Wednesday, April 6, 2022

Local Government Commission Letter Outlines Legal Concerns in Spring Lake Members Also Vote to Approve Series of Infrastructure, Building Projects

Members Also Vote to Approve Series of Infrastructure, Building Projects
Raleigh, NC
Apr 6, 2022

(Raleigh, N.C.) – The Local Government Commission (LGC) voted unanimously Tuesday, April 5, to issue a letter to Spring Lake Mayor Kia Anthony and Board of Aldermen members expressing deep concern over possible lack of compliance with state laws and reluctance to work cooperatively with commission staff.

The vote followed lengthy discussion about a $1 million loan the town secured to build a fire station without lawfully required approval by the LGC, and lack of invoices from the outgoing town attorney for legal services provided for the entire 2022 fiscal year to date.

“The lack of transparency and inadvisable governance issues that are occurring in Spring Lake are disturbing. The fact they are continuing even after a scathing state audit that found more than a half-million dollars in wrongful and questionable spending, as well as dozens of town-owned vehicles that are unaccounted for, is even more flagrant,” said State Treasurer Dale R. Folwell, CPA, who chairs the LGC.

“Our goal in exercising the LGC’s statutory authority to assume control of Spring Lake’s finances in October 2021 remains constant today. We want to save Spring Lake. We are here to assist the town to correct past mistakes and missteps, get on sound, sustainable financial footing, act in accordance with the law and provide confidence to residents that their hard-earned tax dollars are being carefully and properly spent,” Treasurer Folwell said.

The vote to issue the letter follows action at a special meeting on March 24 at which the LGC voted to fill town positions to ensure payroll checks would go out on time. The letter seeks an April 13 response to a series of trouble spots:

  • Compliance with North Carolina Open Meeting Laws — The town board dismissed an interim manager and swore in a new interim manager without a required public vote for either action. No required public vote on the manager’s contract was taken.
  • Compliance with the Local Government Budget and Fiscal Control Act — The current interim manager was sworn in without a contract in place, meaning no payments can be made for services. The board has discussed lifting an employee furlough the town put in place as a cost-saving measure. The board does not have legal authority to unilaterally make that decision because the LGC controls the town’s financial affairs.
  • Willingness to work collaboratively with LGC staff — The LGC is asking for answers to the status of town attorney Jonathan Charleston, who submitted a 30-day notice of resignation on March 23. Those include whether the board officially accepted the resignation, if so the date the contract will terminate, if not the date the board will accept the resignation, and what plans the board has and what steps it will take to obtain legal representation. The letter notes the board voted at its March 28 meeting to refuse to allow an LGC staff presentation dealing with the town’s financial affairs. Understanding town financial challenges is a key fiduciary responsibility.

LGC members also raised concerns about the legality of a $1 million loan Spring Lake used for construction of a fire station. The loan came from the South River Electric Membership Corporation, whose five-county service area includes Cumberland County. Money for the loan originated with the U.S. Department of Agriculture’s Rural Development program, and was passed through the N.C. Electric Membership Corporation to South River.  

Terms of the original loan included an eight-year payback at $125,000 a year. However, Spring Lake never received necessary LGC approval for the financing. The deal was consummated in October 2020, but work had begun on the construction before funding was in place. The contract was for $1.2 million, but the town only budgeted $1 million for it.

In other business, the LGC, which is staffed by the Department of State Treasurer, approved a number of financing requests on the agenda. The commission 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.

The town of Fuquay-Varina, which has nearly doubled in size since 2010, received LGC approval for $38.5 million in general obligation bonds. The money will be used for parks and recreation and transportation projects to accommodate the growth.

Fuquay-Varina’s population was 17,937 in 2010, according to the U.S. Census. Today the Wake County town’s population is estimated at 33,885, a growth rate of about 89%. Due to the expanding population, $20 million is needed to build, reconstruct, widen and improve streets and sidewalks. Traffic lanes, medians and intersection improvements will be added. Streets will be realigned and relocated to relieve traffic congestion and improve safety. The remaining $18.5 million would be used to acquire, construct, improve and expand park and recreation facilities. A new community center/adult activity center would be built in an existing park. A property tax rate increase of up to 5.5 cents per $1,000 is expected to pay for the work.

The LGC approved an application by the Housing Authority of the City of Durham (Durham County) for $19 million in multifamily housing revenue bonds. The money will be loaned to JFK Towers to finance part of the cost of acquiring, rehabilitating and equipping 177 units on Old Farm Road. The seven-story affordable housing development serves elderly and disabled residents.

The North Carolina Housing Finance Agency gained approval for revenue bonds for multifamily housing. The $6 million financing will be used by Five Points Crossing to acquire, build, improve and equip a 50-unit affordable housing apartment complex in Rocky Mount (Nash and Edgecombe counties).

The LGC signed off on three requests by the city of High Point (Guilford County). One request was for $40 million in revenue bonds for water and sewer capital improvements necessary to provide for continued growth in the city.

The second request was for $5.3 million in general obligation bonds for improvements to recreation facilities at City Lake. Those include pool, gym and office space and outdoor facilities, and accessibility improvements. No tax increase is anticipated.

High Point officials also received approval for a request to refund $20 million in general obligation bonds to capture lower interest rates. Savings are calculated at $333,110.

The town of Carolina Beach (New Hanover County) will be able to purchase the 300-acre Freeman Park to use as open space following LGC approval of a $3.25 million installment contract. The property appraised at $9.2 million. An installment contract allows the buyer to make payments over time instead of all at once. No tax increase is expected.

The LGC gave the green light to Clinton City Board of Education (Sampson County) for a $2.67 million installment purchase of a guaranteed energy savings contract. The project includes installation of energy conservation measures such as a solar array, metal roofing and equipment installations and upgrades.

Stanly County’s request for a $1.4 million installment contract to replace the Liberty Hill booster pump station was approved. It will accommodate increased water demands due to the relocation of Charlotte Pipe and Foundry near Oakboro.

Ashe County’s request was approved for a $1.36 million installment contract for infrastructure work at the Ashe County Industrial Park to accommodate increased economic development. No tax increase is expected.

The LGC approved a request from Morrisville (Wake County) for $1.1 million in general obligation bonds to pay for new public safety radio equipment and for cost overruns at the Harris Mill Road Fire Station project. No tax increase is expected.

LGC members approved several revolving loan requests for:

  • Laurinburg (Scotland County), $4.5 million, to replace obsolete water lines and install new hydrants.
  • Beech Mountain (Avery and Watauga counties), $2.9 million, to replace leaking water pipes and install 23 new hydrants. Water loss currently is estimated to be 62% of water produced at the treatment plant.
  • Beech Mountain, $2.87 million, to replace and repair sewage lines that are over 40 years old and repair 194 manholes.
  • Henderson (Vance County), $2.5 million, to rehabilitate sanitary sewer lines and 103 manholes to alleviate chronic sanitary sewer overflows.
  • Selma (Johnston County), $2.5 million, to relocate the Brack Wilson Park pump station above the 100-year flood plain and to make equipment repairs to decrease operational costs and fees paid to Johnston County due to large inflow of water into lines after rainfall.
  • Burnsville (Yancey County), $1 million, for water treatment plant improvements to correct discharges of chlorine and solids that exceed limits.
  • Kinston (Lenoir County), $385,150, to replace water lines and 14 hydrants at the N.C. Global Transpark. The project will increase water pressure to address customer complaints and to accommodate economic development.