September 13, 2012
The Guilford County Board of Education is playing games with taxpayer money.
The school board on Tuesday, Sept. 11 voted 8 to 0 to consider overriding the way it invests the taxpayer money it holds in an effort to steer money to one bank: the Greensboro branch of the black-owned, Durham-based Mechanics and Farmers Bank.
The school board voted to try to steer business to the bank under pressure from the four black members of the school board, Sandra Alexander, Deena Hayes, Carlvena Foster and Amos Quick.
On July 24, 2012, the four black school board members wrote Guilford County School Superintendent Mo Green, who is black, and recently appointed Guilford County Schools
Chief Financial Officer Angie Henry, who is white, pressuring them to deposit money in Mechanics and Farmers Bank.Guilford County Schools
, which has a $677 million budget for the 2012-2013 fiscal year, keeps its available money in three places: in a bank that is the school system's central depository, and which is chosen after issuing a request for proposals (RFP) to get the most secure bank and the best price for its banking services; a short-term investment fund (STIF) account through the North Carolina Department of State Treasurer, which gives the school system safety and, according to Henry, a high rate of return; and in various other local banks that are only used to deposit the daily revenues of individual schools from things such as gate receipts from athletic events.
The central depository is the bank where the school system makes daily deposits and from which it issues checks. The STIF account is used for investing funds not required for daily operations.
Since Oct. 23, 2006, the Guilford County Schools
central depository has been Wachovia, which since merged with and changed its name to Wells Fargo. On that date, Guilford County Schools
signed a contract to use Wachovia for a four-and-a-half year period, from Jan. 1, 2007 to June 30, 2011. The school board's contract with Wells Fargo includes an option to renew the contract yearly for five more years until June 30, 2016. Henry said Wells Fargo has not increased what it charges the school system, although the contract allows it.
Before the Wachovia/Wells Fargo contract, the school system had used BB&T as its central depository since the consolidation of the Greensboro, High Point and county school systems in 1992. Henry said it switched to Wachovia/Wells Fargo because it got a better price.
The school board's vote on Tuesday was on a motion by Alexander to have the school board members read the annual report of Mechanics and Farmers Bank and for Green and Henry to hear a presentation from the Mechanics and Farmers Bank in preparation for an effort to move money to that bank.
Alexander made the motion after giving a long, laudatory sales pitch for Mechanics and Farmers Bank that sounded as if it could have come from an employee of the bank.
Exactly which money would be moved to Mechanics and Farmers Bank was not clear. Green said the money involved would be the money now invested in the state STIF account, but Henry said Guilford County Schools
could switch its central repository to Mechanics and Farmers Bank. She said, "If we were directed to do so, we could issue a new RFP and select a new banking service."
The last time the issue of moving money to Mechanics and Farmers Bank came up was at the August 14, 2012 school board meeting, when Quick said he and the other black school board members wanted the school system's money deposited in more banks that serve minorities. Wells Fargo also serves minorities.
Quick's comment followed the July 24 letter, in which the four school board members wrote, "It has been brought to our attention that Guilford County School District does not currently have any of its operating funds deposited in the branch of Mechanics and Farmers Bank located in Greensboro, North Carolina" – as if it was unusual for a local government entity not to have deposits in a small bank that has only two branch offices in Greensboro.
The letter made clear that, unlike Quick said at the meeting, the special interest the four school board members were supporting was Mechanics and Farmers Bank – not the Guilford County residents who use the bank, as Quick's comment suggested.
"We believe that African-American-owned and operated financial institutions should be given the same opportunity to provide banking services to the school district that other banks are afforded," the four school board members wrote. "According to the District's website, 'GCS is deeply committed to furthering the involvement of minority and women-owned businesses in school construction and renovation as well as other services and operational areas.'"
There have been specific legal cases that have set precedents for setting goals for minority participation in construction and architecture. The legality of doing so in other areas is uncertain. In any case, Guilford County Schools
is restricted in its banking and investments by a slew of state laws, which Henry presented to the school board on Tuesday.
For example, state law requires banks that take government business to collateralize – keep in escrow – 100 percent of the money deposited by the government entity.
In other words, the banks have to have enough income from other deposits that they can afford to basically keep the government money locked in a vault, instead of investing it. To do so, a bank must have money, the more the better.
Mechanics and Farmers Bank is a tiny bank, with assets totaling $295 million as of March 2012, according to the Federal Deposit Insurance Corporation (FDIC) – or less than half of the school system's budget. Wells Fargo & Co. had assets totaling more than $1.2 trillion at the same time. Wells Fargo is the largest bank in the United States by market capitalization.
School board attorney Jill Wilson completely changed her tune between the August 14 meeting and Tuesday's. After the August 14 meeting, she said she saw nothing unusual or inappropriate in school board members lobbying for Guilford County Schools
to use a particular business.
On Tuesday, Wilson said it was "not very appropriate" for school board members to direct the school system to use a particular vendor for anything. She said it would be best for the motion to state that the school system would research ways to broaden and diversify its banking.
As often happens with the school board, by the next day the language had changed. According to Guilford County Schools
, the final motion was "was for staff to solicit information from other banks about their services."
Green said the motion would elicit proposals from banks and that Guilford County Schools
administrators are open to considering proposals from other banks, including Mechanics and Farmers Bank.
All of which was merely a fig leaf – and not a very big one – to cover the intention of Alexander and the other black school board members to hand business directly to Mechanics and Farmers Bank....continued on page 2