Once-troubled Rural Center tightens belt to refocus

A nonprofit agency whose long history of helping to stimulate the economy in rural North Carolina was derailed in controversy three years ago has re-emerged in a smaller and possibly more resourceful version.

The N.C. Rural Economic Development Center is rebounding from the loss of state funding that for three decades it awarded as grants. The center received between $20 million and $24 million from the state until legislators ended funding for it in 2013.

That’s when a critical state audit said the agency had failed to provide sufficient oversight of the state money, and paid its longtime president an unreasonable salary of $221,000. A series in The News & Observer reported that a sample of Rural Center projects failed to create jobs, broke its own rules for awarding grants, and failed to establish whether the grants were necessary.

Rural Center officials said the criticism didn’t explain the full scope of their work. But Gov. Pat McCrory immediately called for the replacement of longtime president Billy Ray Hall. After Hall resigned, the center’s board voted to deny him a special severance worth nearly one-quarter million dollars, which had accumulated in a fund in addition to his regular retirement contributions.

The center’s accounts were frozen and its grant funds returned to the state. Some of its employees were hired by the state commerce department to work on projects that transferred to the state.

But the Rural Center survives.

Despite the loss of state money, the center has $3 million in annual operating expenses. It has net assets of $55 million, according to the most currently available report to the Internal Revenue Service, most of which is in current loans or available loan capital in four programs the center manages. It has about $5 million in reserves.

The center staff has talked to people around the state and compiled its first advocacy agenda, which lays out 10 strategies for helping struggling rural areas, which have been the last to recover from the nation’s economic problems.

“It’s a statement to North Carolina that this is what we believe works,” said Jason Gray, a senior fellow at the center who visited The News & Observer on Thursday, along with president Patrick Woodie. “But you have to look at all 10.”

The strategies include working on ways to make sure there is a sufficiently trained local workforce, improving access to healthcare, expanding high-speed fiber broadband, dealing more aggressively with deteriorating water and wastewater systems, and expanding natural gas delivery.

Other goals involve encouraging entrepreneurs and small-businesses, supporting homegrown manufacturing, developing biotechnology and getting more value out of agricultural products, encouraging partnerships and coming up with stable ways of paying for rural development.

There has been talk in the legislature about ways to address problems in rural areas, many of which have been hit hard by the loss of manufacturing jobs. The center counts 80 of North Carolina’s 100 counties as rural, according to population density, but that number changes as people move around.

Gray and Woodie said most of the discussion in the General Assembly last year was on the JDIG job recruitment fund, but recruitment is only part of the picture: The center will emphasize expanding businesses that are already here, and encouraging entrepreneurs. “Ninety percent of the conversation is about 10 percent of the jobs,” Woodie said.

The center’s agenda, Woodie said, is meant to find new ways to improve conditions, including encouraging communities to invest in themselves such as through charitable tax-deductible contributions, in the face of the loss of state funding.

“We don’t believe state government can do it alone,” Woodie said.

This story was originally published March 31, 2016 at 7:02 PM with the headline "Once-troubled Rural Center tightens belt to refocus."