03/04/09 — Schools say lottery funds are not lost

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Schools say lottery funds are not lost

By Phyllis Moore
Published in News on March 4, 2009 1:46 PM

Facing the state's recent announcement that lottery funds will be pulled to offset budget shortfalls, school officials say they are "confident" they will be able to proceed with construction projects that are under way.

The matter was briefly discussed during a joint meeting of the school board and county commission on Tuesday. Sprunt Hill, assistant superintendent for auxiliary services, along with representatives from R.N. Rouse, project managers for the current $23 million construction and renovations plan, gave an update on the building projects.

The first three -- Brogden Primary, Greenwood Middle and Mount Olive Middle schools -- will be paid out of lottery funds, Hill said.

According to the timeline, Phase I construction drawings were completed Feb. 26 and advertised for bids March 1, with plans to proceed in May.

Last week, Gov. Bev Perdue requested further reductions as a precautionary step to manage cash flow. The state announced the possible transfer of up to $300 million from several accounts, including the lottery, to offset the shortfall.

According to the governor's proposal, $50 million would come from the education lottery fund.

Hill said he has had discussions with the state and did not feel the move would necessarily stall local projects.

"What we're trying to accomplish ... I feel almost certain we will be able to move forward with what we have," he said. "We are very confident that we can move forward with the first three projects."

County Manager Lee Smith was not so sure.

"Our nightmares are coming true. The state is pulling money," he said.

Superintendent Dr. Steven Taylor echoed the district's confidence that the money the district has already received -- $5 million -- will be available for projects.

"We have confirmed that everything in the account is safe," he said.

Smith said he still has concerns, as the quarterly proceeds from the lottery are counted on to make debt payments.

The school district has come to anticipate the quarterly deposits from the state lottery, Hill said.

"We have a little over $5 million (in the lottery account), what we did not get was our February deposit," he said. "When we first started this, we were not going to use our accumulated lottery funds up front. It was to be used for debt services."

Nan Barwick, assistant superintendent for finance, said the district hopes to use the $5 million from the lottery account to pay for Brogden, Greenwood and Mount Olive Middle projects. She recently sent a request to the state requesting release of those funds.

The application, which must be approved by the state, "was to pull the whole amount that's in there currently to pay for those three schools," she said.

Now, the next two projects in line -- Eastern Wayne and Norwayne middle schools -- are in jeopardy, Hill said. Even though those projects will come out of a loan, lottery funds were to be used for debt payments.

With the latest shift to the economy -- also impacting sales tax and potentially property tax -- budgets are especially tight and there is no fallback plan, the officials said. Now would not be the time to incur more debt, especially if there is no payback measure in place.

"I think we would have to sit down as a staff and crunch some numbers," Taylor said.

The half-cent sales tax would be ideal, but even that isn't a certainty.

Pam Holt, county finance officer, said the "economy is getting worse by the day."

She estimated the county lost 21 percent of its expected sales tax in January and February, and said, "I do feel that it's going to drop even more. ... I predict that the sales tax will be worse in the next couple months than it has been."

Smith said the same holds true in terms of property tax growth.

"We're actually going to estimate no growth over the next 24 months," he said. "We hope that we're wrong. But I do not believe that will be the case."

He anticipates there will be "lots of conversations ahead," especially with regard to payments of some of the schools' projects.

Taylor agreed that if the school district has to tighten up a bit for the coming year to make it work, it will.

"As long as we have waited to get these projects moving, we want to be able to move forward," he said. "We know the longer we wait, the higher the price. If we delay and can't move forward, we don't know what these projects are going to cost. That's why we are anxious to move forward.

"I think we can do it. I don't believe they're going to continue to take the lottery."

Meanwhile, Hill said, there is the matter of looming deadlines for the construction projects.

"We're going to have to meet pretty quick because March 22 is our D-Day" to actually take the bids on the final two projects -- Eastern Wayne and Norwayne middle schools, he said. "If we get delayed any at all, then we have to start all over again. If we could meet as quickly as possible, so we can discuss this and come back to our board."