By. Brent Wilson, Field Officer
The Greene County Board of Supervisors took the final step to approve going forward with a general obligation school bond not to exceed $28.16 million at their August 22nd meeting. . Virginia Public School Authority (VPSA) will purchase the bonds by the fall of this year.
The agenda item was presented during a public hearing – but no one showed up to comment. Chairperson Michelle Flynn (Ruckersville) took this to be a favorable commentary on the open process for the past two years leading up to tonight. She also indicated that she has received only positive feedback related to the project. Former Chairperson Bill Martin (Stanardsville) echoed the same sentiment and that the project will be good for the community and the school system.
Supervisor Jim Frydl (Midway) is the Board’s liaison to the schools and has been involved in the process over the past 30 months. He further stated that high schools are the most expensive schools to build and the project to renovate the high school and other schools in the Greene County School System is the most efficient way to provide quality educational facilities. At the same time, the study was a forward looking process with a look toward 20 years into the future.
Finally, Flynn said that the best way she could summarize the process is to quote Supervisor David Cox (Monroe) – “do it once and do it right”.The gross cost of the project of $28.16 million will cost nearly $41 million ($1.63 million x 25 years) assuming an interest rate of 3 % over 25 years. The accumulated Capital Fund Balance of $2.814 million represents excess tax revenue that taxpayers have paid in previous years. When Supervisor Dale Herring (At-Large) was asked if these funds should be used to help pay for the project, he indicated that Tracy Morris, Finance Director and Stephanie Deal, Treasurer indicated that these funds should be released over a period of time and not in a lump sum.
This raises the question – why?
Herring also indicated that the project will solicit quotes from multiple vendors and the project may cost less than the architects estimated – $28.16 million.
Logically, spending the $2.814 million at the beginning of the project would reduce the need for new tax revenue. Plus this is tax revenue already collected from taxpayers. One explanation not to spend it all up-front, has been that the unspent capital needs to be held back for unexpected capital requirements. That may be true to some degree, but it seems excessive to some observers.
The other comment in response to spending the $2.814 million excess capital is it would draw down cash too far. This seems to beg the question, how low should the cash balance be allowed to get down to – especially right before personal property taxes are collected in June and December (the lowest points each year).
The county has a Reserve Fund target, which includes cash and all assets which their auditors have recommended. But you can’t write checks against total assets, you have to have cash in the bank. As nationally known financial advisor Dave Ramsey advises – you need 3-6 months of living expenses on hand for emergencies.Perhaps Greene County could look to live by Dave’s advice.
If the Board is so inclined, they could easily agree on a transparent Cash Reserve Fund calculation so that a clear, well thought out policy can be developed.
Such a policy could provide the data to clearly determine how much cash could be spent to pay for the school project from excess capital funds. The concerns raised by the Treasurer and Finance Director are testament that there needs to be some safeguard – but it should be formalized. The current board may not spend too much but who is to say that a future board may be too aggressive and get the county back on the edge of bankruptcy.
The final question is – who determines if spending is to be made from the excess capital funds that the school system has accumulated. Per Herring, while the funds are designated for school capital funds, it is part of the overall county reserve position.
Currently, the determination of the usage of the excess capital reserve has not been decided. This needs to be clearly defined so that funds can be easily consumed when needed and done in conjunction with a Cash Reserve Policy so that the county doesn’t revert back to where it was several decades ago – nearly bankrupt.
Brent Wilson is the Greene County Field Officer for the Free Enterprise Forum a privately funded public policy organization. The Free Enterprise Forum Field Officer program is funded by a generous grant from the Charlottesville Area Association of REALTORS® (CAAR) and by readers like you. To support this important work please donate online at www.freeenterpriseforum.org
Photo Credit: Greene county, Dave Ramsey
By. Neil Williamson, President
In case you did not notice, earlier this week there was an election.
In addition to the Presidential race, several localities had so called “Bond Issues” on their ballots. Albemarle County was one of 17 bond issues presented by 6 localities this year – This represents over $1.3 Billion in capital spending – not surprisingly all passed by fairly significant margins.
The Free Enterprise Forum does not question the need for any of these projects but we do wonder if the ballot box is the proper place for determining their priority in the community.
Voters are provided a binary choice of support or not support a distinct number of capital projects in a particular government function but they are not told (on the ballot) the impact on their local budget or the other capital improvement items that might have to be postponed in order to pay for the proposed bond referendum.
Interestingly, this year when voters in four localities were provided the option to institute a meal tax – it failed in three of the four localities (Passed Matthews County 54%). The lesson, regardless of the actual impact, if you do not call something a tax the citizens will be likely endorse it.
The Free Enterprise Forum is very concerned that referendums [and fees (i.e. storm water)] are providing local government a new way to generate revenue and duck responsibility for making the hard choices that result in tax increases.
In addition, it seems that the manner the ballot question is phrased also has an impact on the success of the effort.
Tuesday, Augusta County residents were asked not about a bond issue but a straight spending question.
Shall the Courthouse of Augusta County be removed to the Augusta County Government Center Complex in Verona, Virginia, and shall the Board of Supervisors be permitted to spend $45,000,000.00 therefore?
Voters (66%) said no.
But Henrico Schools Bond referendum asked a 6 times larger spending question in a completely different way:
Shall Henrico County, Virginia, be authorized to contract a debt and issue its general obligation bonds in the maximum aggregate principal amount of $272,600,000 pursuant to the Public Finance Act of 1991 to finance school projects and the Henrico County School Board’s Capital Improvement Program, including capital improvements to schools, furnishing and equipping of schools, acquisition of future school sites, and such other school construction, renovations, and improvements as may be required by the actual education needs in Henrico County?
It seems to this observer that voters strongly favor financing options for municipal spending even absent tax ramification information but push back on the concept of making specific spending decisions. The language of the ballot question matters.
More importantly perhaps is not how voters are asked but should they be?
The self governance part of our philosophy appreciates the apparent citizen involvement in the process but the cynical portion questions if by limiting the choice to a binary yes/no decision they are truly engaged.
Shouldn’t those we elect make the tough choices between adding classroom space or adding a firehouse? Aren’t they in the best position to evaluate competing priorities?
The reality is each and every one of the bond referendums that passed will be repaid using local tax revenue but not one of them said in the ballot question how the amount borrowed equates to the property tax rate increases during the term of the bond. .
Considering the significant disclosures required when we as private citizens take on debt (car, auto, etc.) is it too much to ask for a truth in lending statement for over $1.3 BILLION in capital spending?
The Free Enterprise Forum believes such fiscal clarity should be an integral part of such ballot questions. Unfortunately, we doubt such change will be made any time soon as that might negatively impact the passage rate and require elected officials to make the tough capital budget decisions.
Neil Williamson, President
Neil Williamson is president of the Free Enterprise Forum, a privately funded non-profit public policy organization focused on local governments in Central Virginia. For more information visit www.freeenterpriseforum.org.