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County discovers IRS provision to partially fix botched bus buy

An unexpected opportunity has enabled Washington County to provide almost $100,000 toward the Board of Education’s purchase of school buses.
During the Dec. 12 Budget Committee meeting, Mayor Dan Eldridge told members the county was able to take advantage of an IRS provision that allowed a portion of the proceeds from the recent sale of general obligation school bonds be used for unplanned expenses related to school buses.
The commission voted in September to finance $1.85 million to buy three years’ worth of new school buses. The bonds were sold last month, but requirements related to the date the bonds were purchased made it impossible to reimburse the school system for the $592,000 it spent during July for the first year of buses.
The county’s bond counsel identified the IRS provision, which required Eldridge to make a decision by Dec. 9.
The resolution commissioners approved for the purchase of the bonds authorizes the mayor to handle the required transactions and allocation of proceeds, which are restricted for school buses.
Eldridge said reimbursing the school system for even a small amount of the total will prevent a duplicate purchase of buses, which are acquired in a staggered system due to a limited number of years for use.
According to IRS guidelines, the remainder of bond proceeds must be spent, or at least committed, for the purchase of new buses by May 9, 2013.
The night before the county cut a $92,000 check for the school system, Board of Education members expressed their disappointment in the lack of support from the county commission.
Eldridge said Director of Schools Ron Dykes knew of the impending transaction, but wasn’t sure it had been shared with school board members.
Dykes made no comment on this topic during the public board meeting Dec. 6.
“My concern is we aren’t operating with the same information,” Eldridge said. “In addition, the school board does not appear to respect the statutory responsibility of the county to its taxpayers.”
Eldridge said commissioners will be held accountable by their constituents for answering the “how and why” questions related to the schools unbudgeted expenses of more than $500,000 for a new roof for Fall Branch Elementary, a cooling tower for Boones Creek Elementary, and architectural services for a long-range educational facilities plan.
“One thing that really disturbed me was the comment that the county commission was not doing its part,” he said. “If what the county commission has done over the last couple of years doesn’t satisfy the board, we have a real problem.”
An example of stepping up to address the operating expenses, according to Eldridge, is the decision to incur $1.85 million in debt to purchase new school buses, which will save the Washington County School System approximately $600,000 during each of the next three years.
“If the commission is perceived as not doing its part, I don’t know where that’s coming from,” he said.
In addition to the purchase of bonds, the commission approved a tax levy reallocation from the the county’s General Fund that will provide a permanent increase of $640,000 in annual revenue to the system.
Despite both of these actions, the Board of Education refused to reduce the amount of money they are pulling from the schools fund balance this year to provide larger salary increases for all system employees.
“During the budget process, we accomplished a two-year agreement,” Eldridge said. “Now school board members are acting like they never heard of it and spending the schools fund balance rather than saving it to balance the budget.”
Commissioners approved the resolution for the general obligation school bonds during their Sept. 24 meeting.
The following week, Board of Education members unanimously voted during their Oct. 4 meeting to accept the bid from Morristown Roofing to complete the Fall Branch Elementary re-roofing project for a $200,000 unbudgeted cost.
While a reconciliation between the school board and the county commission is needed, Eldridge knows he is ultimately accountable.
“At the end of the day, I have to take responsibility and do everything I can to rectify the problem,” he said.