Coto grilled on finances

Aug. 22, 2013 @ 04:56 PM

The trial between the Union County Board of Education and the Union County Board of Commissioners continued this week. 

County Manager Cindy Coto was called to the witness stand on Monday. Coto was examined by School Board Attorney Richard Schwartz until Wednesday afternoon. County Commissioner Attorney Ligon Bundy was cross-examining Coto as of Thursday morning.

Numbers and budgets took center stage Wednesday as Schwartz asked Coto to use a calculator to figure out differences. The jurors each had large three ring binders to store the documents being put into evidence.  

On Wednesday, Schwartz asked Coto about the county’s fund balance, particularly their unassigned fund balance, which has no strings attached. 

Schwartz pointed out that for the past few budget cycles, the amount of revenue has been underestimated, leaving the county with a larger general fund than previously believed. 

In the 2011-2012 fiscal year, Schwartz said, the estimated unassigned fund balance was about $44.2 million, while the amount on the audit was $51.2 million.

Schwartz asked Coto if that was a big difference. She agreed there was a difference and it was more than projected. Schwartz noted that the money was there and she said that may not be the case today.

The county commissioners determined that the unassigned fund balance should have 16 percent of the fund in it and state law requires 8 percent.

Schwartz said the final audit was about $7 million more than the estimated audit, which was initially thought to be too low, so had $6 million added. 

For the 2011-2012 budget, about $10 million was appropriated from the general fund, but that money was not spent because more revenue came in than was anticipated. Schwartz noted that the county allocated about $11.5 million more to the fund balance that year.

Schwartz noted that the board of education received no additional capital outlay that year. Coto said that based on discussions, they requested the money be put in the operations budget. 

Schwartz said that 12 days before the end of the fiscal year in 2012, $7 million was transferred. He noted that the money could have been given to the schools but was not.

“(The) county had enough money to put away for future needs...not future school needs, correct,” Schwartz asked Coto. 

Schwartz asked Coto if she was conservative in her estimates. She said they tried to be accurate but conservative because it is not their money, but taxpayer money.

Schwartz also spent Wednesday morning and afternoon talking about the current fiscal year, 2013-2014. He asked Coto if revenues were up so far this year, which led to a long back-and-forth. 

Coto said that “due to other matters” she had not had time to check the estimates in about a month. She said that based on projections, they expect more revenue in the future because tax collections are up. 

Schwartz noted the 2013-2014 audit had not been completed, but asked if Coto received updates. She said yes, but she has not received them recently. She said she does not know for a fact that revenue is up this year. 

Schwartz presented a budget worksheet that they received as part of the document request the school board made prior to the trial. Coto said she had not seen the document before. When asked to make projections using the worksheet, she said she was confident with the proposed budget and not willing to answer based on a worksheet she has not seen. 

The worksheet showed that reveue was up this year, but Coto would not stipulate based on a worksheet. 

At one point, Schwartz read a state statute, emphasizing the word “shall.” Bundy objected and Judge Erwin Spainhour asked Bundy what the objection was a response to. When Bundy answered the inflection, Spainhour overruled.

Bundy began his cross-examination Wednesday afternoon discussing Coto’s background and all of the departments Union Counfunds. 

Thursday morning, Coto’s fourth day on the witness stand, Bundy asked her to explain the county’s school-related debt.

Since 1998, voters approved $501.7 million in bond referendums to borrow money for constructing 23 new schools. Any money left over after construction was put into a bond savings account. In the past UCPS has submitted invoices to the county for payment out of bond savings. That money can only be used for capital, Coto said.

Bundy asked if the county then pays the bill.

“As long as it meets the definition of capital,” Coto said.

The money cannot be used for any other purpose, she said.

Bundy asked if the county had the legal authority to deny payment of of capital expenses.

“As long as it meets the definition of capital, the county has to pay the bill. Is that correct?” Bundy said.

“Yes it is,” Coto said.

After the bonds passed and the money was released to the schools, UCPS moved forward with land purchase and school construction.

“And the county got the bill,” he said.

“Yes, sir,” Coto said.

“And how does the county pay that bill?” Bundy said.

About $9 million comes from the N.C. Education Lottery each year. But the remaining $37 million in annual payments is paid out of the county’s revenue stream, she said.

School construction debt makes up 84 percent of the county’s $450.3 million in outstanding debt, she said.

Early this year, county administration began work on the 2013-2014 budget. Instead of adding onto last year’s budget, Coto asked department heads to start with nothing and add expenses that were absolutely necessary. County-funded departments, like the Union County Sheriff’s Office, followed the zero-based budget development, even though they were not overseen directly by the county.

State law requires school districts to develop a budget and present it to the school board for approval. The budget message must explain funding changes from the previous year.

Until approved, the district superintendent shall to keep a copy in his or her office for public inspection. The law also states that the superintendent can announce the proposed budget is available by advertising in the local newspaper.

Bundy asked Coto to read aloud a state statute that said the schools district may hold a public hearing about the budget. At that time, anyone can make public comments about it.

“So the statute doesn’t even require the board of education to hold a public hearing on the budget?” Bundy said.

“No, sir,” Coto said.

Court will not be in session Monday or Tuesday. Proceedings will resume on Wednesday at 2 p.m.