County worries about debt
By Steve Herring
Published in News on August 21, 2013 1:46 PM
Federal budget cuts have forced Wayne County to absorb more than $56,000 in bond interest payments on two recent school projects.
Now the county commissioners are worried the county could face repaying nearly $13 million still owed on the projects if the state continues to reduce the amount of lottery money available for school construction.
"It would absolutely have an impact if they reduce the amount," County Manager Lee Smith said. "If they were to reduce that any more, we could become responsible. We, the county, would owe that $12.8 million (outstanding) balance."
The county used $15 million in federal Qualified School Construction Bonds for the $17.7 million renovation and building project at Eastern Wayne and Norwayne middle schools.
An advantage of using the bonds is that the federal government reimburses the county for the interest. However, the federal sequestration has reduced the reimbursement by $56,506 this year -- a difference that the county has to pay.
The remainder of the project funding came from county funds, $972,000; school district capital funds, $370,000; and estimated sales tax refunds, $290,000.
The projects got under way in November 2011 and were completed this past spring.
The county is using lottery funds to make the annual payments of slightly more than $1 million and local dollars to pay the interest of $649,500.
Concerns about the lottery funds arose Tuesday morning when commissioners authorized the second principal payment on the bonds.
"This is to assist with the payment of the Qualified School Construction Bonds," Smith said. "The school board is prepared to make the request, but it requires the approval of the commissioners to submit the application to the state. We make these annually."
Commissioner Ray Mayo sought assurances that the payment was for Norwayne and Eastern Wayne middle schools. He also asked what the balance is.
The balance is about $12.857 million, Smith said.
Commissioner Steve Keen said he had what could be considered a "speculative question."
"If the lottery funds, like this year, change will it affect this next year?" Keen said.
"If the lottery funds disappear, in total, if they said it was gone, we would have to pick up this million dollars (annually)," Smith said.
"So next year, if the General Assembly decides to bring it down to $50 million (available statewide), everybody would have to lobby for that $50 million," Keen said.
Smith said that was correct and that the county could be impacted.
It is important to let lawmakers know how important lottery funds are to the county, Keen said.
There was no discussion of what funds the county would use to make the principal payments should the lottery funds be further reduced.
Smith and Pam Holt, county finance director, were contacted for comment. Neither responded. Public information officer Barbara Arntsen responded to the questions posed via email.
"Both Lee and Pam said you had asked them where the county would get the money to pay the $1 million if the lottery funds went away," she wrote. "It could be a multitude of answers and all would be speculation.
"It would be dependent on a future board that would have to make that decision."
However, Ken Derksen, the schools public information officer, said the school system would be responsible.
"For future school construction projects, lottery dollars have been suggested as a primary funding source," Derksen said. "It is important to note that if for some reason lottery dollars were to be ended by North Carolina in the future, the County of Wayne would be technically responsible for the payment.
"However, it is the half-cent sales tax funding that is allocated to the County of Wayne for the school district by the North Carolina Department of Revenue, which would be the actual funding source to retire any debt service originally intended to be paid for with lottery funds. This means, the school district would still be using its own funds to pay for school construction debt if the lottery funding ends."