Wednesday, May 22, 2024

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Graham, NC 27253
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Courthouse expansion cost now estimated at $67 million; can it be built without a property tax increase?

Much of commissioners’ discussion focuses on how to finance expansion without a property tax increase; should use extra money from capital fund designated for schools?

The movers and shakers of the local court system suspended their judgment this week as Alamance County’s leaders mulled over their latest proposals to pay for a multimillion-dollar upgrade of the county’s main criminal courts building in Graham.

The proposed renovation and expansion of the Judge J.B. Allen, Jr. Court House, which has recently been quite a conundrum for county officials, has also been a long-standing priority for those who are responsible for the court system’s operations. The court system’s top brass were consequently out in full force on Monday when Alamance County’s board of commissioners considered some potential solutions to this $60-plus-million-dollar question.

[Story continues below graphic of expansion options.]

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During the board’s regularly-scheduled meeting that evening, Alamance County’s manager Heidi York went over some options that a consultant in the county’s employ had previously pitched to the commissioners three weeks before. These proposed measures presume that the county will have to take out a loan to cover the lion’s share of this project’s expense, which York currently estimates at $67 million. To pay off that loan, both the county manager and the county’s consultant have advised the commissioners to either increase the county’s property tax rate or siphon revenue away from the capital reserves that the county maintains for the Alamance-Burlington school system.

During her presentation on Monday, York assured the commissioners that they have plenty of time to chose between these two competing alternatives even if they decide to move forward with the design work for the court building’s upgrade.

“I don’t need a decision tonight,” she insisted. “I’m just running scenarios so you can see the capacity within the model.”

As tentative as the county’s plans for this project may be, they’re grounded on a much more solid financial foundation than they had been last spring, when the county’s administrators trotted out their initial proposal for the renovation and expansion of the Judge J.B. Allen, Jr. Court House. In fact, the board of commissioners practically did a double take when they saw the $99 million price tag for the project’s original plans, which called for a full makeover of the existing courthouse as well as a four-story expansion to house the court system’s administrative functions.

Since then, the county’s administrators have proposed some scaled down alternatives with costs ranging from a $65 million for a three-story addition to a $75 million for a fourth story shell that could be dressed up as the court system expands in the future. In the meantime, Ted Cole, a consultant with the firm Davenport & Company, has roughed out with some financing options based on the assumption that the county will have to borrow most, if not all, of the revenue it needs to pull off its venture.

The commissioners got a preliminary glimpse of Cole’s recommendations in late January when they convened an all-day retreat at the main campus of Alamance Community College.

During this seven-hour confab, the county’s consultant assured the commissioners that they have the debt capacity to borrow up to $70 million – the figure he used as a placeholder for the admittedly variable cost of the courthouse expansion. Cole went on to explore the various ways that the county could leverage its own savings to reduce the size of the loan.

He also shared some ideas for footing the loan payments that relied, alternately, on the county’s own property tax revenue or funds from the local school system’s capital reserves.

Aside from four of the five county commissioners and select members of Alamance County’s staff, the only one present to hear the consultant’s initial briefing was a reporter from The Alamance News. The public couldn’t even watch the presentation after the fact since county officials hadn’t made any provisions to record the retreat.

Those who missed all the excitement three weeks ago were nevertheless able to get back up to speed when York rehashed the consultant’s financing proposals with the commissioners on Monday.

In her report to the commissioners, the county manager made a couple of adjustments to Cole’s figures. Among other things, York tamped down the consultant’s estimate of the project’s cost from $70 million to $67 million, deeming the lower figure sufficient to cover a three-story expansion with a reinforced roof to accommodate a potential fourth floor in the future. York also augmented Cole’s estimate of the savings that the county can use to offset the project’s expense. According to the county manager, the commissioners can not only avail themselves of $10 million in previously budgeted funds that the county has squirreled away thanks to infusions of federal pandemic relief; they can also safely draw up to $10 million from the county’s own capital reserves, which she insisted are on track to reach $17 million by the end of the current fiscal year.

York went on to review the consultant’s competing proposals for raising the money needed to pay off the aforementioned loan.

One option which Cole had previously floated would be to increase the county’s property tax rate when the first loan payments come due in, perhaps, 2028 or 2029. York told the commissioners that, given last year’s estimate that a penny on the tax rate is worth about $1.6 million in revenue, this particular alternative would necessitate a cumulative hike of 1.99 cents to pay off a $47 million loan, or 2.87 cents if the county borrows the full $67 million it needs for the project.

Alamance County manager Heidi York

York went on to reiterate the consultant’s observation that the commissioners could reduce the size of this tax increase if they implement it in 2024 rather than wait until the revenue is actually needed. According to her calculation, this upfront hike would range from 1.26 to 1.76 cents depending on whether the commissioners borrow $47 million or $67 million.

The county manager also touched on a third alternative that Cole had suggested if the commissioners were utterly determined to avoid a property tax increase to pay for this project. To this end, the consultant reminded the commissioners that a deal brokered by a previous county manager has given the county effective control over the capital reserves which the Alamance-Burlington school system has traditionally maintained for its own needs.

York added that recent growth in both sales and property tax receipts have inflated the revenue stream that feeds these reserves well beyond the projections made when this arrangement was struck.

York went on to assert that the county could skim off as much as $2,985,000 a year from these capital reserves to fully cover the debt payments on a $67 million loan and still leave enough money to cover the school systems own maintenance needs. She noted that, if this plan is implemented in 2024, the school system’s reserves would drop to just over $2.1 million by 2025 before making a rapid recovery and climbing to nearly $50 million by 2033.

“We’ve used the term ‘right sizing the ABSS model,’” the county manager went on to explain.

“The reason we might want to consider doing that, when the model was initially developed, one penny [on the tax rate] was about $1.3 million. Today, a penny is $1.6 [million], and we know that with the [county’s newly implemented property tax] reval, the value of a penny is going to grow even more…So you’re truing up the revenues as well as the project needs.”

This plan to divert funds from the school system’s reserves seemed to go over well with most of the county commissioners. Commissioner Craig Turner seemed particularly taken with the plan’s logic notwithstanding his stated commitment to the school system’s maintenance needs.

On taking some funds for a court expansion from the school system’s capital funds:

County commissioner Craig Turner (with commissioner vice chairman Steve Carter in background).

“I have been a very strong supporter for capital spending for ABSS.  I don’t want them to get into a hole, and I don’t think that they will.

“What has changed is the value of a penny [on the tax rate]. Because the value of a penny is increasing, more money is going to it, and sales taxes are increasing, which also goes into ABSS’s [reserves] as well…all of those things are allowing that pot to grow above what it was designed to do.”

– County commissioner Craig Turner

“I have been a very strong supporter for capital spending for ABSS,” Turner assured his fellow commissioners. “I don’t want them to get into a hole, and I don’t think that they will.

“What has changed is the value of a penny [on the tax rate],” he added. “Because the value of a penny is increasing, more money is going to it, and sales taxes are increasing, which also goes into ABSS’s [reserves] as well…all of those things are allowing that pot to grow above what it was designed to do.”

“If the tax base has increased, the taxpayer should get some benefit from it.”

– County commissioner Bill Lashley

Turner’s take on this matter was later echoed by commissioner Bill Lashley, who argued that “if the tax base has increased, the taxpayer should get some benefit from it.” John Paisley, Jr., the chairman of Alamance County’s commissioners also voiced his support for York’s “Scenario C” – in an apparent reference to the proposed use of the school system’s capital reserves.

Yet, this measure proved a much harder sell with commissioner Pam Thompson, who had served on the Alamance-Burlington school board before she joined the board of commissioners two years ago.

“I just know how hard we worked to get something [built up in the reserves],” she recalled from her previous career on the school board, “because on any given day, something will break.”

Thompson also second guessed the basic strategy of borrowing money to pay for the court building’s upgrade.

Yet, these scruples seemed somewhat beside the point to many of the court system’s representatives, who had turned out en masse to hear York’s presentation.

Conspicuous among that evening’s spectators were the familiar visages of district attorney Sean Boone, the clerk of superior court Meredith Edwards, resident superior court judges Tom Lambeth and Andy Hanford, and their district court counterparts Brad Allen, Katie Overby, Larry Brown, and Rick Champion. Some of these visiting dignitaries were even willing to venture up to the podium when Paisley invited them to share their thoughts and concerns about the court building’s proposed upgrade.

“We were already outdated the day we moved in, and there’s no space in the J.B. Allen Court House for another [potentially fifth district court] judge.” – Chief District Court Judge Brad Allen (son of superior court judge for whom the court building is named)

Typical of those who took the chairman up on his offer was the county’s chief district court judge Brad Allen, who also happens to be the son of the late superior court judge whose name graces the 30-year-old criminal courts building. Allen insisted this edifice, which was already cramped in his father’s day, will become completely inadequate if the county gets a fifth district court judge – as is currently being proposed in the General Assembly.

“We were already outdated the day we moved in,” he added, “and there’s no space in the J.B. Allen Court House for another judge.”

Although York told the commissioners that they can continue to ruminate about the expansion’s financing, she nevertheless urged them to give her the go-ahead to move forward with the design work for the $67 million layout that had formed the basis of her calculations.

Most of the commissioners seemed to concur that this option is preferable to the $75 million alternative, which would feature a fourth story shell rather than the reinforced roof in York’s favored model. But York’s hope for some clear direction from the county’s governing board was nevertheless frustrated by some lingering doubts on the part of commissioner Craig Turner.

“I would prefer to wait a couple of weeks and allow this TRC/operational review process to work,” he said to the general acclimation of his fellow commissioners.

York ultimately accepted this two-week delay in the project’s overall timeline.

“I am on your schedule,” the county manager replied and agreed to bring the matter back up at the board’s next regularly-scheduled meeting on March 6.

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