The Rhinoceros Times Greensboro
Thursday, December 13, 2012
Handpicked Bank Fails Schools’ Test by paul C. clark Staff Writer
The administration of Guilford County School Superintendent Mo Green has killed an effort by the Guilford County Board of Education’s four black members to divert taxpayer money from the banks Guilford County Schools usually uses to Durhambased Mechanics and Farmers Bank. After pressure from school board members Sandra Alexander, Deena Hayes, Carlvena Foster and Amos Quick, the school board in September voted unanimously to consider overriding the way it invests the taxpayer money it holds to steer money to one bank: the Greensboro branch of the black-owned, Durham-based Mechanics and Farmers Bank. Exactly why the four school board members, in a July 24, 2012 letter written by Alexander and signed by the other black school board members, tried to get Green, who is black, and Guilford County Schools Chief Financial Officer Angie Henry, who is white, to deposit money in Mechanics and Farmers Bank, has never been clear. Mechanics and Farmers Bank is not based in Guilford County. There are doubtless other black-owned banks. Alexander at the time merely said she had been approached by people in the black community, who she did not identify, who wanted money deposited in the bank. It’s hard to imagine anyone, black or white, who would have that issue high on their agenda, except for the bank’s owners or managers. In any case, the four school board members who signed the letter wanted to do a very small bank a very big favor. None of the four school board members has any experience in investment banking. It was odd for school board members to lobby for one particular business – and a business of particular importance, because it has to be able to safeguard taxpayer money and meet stringent state requirements. Nonetheless, Green’s administration followed the school board’s orders and on Oct. 26, 2012, issued a request for qualifications (RFQ) for investment services to all 20 banks licensed to operate in Guilford County. RFQs are issued for services that are based on qualifications, as apposed to products, which are bid based on cost. Guilford County Schools keeps its available money in three places: in a bank that is the school system’s central depository, and which is chosen after issuing a request for proposals (RFP) to get the most secure bank and the best price for its banking services; a short-term investment fund (STIF) account through the North Carolina Department of State Treasurer, which gives the school system safety and, according to Henry, a high rate of return; and in various other local banks that are used only to deposit the daily revenues of individual schools from things
such as gate receipts from athletic events. Along with the RFQ, which is supposed to weed out banks incapable of providing the service, Guilford County Schools issued an invitation to bid on an investment of $2 million dollars – a pittance in terms of Guilford County Schools, which has a $677 million 2012-2013 budget. Taxpayer money held by a large public institution shouldn’t be allowed anywhere near a bank that can’t collateralize a $2 million deposit. That didn’t stop Alexander, at the school board’s Dec. 4 meeting, from complaining repeatedly that the bar had been set too high – that Guilford County Schools should have crafted a teensy-weensy deposit that Mechanics and Farmers Bank could handle. Alexander said, “It appears that you all set the bar very high – so high that only the largest bank in the country chose to really compete for the opportunity to provide services to us.” Alexander said that because, of the 20 banks, only six bothered to answer the RFQ for what is, for a bank, not a large institutional deposit. Of those six banks, four turned Guilford County Schools down, including Mechanics and Farmers Bank. The other three banks were BB&T, the Bank of Oak Ridge and First Citizens Bank. Two banks responded to the RFQ: American National Bank & Trust, which submitted an incomplete response that was not considered, and Bank of America Merrill Lynch, which submitted the only response qualified for consideration. Bank of America Merrill Lynch offered the school system an annual percentage rate of 0.20 percent – at a time in which money in the state STIF fund is earning 0.482 percent. Bank of America Merrill Lynch was offering less than the federal funds rate, the cheapest rate on any loan in America, which is now running 0.25 percent. In other words, Alexander had it backwards – in a time of cheap money, banks have little incentive to take deposits and the $2 million was setting the bar too low to interest them. Green and Henry’s report, presented at the Dec. 4 meeting, concluded briefly and with no need for explanation, “Given that GCS earned .482% in October 2012 on funds invested in the Short Term Investment Fund (STIF) with the NC State Treasurer, staff will continue investing all funds not required for daily operations in the STIF account.” The entire exercise, which must have taken hours of staff time, not to mention wasting the time of the banks, resulted in only one proposal from a bank, which Guilford County Schools declined. It was (Continued on page 8)
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