NC officials press towns with shaky finances to shape up or face consequences

The tiny town of East Laurinburg in Scotland County has been around for over a century, but state officials say its time is up.

The state Local Government Commission (LGC), headed by State Treasurer Dale Folwell, has asked the General Assembly to repeal the town’s charter and effectively end its existence.

The reason? East Laurinburg, population just under 300, hasn’t filed a required annual audit report with the LGC since 2016. A resolution the LGC sent to the legislature says, the town “demonstrated a continued inability to meet the statutory obligations outlined in the Local Government Budget and Fiscal Control Act and to provide a proper accounting of public funds.”

It is the first time the LGC has sought to revoke a local government charter.

Folwell, a CPA and a Republican in his second term as treasurer, isn’t taking any excuses from East Laurinburg or other towns who aren’t keeping up with their state filings or are sliding toward insolvency. The LGC is using its oversight powers to make them comply, surrender control or possibly meet the fate of East Laurinburg.

“This is our way of doing our job,” Folwell said.

The state has recently taken over the finances of the small towns of Robersonville, Eureka, Pikeville, Kingstown and the Cliffside Sanitary District in Rutherford County. Local governments have been subject to a takeover only five other times, all since the late 1990s.

Folwell said more than 100 local entities, including counties, are on the LGC’s watch list – officially the Unit Assistance List – because they are out of compliance with financial reporting rules or have financial issues with their general fund or utility fund.. “It’s happening east and west, it’s mainly happening in the east,” he said.

Most local entities will be able to get off the list, but some could have their ability to borrow suspended or lose their charters. “Our hope is to never get to this point, but unfortunately, there are going to be more and more of these each year, not less and less,” Folwell said.

State Auditor Beth Wood, a member of the LGC, has teamed with the treasurer in taking a more aggressive approach to local governments that are not complying with state law. She said said some local governments started struggling financially during the 2007-08 recession and the pandemic has increased their troubles, but they are not taking steps to get their finances back on track.

Wood, a Democrat, said, “I’ve been working with the treasurer to put a foot down and say – ‘This has got to stop.’ “’

The LGC was created in 1931 after many North Carolina counties and towns defaulted during the Great Depression. The nine-member commission approves and sells local bonds and ensures that local governments and utility districts are well managed and solvent.

But strictly enforcing high standards could jeopardize small towns that shape the character of what is still a largely rural state. One town added to the list this year is emblematic of the state itself. Pilot Mountain is named for a state landmark and was the model for Mount Pilot, Mayberry’s “big city” neighbor on TV’s “The Andy Griffith Show.”

Michael Boaz, Pilot Mountain’s town manager, said the town of 1,500 has drawn state scrutiny because it has too few customers to support utilities built to supply a dye and finishing plant that closed in 1998. “We’re a typical small town in North Carolina,” he said. “Our water and sewer were built to serve one customer.”

The town is planning to join water systems with Mount Airy, but that project has involved upfront costs that have strained its finances.

For his part, Folwell would rather not be shaking up small towns over their wobbly finances. He wishes there was nothing to fix. “We’d rather be the Maytag repair man,” he said.

But he’s not. He’s Dale Folwell, leader of LGC and the fiscal overseer of Robersonville, Eureka, Pikeville, Kingstown and soon maybe more.

Correction: An earlier version of this column incorrectly referred to Robinsville in the last line. The correct town is Robersonville.

This story was originally published April 27, 2021 at 12:00 AM with the headline "NC officials press towns with shaky finances to shape up or face consequences."