State Politics

School leasing bill for poor districts prompts warnings from NC treasurer

Janet Cowell
Janet Cowell Dept. of State Treasurer

Construction industry executives are pushing for a law that would allow Robeson and other cash-strapped counties to redirect state money used for personnel to help pay for long-term leases on new buildings they desperately need.

But the state treasurer’s office is sounding alarms, saying the proposal would benefit a developer while putting Robeson County at financial risk.

Senate Bill 554 would allow school districts looking to vacate old schools and build fewer new ones to enter into long-term leases and use money saved by consolidation to help pay the costs. Leasing is already allowed, but the proposal goes further by letting districts use state money that would have gone to pay custodians, clerks and substitutes to instead be used to help pay rent.

The state treasurer’s office is opposing the bill because it allows state money reserved for school employees to go to private developers. And it doesn’t like that a developer, Robbie Ferris, came up with the plan, is one of the bill’s most active boosters and is in a position to profit.

In a June 7 letter to legislators, Treasurer Janet Cowell said the bill could force Robeson to raise its per person debt burden from $202 to $4,694, the highest in the state.

“Allowing those who aim to profit from these plans to design the financing model is a bad deal for taxpayers and a conflict of interest,” the Democratic treasurer wrote.

Among her other objections are that the bill would allow the developers be paid before other county services, would assign sales tax refunds to a for-profit company, and would not require the county to open the operating lease to competitive bidding.

Ferris and other bill supporters said Cowell’s assertions are inaccurate or misleading and that the plan would end up saving Robeson money. For example, nothing in the bill says that the county would have to put developers first in line for payments, he said.

Cowell has not taken into account how much the county will save from having new, energy-efficient schools that it doesn’t have to keep patching up, Ferris said.

The bill isn’t just for Robeson, he said. It could help Jones County and other counties that cannot afford the traditional means of using bond debt to build schools and must “throw money down the drain” on maintenance.

“I don’t see why anyone would suggest there’s wisdom in spending money in maintaining old buildings that are falling apart,” Ferris said.

What is not in dispute is that Robeson could use new schools. Some of its buildings date to the 1930s.

“Our problem is, we haven’t built a school since 1986,” Robeson County Manager Ricky Harris said. “We can’t afford to raise taxes an extreme amount to build schools.”

County and school district finance officers have reviewed the numbers, Harris said, and county commissioners have approved the plan. It hinges on the state allowing the schools, as they consolidate, to use some of the money it would have spent on school personnel to help pay the lease.

Phillip Price, chief financial officer at the state Department of Public Instruction, said DPI had concerns about that part of the bill because the state wouldn’t know how much the district was pulling out for building costs.

The local school board hasn’t approved it, and representatives from Cowell’s office recently attended one of its meetings to warn of the financial risks.

In a memo to the Local Government Commission – a group of statewide elected officials and political appointees that must approve county debt – the director of debt management, Timothy Romocki, said there are many unanswered questions about the financing model.

“We question whether the savings identified can be sustained at the indicated levels plus inflation for the life of the 40-year lease obligation,” he wrote. “If the savings aren’t there, where will the extra money come from for the debt service/lease payments?”

Cowell wrote that the bill may prevent the LGC from disapproving the school leases. The bill’s supporters said that’s not true, pointing to a requirement for LGC approval in the bill.

Ferris has presented a few options for closing 30 schools in Robeson and building 13 K-8 schools and a career and technical high school. He shows the county saving money over 40 years – one of the options shows a savings of more than $324 million over that time. The budget does not include the cost to buy land.

But Ferris’ calculations show that the county will have to come up with extra money in the early years – nearly $6 million in year four.

The county may have to raise taxes by as much as 5 cents per $100 in property value, Ferris said, but that’s not certain.

A collection of construction interests is pushing the bill. Ferris is president and CEO of SfL+a Architects and the development company FirstFloor K-12 Solutions.

A group interested in local economic development called Robeson for Advancement is lobbying for the bill. The group’s manager is Aaron Thomas, president of the construction company Metcon. Patrick Ballantine, a former state senator and GOP gubernatorial candidate, is the group’s lobbyist. The bill’s main sponsor is state Sen. Wesley Meredith, a Fayetteville Republican. He owns a landscaping company that has won work as a Metcon subcontractor.

Meredith said he isn’t pushing the bill to benefit his company. “This is a way to build schools,” he said.

Meredith said he would start moving the bill through Senate committees this week.

Thomas, who has built schools around the state, said his company will get work whether or not the legislature passes the bill. He is frustrated by opposition from Cowell’s office, which he said is misguided and misinformed.

If officials in Cowell’s office had dug into numbers, he said, they would see that the financing works.

“I think the bill is in the best interest of school systems around the state,” Harris said. “It’s not about the construction industry.”

Ballantine said Cowell’s office wants to preserve the traditional way of financing schools, through a bond process that her office controls.

“They have this attitude that the treasurer’s office knows best,” he said.

Sen. Jane Smith, a Robeson County Democrat, said she wants legislative staff to meet with the local delegation to offer an unbiased analysis.

“I want to get information from people who don’t have a stake in it,” she said.

In a memo to the legislators last week, Anthony Solari, a lobbyist in the treasurer’s office, said they are coming up with a plan to help Robeson build schools.

“It incorporates some of the best elements of what Mr. Ferris and his associates bring to the table, is affordable within the current budgetary constraints of the County, has numbers that can be verified as being accurate by an independent third party assessment and, most importantly, protects the public interest,” Solari wrote.

Lynn Bonner: 919-829-4821, @Lynn_Bonner