$91 million in the hole

Editor’s Note: This is the fifth of a multi-part series of interviews conducted between Courier staff reporter Nicole Daughhetee and SDPC board trustee Jim Shelton, a former board chair.

“Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you’re generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don’t make.” — Donald Trump
Jim Shelton had that gut feeling that something just wasn’t right. And he was about to find out just how accurate his gut instinct would prove to be.
Fast forwarding to January 2009, Superintendent Lee D’Andrea resigned and Dr. Mendel Stewart came aboard as interim superintendent while the SDPC trustees went forward in their search for a new, permanent superintendent to take over the position in the district.
“Mendel Stewart was, quite frankly, my only choice for that interim position,” said Shelton. “There was nobody I knew of who could step into our situation and handle it remotely as well as Dr. Stewart. He was my only choice.”
Shortly after Dr. Stewart became acting interim superintendent, only a few short days after he was back on the job, Shelton recalls receiving a phone call from Stewart.
Shelton reminds me that we are now in January 2009, and at that time, January was the month during which board officers were elected. Dr. B.J. Skelton was at the end of his requisite two-year limit. Shelton said that looking around the board, it was obvious that he would be next in line to take the position of chair.
“It was going to be me — I knew it was going to be me, the board knew it was going to be me, Dr. Stewart knew it was going to be me,” recalls Shelton. “So Mendel called me up and asked ‘Are you going to be the next board chair?’ And I said, ‘Well, I think so. I think that’s where things are going.’”
At this point Shelton said Stewart dropped a bombshell on him — one that Shelton had been feeling in his gut but simply could not put his finger on.
“Stewart said ‘I want to tell you something now before it breaks, Jim. Your building plan is $91 million over drawn,’” Shelton said.
Only a few months prior to that, Shelton had been given a piece of paper detailing a balanced budget. Mere months after looking at that balanced budget sheet, not nearly enough time, said Shelton, to have a $91 million hole manifest itself — Dr. Stewart was presented information by Mr. Reggie Hall (building administrator for the SDPC in 2009) that showed a budget not balanced at $365 million. Instead, Hall presented a budget that was actually $456 million based on then-current estimates.
“This is where we were lucky,” said Shelton. “Had we not caught it then, had even four or six more weeks elapsed before we caught this, we would have been forced to make decisions that would have wreaked havoc on Pickens County.”
Shelton said that in those four to six weeks, had construction begun, the district would have been at the point of no return.
I thought to myself, $91 million in the hole isn’t exactly what I’d call lucky, however I continued to listen and jot down notes as Shelton spoke.
What apparently had driven this manic high in the budget was that the original designs for the high schools and for some of the unanticipated costs was based on current square footage and did not factor into the equation the additional hundreds of thousands of square footage that was not considered (as in the conversion of portables to permanent structures).
Hall presented to Dr. Stewart what, Shelton learned, was the actual plan — a whopping $456 million dollars.
“Dr. Stewart comes to me because by this time the elections have occurred, and I am now sitting in the chair,” said Shelton. “My very first board meeting was the vote for the Greenville plan. My very first meeting as the chairman was going to be ‘Hey, you’ve got to find $91 million dollars to plug this hole.’”
Yiddish speaking or not, an “Oy Vey” was certainly in order at this point. Ever the optimist, however, Shelton focused on the options available to the district.
“The first option was that we could opt for what is called millage stabilization, and there was actually a plan for this at the district office prior to Dr. Stewart’s arrival,” explained Shelton. “It said that we took what I’m going to call a tolerance level, meaning this was as far as it would go, at 58 mills.
“If we allowed that 58 mills to stabilize, while the debt was paid down, the available millage starts to drop little by little over the years. At the same time, the value of the mill increases slightly every year, so that gap starts doing this (at this point Shelton offers a demonstration using hand gestures): if you go back to math this is the area under the curve — the area that represents available cash. Anything below this curve is debt. Anything above this is la-la-land. It is the area in between that is important.
“However, in order to actually get to that money, more bonds must be issued, which means issuing more debt, which means raising more taxes,” he explained. “So the first option that was out there, and this is in no particular order, was that millage would be stabilized to at least account for the $91 million plus whatever the interest rate was.”
Based on Shelton’s calculations, over time this would have been an additional tax burden of $165 million dollars to the people in Pickens County because the deficit had to be made up and there was available millage to do it.
“Another option was that we take anything that’s not a high school — because those were the biggest consumers of the cash — we just leave the high schools intact and then new middle schools, new career center, new elementary schools — all of that goes away,” said Shelton. “But that is not what we pledged to the public.”
Shelton said the option that was chosen — a conclusion arrived at by both he and Dr. Stewart in February 2009 — was the suspension of the building plan. If there was site preparation work going on, it would continue. Renovations or upgrades in the elementary schools would be ongoing. Any new construction, which was four high schools, two elementary schools and one career and technology center, was suspended until they could get a handle on things.
“And there is so much that the public didn’t see,” Shelton said. “It wasn’t that we were concealing things, but there were so many things happening and the dynamics involved were so diverse. There were so many moving parts to this great big moving machine that there was really no way to give a clear picture to the public unless they were to come and sit in all of our meetings. The only time we closed the doors were our regular executive sessions and some budgeting meetings. There were so many unknowns at this point, that unless someone had followed it from the beginning, people would draw the wrong conclusions.”
In February 2009 this is what the SDPC board faced: a building plan that was $91 million in the hole; continuing to search for the right person to become the next superintendent; a national economy that had, by the way, completely crashed; mid-year cuts from the state because revenue was falling at a rate no one could comprehend.
Harry Truman once said, “a pessimist is one who makes difficulties of opportunities, and an optimist is one who makes opportunities of his difficulties.”
When Shelton stepped into the position of chair for the SDPC board of trustees, his ability to make opportunities out of difficulties was put to the test, but he does not take all of the credit for being able to do so.
“Thankfully, we had an interim, but very capable and competent superintendent, who had his hands on the reigns steadying this wild horse,” said Shelton. “The end game is I think we came out of it OK, but those were some really, really tough days.”