Every little bit helps.
That’s what Washington County Mayor Dan Eldridge conveyed to Washington County Commission Budget Committee members Wednesday when he announced his decision to utilize a passage in IRS code that will allow a partial reimbursement from the $1.8 million in bonds issued by the county in November for school buses.
Committee members were surprised last month when they learned the Board of Education in February instructed Director of Schools Ron Dykes to order six large school buses, two pickup trucks and a van at a cost of $638,000.
The problem turned out to be that Washington County Schools had not included that amount as an expense in its 2013 fiscal budget. The method by which school bus replacement traditionally and legally transpires does allow for bonds to pay for such expenses. But in this case, the check for the buses — which alone cost about $592,000 — was cut in July, just 13 days too early for the bonds to cover that cost.
“The IRS will allow the county to reimburse $92,000 for prior purchases, and this can be taken out of the bonds,” Eldridge said. “This will go back in the school board’s fund balance. If we didn’t take that out now, that $92,000 would come from the county’s general fund. And in that case, it would be a shared cost with the city, which would mean the total amount would be $167,400.”
Eldridge’s decision followed an inquiry by Commissioner and Budget Committee member Ethan Flynn, who asked what commissioners would do if a similar miscommunication occurs in the future.
The cost of replacement buses was one of the main topics of discussion between Dykes and the Budget Committee during the budgeting process, including a few prickly moments regarding requests for Dykes to find ways to cut costs.
“We’ve asked the board to come back to us and explain what they intend to do if this happens again,” Eldridge said. “We can’t tell them how to spend the money that was approved in their budget. I’m as curious as you are, because that money was going to be used to help balance our budget.”
Eldridge said neither Dykes nor any board members have asked to be included in committee meetings to explain.
Dykes has said his understanding was the $1.8 million in bonds approved in September by the County Commission would be used to reimburse the school system’s transportation line item for buses. Dykes said early this year that 19 large buses and five small buses would be purchased over the next three years, according to a state-established system of replacement after 16 years of service.
In September, county commissioners approved the bond issuance to finance the turnover through three years. But the finding that the first round of buses had been paid for means the county is in a position to financially stockpile four years worth of buses by spring.
The bonds issued are tax-exempt bonds, and they come with rigid restrictions. Eldridge also has said the Board of Education had plenty of opportunities to alert the Budget Committee about the situation and that it would have “absolutely been an easy thing to fix.” He said it still is up to the Board of Education to decide how they want to handle the situation.
The stumble is just one of several issues that could end up costing from $2 million to $3 million.
Washington County Finance Director Bobbye Webb reported Wednesday that a projected sales tax shortfall alone could leave the school system with a $1 million deficit. The actual 2012 sales tax revenues came in at about $5.6 million, but they were budgeted/estimated at more than $6 million.
Sales tax collections from the beginning of this fiscal year (July 1) through November already are about $360,000 behind projections. The school system also is staring at a series of unbudgeted projects totaling $450,000, such as the new roof for Fall Branch School and other capital projects, not to mention the unbudgeted buses.
How school bus purchases will be made using bond proceeds: (Source: County mayor)
- Board will “spec” the buses and request proposals from various bus vendors.
- Board will provide proposals and vendor recommendation to purchasing agent.
- Purchasing agent will make award and issue purchase order for buses.
- Buses will be received and accepted by board.
- Upon acceptance, county accounts payable issues payment to vendor.
- Buses will be titled and insured under the Washington County Board of Education.