Wednesday, November 3, 2021

Local Government Commission Assumes Financial Control of Ailing East Laurinburg A Host of Funding and Refinancing Requests Approved for Variety of Projects Around the State

Raleigh, NC
Nov 3, 2021

(Raleigh, N.C.) – Stymied after multiple attempts to gain cooperation from the struggling town of East Laurinburg to correct major bookkeeping, banking and auditing deficiencies, the Local Government Commission (LGC) has voted to impound the town’s books and assume full control of its finances.

“This is not a measure we ever want to take, but it is a necessary, last-resort action when a government unit fails repeatedly to comply with state regulations and statutes,” said State Treasurer Dale R. Folwell, CPA, who chairs the LGC. “Town residents must have full faith and confidence that their government is acting in accordance with the law, money is properly accounted for, tax funds are not being misused and essential services are being provided.”

The LGC unanimously approved the resolution in the wake of a recent investigative report by the State Auditor’s Office. That audit concluded that a former finance officer used town funds for personal or questionable expenses that drained the town bank account, resulting in overdrafts and lack of money for town operations. The finance officer’s mother, a sitting Town Council member, countersigned the checks. The report concluded Town Council failed to provide oversight and lacked written accounting policies and procedures. The report recommended legal action be taken.

The LGC resolution cites, among other reasons for assuming control of the Scotland County town’s finances, the failure to submit required audits since 2017, and the town willfully or negligently continuing to be out of compliance with the Local Government Budget and Fiscal Control Act. Provisions of the act require the town to “establish and maintain an accounting system designed to show in detail its assets, liabilities, equities, revenues and expenditures (and) operate under an annual balanced budget ordinance.”

The LGC has a statutory duty to monitor the financial well-being of more than 1,100 local government units. The commission also examines 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.

Treasurer Folwell has continued to call on the General Assembly to immediately revoke the charter of East Laurinburg because it has ceased to function as a viable governing unit. The LGC passed a resolution to that effect in April. Only one candidate filed to run in the Nov. 2 election to choose three town commissioners. Seven write-in candidates also received votes on Election Day for those three seats. No one filed to run for the open mayor seat, but three write-in candidates received votes.

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

With an eye towards additional interventions to help government units prevent and correct fiscal distress, and to avoid the need for the LGC to assume financial control of a government unit, the LGC approved criteria to evaluate certain municipalities for financial rehabilitation. It is the first major initiative under the newly granted authority of Senate Bill 314, the so-called Tool Kit Bill.

Analysis criteria include:

  • A five-year municipal population trend and 10-year primary county population projection to determine if there might be difficulty generating sufficient revenue to support and maintain a city’s operations, or sufficient resident support for capital-intense operations.
  • Trend information in the city’s taxable property valuation that can signal potential tax revenue difficulty.
  • Five-year trend in General Fund balance as a percent of expenditures and transfers. Declining balances might indicate cash-flow problems.
  • Five-year trend in submitting timely annual audits. A pattern of noncompliance signals fiscal management weaknesses and an inability to provide effective oversight of public funds.
  • Five-year trend of compliance with the Local Government Budget and Fiscal Control Act. Noncompliance could mean staff failure to meet basic financial management standards.
  • Trend in governance measuring long-term vacancies on the governing board, a lack of declared candidates for governing board seats during elections, or results of investigations related to fiscal management.

Among other items on the LGC meeting agenda, the city of Charlotte was granted approval for up to $200 million in short-term bonds as advance funding for previously approved transportation and neighborhood improvements.

The Charlotte Mecklenburg Hospital Authority requested approval for the remarketing of $200 million of the authority’s outstanding bonds. The remarketing intends to continue to capture the lower interest rates on short-term bonds than the rates that long-term bonds offer. The request was approved.

Plantation Village’s request for up to $75 million in revenue bonds was approved for the expansion and renovation of the continuing care retirement center in Wilmington, and construction of 44 new independent living apartments and other facilities. The bonds are expected to be priced on Nov. 17.

The Housing Authority of the City of Durham was approved to seek up to $10 million in revenue bonds, with proceeds loaned to Crescent Drive Apartments to be used for construction of a low-income, multifamily rental housing development comprising 82 units in one residential building.

The LGC approved a request from the town of Ayden for an installment purchase contract of $2.2 million to finance a sewer project.

Several requests to refund existing financing to reap the savings of lower interest rates were approved. Those are: