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A state commission that oversees the financial accountability of more than 1,300 local government units unanimously voted last month to repeal the town charter of East Laurinburg, a once-vibrant textile town in southern North Carolina.
In mid-April, the Local Government Commission passed a recommendation to the General Assembly to decharter East Laurinburg by the end of June.
Although the LGC has previously taken over the finances of several struggling towns, this is the first action ever taken by the LGC to propose removing a local government body’s incorporation status. No bill to honor the resolution has yet been introduced.
The town failed to file annual audits the past four years, and the LGC cited repeated failures to comply with other requirements of the Local Government Budget and Fiscal Control Act. If the charter is removed, its assets will be liquidated or transferred.
A familiar history
East Laurinburg is little more than a half-mile in length and consists mainly of low-income, single-family homes, two churches and an old school building that now houses an after-school ministry.
Laurinburg, the Scotland County seat with a population of 15,000, lies to the west beyond Leith Creek. Unlike its financially troubled neighbor, Laurinburg has a well-kept historic downtown, quaint homes nearby, and clean streets.
The East Laurinburg community began as a “mill village” when homes were built for workers at the Scotland Mill beginning in 1898. The mill merged with three others and consolidated into Waverly Mills in 1926.
“One source of Laurinburg’s continued prosperity was the industrial manufacturing plants in East Laurinburg,” according to “Heritage of Scotland County.”
Originally known as Scotland Village, it became incorporated as East Laurinburg in 1909 as a way for the new Waverly Mill to avoid paying property taxes to neighboring Laurinburg. Residents began paying property taxes once the mill shut down; it has since been demolished.
East Laurinburg’s population peaked at 890 people in 1940, then gradually declined to its current U.S. Census estimate of 279. Nearly 36% of the population lives below the poverty line, and the median household income is $23,269, far less than Laurinburg’s median household income of $30,862.
An estimated 45% of East Laurinburg’s households do not have access to broadband internet.
“As these communities have depopulated, for one reason or the other, the cost of running these communities has gone up,” state Treasurer Dale Folwell, who oversees the Local Government Commission, said.
“This is really about the lower- and fixed-income individuals who get disproportionately hurt when they have to pay more for government services that they’re not getting any value out of.”
Folwell said the goal of the LGC’s recommendation is twofold: alleviate the workload of his staff of around 25 people who specialize in helping troubled government units; and remove the property tax burden for low-income residents.
No movement in General Assembly
The commission’s recommendation won’t come to fruition without legislative action.
Dan Way, spokesperson for Folwell’s office, said a successful bill would depend on an endorsement by Senate Majority Whip Tom McInnis, R-Richmond, or Rep. Garland Pierce, D-Cumberland, who make up Scotland County’s legislative delegation. On Friday, McInnis and Pierce said they have no current plans to endorse a bill to repeal East Laurinburg’s charter.
“I’m just waiting on my colleague,” Pierce said. “I don’t want to make a decision without talking to him.”
In mid-April, Pierce signaled opposition to the LGC’s recommendation. He told ABC 15 News that East Laurinburg commissioners were performing due diligence to file the late audits, and he advocated for state lawmakers to give the town another chance to comply with fiscal accountability requirements.
“I would appeal to them to give us just a little bit more time,” he told the local news outlet, suggesting the town deserves an opportunity to correct its financial mistakes unless it had “blatantly” avoided state financial requirements.
When McInnis was asked whether he would consider endorsement of a bill to remove the town’s charter, his spokesperson replied by email that the Senate’s deadline to introduce new bills had already passed, and she did not respond to requests to explain the senator’s intentions going forward.
“Obviously, that’s disappointing,” Folwell said of the current lack of support from Pierce and McInnis.
“The Local Government Commission has been working with this entity for 10 years. They’re collecting property taxes, but they offer no essential services to their taxpayers. And there hasn’t been accounting of (the town’s finances).”
Deadlines to introduce local bills for both the Senate and House chambers passed in March. When legislators adjourn the 2021 session, which is planned for early July, they will include a list of bills eligible for consideration in the 2022 short session.
“Based on what has been done in previous years, legislators are typically allowed in the second year of the biennium to introduce noncontroversial legislation that has the support of the members of the local delegation,” according to Christine Wunsche, director of legislative reporting services at the UNC School of Government.
“So, assuming they include such a provision in the 2021 adjournment resolution, noncontroversial local bills would be allowed in the 2022 legislative session.”
But Folwell said there are “all kinds of ways to get legislation passed without a new bill being introduced.”
“It could be a part of another larger piece of legislation that deals with local finances and accountability, for example,” Folwell said.
The lack of any legislative response to the LGC’s recommendation points to the controversial nature of the subject.
“It has been a hotly debated issue,” Pierce said of the LGC’s mid-April recommendation.
Scotland County Manager Kevin Patterson did not respond to requests for comment. He told The News and Observer in April the town only employs one person, and property taxes only fund yard waste removal, streetlights and maintenance of the town hall.
In late April, East Laurinburg Commissioner Virginia “Gail” Chavis said Pierce still supported her own efforts to save the town’s charter. Because she became commissioner in 2018, followed soon after by the hiring of a new financial officer, she argued the town should not be punished for the mistakes of those who controlled the finances before her arrival.
“The other financial officer, I mean, she just quit and abandoned us,” Chavis said. “And the (accountant hired by the town) doing the audits and stuff, he never mentioned anything to any of us. And he has talked to our new financial officer several times and never mentioned the audits. And we’re all new to this. We didn’t know, as far as the audits are concerned. Like I told him, if I would have known, and (the new financial officer) would have known, they would have been done. It wouldn’t have gotten this far.”
Chavis said the LGC did not communicate with her until October 2020, when the state agency sent town leaders one of several formal warning notices.
However, according to emails provided by the LGC, the commission sent a warning letter to Mayor Marshall Stevens — copying Chavis, fellow Commissioner Ralph Scott and the N.C. League of Municipalities — in January 2020.
The letter stated the town was “committing a statutory violation” by not submitting audits for the fiscal years ending in June 2017, 2018 and 2019.
Sharon Edmundson, the LGC’s director of fiscal management at the time, wrote in the letter that it was imperative that town officials explain the delays, their plans to submit the missing audits and changes made to submit timely audits in the future.
Edmundson, who now heads the LGC, offered her office’s resources to assist the town, which was cut off from debt approval by the LGC until its financial issues were resolved.
But the LGC’s warning was not addressed. In March, June and October, it issued more explicit warnings to the town’s mayor and commissioners. The October letter stated the commission “may assume full control of the town’s financial affairs” if it again failed to comply with its latest notice.
In December, Edmundson sent Chavis, the mayor and other commissioners five warning letters the LGC had emailed the town throughout the previous year, in response to some who had “mentioned that (they) had not seen the various letters.” The October letter also stated the LGC had not yet received any response.
But Chavis said she was surprised by the LGC’s letter to the town recommending the General Assembly repeal the town’s charter.
“We have a right to try,” Chavis said. “We’re made out to look like the bad people. … Give us a chance; give us a chance to get this straightened out.”
She was asked what she plans to do in the months ahead to save the town’s charter.
“Right now, I have no idea,” she responded.
Charles West, an appliance repairman who has lived in East Laurinburg since he was born there in the early 1960s, believes the town should get another chance.
“The state needs to give them one more year and get a qualified person in there so they can get it back together,” West said.
‘This is happening across North Carolina’
The situation in East Laurinburg is not unique, according to Folwell, who calls the LGC’s list of more than 100 troubled government bodies across the state the “watch list.”
He predicted more towns and local governments would be recommended for dechartering if an East Laurinburg bill ever enters the legislative pipeline, pointing to several local governments whose finances were taken over by the LGC in recent years: Eureka, Robersonville, Pikeville, Bethel, Kingstown and the Cliffside Water and Sewer District.
“I know this sounds a little bit like one of the old Tom T. Hall country music songs when I’m naming all these places, but unfortunately, there’s a lot more where this is going to happen,” Folwell said.
“This is not something that I or anyone at the Treasurer’s Office skips to work in some amount of joy to deal with. But we do have the responsibility, both constitutionally and statutorily, to figure out what’s right, get it right and keep it right.”
Folwell, who was elected as the state’s top financial director in 2016, hopes the LGC’s resolution — and more importantly, a potential bill to repeal East Laurinburg’s charter — could set a precedent going forward and raise the accountability of local governments across the state.
He said many communities that fail financially have experienced “some financial shenanigans” by those controlling the budgets, and there is a widespread lack of communication between financial officers and elected officials.
In response to the issue, Folwell said he has focused the LGC’s efforts on expanding its communications beyond financial officers to locally elected leaders and members of the N.C. League of Municipalities, N.C. Association of County Commissioners, UNC School of Government and local legislative delegations.
East Laurinburg’s failure to address the concerns presented by his office over the past decade, according to Folwell, “is a very serious matter.”
“Getting to this phase is not something we ever desire,” Folwell said. “But what’s really been happening for decades is people just keep kicking the can down the road. And we can no longer kick the can down the road because more cans are coming at us.”