Union County commissioners will appeal $91M verdict

Union County commissioners announced Thursday that they will appeal the verdict awarding the school board $91 million in additional county funds for its budget. If the judgment stands, they said, it would result in a “catastrophic” tax hike.

“We cannot allow a verdict that would bankrupt our businesses and squeeze every single taxpayer in our county to go unchallenged,” commissioners Chairman Jerry Simpson said in a statement. “This decision would devastate businesses, seniors, taxpayers and children.”

Last week, a Union County jury capped a two-month trial by siding with the school board in a budget funding dispute. The scope of the award stunned both sides. Entering the trial, they were roughly $9 million apart.

To help cover the verdict, commissioners said they would need to use $26.7 million in the county’s rainy day fund balance for its general fund. Taxes also would balloon by 42 percent for a year to generate $64.4 million to offset the verdict.

Such a move would hike the property and personal property tax rate from 66 cents to 93.7 cents per $100 valuation. That would add an additional $554 for a tax bill on a $200,000 house, about the average price of a home in the county.

“An unplanned tax bill of that size for any family would be catastrophic,” Simpson said. “We are not going to sit by and have 12 jurors determine the future of our county.”

School board Chairman Richard Yercheck said he was not surprised the county is appealing the verdict, but added, “I’m disappointed we will continue to spend taxpayer dollars on legal fees.” Between the school board and commissioners, those bills stand at around $450,000 and counting.

The county’s notice of appeal did not detail reasons for the appeal. Given the length of trial transcripts that need to be prepared, along with more than 1,000 trial exhibits, it may not be until late winter or early spring before the N.C. Court of Appeals hears the case.

Fighting over funding

Even before the appeal was announced, the two sides clashed over the award.

On the school district website, Yercheck urged the county to use ample unrestricted rainy day fund balances without raising taxes and stop claiming “that it does not have the funds available to adequately support the schools.”

Commissioners dismissed those statements. “It’s easy to make comments like that when you don’t know what you are talking about,” commissioner Richard Helms said.

On Tuesday, County Manager Cindy Coto detailed available funds in a memo to commissioners. Trial testimony suggesting the county had an unrestricted fund balance of more than $230 million was incorrect, she wrote.

Coto said that number came from June 2012 data combining total fund balances in the general fund and capital projects, as well as net assets in “enterprise funds” generated by user fees in water and sewer, solid waste and stormwater funds.

Part of the capital projects fund balance was spent last fiscal year, Coto said, and the rest is designated for other projects.

School supporters cited water and sewer funds as a way to pay for the verdict without raising taxes.

The enterprise funds, which totaled $89 million as of June, are meant for infrastructure and other projects that benefit rate payers, county officials said. “There is moral, if not legal, obligation for the user fees that support these funds to be used for their intended purposes,” Coto wrote.

As for the fund balance in the general fund, the county said it must preserve $35 million, the sum needed to cover about two months of operations in case of emergencies or economic crises. That leaves about $26.7 million in unrestricted reserve funds for the verdict.

Award covers many needs

The school board sued the commissioners after mediation failed to produce a deal in July. Jurors apparently considered capital needs over several years in their judgment.

Most of the capital funds will go to leaky roofs, compliance with the Americans with Disabilities Act, and safety and security needs. Union County schools has about 42,000 students and is the state’s sixth-largest district.

The jury award – $4.97 million for general operating funds and $86.18 million for capital projects – is on top of the money the county already allocated for the district.

In June, when commissioners approved their $298 million operating and capital budget for all county operations, they designated about $82 million in operating funds for the district, and an additional $3 million in capital funds, leaving the school board about $9 million short of what they requested.