Rural Center board confronts bleak future, holds up severance payment

acurliss@newsobserver.comJuly 29, 2013 

  • Rural directors recuse from vote

    At least seven board members of the N.C. Rural Economic Development Center recused themselves on Monday from voting on a key decision about the future of the center.

    They said they had a conflict of interest, or the appearance of one.

    A News & Observer report on Sunday detailed how Rural Center grants had gone to organizations connected to at least 20 of the current 47 board members. Some have received direct payments from center grants for their salary, consulting fees or to improve their property.

    Center board members serve in their oversight capacity at the Rural Center as volunteers.

    Scott Hamilton, president and CEO of Advantage West, a nonprofit that focuses on economic development in Western North Carolina, was in the midst of raising concerns about a plan the board was about to vote on when he sought guidance from the board’s lawyer.

    The vote was on whether to delegate the full board’s authority to a special five-person committee to make decisions over the next month. That plan would pass. But Hamilton, who was mentioned in The N&O report Sunday as head of an agency that also is benefiting from Rural Center grants, said he had concerns about giving away that much authority to a small group.

    “I’m trying to think through this here,” he said, “that a committee of five would be making a recommendation on those funds without the discussion of the full board of directors and I do have some concerns about that.”

    He began to put forth a motion, but further discussion cut him off. Hamilton then sought clarity from the board’s lawyer about his standing as a grant recipient and whether he could make a motion. The lawyer told him to recuse, and he did.

    Within moments, others also announced they were recusing, too. Several had already spoken up in the discussion. Chairwoman Valeria Lee asked for a show of hands and quickly announced six recusals. A seventh person later announced he was recusing. The News & Observer counted eight recusals. The vote on the plan was overwhelmingly in favor and there was no roll call.

    In the past, board members have not recused themselves when voting on similar, broad motions dealing with state funding.

    J. Andrew Curliss

The board of directors at the crippled N.C. Rural Economic Development Center on Monday confronted a bleak future without state money, endorsing a plan to consider whether to start “the legal process of dissolution” as soon as next month for the nonprofit that focused for three decades on serving the state’s rural areas. If the agency survives, officials said, it will be in a much-diminished form.

In the next moments, they took action on a piece of what had brought them to that point: The board voted to withhold payment, at least for now, of about $242,000 in a severance account set up for its founding president, Billy Ray Hall, who resigned this month. An attorney for the board told members that Hall, through his own attorney, had inquired about the severance payment and “when that will occur.”

The actions came as the full board gathered at what they said was a moment of crisis for the Rural Center.

Larry Wooten, president of the N.C. Farm Bureau and a longtime board member, said he supported efforts to decide how the Rural Center might look going forward. But dissolving the nonprofit is a clear option with its main source of funding cut off, he said.

“The Rural Center can continue to exist without state money,” he said. “How? I don’t know.”

The center’s board voted to create a five-person committee to study the center’s future and act on behalf of the full board in overseeing a planned transfer of center funds to state agencies.

Already, board Chairwoman Valeria Lee had formed a separate special committee to review the center’s grant monitoring and performance following a News & Observer report in June. That work is unlikely to go forward now.

A critical state audit released this month caused lawmakers to cut off funding. State officials then froze the center’s ability to spend state money it had on hand, an amount that tops $100 million. More than two-thirds of that has been earmarked for job-creation grants.

On Monday, the board began making moves to ensure its grant awards are fulfilled. State officials said they will be reviewing the center’s grants and freeing up money as it can while also ensuring accountability.

But the board said “no payment under the severance pay arrangement” for Hall would be authorized unless the full board takes that action, which it has not. The board wants to study legal issues around Hall’s severance, which was first disclosed in a footnote to the state audit.

Lee has expressed support for the severance pay account as deserving and a way to show appreciation for Hall’s long service at the center. Others, including Senate leader Phil Berger, have called the account a wasteful “golden parachute” that should not be paid to the head of a taxpayer-funded nonprofit serving poor, rural areas of the state.

State auditors did not judge the severance but wrote that Hall’s pay of $221,000 a year was “unreasonable.” The severance account was set up in 2003, according to the audit, and is in addition to regular retirement contributions the center made on Hall’s behalf.

Calls for resignation

Disclosure of the severance account was one factor in action by lawmakers this month to halt funding for the center, which had received an average of $25 million a year since 2009 to award grants and host programs to assist struggling areas of the state. The state money has generally been at least 80 percent or more of its funding, many years much more.

In all, since 1987, more than $650 million has passed from the state to the center.

As part of passing the state budget last week, the General Assembly created a new rural infrastructure authority within the state Department of Commerce. It will carry out some of the rural center’s programs using money the center would have received.

Lee, who is resisting calls by Gov. Pat McCrory for her to resign, will appoint the new special committee comprising five members of the current 47-person board. An effort by some on the board to ensure the special committee was made up only of Rural Center board members who were appointed by the governor, lieutenant governor or speaker of the House failed.

Lee had said previously that the board elected her and could decide her standing, but she did not face a vote on whether she would remain as chairwoman. Board members instead voted to consider changes to the nonprofit’s bylaws next month as it relates to who can serve as chair of the board. The board’s officers are typically chosen in October.

Bob Luddy, a board member who has been pushing for Lee to resign, said he did not think there were enough votes on the current board to forcibly remove Lee. He expressed frustration that Lee is still in charge after the actions by the governor and lawmakers.

Meeting with reporters after the meeting, Lee said she did not have much to say about calls for her to go other than, “I am still the chair.”

Lee, who has previously headed the Golden LEAF Foundation, a nonprofit that oversees half of the money the state gets from a legal settlement with cigarette manufacturers, and was a director at BB&T, said she would not serve on the special committee that will act for the full board over the next month.

Help for rural N.C.

Commerce Secretary Sharon Decker attended Monday’s meeting, and she expressed optimism about the state’s ability to do better in rural regions.

Decker cited high unemployment as evidence that “what we’re doing isn’t working” and said she expects the state to provide more help – not less – to rural areas.

“How that looks and how that is executed I can’t tell you right now,” Decker told reporters.

She and others acknowledged that the Rural Center itself might not be around much longer even as they praised its years of effort.

Several of the board members spoke movingly of the value of Rural Center programs in tiny pockets of the state. Among them was former Lt. Gov. Bob Jordan, a Democrat who was involved in creating the center in 1987 and who served as a longtime board member. He is considered an “emeritus” member.

‘Maybe … mistakes made’

The N&O reported last month that Jordan’s lumber company had been awarded a center grant this year to rehab a building he owns in Biscoe. His company had already hired the workers for jobs the grant was supposed to create and he later backed out.

Jordan on Monday mentioned another recent grant award made in his home county that would in part use Rural Center funds, and he urged Decker to make sure it is funded.

He said he hopes the state’s taxpayers will not lose sight of their sustained efforts to help rural regions through agencies like the Rural Center.

“Maybe there were mistakes made,” he told board members and Decker on Monday. “I’ll grant that, if there have been, then we need to correct those... All I care for is that you focus, that you have a focus on helping rural North Carolina.”

Curliss: 919-829-4840

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