The Local Government Commission has voted to take over the finances of Spring Lake, a rare action that comes two months after a powerful warning to town officials they needed to get their budget and fiscal control practices in order.
The resolution, passed unanimously by LGC members at their Tuesday, Oct. 5, meeting, directed LGC Secretary Sharon Edmundson “To impound the books and records of the Town, assume control of the finances of the Town and oversee and direct all its financial affairs as set out in N.C.G.S. Chapter 159 and the rules of the Commission.”
The LGC is staffed by the Department of State Treasurer and has a statutory duty to monitor the financial well-being of more than 1,100 local government units. The resolution cited concerns that Spring Lake might be in danger of default on November debt service payments totaling $221,385 without corrective measures.
The beleaguered Cumberland County town of 12,000 residents near Fort Bragg has been under investigation by State Auditor Beth Wood, forcing temporary closure of Town Hall in mid-July while auditors examined records.
“This is not an agenda item we ever desire. But we have to continue on behalf of the taxpayers to find out what’s right, get it right, and keep it right,” said State Treasurer Dale Folwell, who chairs the LGC.
Spring Lake Alderwoman Sona’ Cooper thanked the treasurer, LGC members and staff for their work with Spring Lake and said she supported the resolution. The Board of Aldermen passed their own resolution at an emergency meeting earlier in the day in support of the financial takeover.
Spring Lake officials previously entered into a Fiscal Accountability Agreement with the LGC, promising to take steps to get the town’s financial operations in order. Among other problems in past years, the town permitted expenditure of funds not in the General Fund budget and had allowed the General Fund to fall into a deficit. LGC staff recently learned Spring Lake failed to seek or obtain required LGC approval of a $1 million loan on Oct. 28, 2020, from the South River Electric Membership Corporation to build a fire station.
At a July 26 emergency meeting, LGC staff said the town’s governance system did not comply with state statutes requiring that local governments establish and maintain an accounting system designed to show in detail liabilities, equities, revenues and expenditures. Treasurer Folwell said at that meeting a resolution LGC members passed was intended “to send the strongest possible message” that the town was at risk of financial takeover.
Spring Lake becomes the sixth local government unit under financial control of the LGC. The others are Eureka (Wayne County), Kingstown (Cleveland County), Pikeville (Wayne County), Robersonville (Martin County) and Cliffside Sanitary District (Rutherford County).