Category Archives: Governance reform

Harder Than It Looks

When Bacon's Rebellion caught up with Sara Carter, Appomattox County supervisor, she was driving this snappy yellow two-seater. She insists that she normally drives a "mom" car, but when she, her husband and kids start playing musical chairs with cars, she sometimes ends up with her husband's "midlife-crisis car."

When Bacon’s Rebellion caught up with Sara Carter, Appomattox County supervisor, she was driving this snappy yellow two-seater. She insists that she normally drives a “mom” car, but when she, her husband and her teenage children start playing musical chairs with cars, she sometimes ends up with her husband’s “midlife-crisis car.”

by James A. Bacon

Elected to the Appomattox County Board of Supervisors in 2013, Sara Carter enjoyed an edge over other newby supervisors when it came to learning the intricacies of local government — she also was serving as planning director for  Cumberland County not far away. An “exemplary” certification program provided by the Virginia Association of Counties (VACO) on open government and other legal aspects of the job was helpful. But when it came to deciphering government finances, she was largely on her own.

Carter and I chatted early this morning at a Sugar Shack (obscenely delicious doughnuts guaranteed to cut short your life expectancy) while she was in Chesterfield County for a VACO conference. She reached into a tote bag and pulled out two hefty documents, one a line-item budget, the other a copy of the Comprehensive Annual Financial Report. No one offers certifications for reading documents such as these that would make even a CPA’s eyes glaze over.

Our discussion was prompted by the travails of Petersburg City Council, which got blindsided by a massive backlog of unpaid bills and a budget deficit equivalent to roughly 20% of the budget. While steering clear of comment upon Petersburg’s woes or the performance of its council members, Carter emphasized the challenges of councilmen and supervisors of small towns and rural jurisdictions in Virginia.

For starters, the subject matter is forbiddingly complex, encompassing a wide array of disciplines — even for a College of William & Mary grad like Carter. It can take years for a novice to master the nuances  of everything from school funding, public works, water & sewer, public safety, and transportation, land use and community development.

VACO’s programs focus mainly on public policy issues and on keeping newbies from violating open-government laws, such as unwittingly discussing in private communications or chance encounters subjects that should be limited to a public forum. Those topics are important, Carter says, but newcomers need help on other subjects, too.

Second, part-time public officials have a limited amount of time to dedicate to understanding the numbers. Most members of the Appomattox board work for a living. She, too, has a full-time job, not to mention a marriage, three children and a small pig farm to occupy her attention. And when she is on the job, her time is often consumed by “micro” issues that get people stoked up but have minimal budgetary impact. “I can’t tell you how much time I’ve spent on the animal shelter,” she says. “Animal people are crazy!”

To understand local finances, elected officials typically rely upon presentations by city or county staff. The quality of staff varies widely in smaller localities. (She’s quick to sing the praises of Appomattox’s county manager.) Competent, ambitious managers often move to larger jurisdictions that pay better. “You have board members who don’t understand finance. They listen to staff – and the staff is often overwhelmed, too.”

Another source of advice comes from outside financial advisers such as Davenport & Co., a Richmond-based investment banking firm. While Davenport’s representatives are professional – she does not question their integrity – they do have a subtle bias. They make money by selling bonds, Carter observes. They don’t make policy recommendations on whether or not to sell bonds. But, she adds, “their job is to sell a product.”

When she joined the Appomattox board, the county enjoyed sound finances and low indebtedness, and it had the capacity to issue new bonds, Carter says. What the books did not say, she adds, is that important public buildings suffered from a major maintenance backlog. The balance sheet did not necessarily reflect the true condition of the county’s assets – a level of detail that investment bankers from Richmond might not be familiar with.

A third challenge is citizen indifference. Only one issue is guaranteed to pack the supervisor chambers – a proposed tax increase. Many are the meetings where no more than one or two citizens show up. Supervisors get punished for taking a highly visible action like raising the property tax, but no one notices if they take budgetary short-cuts that undermine the county’s fiscal health.

Most people don’t pay attention to the nitty gritty issues of local government until things fall apart, Carter says. “Then they want to know, what went wrong?”

Goodwin Says Closed Meeting Was Legal

William H. Goodwin, rector of the University of Virginia, has disputed the account by former rector Helen Dragas that a June Board of Visitors meeting held in closed session violated the Freedom of Information Act.

The Freedom of Information Advisory Council issued an advisory opinion Friday saying that the board appeared to violate the law, assuming events unfolded as alleged in a letter written by Virginia Beach attorney Kevin E. Martingayle at Dragas’s behest. (See details of the opinion here.)

During a break in the orientation program for new board members Sunday, Goodwin told the Daily Progress that the narrative was inaccurate, but declined to get into specifics. “I think it was disappointing they would write such a lengthy article based on what one person said,” he said, referring to the 5,000-word opinion.

The board voted to hold a closed session to discuss personnel and legal matters. Dragas, whose term on the board has since expired, said that the board discussed substantive details of a $2.3 billion Strategic Investment Fund, a topic that should have been aired in open session — a charge seemingly backed by the distribution of guidelines for spending revenue from the fund that were tagged for discussion in “executive session.” University officials retorted that board members “asked questions about the Fund that deviated from the designated personnel topic” and that when university counsel brought it to his attention, Goodwin “ended the discussion.”


FOIA Case Against UVa Tightens

uva_fog_smallDiscussion of a controversial $2.3 billion Strategic Investment Fund in closed session during a University Virginia Board of Visitor’s meeting appears to be a violation of the Freedom of Information Act (FOIA) — assuming events unfolded as alleged in a letter by an attorney representing former Rector Helen Dragas, concluded Maria J.K. Everett, executive director of the Virginia Freedom of Information Advisory Council in a staff advisory opinion released today.

Virginia Beach attorney Kevin E. Martingayle asked for the opinion in a letter describing Dragas’s version of events at the board meeting, her last before being rotated off the board. In that meeting, she dissented from a vote to certify that the closed session had been held in compliance with the FOIA.

Wrote Everett:

The answer to your question is therefore “yes,” it would be a violation to hold a closed meeting to discuss a fund when the motion to convene the closed meeting was for purposes of discussion of personnel, legal matters and litigation.

The open-meeting exemptions allowed for “personnel” and “legal matters” do not cover “general policy or other matters that may eventually have legal consequences,” Everett wrote.

However, the law does not set forth any remedial action to be taken by the public body, in this case the UVa Board of Visitors. The statutory remedy for a FOIA violation, Everett wrote, is “a petition for mandamus or injunction supported by an affidavit showing good cause.”

While University of Virginia officials have stoutly defended both the justification for the $2.3 billion fund and the manner in which it was approved by the board, they have met Dragas’s FOIA charge with silence.


More Questions about UVa Board’s Closed Session

Email from Megan K. Lowe, who works in the office of Patrick D. Hogan, executive vice president and COO of UVa, to Hogan.

Email from Megan K. Lowe, who works in the office of Patrick D. Hogan, executive vice president and COO of UVa, to Hogan four days before the Board of Visitors meeting.

by James A. Bacon

The Virginian-Pilot has identified material in Freedom of Information Act documents released to members of the General Assembly that seem to support the version offered by former University of Virginia Rector Helen Dragas of a closed session held June 10 by the board.

While the board justified the closed meeting on the grounds of discussing confidential personnel issues, which is allowed by law, Dragas maintains that the board dealt with substantive policy issues relating to a controversial $2.3 billion Strategic Investment Fund that should have been discussed in an open forum.

Here’s what the Pilot has to say:

The June 6 email from an assistant vice president at the University of Virginia to two other administrators seems clear.

In a summary of what was expected to happen at the June Board of Visitors meeting a few days later, it said the rector would give a report:

“EXECUTIVE SESSION: [Rector] Bill Goodwin to give overview on Strategic Investment Fund.”

Board members received similar information in an email a few days earlier: “In preparation for the discussion in Executive Session on June 10, please review the attached background materials on the Strategic Investment Fund.”

The Pilot article doesn’t mention it, but those background materials included a list of more than 50 projects, proposing the expenditure of $128 million over five years and submitted for funding by the Strategic Investment Fund, and a list of guiding principles for selecting projects. Dragas has said that the closed session, consistent with the distribution of those two documents, provided an overview of how the projects would be evaluated and funds granted, and timetables for the first awards.

The University has insisted that it did not break the law. A university spokesman provided the Pilot a narrative of the closed session, which the newspaper summarized as follows:

The materials circulated about the fund ahead of time were to provide board members background for the “confidential discussion of personnel issues.”

It continues: “During the personnel discussion, some Board members asked questions about the Fund that deviated from the designated personnel topic.”

At that point, university counsel Roscoe Roberts “called the deviation to the Rector’s attention” and Rector Goodwin “ended the discussion and moved on to another personnel matter.”

Bacon’s bottom line. The question that naturally arises is this: If the Board of Visitors intended to discuss “confidential personnel issues” only in the executive session, (a) why did the administration say in an internal communication that Goodwin would “give overview on Strategic Investment Fund” in that session, and (b) why did the administration distribute to board members a list of proposed projects and funding guidelines ahead of time?

For those inclined to digging deeper into UVa’s Strategic Investment Fund, here are 837 pages of documents released in response to the General Assembly’s Freedom of Information Act query.

A Fog Descends upon UVa


Did the University of Virginia’s Board of Visitors hold a closed session to avoid discussing in public what to do with a $2.3 billion pot of money?

by James A. Bacon

This past June 10, the University of Virginia Board of Visitors held its regular quarterly board meeting. With its preferred meeting place in the Rotunda undergoing renovations, the board assembled in the auditorium of the special collections library near Alderman Library.

The meeting started pleasantly enough. The board recognized the contributions of E. Darracott Vaughn, Jr., a graduate of UVa medical school and a prominent urologist who had recently passed away; Robert D. Sweeney, a vice president of development who had headed the effort to raise $3 billion, one of the Top 10 university fund-raising campaigns of all time; and Joe Garafalo, a prominent faculty member and retiring board member.

Then Rector William H. Goodwin Jr. rose to thank Helen Dragas, whose second term on the board expired that day. Her tenure had been a stormy one at times. A previous rector, she had led the controversial ouster of UVa President Teresa Sullivan, endured considerable scorn during the blacklash, and witnessed Sullivan’s re-induction. Although Dragas had mended fences with the president and was appointed to a second term, she continued to question the board’s priorities as it aggressively increased tuition to pay for prestige-enhancing initiatives. Giving a voice to a voiceless constituency — middle-class Virginia parents paying ever-bigger tuition checks — she often found herself voting alone.

Emphasizing the positive, however, the resolution commended Dragas for her service. “Mrs. Dragas is an ardent proponent of academic excellence in, and affordability of, higher education in Virginia. … The Board thanks [her] for her eight years of service and her leadership as Rector … and considers her a friend and colleague. … The Board wishes Ms. Dragas and her husband, Lewis Webb, continued success and happiness in all their endeavors.”

According to the June board minutes, Dragas followed with some comments in kind, saying that “she respected everyone at the table.”

The bonhomie would not last long.

Before the meeting concluded that day, there were a few final items of business to attend to. At 3:30 p.m. the board withdrew into a closed session to discuss personnel issues and legal matters, say the minutes. The board resolution cited Sections 2.2-3711 (A)(1) and (7) of the Code of Virginia.

At 4:50 p.m., the board left the executive session. According to the minutes, 13 board members certified that the meeting had been conducted in accordance with the exemptions permitted by the Virginia Freedom of Information Act (FOIA). Only one board member refused to vote in favor of the certification: Helen Dragas.

Eighteen days later at Dragas’ behest, Kevin E. Martingayle, a Virginia Beach attorney, wrote to Maria J.K. Everett, executive director of the Virginia Freedom of Information Advisory Council, asking for a ruling regarding that executive session. That letter described, from Dragas’s perspective, what had happened June 10. Eight days before the meeting, board members received documents outlining guiding principles for spending income generated by a $2.3 billion Strategic Investment Fund, and a list of grant requests submitted for funding.

The correspondence indicated that the fund and plans for spending it were intended to be topics discussed in an executive session of the BOV and, in fact, were a major part of the discussion during the closed meeting.

Although the motion to go into a closed session referenced personnel matters and legal advice, there was very little substantive discussion of either topic related to the funds during the closed meeting.

The only personnel referenced during that portion of the closed meeting were two former employees cited for having done a good job of accumulating and managing such a large sum of funds over time (though neither individual has been employed by this university for several years). … There was no discussion that related to pending, threatened or possible litigation regarding the fund.

Instead, the closed discussion focused on principles for spending the money that now comprise the fund. By way of example, members were asked to deny granting funds to proposals that would support university operations and to elevate those that would enhance its reputation. Concerns relating to premature revelation and publicity, given the fund’s substantial size, were conveyed, and it was requested that members refrain from discussing the fund with legislators and the media.

Regarding the certification that was read and approved after the conclusion of the closed meeting, “aye” votes were solicited and seemed to be voiced by a majority in attendance. No “nay” or negative votes were requested, nor was any role call taken or recorded. At least one BOV member subsequently notified the secretary of the BOV that the minutes should reflect that this particular Board member did not vote on the closed meeting certification due to questions and concerns regarding whether the discussion in the closed meeting exceeded and strayed outside of what was legally permitted.

If the closed session was illegal, Martingayle asked what remedial action, if any, BOV members might take individually or collectively.

On July 6, the Washington Post published a column by Dragas criticizing the university for its runaway tuition (a 74% increase since 2009), questionable spending priorities, and the recent revelation after the board voted on a double-digit tuition increase for incoming students that the university possessed a $2.3 billion “pot of reserves, surpluses and earnings” that had previously been classified as operating funds. Administrators, she charged, did not explain the purpose behind the “financial maneuvering” — liberating funds to be spent on initiatives that would enhance the university’s prestige.

A few days later, twelve state delegates including House Majority Caucus Leader Tim Hugo and 11 other delegates sent a letter addressed to Rector Goodwin and President Sullivan. Calling for “full transparency” in the university’s decision-making process, the letter focused mainly on the $2.3 billion fund. But toward the end, it said:

It appears that the university’s Strategic Investment Fund was the topic of an executive session held during your June Board of Visitor’s meeting. Why did the conversation about the use of these funds occur behind closed doors? What exemption to the public records law was pertinent and how was it appropriately applied?

On July 20, UVa’s Chief Operating Officer Patrick D. Hogan shared records from a Board of Visitors subcommittee meeting with the media. The records showed that members had discussed what would come to be named the Strategic Investment Fund. “We have absolutely nothing to hide,” he said. “We’re looking forward to answering questions from the legislators.We believe we’ve been transparent.”

The story published by the Daily Progress made no mention of any defense that Hogan might have offered for discussing the fund during closed session.

Bacon’s Rebellion submitted a draft of this article to the University of Virginia public affairs office on late Friday for comment. I have received no response, but I will post it if I do. Continue reading

We Weren’t Hiding Anything, Says UVa’s COO

What would T.J. say?

What would T.J. say?

by James A. Bacon

University of Virginia officials vigorously dispute allegations by members of the General Assembly that the university was less than transparent with its $2.3 billion Strategic Investment Fund, a pot of gold that critics have characterized as a slush fund. Patrick D. Hogan, chief operating officer of the university, supplied records yesterday from a Board of Visitors subcommittee meeting showing that members had discussed using investment earnings to invest in projects approved as part of the long-term plan in 2014.

Said Hogan: “We have absolutely nothing to hide.”

Reports the Daily Progress:

The investment fund originated with more than $1 billion in investment returns that had accumulated between 2009 and 2014. Officials had talked about using this money to pay for some of the projects outlined in UVa’s strategic plan, passed in 2013. The Cornerstone Plan, as it’s called, lays out a broad series of goals, including improvements to UVa’s technological infrastructure and a wave of faculty hires.

The plan — initially priced at $564 million over five years — was not completely funded when it was passed, and there was concern that costs could be passed on in the form of tuition. The idea was to take some of the investment returns that had accumulated over the years and use them to pay for these improvements.

The investment returns were combined with other reserves to create the fund, which could pay out up to $100 million annually, Hogan said.

“We recognized then that the Cornerstone Plan needed long-term support,” he said.

Hogan said the creation of a permanent fund will allow UVa to improve the student experience without passing the cost on to students. This fund will pay for the improvement projects UVa hopes to undertake — hiring new faculty and providing them with research startup money, for example — without straining operating funds.

Bacon’s bottom line: Changes to the fund apparently followed normal bureaucratic procedure, moving quietly through a Board of Trustees subcommittee before surfacing before the full board. I’m prepared to believe that UVa administrators thought they were being transparent. But there was a breakdown somewhere if some board members were caught by surprise and it’s taken this long for UVa to explain in a way that people can understand how the fund came to be. What Hogan did not address in the Daily Progress article was why the board felt compelled to discuss the issue in closed session. Such an action does prompt people to wonder, “What were they hiding?”

At the end of the day, the controversy is over how to use an investment windfall amounting to $100 million a year — whether to invest in initiatives to make UVa a more prestigious institution or to lower costs for Virginia students. Clearly, the administration and a majority of the board favor advancing the university’s institutional interests over its historic mission of providing an affordable, quality education for all Virginians. All the rest is window dressing.

New Criticisms of UVa Investment Fund



by James A. Bacon

Lawmakers have raised new concerns about a $2.3 billion University of Virginia investment hoard that critics have characterized as a “slush fund.”

The controversial pot of cash was originally labeled as “University Operating Funds.” Then it was marked “Strategic Investment Fund” in a Jan. 31 document — two weeks before the Board of Visitors formally authorized the naming of it as an investment fund, reports the Daily Progress.

“It’s almost like the board is there to rubber-stamp [administrative decisions],” said Sen. William R. DeSteph, R-Virginia Beach.

“In light of this cash reserve, why are we raising student tuition and acting like we’re broke?” asked Sen. J. Chapman Peterson, D-Fairfax City.

The university has designated the fund to recruit new faculty, build new lab space, and provide financial aid to high-achieving students from low-income schools around Virginia in support of its “affordable excellence” program.

The magnitude of the controversy has grown in recent days. DeSteph, Peterson and other legislators also allege that the university gave conflicting reasons for opening up a $300 million line of credit. Summarizes the Daily Progress:

In November, the board gave the administration clearance to take out up to $300 million in operating lines of credit.

According to previous university statements, this cleared the way for the university to transfer $480 million in operating cash to the Strategic Investment Fund — providing it with a boost while keeping UVa’s bond rating strong.

But according to minutes from the November meeting, during which Chief Operating Officer Patrick D. Hogan addressed the board, the purpose of these new lines of credit was to meet different “stress scenarios” facing the university, such as an inability to fund operating expenses or convert assets into cash “without significant losses.”

“The operating lines of credit will be a new source of liquidity and are being considered only as back-up liquidity,” according to a summary of the action item provided to the board in November.

DeSteph said the administration acted inappropriately. It appears administrators told the board — and the public — it would use these lines of credit one way and then decided to use it another way, he said.

“What they told the public was they were going to set up lines of credit and only use them if needed,” DeSteph said. “It looks like they set up the lines of credit and maxed them out.”

The legislators also charged that the Board of Visitors went into closed executive session last month to talk about the fund. “I feel like they’re trying to do as much of their business beyond the public’s eye [as possible],” said Peterson. “A $2 billion cash reserve? How can that not be a public issue?”