THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, November 10, 1995 TAG: 9511100455
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY ALETA PAYNE, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 109 lines
The School Board has agreed to one of the major conditions of getting a $12.1 million loan from the city - how the division will pay back the money. Left to be decided is the thornier issue of whether the school division's financial operations will be consolidated with the city's.
The money will cover a shortfall in the division's budget at the end of the 1994-95 fiscal year. At the board's meeting Tuesday, two auditors from KPMG Peat Marwick outlined a litany of problems with the division's budget process and told the board members that, had the budget been properly monitored, they would have known the division was in financial trouble almost a year before it became public.
The board members had sat through meeting after meeting in large part holding their emotions in check as news of the division's finances grew worse and worse. By late Tuesday night, however, when they began discussing the reconciliation plan hammered out by Interim Superintendent James L. Pughsley and City Manager James K. Spore, frustrations were boiling over.
``(I feel) like I've been taken by the big kids on the playground who own the ball . . . and gained immense pleasure when I dropped the ball,'' said board member Elsie M. Barnes. ``It seems (City Council) watched us hang ourselves.''
But board member Susan L. Creamer favored the agreement.
``We are responsible. We were given the budget, we overspent the budget,'' she said. ``It's unrealistic to expect we won't have to pay this money back.''
Under the reconciliation plan approved Tuesday night, the board is to make its best effort to pay back the deficit on or before June 30, 2000. If the money is repaid before that date, the agreement becomes void. The city supplies about 40 percent of the district's $340 million budget, with the remainder coming from state and federal sources.
The loan could be paid off in a number of ways, including the return of money left over from the operating budget at the end of a fiscal year - something that already takes place but usually with the acknowledgment that the city will return it to the schools for one-time expenditures.
Other possible sources of money are the sale of surplus school system property or the transfer of such property to the city at fair market value. With the impending moves out of Seatack and Linkhorn Park elementary schools, those properties might become such surplus assets.
Also up for consideration would be any savings from the consolidation of city and School Board operations - a reference to the possible consolidation of their financial offices.
Some School Board members have argued against this as an attempt by the city to take over the district. Others have said it makes sense because of the savings. However, estimates of savings have not been provided.
Pughsley said Thursday he was not sure when the issue of consolidation would be brought before the board. Spore has said it is essential to a city bailout.
The focus of the reconciliation agreement is on money that comes to the school division through savings, rebates and unbudgeted windfalls. Still, some board members worried that the original wording of the agreement was too harsh, locked future school boards into repaying the loan and put the education of children at risk.
``Not once does this document mention the education of children,'' board member Ulysses Van Spiva said at Tuesday's meeting.
But board member Joseph D. Taylor disagreed, saying that approving the document would help the board move beyond the fiscal crisis.
``I don't think it's harsh. I don't think it's locking in anybody,'' he said.
At the suggestion of Vice Chairman D. Linn Felt, the agreement was slightly reworded so that any money that might go toward repayment would be considered on a ``case-by-case'' basis, requiring both the City Council and School Board to agree that it could be used for that purpose.
Spore said Thursday the district's version of the plan is acceptable.
``We will have the city attorney review it, but I would categorize the changes as minor,'' Spore said. ``The resolution the board adopted was very helpful and important, and we'll go forward on that basis.''
The document has yet to come before the City Council. MEMO: Staff writer Tom Holden contributed to this report.
PAYING IT BACK
These are the sources of money that the Virginia Beach school
district will use to repay a $12.1 million loan that is expected to be
approved by the City Council. The sources of funding will be considered
on a case-by-case basis. The district hopes to repay the city by June
30, 2000.
Cash from the sale of school division property or assets no longer
required for school purposes.
The fair market value of school division assets transferred by the
school board for reuse by the city for public purposes. If the two
governing bodies are unable to reach consensus on what ``fair market''
means, they will agree to the assessment of an independent appraiser.
Any money left from the schools' operating fund.
Savings from completed school division capital projects, providing
the unused money is not committed to something else. Also, the district
must return to the city any savings realized from changes in
construction projects for the fiscal year 1995-96 that result in lower
costs.
Savings from the consolidation of the school division's financial
accounting, payroll, purchasing and risk management departments with the
city's Department of Finance.
Savings from additional refunds by the Virginia Retirement System for
previous overpayments.
KEYWORDS: VIRGINIA BEACH SCHOOL BOARD BUDGET DEFICIT LOAN
VIRGINIA BEACH CITY COUNCIL by CNB