School Bond Referendum: Conflict of Conscience
In good conscience, Mr. Skip Alston (chairman, Guilford County Board of Commissioners) cannot support the $1.7 billion school bond referendum. For that reason, neither can I. Please allow me to explain …
I’m a father with three children in Guilford County Schools. I’ve seen the issues in our school buildings firsthand. However, I’m also a taxpayer, and I saw just how poorly the last school bond ($300 million in 2020) was handled.
To become better informed, I first met with Rev. Frank Thomas (co-chair of the School Bond Referendum). He explained the intent of the school bond but could not answer my financial questions, which were centered around: (1) property taxes; (2) the current level of school bond debt/rate we were paying on that debt; and (3) how the $1.7-billion-dollar school bond would be funded if the ¼ cent sales tax hike didn’t pass.
To get answers to those questions, I reached out by email and phone to Mr. Michael Halford (Guilford County manager). Unfortunately, those communications were ignored. However, by moving down the Guilford County organizational chart, I was able to reach Mr. Toy Beeninga (Guilford County budget and management services director), who was extremely helpful. He took time after work one night to answer most of my questions in a 45-minute phone conversation.
That conversation left me with one remaining question, so I next attended the Guilford County Board of Commissioners work session (5-5-22) to get an answer. At that meeting, I listened to Mr. Ben Chavis (Guilford County tax director) explain that Guilford County had seen record sales and property taxes in FY2021. He called attention to the fact that there was significant speculation in the real estate market (i.e. housing bubble), which would cause a shorter cycle to correct tax values (i.e. time until the housing bubble bursts). This concerned me, because property taxes are the primary revenue source that will be used to pay the debt service on the $1.7 billion school bond.
For reference, the value of total taxable real property in Guilford County increased by 31 percent – 33 percent in 2022 (as compared to 2021). This equates to $92 million in additional property tax revenue, of which approximately half could be used to meet the additional debt service requirements associated with the $1.7 billion school bond (approximately $50 million per annum).
This must have also concerned Commissioner Alston because he made it a point to ask Mr. Chavis what happened when the 2008 housing bubble burst. Mr. Chavez explained that all of the appreciation in the tax base from 2004-2008 had been wiped out. Further, some counties that completed reappraisal in 2008 actually lost 10 to 12 percent of their total tax base.
Readers may want to review this concerning exchange for themselves, so I have posted the video on my campaign Facebook page (Matthew R. Kuennen for Guilford County Board of Education, District 6).
Following that discussion, I went back to the 2004 Guilford County reassessment to see what county commissioners did at that time. They must have realized they were on the leading edge of a housing bubble (similar to our present circumstances), because despite the 22 percent increase in total taxable real property, the tax rate they levied for fiscal year 2004-05 was $0.6184 per $100 valuation (as compared to the tax rate of $0.7135 levied for fiscal year 2003-04 and the revenue neutral tax rate of $0.6034). In layman’s terms, this means the county commissioners went with an almost revenue-neutral rate, which reduced the amount of tax citizens paid by 9.5¢ per $100 valuation.
Can you imagine how much property tax would have been wiped out if they had left the property tax rate at rate neutral ($0.7135 per $100 valuation)? Well, you won’t have to, because that is exactly what county commissioners have done in 2022. Rather than adopting a revenue neutral strategy ($0.5954 per $100 valuation) as was done in 2004, they have instead gone with a rate neutral strategy ($0.7305 per $100 valuation). What’s more, they are actively leveraging one-half of that inflated property valuation to service the debt on the $1.7 billion school bond. I suspect this is why Commissioner Alston (who has 40 years of experience in real-estate) took the time to ask Mr. Chavez those leading questions at the commissioners work session. I attempted to ask Mr. Alston about this at the end of that meeting, but commissioners had to run to their next meeting so that question remains unanswered.
In summary, I cannot support the $1.7 billion school bond until county commissioners can articulate to me (and all Guilford County taxpayers) where the $50 million of additional debt service requirements will come from when the housing bubble bursts. For reference, that amount is equivalent to 7 percent of Guilford County’s total annual operating budget ($714 million). How will we meet this debt service requirement when overleveraged real estate developers (and homeowners) begin defaulting on their loans, as they did during the last housing crisis?
If Guilford County can provide me with an answer to this question, then I will fully support this bond. But until then, I cannot. Based on the questions he asked at the May 5, 2022 work session meeting, I do not believe that Commissioner Alston can either.
Matthew R. Kuennen
Republican District 6 Board of Education Candidate