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Wednesday, 17 March 2010 18:34

Recurring money problems pit HCC, county against each other

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Haywood Community College leaders are at odds with county commissioners over funding for the college.

The county slashed capital contributions to the community college by two-thirds due to the recession. The college counted on the annual funding for repairs and renovations and is now hamstrung by the loss.

Unable to produce what was promised during better times, the county commissioners have pitched another solution: dipping into a special pot of money earmarked for expansion projects.

College leaders don’t like the idea. Dipping into the special pot of money to cover repairs — like new roofs or paving jobs — would sideline some of their expansion plans for new buildings.

College leaders responded with a two-fold appeal to the commissioners. They want their annual maintenance funding restored. And they want the special pot of money to be placed in a lock box to fund new construction only.

The college is entirely dependent on the county for construction dollars, whether it’s filling potholes, patching holes in the roof, replacing carpet or building new facilities. While the state funds community college operations, from salaries to the light bills, it doesn’t pay a dime toward upkeep of buildings or new construction. That is left up to counties.

“They have a responsibility to build the buildings the community college needs,” said Bill Bird, a supporter of Haywood Community College. “They need to find the money to do it.”

But the county claims it is cash-strapped and can’t afford to restore the funding that was cut.

“I am looking for a win-win situation, and it is tough to have a win-win situation when you don’t have money,” Commissioner Bill Upton said.

Bird said that the commissioners seem to find the money “to do they things they want to do,” however.

 

Recession hamstrings county

When the recession hit, commissioners slashed the county’s budget by $7 million. No branch of county government was spared. As a last resort, commissioners even enacted a slight property tax increase to avoid deeper cuts.

The college saw its annual contribution for maintenance and construction drop from $500,000 to $165,000.

“Capital outlay across the board was reduced by two-thirds. No particular entity was singled out,” County Manager David Cotton said.

Nonetheless, it created a backlog of repair needs at the college. The nursing building has no insulation and the siding is deteriorating, for example. That was on the list to repair this year, but got pushed back, said Debbie Trull, executive director of administrative services.

“I understand the commissioners are in a real problem financially with the amount of taxes they collect and the amount of wants,” said Larry Leatherwood, the leader of a group that supports full funding for the college’s needs. But the county can’t simply let the buildings at the college crumble, he said.

“If you don’t take care of what you got, you end up spending more in the long run to fix what you had,” Leatherwood said.

College leaders argued that HCC is an economic driver in the community. Its practical degrees, both for young students and the unemployed trying to re-enter the workforce, are invaluable. HCC even partners directly with industry in the county to provide job-specific training.

Enrollment has increased in recent years, and HCC will serve more than 10,000 students this year.

“That is a number, but behind that number is a lot of pressure on the college and its facilities,” said Dr. Rose Johnson, HCC president.

Even before the cuts, the annual funding wasn’t enough.

“We have a lot of buildings there now and to maintain what you own takes right much money every year,” said Neal Ensley, a member of the college board of trustees.

It certainly wasn’t enough to fund expansions. The master plan calls for a new building for the flagship arts and crafts program, an expansion of its equally renowned natural resources department and a new building for emergency services instruction.

“The money you get for maintenance is not sufficient to build new buildings or to make major additions,” Ensley said.

That’s why the college needed a special pot of money. And the perfect solution just happened to come along. In 2007, the state gave counties the option of enacting a quarter cent sales tax. In Haywood County, it would raise about $1.5 million a year — a nice sum to pay for HCC’s expansion plans.

Typically, counties don’t have the power to enact sales tax, but the state made an exception. It came with a hitch: counties could enact the quarter cent sales tax only if it was put on the ballot and passed a countywide vote. Commissioners decided to take the gamble, pledging to dedicate the sales tax proceeds to HCC if the measure passed.

Supporters of the community college mounted a campaign to convince the public to approve the measure, and it worked. The sales tax passed with 57 percent of the vote in May 2008. Haywood County was one of only a few counties where the voluntary tax passed muster with voters.

“I have to thank the people of Haywood County for passing that. It shows the people of Haywood County think the community college is a real source of help for them,” Neal Ensley said.

The pitch to voters throughout was clear. The sales tax would be set aside for construction and expansion on the campus of Haywood Community College.

“The money we were going to raise with the quarter cent sales tax was new money not to supplant or take the place of or eliminate the maintenance money,” said Larry Leatherwood, the chairman of Neighbors of Haywood Community College, a group that formed in 2008 with the express purpose of lobbying the public to pass the sales tax.

College leaders are upset at the prospect of using the special pot of money for general maintenance.

But Julie Davis, county finance director, sees the situation far more positively. The sales tax money offers the college a lucky break.

“If it weren’t for the sales tax, I don’t know that the county could come up with the money without increasing taxes,” said Julie Davis, county finance officer. “Thank goodness we have the sales tax to give.”

In reality, the county is only proposing that a small sliver of the quarter cent sales tax go toward maintenance: about $800,000 for two major roof repairs. The rest would still be going to new construction projects for now.

College leaders fear the commissioners are setting a precedent, however. Instead of restoring the annual capital outlay to pre-recession levels, the county may stick with the lower contributions and rely on sales tax proceeds to make up the difference.

“If we spend the quarter cent sales tax on anything but new buildings, we won’t get the new buildings we need,” Ensley said.

Commissioner Skeeter Curtis said that’s not what he intended nor what the voters were told.

“I looked at it as this was money you would have in addition to what we already gave you,” Curtis told the college leaders. “We have to decide which way we are going to go. Are we going to say we aren’t going to give them any money because the quarter cent sales tax satisfies their needs?”

 

Tension at work session

Community college leaders and county commissioners met last week to hash out the issue. Despite civility by both sides, the tension was obvious.

Commissioner Bill Upton opened the meeting in a friendly fashion, but admitted upfront that everyone may not get what they want.

“Tonight is for us to listen,” Upton said. “We’ll find out what we agree on and what we don’t agree on. We won’t always agree, but we will go away happy knowing that people are listening.”

“I appreciate you laying the groundwork for this being friendly and informative conversation. That’s how we are approaching it also,” Johnson replied.

The format wasn’t exactly what the college desired, however. The commissioners took their usual place behind a long meeting table at the front of the room, while college representatives sat in the audience. To speak, they had to take turns coming up to a podium and speaking into a microphone.

“We envisioned we would all be sitting at a big conference table to allow for more give and take,” Johnson said at one point in the meeting.

The community college came armed with a slide presentation, replete with bar graphs and charts. The first half was aimed at demonstrating the value of the college to the community, followed by budget numbers illustrating the funding shortfall.

The college produced staggering figures: $33.2 million is needed between now and 2014. The number includes new construction, repairs, renovations, equipment and infrastructure.

The figures weren’t pulled out of a hat. Johnson said college staff spent the past two weeks getting estimates from contractors for every item on the wish list.

Of the total, new buildings and major additions account for the lion’s share — $25 million. It would take 30 years for the sales tax revenue to cover it all — even if none of it is diverted for maintenance and repairs.

County Manager David Cotton said the college clearly has needs beyond what the sales tax will pay for at the moment, but there’s nothing the county can do about that.

“I understood the agreement was ‘pay as you go’ and the quarter cent sales tax, whatever that amount was, would be the cap,” Cotton said.

 

Flagship in tatters

The first new building the college plans to tackle is a creative arts building, one of the college’s renowned degree programs. The college teaches commercial woodworking, pottery, weaving, jewelry making and more, along with a business component that helps artists thrive as entrepreneurs.

“It so well-known that people move here to do that program. It has been very important to us,” Neal Ensley said.

But the arts and crafts building is also one of those most in need of repair.

“It was falling down around the students,” Leatherwood said.

The old one will simply be demolished after the new one is built. The cost is estimated at $10 million.

The quarter cent sales tax is on track to bring in $1.5 million this year. It’s enough to cover payments on a $12 million loan over 15 years. That leaves another $2 million on the table for other projects that could be wrapped into the loan and tackled immediately.

Plus, the sales tax will likely reap a little more each year as commerce increases.

“When the economy does recover, I would anticipate some natural growth in the sales tax so I would think over time there would be additional funds annually,” Cotton said.

Not every penny of the sales tax proceeds will go to the loan payments, leaving more to work with.

But, the problem remains whether the county will restore the college’s annual contribution, which went toward maintenance.

“If we don’t get that annual allocation, we can’t function as a college. So that is the true issue,” Johnson told commissioners.

Buildings on campus are valued at more than $50 million, and it takes money to maintain that kind of facility, said Neal Ensley, an engineer and a member of the HCC trustees.

“If we don’t get that [appropriation], it will be a serious problem for the college,” Ensley said.

But that’s something the commissioners can’t answer right now. Next year’s budget is still in its infancy. It will be refined over the next two months as commissioners grapple with the usual tough decisions.

With the economy holding steady if not improving slightly, the county’s revenue should begin looking up. As commerce increases, so do sale tax revenues, which the county gets a part of. And as construction returns, new homes and businesses get added to the property tax base.

The uptick will be slight if anything, and for now the county is banking on a flat budget for the coming year.

“We don’t have the money right now, and it is hard to make people happy when you don’t have money,” Upton said.

“This budget is going to be tough,” Commissioner Skeeter Curtis agreed. “We cut millions of dollars in the current budget. The employees gave up time and money out of their pocket to get us where we are.”

“And jobs,” Commissioner Mark Swanger added.

“We cut the school system, we cut the county, we cut a lot of other people,” Upton said.

The county would be in a difficult position if it restored the budget for the community college ahead of everyone else, Upton said.

“I’m sure our school people would come to us and say ‘How about reinstating our capital outlay,’” Upton said.

 

Root of the conflict

An underlying source of contention is whether the county has failed to deliver on financial promises it made to the college over two years ago.

In 2007 — before the quarter cent sales tax idea was on the horizon — county commissioners and college leaders struck an agreement to give the college an advance on their annual funding. The college had a couple larger than normal projects it wanted to carry out — projects that exceeded the $500,000 capital outlay it was getting from the county each year.

So the county commissioners agreed to take out a $2.6 million loan on behalf of the college to fund the work. The county would then deduct the loan payments from future contributions each year until it was paid off.

“We couldn’t see anyway to get anything done at HCC unless we borrowed the money and paid it back with the $500,000,” Upton said.

The college got to work preparing construction documents and paperwork for the loan. But the construction documents were held up at the state level. In all, the process took two years.

With everything finally in hand, the college came to the county last month ready to make good on the offer of a loan.

But along the way, things had changed. Most notably, the recession had a stranglehold on the county. As part of countywide cuts, the college saw its maintenance and construction funding slashed by two-thirds, from $500,000 to $165,000.

The county commissioners couldn’t guarantee when the annual funding would be restored. That threw a wrench in the plans for a loan. The annual contributions were supposed to cover the loan payments but were no longer enough to do so.

Upton said the commissioners were somewhat surprised when the college showed up last month asking the county to make good on the loan promise made over two years ago.

“For two years, we really haven’t talked about the $2.6 million,” Upton said.

“I disagree,” Dr. Johnson replied.

“Where was it talked about?” Commissioner Mark Swanger asked Johnson.

Johnson said the college board of trustees and the college strategic planning committee regularly referenced the pending loan from the county. County Manager David Cotton was a part of those meetings, and Johnson assumed he was reporting back to the commissioners.

“There seems to be a disconnect between what has been discussed very thoroughly in strategic planning meetings and what has been presented to the commissioners from those meetings,” Johnson said. “We made decisions based on what we were understanding from county staff.”

Johnson said that appears to be the source of the misunderstanding.

Cotton took issue with the comment and called it disparaging.

“You address your board and I address mine. I feel I have kept them up to speed on the process. I did take offense to that remark,” Cotton said.

Johnson apologized and said she didn’t intend it that way. Johnson said the college trustees “moved forward in good faith” on things that apparently weren’t hard and fast decisions.

Swanger said discussions the college leaders had with county staff during planning meetings are just that: discussion, not decisions.

“They are not binding,” Swanger told Johnson. “We need to make sure that monetary decisions are not made based on conversations that were not formally endorsed by this board.”

However, Johnson assumed she would have been corrected somewhere along the way if the loan had been taken off the table.

Upton asked why it took so long for the loan to get squared away.

“Our request for that construction was stalled at the state level for many, many, many months,” Johnson said. “It was not lack of work on the behalf of the college. It was beyond our control.”

Johnson said county staff was updated regularly of the status.

The college had two projects in mind for the $2.6 million: $1.8 million for an expansion and $800,000 for major roof replacements.

As the college waited and waited to get construction documents approved on the expansion, it chose to move forward with the roof repairs. To pay for it, the college borrowed from flood settlement funds. The flood money stemmed from the 2004 flooding along the Pigeon River, which destroyed several satellite HCC buildings near downtown Clyde.

The flood money was supposed to go toward only new construction, theoretically to replace the destroyed classroom buildings, and not things like roof repairs. But the college planned to pay back the borrowed flood money as soon as the loan from the county came through.

Johnson said it is “critically important” to repay the flood money.

“We need to repay the flood settlement fund for monies that have been diverted for other purposes,” Johnson said.

Johnson said the county had previously agreed to pay back what was borrowed from the flood account with the $2.6 million loan.

Commissioners seemed puzzled, however, and asked County Manager David Cotton if he could remember such a promise.

Johnson said she thought the commissioners passed a resolution to that effect. Cotton disagreed. The commissioners did pass a resolution pledging to help the college with a loan, but it made no reference to paying back what was borrowed from the flood settlement fund.

“I wasn’t aware there was an agreement for you to spend money and get reimbursed,” Davis said.

“I wasn’t aware of it,” Commissioner Skeeter Curtis said.

“I wasn’t aware of it,” Commissioner Mark Swanger echoed. “I wasn’t even aware that money was being used. I reviewed the minutes, and it is not reflected in the minutes.”

Mark Bumgarner, chairman of the HCC Board of Trustees, then stepped up to the microphone and said the more important issue was that the county had promised to take out a $2.6 million loan on the college’s behalf. The college was counting on that, he said.

The college will still get the money, Davis chimed in. It will just come from a different source now.

The sales tax has been accumulating since October 2008. In another few months, there will be just the right amount saved up to cover everything the college needs without taking out a loan.

“We will end up with $2.6 million sitting there,” Davis said. “They are going to get the money, it’s just we aren’t going to have to borrow it.”

“And that is from the quarter cent sales tax money,” Dr. Johnson clarified.

“Right,” Commissioner Kevin Ensley said.

Ultimately, county commissioners voted not to do the loan, but instead to use money from the quarter cent sales tax.

Using the accumulated pot of sales tax money won’t affect the county’s ability to still take out a $12 million loan for the creative arts building, Davis said.

 

Pinching pennies?

Commissioners questioned whether the college is making the best use of the money it has.

Commissioner Kevin Ensley did a cost comparison of the creative arts building and other construction projects in the county in recent years, including the new jail, justice center and Bethel Elementary School.

“I am a little it concerned with the cost. This is the most expensive building per square foot that I have seen in Haywood County by far,” Ensley said.

“You would have to compare apples to apples,” Johnson replied.

Johnson said the creative arts building requires dust collection systems for the woodworking classrooms, air ventilation for jewelry making and extremely high-energy use for pottery kilns. The college also has to meet energy efficiency mandates imposed by the state for new buildings. The energy used by the kilns and shop tools made it particularly costly to meet those state mandates.

Under Johnson, the college has embarked on green initiatives aimed at sustainability. Commissioner Swanger questioned whether green features incorporated into the building cost more.

Johnson said the building’s green features don’t cost any more than a traditional design would, according to estimates of both.

Nonetheless, Ensley asked the college leaders to go over the plans for the creative arts building and look for savings.

“I want to be a good steward of taxpayers money, and I really wish y’all could take a good look at this,” Kevin Ensley said. “That is my honest opinion — it is a couple, three million too high.”

But it may be too late to realize substantial returns.

“We may have approached the creative arts facility a little differently knowing the facts we know today, but we are sufficiently on the train tracks, and it is really hard to make changes,” said Bumgarner, chair of the HCC trustees.

Commissioner Skeeter Curtis asked why all this mattered since the money is coming out of a special sales tax fund anyway.

“I think we have lost focus here,” Curtis said. “The people in this county voted that in and the quarter cent belongs to the community college. It is their money.”

Swanger said it is still tax dollars being paid by county residents, and it should be spent prudently.

In this case, Curtis said, it was up to the college to be prudent with the money.

Swanger disagreed. If the college overspends on the creative arts building, “then the college comes back to us for additional appropriations to fill in other gaps,” Swanger said.

“We aren’t picking up the gap anyhow,” Curtis countered.

Curtis made it clear that he wasn’t happy about the cuts the college suffered at the hands of the county.

“By law, the county is supposed to keep it up, and we just let it go a long time. It was falling apart out there. We have let a lot of our facilities end up like [that],” Curtis said.

“We have to decide what are we going to take care of. This is going to get worse as years go on. That’s the reason we are in the situation we are in now because we haven’t done anything,” Curtis said. “We need to keep this from happening to the next board.”

Curtis expressed similar sentiments last month when the commissioners became the new owner of the fairgrounds. The Haywood County Fair board had relied on an annual contribution from the county to pay off a loan for a new arena. When the recession hit and the funding was cut, the fair board couldn’t pay the loan and faced foreclosure.

So the county stepped in to rescue the fairgrounds, anteing up the money to pay off the loan after all and assuming ownership of the fairgrounds from the nonprofit in the process.

Curtis had the unique stance of voting against a slight property tax increase last year during the thick of the recession. His reason: it wasn’t enough of an increase. Curtis felt the cuts to the county budget went too deep and too far. Curtis’ seat is up for election this year, but he is not running.

Commissioner Ensley pointed out that the county is paying $300,000 a year on a loan for the construction of the HCC Child Development Center, a teaching institution and daycare combined.

“I think it is important that everyone know the full contributions the county is making,” Swanger chimed in. “The child development center is substantial.”

The county also donated a tract of land to the college for future expansion that is valued between $650,000 and $900,000.

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