Thursday, July 21, 2022 - 00:00

Treasurer Folwell Says East Laurinburg Action Could be Applied Elsewhere Local Government Commission Dealing With Rising Number of Municipalities in Fiscal Straits

Local Government Commission Dealing With Rising Number of Municipalities in Fiscal Straits
Raleigh, NC
Jul 21, 2022

(Raleigh, N.C.) — The dissolution of East Laurinburg as an incorporated community was the first time that the Local Government Commission (LGC) exercised newly granted authority to dissolve the charter of a municipality. That approach could be a solution for other troubled local government units struggling to meet fiscal management and reporting requirements and facing a financial outlook insufficient to continue operations, according to State Treasurer Dale R. Folwell, CPA.

East Laurinburg ceased to be an incorporated municipality effective June 30, ending a decade of fiscal struggles including bookkeeping disorganization, financial transgressions and failure to comply with local government budget and fiscal control laws. Town assets and accounts receivable were transferred to Scotland County under a first-of-its-kind agreement reached by the LGC and county officials.

“Obviously, we would prefer never to be forced into the position of shutting down an incorporated entity. This decision was not taken lightly. Nor was the process easy. It was new and untested. But Scotland County officials worked in close collaboration with the Local Government Commission to see this unfortunate matter through for the greater good,” said Treasurer Folwell, who chairs the LGC.

He said the cooperation of Scotland County Manager Kevin Patterson, Attorney Edward H. Johnston Jr., Chairman Whit Gibson and the entire Board of Commissioners was invaluable in achieving a smooth transition.

“They worked patiently and diligently with us throughout the process to ensure the best outcome for the citizens of East Laurinburg and all of the citizens in the county,” Treasurer Folwell said. “They were determined not only to ensure that all legal considerations were satisfied in the transition, but recognized and respected the impact the action would have on the citizens.”

Even though the town no longer is incorporated, it will preserve its name, history, heritage, parochial pride and civic service in a fashion similar to many other unincorporated communities around the state, Treasurer Folwell said. In keeping with that objective, county officials are looking to secure East Laurinburg’s legacy by preserving historic items from Town Hall.

The LGC dechartered East Laurinburg through newly granted authority from the General Assembly under a new law. It allows for the LGC to adopt a resolution dissolving the charter of a municipality under its financial control after applying evaluation criteria, finding that the municipality’s financial affairs are not sufficiently stable to continue operations and determining that it is in the best interest of the people of the municipality and state.

The LGC developed criteria including trends in governance, population and compliance with budget statutes, and then applied them to East Laurinburg . As a result, the LGC adopted a resolution in December 2021 to dissolve East Laurinburg’s charter effective June 30.

The new law also required the LGC to identify local government partners that would assume the town’s assets. LGC staff worked to identify partners and Scotland County agreed to assume the role.

“While East Laurinburg is the first government unit to lose its charter under this statute, there are other small, rural municipalities around the state that are overwhelmed and on similar, unsteady footing as the tax base shrinks due to depopulation and loss of industry,” Treasurer Folwell said. In East Laurinburg and elsewhere, state audits have uncovered embezzlement and other financial misbehavior.

LGC members are taking a harder look at whether some towns can continue to be self-sustaining, suggesting that municipal leaders conduct a serious self-evaluation about their durability as an incorporated unit.

“Being an incorporated municipality comes with weighty obligations of having elected officials to govern and lead to the benefit of the community. They must be responsible for complying with laws, and responsible for the oversight of hard-earned taxpayer funds,” Treasurer Folwell said. “If they can’t handle tax money with the highest degree of confidence, competence and transparency, they shouldn’t be incorporated and taking money from the taxpayers.”

The LGC, chaired by Treasurer Folwell 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. The commission also examines whether the amount of money that units borrow is adequate and reasonable for proposed projects, and confirms the governmental units can reasonably afford to repay the debt.