Source: Rhino Times Greensboro

City Wants To Know Where Its Money Is

by John Hammer

November 23, 2011

How much money is in the joint city county water and sewer fund and where did the interest on the money go?

If you know, please call city hall because the city would really like to know.

City Manager Rashad Young said that despite the fact that Guilford County sent the city a five-inch thick stack of paperwork about the fund, as of Tuesday, Nov. 22, he still didn’t have the information he needed to determine how much was in the fund. And the county won’t say, even though it is a joint fund and half of the money belongs to Greensboro.

When asked if he knew how much was in the joint fund, Young said, “No, I don’t.” He added, “We really don’t know what the amount is.” And he said that, so far, the city didn’t have the information it needed to figure it out.

At the meeting between city councilmembers, county commissioners and city and county staff in October, Young said, “I think [Councilmember] Trudy [Wade] asked [County Manager] Brenda [Fox] and she said about $20 million.” He added, “I’d never heard $20 million.” Young said he had heard $14 million or $16 million but nothing as high as $20 million before that meeting.

What is incredible is how long this is taking. Following a unanimous vote of the City Council, the city sent a letter terminating the joint water and sewer contract in June 2010. So Guilford County has had 17 months to figure out how much is in the fund because the agreement states that when the contract is terminated, the money in the fund will be divided evenly between Greensboro and Guilford County.

So 17 months ago, when the city sent a notice to terminate the contract, it had reason to believe that in six months it would receive an accounting of the money that had been spent and a check for what city personnel thought would be about $7 million.

Instead, what Young received from Fox was a letter stating that there were complex issues involved. It appears the complex issues boil down to two.

The first is that Guilford County wants Greensboro to agree to pay for two projects – extending water and sewer services to Forest Oaks Estates and Lynwood Lakes – which the commissioners had already agreed to pay for with county bond funds in 2006 and 2007.

The second is the question of interest on the money in the fund. If the fund does in fact total $20 million, as the city was told at the October meeting, then according to Young, the government could reasonably expect to earn $500,000 to $700,000 a year in interest.

Young said he had heard a number of things about the interest. He said he was told that the county said the money was not in an interest-bearing account, which is ridiculous. He said at another point, “There was a comment made that the agreement did not speak to where the interest would go, so the county kept it.”

If the county has kept the interest from this joint account for 42 years, that would certainly explain why the country refuses to tell the city how much is in the account and has rebuffed the city’s attempts to audit it.

If the agreement doesn’t speak to where the interest would go, it also doesn’t say that it belongs to Guilford County.

The agreement set up a separate water city-county trust fund. Money could, according to Fox, only be expended from the fund for projects that had the formal approval of both the Guilford County Board of Commissioners and the Greensboro City Council. If the agreement does not state otherwise, it seems the interest from the account should stay in the account and not be taken by one of the two entities without the knowledge or permission of the other.

Currently Guilford County has sent over 1,000 pages of information about the joint account to the City of Greensboro, but the 1,000 pages do not include a bottom line or enough information to figure out what the bottom line is.

Young said the city had requested the necessary information to audit the account, but had not received it as of Tuesday.

Since the city collects water and sewer fees, the city knows how much it has paid into the account, and has some idea of how much has been spent on projects. And while Guilford County should be able to inform the city as to exactly how much money is in the account, in 17 months, despite meetings, letters back and forth and numerous requests and proposals from the city, Fox has failed to provide that information.

In one letter Fox states that the fund cannot pay for an audit because the agreement doesn’t state that money from the fund can be used to pay for an outside audit. Young said that after going round and round on the audit, the city agreed to pay the cost. Young said, “I’m happy to do so because we’re paying $15,000 for an audit of a fund that may have $15 million in it, and we get half.”

Young also said a sticking point that was raised in a letter from Chairman of the Guilford County Board of Commissioners Skip Alston was that the city kept the funds that were supposed to go into the city-county trust fund during the six months after the country was notified but before the contract was officially terminated. Young said, “We have maybe $50,000 and they have maybe $20 million; that just doesn’t make sense.” The city said that the amount it had not put in the fund during the last six months should be taken out of their share. The county said that the city had to send the money to the county.

So the county is quibbling about $15,000 for an audit and $50,000 in funds when it is holding about $10 million that belongs to the city, and it won’t even tell the city how much it actually is or give the city the information to figure out how much it is.

When somebody goes to great lengths to hide something, you have to figure they have a reason. In this case it appears that the county has been taking the interest from the joint account and spending it.

Fox may be right. If the county is trying to figure out how much should be in the joint account based on the fact that the county had been taking the interest for years, that would be very complicated.

At the Nov. 17 Board of Commissioners meeting where residents of Forest Oaks Estates and Lynwood Lakes demanded the water and sewer service they were promised in 2006 and 2007, Alston tried to blame Greensboro Mayor Bill Knight and the conservatives who were elected to the City Council in 2009 and will be going off the council next month. It’s difficult to see how it is Knight’s fault.

The truth is that the Guilford County Board of Commissioners voted to use county bond funds to extend water and sewer to Forest Oaks Estates on Jan. 19, 2006. The resolution passed by the Board of Commissioners, which included Alston, reads in part, “Adopt the Forest Oaks Estates Water and Sewer Project Ordinance and appropriate funds from 2/3 Water and Sewer Bonds as follows: Water – 688,638.00 Sewer – 730,656.000 Total – $1,419,294.00.”

The agenda of that Jan. 19, 2006 meeting also states, “This is an approved CIP [capital improvement project] project to be funded from 2/3 Water and Sewer Bonds.”

For the Lynwood Lakes project at the commissioners meeting on Dec. 13, 2007, the board approved a motion to “Adopt the Lynwood Lakes Subdivision Water and Sewer Project Ordinances and appropriate funds from the 2/3 Water and Sewer Bonds as follows: Water – $1,535,506.00 Sewer – 2,551,192.00 [Total] $4,086,698.00.”

There is a special note on this agenda item: ”NOTE: This is a CIP project with funding from the 2002 Water and Sewer Bond Issue.”

On the Greensboro City Council agenda for Feb. 5, 2008, an item to approve funding of $4,086,698 for the Lynwood Lakes water and sewer project reads, “This will increase the County Construction Projects Fund by $4,086,698. This increase will be funded through County revenues. No City funding is required.”

Alston has been on the Guilford County Board of Commissioners since 1992. He may not remember these votes, but the minutes of the meetings are available to him, and they prove that these projects are county projects, not joint city-county projects.

The only area where confusion could be raised is that the city was going to handle the construction because Guilford County doesn’t have a water and sewer department. But that is done as a contracted service, and all the minutes state that county funds would be used. This is not a project that was to be paid for with money from the now defunct city and county water and sewer trust fund.

Knight had not even run for office in 2006, much less been elected. It is hard to see how Alston can blame Knight for the county’s own incompetence, but he is. Five years ago the county commissioners passed a motion appropriating the funds to complete the Forest Oaks Estates water and sewer project, and so far not an inch of pipe has been laid. That is not the fault of the current mayor of Greensboro; or the previous mayor, Yvonne Johnson; or the mayor at the time the motion was passed, Keith Holliday.

It is true that Alston shot himself in the foot in dealing with Knight and the newly elected Greensboro City Council on Jan. 29, 2010, just over a month after Knight had been sworn in as mayor. Alston and then Vice Chairman of the Board of Commissioners Steve Arnold met with Knight and then Mayor Pro Tem Nancy Vaughan to set the agenda for an upcoming joint meeting of the two boards.

After Arnold left the meeting, Alston threatened Knight and Vaughan about what would happen if they didn’t support the federal funding for a proposed hotel on South Elm Street. Alston said he was just relaying what he was hearing in the community, but both Vaughan and Knight said they felt threatened and also believed it was highly inappropriate for Alston, who was the real estate broker of record in the deal, to be bringing up a private business deal in which he stood to make a lot of money at a meeting that was between Greensboro and Guilford County.

Knight and Vaughan went to the media with the story of being threatened by Alston, and the joint meeting of the boards never took place. Even Arnold, who had left the room when the discussion took place, agreed that it was inappropriate.

Vaughan, who was reelected to an at-large seat on the City Council in November, said she felt like they had gotten ambushed. At that meeting, Alston told Knight that if he didn’t support the hotel that Alston might remove him from the dais for the upcoming opening of the International Civil Rights Center and Museum. Knight said that he told Alston, “I am not intimidated.”

Six months later the Greensboro City Council voted unanimously to terminate the city and county water and sewer agreement that had been in place since 1968.

Looking at the contract was like reading a history of Greensboro. Every mayor and every chairman of the Guilford County Board of Commissioners had signed it for over 40 years. The first mayor to sign was the late Carson Bain.

What happened to end 40 years of cooperation was not anything Knight did. In fact, one of the more outspoken proponents of terminating the joint water and sewer agreement was Councilmember and Mayor-elect Robbie Perkins. He said that Greensboro had to control its own water and sewer because that determined growth and development.

But the council was united because the Guilford County Board of Commissioners had refused to honor its agreement with Greensboro on the funding of the Greensboro library system, which is used for free by residents of Guilford County who are not residents of Greensboro. A percentage had been agreed to for funding, but because the agreement was not written down, Alston and the majority of the Board of Commissioners said that the county did not have to honor it.

Guilford County also decided that it would increase the amount it charged Greensboro to collect property taxes by about 400 percent. In the discussion on what to do about the enormous increase in fees for property taxes, one councilmember asked what the actual cost was to the county to collect the city taxes. Perkins replied, “The ink.” He explained that the county already had to send a tax notice to every Greensboro property owner because all of Greensboro was in Guilford County, so the only increased cost to the county was the additional ink on the tax bill.

Also at this time, the county manager kept the city manager and his staff waiting for 10 minutes for a scheduled meeting and then said that she couldn’t meet with them. It did not sit well with councilmembers to have the county manager refuse to honor a scheduled meeting with their manager. At the council meeting where that non-meeting was discussed, Councilmember Zack Matheny, who was reelected in November, suggested that the city contact the county by “certified airmail.” Both city hall and the Old Guilford County Court House, where the county manager’s office is, are on Phill G. McDonald Plaza – a hundred yards or so from each other.

The money in the joint trust fund came from water and sewer users who live outside Greensboro and are charged double the rate of city residents. One-quarter of that double rate went into the joint water and sewer fund to pay for joint projects, but for some reason Guilford County got to hold onto the money. The contract clearly states that upon termination of the contract the money in the fund is to be divided equally between the city and the county.

The city had been told that there was about $12 million to $14 million in the join account so was expecting a check for about $6 million or $7 million. But it turns out either the county had no idea what was in the account or the county was once again misinforming the city, because this October it was revealed that the estimate by the county was off by as much as 100 percent and that the actual amount was $20 million to $24 million. It may have been when the city insisted on an outside audit that the county “found” the additional revenue.

Is it any wonder that Greensboro does not want to enter into any cost-sharing agreements with Guilford County? There is no question that half the money in the account belongs to the City of Greensboro. There is no question that Guilford County has the money, and no question that in 17 months even the Guilford County managers’ office counting the money on their fingers and toes should be able to come up with a total.

Correspondence from Young to Fox indicates that since at least April 2011, the city has been trying to make a deal to settle the accounts and divide the money. Even though the city was not obligated to spend any trust fund dollars on the Forest Oaks Estates or Lynwood Lakes projects, Young, in a letter dated April 12, 2011, offers to use money from the fund to pay the costs over what had been allocated by the commissioners for the projects.

As one might imagine, since 2006, the cost has increased considerably. The total cost of the projects when they were passed was $5.5 million, and the current estimate is $9.6 million. So the city offered to pay $4.1 million out of the joint trust fund for a project for which it had no obligation to pay.

On July 11, 2011, over a year after the City Council had sent the notice of termination of the contract to Guilford County, Young sent a letter to Fox still trying to get Guilford County to agree to have the fund audited.

On Sept. 21, 2011, 15 months after the county was first notified that the contract was being terminated, Young wrote that the city was willing to pay for the audit by the internal audit staffs of Greensboro and Guilford County, followed by the city’s outside auditor. Previously, Young had suggested that the trust fund pay for the outside audit and evidently that didn’t fly.