WINTON – A cost-saving measure for Roanoke-Chowan Community College led to a long lesson in economics here Monday night.

In the end, the Hertford County Board of Commissioners approved a request made by RCCC President Dr. Michael Elam to allow the college to enter into a lease-purchase agreement for an Energy Management System, but not before gaining assurances that the college will not need additional county dollars to meet the debt service payments.

That system, according to Elam, is listed as a high priority on the college’s Facilities Plan. Upon installment of the system, Elam said the college could potentially realize accumulated savings on its utility bills between $640,000 and $750,000 over a 10-year period.

The system will be placed in the Freeland Building, Freeman Building, Jernigan Building, Young Building and the Student Services Building at a total cost of $319,495. Financing the project over five years at a 4.6 percent interest rate would produce a monthly payment of $5,971. Later in the discussion, Elam stressed that the savings on the utility bills are significant to the point to help soften the impact of that monthly payment.

That impact can be further reduced if the college is awarded a $100,000 grant through the Cannon Foundation which can be applied to the project. If secured, that grant would lower the amount to be financed to $219,495 and a monthly payment of $4,021 over five years.

“We’re looking at several different options, but the one before you (to consider) is without the grant because we do not have that yet,” Elam explained to the commissioners. “We’re looking at the full amount and if we get the grant it will automatically reduce the amount (to be financed).”

Elam said the deadline for the grant application is April 4. Grants are awarded in June or July.

Commissioner Ronald Gatling began the discussion over the project by asking Elam about the financing of the energy management system. Gatling’s comments were aimed in a direction that the college’s monthly repayment of the loan would come from what RCCC already receives in annual appropriation from Hertford County.

“What if your savings do not work the way you assume they will work,” Gatling inquired.

“We looked at that as a contingency,” Elam answered. “There are a few other options that we would have to cut back on in order to be able to meet the payment, but we still believe we could meet the payment.”

“Our obligation to assist you with this lease payment is to maintain that we continue to fund you at the level of (current) funding,” Gatling stated. “If we don’t then you can’t make the payment.”

Commissioner Curtis Freeman asked Elam if the college was seeking any new money from the county.

“In the (2014-15 fiscal year) budget request we will be requesting some additional dollars, but they would be for different types of projects,” Elam said. “We will be asking for at least level funding (the money appropriated by the county in the current fiscal year) and then we will have some additional dollars we will be requesting over and above that for other projects.”

One of the “other” projects Elam referenced is for community outreach.

For the current fiscal year, the county appropriated $878,000 in operational funds for RCCC plus an added $100,000 for capital improvement projects. The $878,000 was $100,000 higher than the previous budget year (2012-13).

Commissioner Howard Hunter III pointed out that the $100,000 capital improvement money was just a one-time appropriation. He asked Elam if the college was including that figure into their budget request for 2014-15.

“Yes sir, all that you gave us last year will be included (in this year’s request),” Elam said.

“You can’t count the $100,000 that we gave you in capital outlay,” Gatling remarked. “So, this goes back to my original question…. are you projecting that you will pay out of level funding the $5,971 (per month for the energy system) or are you talking about paying that out the of the $100,000 that you are anticipating?”

“The $100,000 is a separate line item for capital that the county keeps and we basically spend against that cap,” Elam noted.

“You only have that capital because we created the capital,” Gatling stressed. “That doesn’t mean that we were going to create two types of funding, because we were already giving you money (annual appropriation) that you were utilizing as capital anyway.”

“Last year we appropriated $200,000 in additional funding for the community college,” explained County Manager Loria Williams. “We raised their current expense, which is operational funding, from $778,000 to $878,000. Capital outlay, which ya’ll (the college) had not been requesting separately, we created a separate capital outlay fund (of $100,000).

“What is important to know and understand is that either one of them can be changed….the $100,000 in capital outlay isn’t automatic in any given year,” Williams continued. “My question would be could the college’s current expense facilitate (payments for) this energy management project?”

Williams added that the current expense and/or capital outlay funds appropriated by the county for the college could fluctuate from year to year.

“We can’t say at this point that we’ll be giving the community college the same thing because we haven’t started our budget process,” Freeman said. “Once we crunch the numbers for the county, there could be cuts, or there could be increases, so to sit here and say it will be the same level of funding, we can’t say that right now.”

Elam assured the commissioners that the college would be able to continue to pay their bills at the current level of funding. He said what is needed now from the commissioners is to, “give me the green light for us to enter into the lease agreement (for the energy management system).”

Williams pointed out that according to the state general statues, for the community college to enter into a financing arrangement it requires the concurrence of the governing body (the commissioners) due to the fact that the county is the college’s primary funding source for operational monies.

“We are responsible for their capital needs; whatever deficiencies in the physical plant of the community college are Hertford County’s responsibility,” Williams said. “I am recommending that we partner with them as they are trying to realize some savings in operating more efficiently within their system.”

However, Williams wanted to make it clear there would be some trade-offs.

“They have a current operational budget of $878,000 that they have full discretion to move money around, so it’s going to be up to them to continue to maintain within the environment of which they have full discretion to cut and move money around if and when we’re not able to fund them at the same level,” she stressed.

“We definitely will partner, but we need to be sound in our judgment by knowing the financial part and the available resources, not hopes and dreams, but actual funds,” Gatling said. “If you (Elam) are saying that within the operational funds (from the county) that you can support the $5,971 (monthly loan payment) then we don’t have any problem with that. I do have a problem with you (Elam) saying that you hope you get a grant, or hope you realize (energy) savings. I need actual amounts.”

Freeman inquired of Elam if he was making a request from Bertie and Northampton counties (also served by RCCC) for added funding?

“I know by statute that we are the county that provides for the community college, but the other counties use the community college just as much as we do, but yet they give very little,” Freeman noted.

“Yes, I’m constantly on the road talking to each one of them. We will be making a similar request (to the other counties) to help us out; to help cushion the burden on Hertford County residents,” Elam said.

Gatling offered the motion to support the lease agreement. The motion, seconded by Hunter, was approved without objection.

The RCCC Board of Trustees, at their Feb. 25 meeting, approved to move forward with the project and ask the county commissioners for permission to develop the lease-purchase agreement. Gatling also serves as a Trustee at RCCC.