With leaking roofs and crumbling window frames in urgent need of repair, the $25 million project to update Asheville High School’s iconic 1928 Douglas Ellington building and other campus structures couldn’t wait any longer. Approved by the Buncombe County Board of Commissioners in October 2016, the ongoing project is just one of a number of high-dollar construction initiatives at local public schools.
“Anything that was detrimental to the building, that was beginning to really show wear and tear on it, all of those have been touched through this project,” says Don Simms, the director of maintenance and properties with Asheville City Schools, of the work at Asheville High.
In the future, the school system hopes to find money to replace interior finishes and install new, more efficient plumbing fixtures. “There’s still a lot of things on the interior of the building that would really need to be touched up,” Simms notes. Much of the building’s plumbing hasn’t been updated since the school was constructed in 1928.
According to the N.C. Association of County Commissioners, state law assigns responsibility for building and renovating schools to county governments, a charge that by its nature produces big bills and big amounts of debt.
At nearly half a billion dollars — $458.5 million as of June 11 — the county’s debt is no small figure. Spending on schools makes up over half of that balance, with $270 million borrowed to pay for facilities for A-B Tech and the county’s two public school systems, the Asheville City and Buncombe County schools.
As Buncombe County struggles to regain the community’s trust following allegations of fraud against former County Manager Wanda Greene, members of the county’s staff have provided additional information about county finances, including its debt, in recent months. Xpress takes a look at the county’s outstanding balances to see how they stack up against other North Carolina counties and what they can tell us about local priorities in recent years.
On the dashboard
Wanda Greene and her son Michael Greene, who also worked for the county, were indicted on fraud charges related to improper use of county credit cards on April 13, and federal prosecutors announced new charges alleging that Wanda Greene misappropriated $2.3 million in county funds to pay for life insurance policies for herself and several other county employees on June 5 (see “County releases more details about alleged Greene insurance scheme“).
Less than two weeks after Greene’s July 1, 2017, retirement, new County Manager Mandy Stone, who the county has announced will retire on July 1, 2018, presented suggestions to the Board of Commissioners to make the county’s financial information more accessible to the public.
Stone proposed a set of “dashboards” to be posted on the Buncombe County website. Increasingly used by businesses and government, data dashboards visually track and display important data points to share information and help monitor the financial health of an organization or project. The city of Asheville, for example, has created interactive online dashboards to provide budget and cost information for its capital improvement projects, including spending authorized by the city’s 2016 $74 million bond referendum.
The new online tools were part of a push by Stone towards increased transparency and accountability, says Buncombe County spokesperson Kassi Day. “However, the investigation into Wanda Greene accelerated our efforts.”
Both Stone and county Chief Financial Officer Tim Flora, whose June 15 resignation was announced on May 30, were among the senior staff members for whom Wanda Greene purchased whole-life insurance policies beginning in 2016. According to a statement issued by the Buncombe County Board of Commissioners on June 5, however, no county employee other than Wanda Greene received personal financial benefit from the policies.
In your debt
One of the county’s new dashboards provides an itemized breakdown of Buncombe County’s debt, which has been issued to pay for a wide variety of capital projects, ranging from a new animal shelter to recreational facilities to a 16-tower public radio system for the county’s first responders.
The overall size of Buncombe’s debt, says Flora, is consistent with other North Carolina counties.
The N.C. Department of State Treasurer oversees county debt through the Local Government Commission, an arm of the office that was created in the 1930s when scores of counties and cities across the state defaulted on loans in the wake of the Stock Market Crash of 1929 and the ensuing Great Depression.
In fiscal year 2017, which is the most recent year for which the department has data available, Buncombe County’s total tax-supported, long-term debt was about $395 million. That amount represents almost 1.3 percent of the county’s total appraised property value, which in FY 2017 was more than $30 billion.
That ratio was the second-smallest among the seven counties in North Carolina with a population greater than 250,000. The highest ratio was held by Forsyth County, which encompasses Winston-Salem, at 2.68 percent; eastern North Carolina’s Cumberland County, whose county seat is Fayetteville, boasted the lowest ratio, at 0.43 percent.
The Department of State Treasurer uses several benchmarks to measure the financial health of counties. A county’s “financial obligation,” for example, measures the proportion of its overall spending a county dedicates to paying off debt in a given year compared to its total expenditures.
In FY 2017, seven percent of Buncombe County’s expenditures went to pay off debt. According to the Department of State Treasurer, counties tend to be in trouble when they reach 15 to 20 percent.
By the end of the 2018 fiscal year, Buncombe County will have made $48.5 million in debt service payments, with $29.3 million of that money paying down the county’s principal debt balance.
Buncombe County policy requires county government to pay off 55 percent of its debt within 10 years. According to a third-quarter financial report delivered to commissioners during a meeting on May 1, the county is poised to pay off 63 percent of this allotment within that time frame.
It takes a county
Almost 60 percent of Buncombe County’s debt is wrapped up in education.
Kevin Leonard, the executive director of the N.C. Association of County Commissioners, notes that Buncombe County’s percentage split between education debt and remaining expenditures is fairly typical for counties in North Carolina.
“Counties are significantly different from cities in that our budgets are really focused on education and health and human services,” he says, “and so a lot of the funding for counties, the majority of their budgets are really made up by those two components.”
Human services makes up another significant piece of Buncombe County’s debt ― almost $56 million. The money the county borrowed to expand its Health and Human Services building at 40 Coxe Ave. makes up the majority of this sum, with a $45 million balance yet to be paid off.
Greg Allison, a professor at the UNC School of Government, says education spending tends to be the most significant portion of the debt for large, growing counties in North Carolina, with that money spent primarily on construction and renovation of school facilities to keep up with the influx of students. For example, Wake County, which encompasses Raleigh, issued a nearly $1 billion bond several years ago for school projects.
“There’s an inordinate amount of pressures on a county to take care of all of the infrastructure that they need,” Leonard says. Buncombe County issues long-term debt to purchase or construct capital improvements or equipment and has a policy against issuing long-term debt for operational expenses.
Doling it out
Every dollar spent on school construction by Buncombe County goes in front of a five-member body called the School Capital Fund Commission.
The commission oversees a pot of money fed by sales tax revenue identified in article 39 of the state tax code. For every dollar spent at retail in Buncombe County, one cent passes to county government as article 39 revenue. Half of that cent goes to the School Capital Fund Commission to pay for school projects. The county also receives a combined 1 ¼ cent through article 40, 42 and 46 sales tax revenue. Part of that money funds school capital expenses and debt service payments. A quarter-cent is set aside for capital projects and operating needs at A-B Tech.
Board of Commissioners Chair Brownie Newman sits on the School Capital Fund Commission. He estimates that a majority of the projects funded by the body are supported by the issuance of debt. Newman says the county doesn’t have enough cash on hand in the School Capital Fund to pay outright for all of the projects the commission decides to support.
“Just like most people who aren’t millionaires, you don’t just buy a house with $300,000 in cash,” he said. “You’d get a home loan and you’d buy your house and pay for it over time.”
Counties in North Carolina will face a combined $8.1 billion in school capital spending needs between 2015 and 2020, according to a 2015 report completed by the N.C. Department of Public Instruction.
The report predicted that the greatest need would come from Wake, Guildford, Mecklenburg, Forsyth and Union counties, which would have to absorb a combined total of $2.56 billion in school capital projects.
In contrast, Buncombe County makes up a small fraction of the total; the report predicted that the county would require only about $64 million split between Buncombe County and Asheville City schools.
Every county has an issue with building schools, says Leonard, “whether it is keeping up with capacity or whether it is renovating what they’ve got or consolidating because they’ve lost population.”
Leonard says he believes a part of the solution to this problem is a statewide $1.9 billion — “with a b” — bond referendum that has received backing from multiple education advocacy groups. Supporters hope to get the bond on the ballot in November.
A website set up by bond supporters argues that because counties are spending more on school operational costs ― salaries, employee benefits and supplies ― they have less available funding for school construction.
According to the N.C. Association of County Commissioners, the state provides money for operational expenses to school systems, but counties have the leeway to supplement this with additional funding.
During a budget work session on May 8, Buncombe County Schools Superintendent Tony Baldwin told commissioners that while the largest percentage of the system’s funding comes from the state, a growing portion is coming from Buncombe County.
An increasing reliance on local funding is a trend that appears to extend to school systems across North Carolina.
Between 2007 and 2017, the total amount of money that counties have spent on school operating expenses has increased from $2.6 billion to $3.1 billion.
“The per-pupil spending is increasing … and it’s because counties are committed to good schools,” Leonard said. “Every county wants to do the best they can for their kids.”
Leonard says Buncombe County is probably positioned better than many counties in the state because of growing sales tax revenue in Asheville. “You all have just been growing like gangbusters,” he says. But that doesn’t make Buncombe County immune from future budget crunches.
With state legislators pushing for reduced classroom sizes for elementary school students, Leonard believes school systems across the state could be required to construct additions to make up for a lack of space. There’s also the question of school safety, an issue that has reached a national fever pitch following recent mass school shootings in Florida and Texas.
“People think about school safety and they think about [school resource officers],” Leonard said. “I automatically think … about doors and fencing and electronic locking systems for schools and shatterproof glass, etc.” That’s all a capital expense, which would fall on counties to fund, he explains.
Rep. Brian Turner, whose district spreads across the western portion of Buncombe County, says a state bond would help Buncombe County as it addresses school security issues and construction pressure related to reduced classroom sizes.
Turner points to Candler Elementary School as an example of a local school that needs enhanced security measures. “Candler Elementary is spread across three buildings and there is not any controlled access,” he says. “Essentially, kids go outside all the time to get from one class to the other.” Because Candler Elementary School is in the Buncombe County School system, the bill for any capital improvements to address security would likely fall to Buncombe County.
On the face of it, Turner says, reduced classroom sizes are a good thing.
“The smaller the classes, the more individualized attention the child’s going to get,” Turner says. “The problem is the General Assembly, [number] one, didn’t appropriate any money for additional teachers and, number two, when you start reducing class sizes, that means you’re going to have more classes, which means you need more classrooms.” Turner says the General Assembly didn’t appropriate any money for additional classrooms. The legislature did pass a bill that offered school systems a one-year extension on fulfilling this mandate, “but we haven’t solved the overall problem,” Turner says.
Assistant Asheville City Schools Superintendent Terrence McAllister said the system made arrangements about a year and a half ago to ensure there would be enough room for students at each school.
“It’s going to depend on the influx of students we receive both in district and out of district to see whether in the future we’ll have to add additional classrooms or not,” he said, “but right now we have a good plan in place.”
With room to run in its indebtedness, Buncombe County appears to be in a position to take on more debt to cover future school building or other capital needs as they arise. Whether county residents trust elected officials and county staff to prudently manage and oversee that spending, however, depends in part on how far county transparency efforts like the new online dashboards can go in reassuring locals that the oversight failures of the Wanda Greene era won’t be repeated in the present.