Balance sheet: Is Guilford County heading over a cliff of debt?

by Jordan Green

Guilford County Commissioner Billy Yow (right) said, “When the time comes, there’s gonna be a tax increase. There’s nothing any of us can do about it. And people knows that day’s a-comin’. But it doesn’t have to be today.” (photo by Jordan Green)

Guilford County Manager BrendaJones Fox is proposing that thecounty maintain a flat debt servicelevel in FY 2011, at $77 million.Over the next two years, the county’s debtservice payments could make a “dramaticjump” to $98.4 million in FY 2012 and thento $112 million in 2013, before graduallytapering off, in what Budget Managementand Evaluation Director Michael Halfordcalls “the worst case scenario.”The county is going to have to tackle itsdebt to pay for its new jail and new schools.Guilford County voters approved a $412.3million school bond and $114.6 million bondto build the new Guilford County DetentionCenter in May 2008. The bad news for thecounty is that the valuation of taxable propertyin Guilford County is expected decreaseby 1.4 percent between now and the comingbudget year.“When citizens voted for this debt,they voted to pay for it,” DemocraticCommissioner Kirk Perkins said during awork session on May 18. “That looks like acliff we’re getting ready to ride off.”Perkins asked Fox to articulate her planfor when the county’s debt service paymentsjump by $40 million.“The following year, maybe luck will bewith us, and we can do some restructuring,”Fox replied.The uncertain outlook prompted Perkins toutter the dreaded “T” word.“Nobody likes taxes, but majority rules andthe majority voted for this jail that’s $100million, and these schools,” he said.Chairman Skip Alston, a Democrat, washaving none of it.“Let me say this: The easiest way to solvethat is to raise taxes,” he said. “If we were tokinda put a little elbow grease to it, put somebrain power and think outside the box, thereare other ways we can resolve that debt….The sales taxes were down about $8 millionthis year. Hopefully, people will start spending.To say ‘raise taxes’ just because we’relooking at a $40 million [increase] next yearI think is irresponsible…. ‘We should raisetaxes about 10 cents’ — that’s the easy wayout. That’s the way we’ve been doing it in thepast. The same people we’re asking for that10 cents are the same people who lost theirjobs or had their homes foreclosed upon.”Among both Democratic and Republicanmembers of the commission, however, a consensusis emerging that a tax increase mightbe necessary, if not next year, then possiblythe one after that.“Every year we say, ‘Maybe we can avoida tax increase,’” Democrat John Parks said.“There may be a situation where futureboards, this is what they might have to contendwith. It’s not a bright picture.”Republican Billy Yow agreed: “When thetime comes, there’s gonna be a tax increase.There’s nothing any of us can do about it.And people knows that day’s a-comin’. But itdoesn’t have to be today.”Perkins and Democrat Paul Gibson suggestedtwo possible alternatives to increasingthe property tax: respectively, a moratoriumon issuing new bonds for schools and a quarter-cent sales tax.Following the manager’s bleak debt servicereport, a delegation from Guilford CountySchools asked the county commission toborrow $16.8 million in interest-free federalstimulus bonds to cover critical maintenanceneeds.The Qualified School Construction Bondswould pay for 28 maintenance projects at23 schools, including replacement of roofs,windows and doors and HVAC systems. Theschools on the list include Western GuilfordHigh School, Southwest Guilford HighSchool, Guilford Middle School, NortheastMiddle School and Alderman Elementary.The county used an initial increment of $17million for new construction projects todefray costs of the 2008 school bondprojects.“Anytime we know that we introducemoisture into our classroom environment,subsequently we have an indoor air qualityissue; it turns into mold and mildew,”Maintenance Director Gerald Greeson said.“Every time it rains they don’t have tosend in work orders,” Greeson said, ofWestern Guilford High School. “Our staff,we mobilize to Western Guilford…. Whenwe mobilized to Western Guilford for thislast rain on Monday morning, we had amedia center that had a leaking roof. We hadto put buckets out. We had a large trash bin.A media center, as you know, is not a gymnasium.Inside, you’ve got books, you’ve gotcomputers.”Guilford County Schools is constrainedfrom spending bond money on maintenancebecause it’s already been pledged for newconstruction projects. Alston said the choicebefore the commissioners is to decide whetherto apply the $16.8 million stimulus bondstowards paying down the bond debt — savingcounty taxpayers about $5 million — orallow the school system to spend it on maintenance.Fox said the county currently does nothave the money requested for maintenance,so “effectively it would be a tax increase.”Even so, commissioners couldn’t bringthemselves to say no to the schools. Theyformally approved a resolution to borrow themoney under the federal stimulus program onMay 20. !