Tuesday, October 5, 2021

Local Government Commission Votes to Assume Financial Control of Spring Lake Town Has Been Under Investigation By State Auditor’s Office for Months

Oct 5, 2021

(Raleigh, N.C.) – The Local Government Commission has voted to take over the finances of Spring Lake, citing concerns the town might be in danger of default on November debt service payments totaling $221,385 without corrective measures. The rare action comes two months after a powerful warning to town officials they needed to get their budget and fiscal control practices in order.

The resolution, passed unanimously by LGC members at their Tuesday, Oct. 5, meeting, directed LGC Secretary Sharon Edmundson “To impound the books and records of the Town, assume control of the finances of the Town and oversee and direct all its financial affairs as set out in N.C.G.S. Chapter 159 and the rules of the Commission.”

The LGC, which is chaired by State Treasurer Dale R. Folwell, CPA, and staffed by the Department of State Treasurer, has a statutory duty to monitor the financial well-being of more than 1,100 local government units.

“This is not an agenda item we ever desire. But we have to continue on behalf of the taxpayers to find out what’s right, get it right, and keep it right,” Treasurer Folwell said. Spring Lake Alderwoman Sona’ Cooper thanked the treasurer, LGC members and staff for their work with Spring Lake and said she supported the resolution. The Board of Aldermen passed their own resolution at an emergency meeting earlier in the day in support of the financial takeover.

Spring Lake officials previously entered into a Fiscal Accountability Agreement with the LGC, promising to take steps to get the town’s financial operations in order. Among other problems in past years, the town permitted expenditure of funds not in the General Fund budget and had allowed the General Fund to fall into a deficit. LGC staff recently learned Spring Lake failed to seek or obtain required LGC approval of a $1 million loan on Oct. 28, 2020, from the South River Electric Membership Corporation to build a fire station.

At a July 26 emergency meeting LGC staff said the town’s governance system did not comply with state statutes requiring that local governments establish and maintain an accounting system designed to show in detail liabilities, equities, revenues and expenditures. Treasurer Folwell said at that meeting a resolution LGC members passed was intended “to send the strongest possible message” that the town was at risk of financial takeover.

The beleaguered Cumberland County town of 12,000 residents near Fort Bragg has been under investigation by State Auditor Beth Wood, forcing temporary closure of Town Hall in mid-July while auditors examined records.

Spring Lake becomes the seventh local government unit under financial control of the LGC. The others are Eureka (Wayne County), Kingstown (Cleveland County), Pikeville (Wayne County), Robersonville (Martin County), Spencer Mountain (Gaston County) and Cliffside Sanitary District (Rutherford County).

In other business on the agenda, LGC members approved up to $198 million in revenue bonds for the Fayetteville Public Works Commission (Cumberland County) to continue installing water, sewer and electric service in areas the city of Fayetteville annexed more than a decade ago. The LGC has a statutory obligation to examine whether the amount of money units borrow is adequate and reasonable for proposed projects, and confirms the governmental units can reasonably afford to repay the debt. 

In 2005 Fayetteville initiated what came to be known as the “big bang” annexation, with promises to bring utility service to 8,000 households. The $198 million in bonds is the most recent funding request for the infrastructure to provide these services. The commission also signed off on a request to refund existing bonds at a lower interest rate for nearly $4.5 million in savings.

The city of Greenville (Pitt County) was approved for up to $20 million in limited obligation bonds to build a new fire station and extend an existing bay, construct a swimming pool and park, remodel a community center and acquire public safety equipment. No tax increase is expected.

Up to $16.8 million in limited obligation bonds approved for the city of Hendersonville (Henderson County) will be used to build a 253-space parking deck; improve streets, sidewalks, gutters, sewer and stormwater facilities; and refund an existing financing contract to reap nearly $200,000 in lower interest payments. No tax hike is anticipated.

The LGC approved a request from the town of Oak Island (Brunswick County) for special obligation bonds of up to slightly more than $10 million to renourish and maintain the town’s beachline, which was damaged by hurricanes Matthew and Florence. The bonds will be secured by future Federal Emergency Management Agency reimbursements and other sources.

The town of Apex (Wake County) got a green light to obtain a bank loan of $8.7 million to build a new public safety facility that includes a fire station and police station, and a new town Inspections Department building. No tax increase is proposed.

The town of Wendell (Wake County) was granted approval for a bank loan of $11.3 million to build a new town hall and a new road to access it, and to purchase land for a police station. The current town hall and police station are more than 50 years old. The loan also will fund a neighborhood improvement project and fund development of Hollybrook Park. No tax hike is planned.

Other requests approved by the LGC are: