have money coming in," he said.
Sales tax revenue
In the county's sales tax fund, as of June 30, 2007, there was $2.8 million.
For the current fiscal year, sales tax revenues are projected to be $4.4 million, which county finance director Pam Holt said is usually pretty accurate.
"It depends on the economy, but we feel good that will come in," she said.
Of those projected funds for this year, $1.3 million was budgeted for debt service and $1.8 million for the school system's annual capital needs -- leaving a projected balance of $1.4 million.
School sales tax funds, which are taken as percentages of two half-cent sales taxes returned to the counties by the state, are designated strictly for capital improvements, maintenance and debt service.
Those moneys are then held by the county and are requested from the county commission by the board of education as part of the normal budgeting process.
"It's in our account and that's it. It's basically a pass-through," Smith said.
And so, while the county commission does have some measure of authority to allocate to specific land acquisition and building projects, he explained that the final decisions are the responsibility of the school board.
"That's their choice," Smith said.
Cash reserves
It's also school board's choice. Smith said, how it pays the $2.25 million in cash, whether through unrestricted fund balance, lottery or sales tax revenues or other funds.
Currently, the county's undesignated and unrestricted fund balance is $20 million -- the likely source for the county's $2.25 million cash portion.
It's an account the county's been building over the last six years.
"Six years ago we were not able to borrow money. We did not have fund balance to cover it," Smith said.
And so the reason the county is not picking up more of that $4.5 million tab, he explained, is because that fund balance is needed to back anything that is financed -- including the anticipated $16.4 million.
"If the governor or the legislature changes the lottery and the economy falls off, who picks up the debt?" Smith said. "It is backed up by the full faith and credit and taxing authority of the county. It's in our name."
Additionally, he said, the higher-than-required fund balance is not just for the schools. Other capital projects on the horizon include the jail, the libraries, the Department of Social Services, the Health Department and the Services on Aging.
"It's not just schools. It's all county capital," he said.
Planning
When the school system's $23 million will be spent, however, has not yet been decided.
The goal, Smith explained, is to begin work later this year, but that first, county and school officials will need to sit down and develop a two- to three-year timeline of target dates for these projects so they can begin determining when and how each will be funded.
Currently, the school board's facility committee is in the process of selecting an architect to help oversee the design of the renovations. Officials also are examining whether any of these projects can be consolidated under one bid.
"An architect can assist the schools on design and provide construction estimates and expectations," Smith said. "Once the county gets that information, we can work on the financing plan."
"It's all going well. We're moving forward and working together."