In a highly surprising move that virtually no one saw coming, the Guilford County Board of Commissioners, at the prompting of Commissioner Justin Conrad, voted unanimously to approve raising up to $10 million for school security needs using two-thirds bonds – a little understood local government financing method that’s never been used by Guilford County to fund school projects.
Conrad made the motion – one that proved popular with both Democratic and Republican commissioners on the board – at a Thursday, June 14 work session.
What the commissioners are saying publically is that this is the fastest way to get the money into the hands of school officials for the important purpose of protecting Guilford County students at a time when school shootings have drawn more attention in the media.
But what many commissioners are not saying publicly is that one reason the board chose to use two-thirds bonds is that it gives the commissioners much more control over how that money is spent than the commissioners would have otherwise. If they were simply to find the money in the budget and hand it over to the schools, that would be the last say the county had over how that money was spent.
The Board of Commissioners is set to adopt a 2018-2019 budget on Thursday, June 21, and Guilford County Manager Marty Lawing’s proposed budget calls for the county to give the schools $2.5 million more for capital projects than it did in 2017-2018. The total amount in Lawing’s proposed budget for capital needs is $7.5 million. That new money could be used to enhance school security.
“I started thinking – I don’t think that $2.5 million is going to pay for the needs,” Conrad said of school security concerns for the coming fiscal year.
Conrad said that if the county continued to give that extra $2.5 million in funding over the course of four years, the $10 million would get to the school system but the money could come too late.
School officials want to address issues like doors and windows that don’t lock, a lack of video cameras in strategic areas, unrestricted access points in some schools and an insufficient emergency communications system.
Conrad, a Republican, said he was aware that Commissioner Skip Alston, a Democrat, wanted to see $10 million rather than $7.5 million in additional capital money given to the schools in the 2018-2019 fiscal budget.
Conrad also said that, before the June 14 work session, he discussed the two-thirds bonds idea for the $10 million with Commissioner Jeff Phillips, who’s been the county’s go to commissioner on county finance issues since he became a commissioner in December 2012.
“I talked to Jeff because he knows how the numbers work,” Conrad said.
Conrad added that it was clear something needed to be done about school security and this financing method will get the money in the hands of the schools quickly. He said a major school facilities study now underway should reveal its findings on school system security needs in September. The schools have already started taking action in that regard with some currently available school funds.
“This is an unprecedented situation in our history and it needs to be addressed,” Conrad said of the threat of school shootings and other acts of violence in schools across the country. “We’re not waiting on the federal government; we’re not waiting on the state. This is the county taking action.”
At the June 14 meeting, when Conrad proposed the move, he told the commissioners it was imperative the board take action.
“First and foremost the reason to do this is because it’s the right thing to do, period,” Conrad said. “It is the right thing to do for our kids, for our staff, for our community and for our people. We’re at an unfortunate time in our world right now where we even have to discuss this, but the reality is that we do.”
Conrad said there’s absolutely nothing more important than school security and he added that he gets emails and calls to that effect all the time.
The funding method known as two-thirds bonds allows local governments in North Carolina to borrow up to two-thirds of the amount of principal that was paid off on general obligation bond debt in the previous fiscal year, as long as that county or other body hasn’t borrowed more money. Two-thirds bonds give counties the ability to borrow money that’s backed by the full faith and credit of the county – just like voter-approved bonds – however, unlike the more familiar general obligation bonds, two-thirds bonds don’t require voter approval.
Guilford County used two-thirds bonds plenty of times when the Democrats controlled the Board of Commissioners prior to 2012. In the last six years the county has only used two-thirds bonds once.
Over the past decade, commissioners have had all sorts of questions regarding the way the school system has spent the money that the county has provided. For instance, commissioners have had a lot of concerns as to how the schools prioritized the $457 million in school bond money that county voters approved in May 2008 and, rightly or wrongly, the commissioners also have felt at times as though school officials have stated a need for annual budget money for one thing and then used that money for something else.
The commissioners clearly wanted to fund school security needs but didn’t want to just hand $10 million over to school officials. This year, some commissioners have expressed concerns in private about some of the ways the schools are planning to address the school system’s security issues. By providing the money through two-thirds bonds, the commissioners can have final say on which projects get done with that $10 million.
One county official said that, this way, the county won’t just hand the money over to the schools for security needs and get a note back that says, “Thank you for the volleyball field.”
Currently, school board members and other school officials are clearly making school security a priority, so the commissioners might not have to worry about the money being spent in some other way this time around. However, the commissioners clearly like the fact that, with this type of financing, they must sign off on how the money is used. This week, Chairman of the Board of Commissioners Alan Branson openly admitted as much.
“This will give us better control,” he said. ”We can allocate the spending. We can hear it, see it touch it and feel it.”
At the June 14 meeting, Commissioner Alan Perdue also alluded to this benefit before the board’s unanimous vote to approve.
“I just want to clarify that, based on the avenue of this funding, any project would have to come back to us before an expenditure takes place,” Perdue said.
Commissioner Kay Cashion said it was important to note that this move was in no way an indication of a lack of confidence in the Guilford County Board of Education.
Cashion also said she has received a lot of emails and calls encouraging the commissioners to give more money for school security needs.
“This is a real important issue right now,” she said. “They want to be sure that, when school starts next fall, we have made some effort and I think this is a good positive step forward. I can’t imagine not really trying to do something about this, saying no and then there is an incident.”
Guilford County Attorney Mark Payne stated recently in an email that, according to North Carolina law, the commissioners do have some legal control over school spending in some capital spending categories.
“There are a number of specific categories of capital expenditure required to be paid for by the county,” Payne wrote in an email. “This assumes the ability to designate funds to meet said specific purposes.”
That may be, but in practice, when it comes to the money the commissioners turn over to the schools each year, the use of that money is out of the commissioners’ hands.
The county manager’s budget proposal for 2018-2019 would give the schools about $210 million in operating and capital funds combined, with $7.5 million of that allocated to capital needs.
Guilford County has been paying down the county’s debt for years and this could add $10 million to the debt in coming years – though several commissioners pointed out that $10 million is the maximum allowed by the June 14 vote. The board may or may not approve the entirety of that amount.
Conrad said one concern he’s heard is that the board may be “opening a Pandora’s box” because now school officials may come to the commissioners in the future asking them to use two-thirds bonds for various projects. However, Conrad said this is a special situation and it would be a mistake to think the county will make this a regular practice.
Two-thirds bonds were a favorite tool of the Democratic commissioners when they controlled the Guilford County Board of Commissioners prior to 2012. The Democrats kept going back to that well time and time again. For years, they paid off debt one year and borrowed two-thirds of the money they had paid right back, over and over again – putting the county for years on a cycle of debt addiction like a frequent user of a pay-day loan business.
