Chowan County officials to look into possible criminal activity

By Connie Sage

EDENTON, N.C.

To the cheers of a standing room-only crowd, the Chowan County Board of Commissioners on Monday authorized its attorney to investigate the possibility of criminal wrongdoing in the county's budget crisis and, "depending on his findings," turn the results over to the district attorney.

Before asking for an investigation, Commissioner Kenny Goodwin told a crowd of more than 850 Edenton and Chowan residents at Swain Auditorium that he is "sorry and I apologize. I never read an audit and never asked for one."

Other commissioners also expressed regret that they were unaware the county was in violation of state law because it had virtually no cash reserves and was unable to balance its budget.

New County Manager Peter Rascoe said at Monday night's meeting that at the end of July the county did not have enough cash to pay its bills, leaving it "in the red" by $262,800.

In redoing budget projections for 2008- 09, Rascoe said he found that the "corrected shortfall" was $3.8 million, compared with the balanced budget approved in June that called for no tax increase.

That, he said, was "very close to the Local Government Commission's approximate $4 million shortfall" in what former County Manager Cliff Copeland had presented commissioners and what realistic projected revenues likely will be.

Rascoe walked through four budget options. They ranged from a 19-cent property tax rate increase on top of the county's existing 56 cents per $100 of assessed property value, to no tax increase but a cut in services so severe that the College of T he Albemarle's Edenton campus and the county's Parks and Recreation Department would be eliminated.

Each option called for an additional 1.5 cent add-on to help refill the empty reserve fund at the request of the state's Local Government Commission, according to Rascoe.

Not including the add-on tax, a homeowner with a lot and house valued at $200,000 could pay as much as an additional $380 a year.

Rascoe appeared to be promoting an option that calls for an 8.5-cent increase - plus the 1.5 cent add-on requested by the Local Government Commission. That scenario would cut 17 part-time and nine full-time county jobs, eliminate funding of some programs and reduce a proposed $112,000 increase in school funding.

County Attorney John Morrison, appointed to the job Monday night, said the "biggest discrepancy was when Copeland told commissioners there would be $2,281,985 in reserves in the 2008-2009 budget "when in reality it was zero."

Morrison told the audience that both Copeland and the commissioners should share any blame for the budget problems. North Carolina law, he said, states that the county manager is also the budget officer and must make a "complete report annually" of the county's finances.

"We don't have the reserve fund anywhere because the money was taken without authorization... that would have been a complete report," Morrison said.

Rascoe took over as county manager on June 16 after Copeland retired. He said he was told by Finance Officer Lisa Jones that the county had so little revenue on hand that it might not be able to pay its bills.

Rascoe said he alerted county commissioners and the Local Government Commission, which found the county had only $723,335 in "all cash and investments... other than funds held in trust or on behalf other entities."

The county had spent more than it received in revenues "by large amounts, ranging from $1.3 million to $3.3 million each year," according to the commission.

To balance its budget or to pay for capital projects, the county had been tapping its reserves, according to the state commission. That fund started out at $29 million following the sale of the local hospital in late 1998, records show.

At the end of Monday's presentation, residents vented their anger and made suggestions about how the county can get out of its fiscal mess.

A speaker suggested the investigation should be conducted not by the county's lawyer, but by the State Bureau of Investigation. Another suggested that county commissioners resign.

Others said salary cuts should start with the top county officials. One speaker waved a plastic bag he said was full of feathers and asked if anyone had tar to go with it.