Chowan County considers ways to fix its financial crisis

By Connie Sage

Correspondent

Edenton, N.C.

Billed as the "prettiest little town in the South," Edenton is a throwback to a quieter time.

Residents sit on the front porches of antebellum homes on warm summer evenings, or stroll past the 1767 courthouse to the waterfront of this historic town that was North Carolina's first Colonial capital.

Many gather at the downtown coffee shop, drugstore or a fast-food restaurant in the mornings to talk about politics, sports and more politics.

News of Chowan County's fiscal crisis was the hot topic last week. Most wanted to know how the county got into its budgetary jam, who's responsible, why commissioners appeared to be asleep at the wheel, whether residents will be paying more taxes, and how to keep the fiscal showdown from happening again.

County manager Peter Rascoe said he was told June 17, his first day on the job, that apparently there wasn't enough cash on hand to pay the county's bills. He learned that millions of dollars in reserve funds had been drained over the years to balance budgets or pay for capital improvements, he said.

The Board of Commissioners passed a resolution in 1998 specifying that revenue from the primary reserve fund, valued at $25 million, could never be touched without their authorization. Clerk Susanne Stallings last week searched old minutes and said she found commissioners OK'd a transfer of cash once, in 1999.

A few of the county's 14,000 residents, 5,000 of whom live in Edenton, only half-jokingly said they're ready to put a few county officials in the courthouse's backyard stocks - heavy timber frames with armhole locks that were once used to humiliate offenders.

Others are more reflective.

"We're in too much pain; we need to slow down," said Madison Phillips as he sat with the McDonald's "breakfast club" of mostly retirees on Friday morning.

"We're in a healing process now," Carlton Nixon added. "A lot of people are angry, but that's not going to heal the wounds. People made mistakes."

Fred Browne and Carroll Smith agreed that no one seemed to have profited personally, but they can't understand why commissioners weren't given or didn't ask for detailed budget information.

"I don't think anything illegal has been done," Smith said, "but a lot of stupid things have."

In a letter on July 24, the state's Local Government Commission told the county that its cash reserves were almost gone and that revenue estimates for the new fiscal year had been overstated by about $4 million.

The county, according to the fiscal watchdog group, was operating in violation of state law. In a worst-case scenario, the state could take over the county's day-to-day operations, according to Rascoe, who was told by the state that the county had to redo and balance its current budget.

On July 27, Rascoe called the situation a "crisis," because the county's cash flow was limited, which he said "means we can't pay our bills." Cash reserves that had been more than

$31 million in the 1999-2000 fiscal year had dipped to $723,335 by the end of June.

Cliff Copeland, the former county manager, has issued only one statement, in which he said the county's "strategy has been clear - to borrow internally to finance our facilities and services and repay these monies when the economy improved."

For the past month, Rascoe has been working nearly around the clock to figure out ways to come up with a balanced budget.

Stallings has been helping him prepare financial scenarios that will include slashing county services and personnel, raising the tax rate, or both.

Taxpayers will get a chance to see the proposals at 6 p.m. Monday when county commissioners hold their regular monthly session. In the past, few if any residents attended the monthly meetings.

This one will be different. With a throng of town and county residents expected, the session was moved from the commissioners' meeting room on the second floor of the courthouse to the town's Swain Auditorium, which seats 800.

"I'd encourage everyone to go to the meeting," said Edenton resident Linda Lane as she was walking out of the Edenton Coffee House on Friday.

County commissioners, including Kenny Goodwin, echoed her request. "That way they'll see our options firsthand," he said.

At the end of a PowerPoint budget amendment presentation, citizens will have three minutes each to tell county officials how they feel about the plans.

A date to approve a budget will be set at that meeting; it has been tentatively scheduled for Aug. 13.

"We all want to know how it is that we got in this situation, and we deserve answers," said Commissioner Bill Gardner, who has been meeting with local business leaders and residents in groups and individually.

"I've been talking to stakeholders in the community and asking them for their advice and imploring them to participate in this meeting," Gardner said.

At least three commissioners - Gardner, Vice Chairman Jimmy Alligood and Jerry Downum - said they no longer will accept their monthly $500 commissioner's stipend.

Cuts already have been made in services. Rascoe, Gardner and others are asking business owners and citizens to pay their taxes early to help refill near-empty county coffers. By Friday, more than $130,000 in tax revenue had been turned in early, Gardner said.

"It's good to know that citizens from all walks of life are willing to respond for the good of the county, even though confidence in its leadership is diminished."

James Bond, an 85-year-old Edenton native, said over coffee at Blount's drugstore on Friday that he had paid his taxes that morning "to try to help out a little bit." That doesn't mean he's happy about the budget crunch.

"We had a little too much confidence in the county manager and we weren't keeping very close track of the money." Bond said.

"We're in a mess," said Chowan County resident Tom Shephard. Cash reserves topped $31 million in 1999-2000 thanks to a long-term lease of Chowan Hospital. By June 30, after years of tapping cash reserves for operations, reserves were less than $1 million. By the 2006-07 fiscal year, cash and cash equivalents had shrunk dramatically.