Money matters

Goochland leaders’ commitment to prudent stewardship of public funds has earned the county three AAA bond ratings. This is the product of hard work by all members of county and school staffs.

At the December 6 meeting of the county’s audit committee, Chair Ken Peterson, District 5, said that the good news is that Goochland County’s Financial condition is the best it’s ever been. The bad news is that “there are forces conspiring against us to undo all of our good work, not the least of which is a possible pending recession.”

The focus of the meeting was presentation of the final certified annual financial report (ACFER) for FY 2022, which ended on June 30. Mike Garber, Partner, State and Local Government Team Co-leader of PBMARES (https://www.pbmares.com/), the county’s outside auditors, reported that Goochland’s ACFR for FY2022 was clean. For several years following the embezzlement conviction of a former county treasurer, Goochland was considered a “high risk” auditee, which required greater scrutiny by the auditors. Being considered a low-risk auditee, said Garber, means that there’s some element of trust that the right things are being done.

Garber discussed reporting changes mandated by the government accounting standards board (GASB) including the capitalization of operating leases. The audit document has been posted on the county website goochlandva.us under the finance department tab for those who like details.

Garber said that PBMARES, like most employers, has had issues with attracting and retaining skilled employees. The situation is exacerbated by colleges granting fewer accounting degrees.  Jobs in the field are plentiful and salaries generous. “If you’ve got kids in school, push them toward accounting,” Garber said.

The audit committee then discussed the letter from the School Board requesting appropriation of up to an additional $15,726,130 for the new Goochland Elementary School project. The supervisors scheduled a public hearing on the item for its January 3 meeting. (Virginia Code requires that localities cannot amend their budgets to adjust the aggregate amount to be appropriating during the current fiscal year more than 1% of total budgeted expenditures without first advertising and holding a public hearing on the budget amendment.)

Of the $60 million in bonds approved by Goochland voters in a November 2021 referendum for education projects, approximately $41million in bonds were issued in February 2022 at an interest rate of a just over two percent.  The balance of that $50 million bond issue will be used for public safety capital projects. Final GES bids, opened on November 17, came in far higher than estimated.  The bids are good for 60 days.

The initial bond issue was for less than the total amount approved by votes because the county could not handle building all the projects, including the new GES, a new circuit courthouse, a fire-Rescue station in West Creek simultaneously. Funds generated by the bonds must be used in a timely manner.

Peterson said that the head winds of inflation and higher interest rates, which tend to depress the housing, auto, and construction markets, cloud the county’s revenue picture in the near future.

Next year’s budget process, which has already started, is going to require more thought, deliberation, and debate than previous years. Peterson was optimistic that the issue will be resolved.  “This county does the impossible before lunch, so we’ll figure it out.”

Debbie White, Director of Finance for Goochland Schools, explained that four highly qualified companies bid on the GES project. She contended that, due to the cost of making the bid, it was unlikely that a second round would attract the same quality of bidders, or that later bids would be significantly lower.

Should construction of the new GES be delayed, fairly significant costs would need to be incurred for the old school to remain operational.

Peterson contended that given the current environment in the financial markets, selling a smaller quantity of bonds was a non starter. Aside from the fact that interest rates are much higher than the 2.2 percent on the February bonds, it is unlikely that there would be much interest in a smaller amount of bonds.

White said that, due to the duration of the project, which currently has the new GES opening in the summer of 2024, the final payments would not be due until “punch list” completion, sometime in 2025. By then, market conditions could be different and interest rates lower.

District 4 Supervisor Charlie Vaughters suggested “tail” funding for GES, through borrowing at a higher interest rate than bonds, perhaps a blended rate in the neighborhood of 3.5 percent would still be fiscally prudent. Tail funding,” Vaughters contended, would provide time to investigate other funding options that might not “bear interest before a dime is drawn”.

White pointed out that schools spent more that $3 million on design and related costs for the plan that went out to bid. Starting over, should the project be deferred, would require that some of that cost be duplicated.

Peterson contended that a recession is on the horizon. Should property values fall as they did in the great recession, the county’s revenue stream would contract. He opined that the impact of the coming recession on the real estate market will worse than the last time.  That would result in the county making hard choices. “If we’re going to do this school, we have to decide what people are willing to sacrifice,” he said.

The audit committee will next meet on January 3 after having had some time to consider possible ways to fund the GES shortfall. The supervisors will hold a public hearing on the additional appropriation at the 6 p.m. meeting.

This is a thorny matter. We need the school, but also need to safeguard the county’s fiscal integrity.