How common is it for NC to take over a town, like it’s doing with Spring Lake?
Hundreds of cities and towns dot North Carolina’s landscape, from Charlotte and its nearly 900,000 residents to Dellview, population 6.
Nearly all of them elect mayors and other town leaders who are in charge of funding local departments like police or parks and recreation. And while there are often disagreements on exactly how to spend the town’s money, usually the state government stays out of the way and lets each community make its own decisions.
Sometimes, however, things get so out of control that the state has to step in.
That’s what happened in both Spring Lake and East Laurinburg in late 2021, when a group called the Local Government Commission announced it was taking over control of those two towns’ finances. Led by N.C. Treasurer Dale Folwell, it’s the type of state commission whose attention is rarely is good sign.
Spring Lake, about 50 miles south of Raleigh and a Fayetteville suburb on the north end of Fort Bragg, is notable for being far and away the largest town ever to have its finances taken over by the state. It has a population of roughly 12,000 people and a $13 million budget. Most other places the state has taken over, by contrast, have budgets of less than $200,000.
Was there embezzlement or anything criminal?
In both recent cases, investigators working for N.C. Auditor Beth Wood accused town officials — who had the power to write checks on behalf of their towns — of abusing that power and using public funds as their own personal bank account.
East Laurinburg’s former finance director is accused of taking around $11,000, and Spring Lake’s former finance director is accused of taking roughly half a million dollars.
In both cases, that missing cash plus other, more general mismanagement, left each town facing fiscal woes serious enough to warrant attention not just from Wood but also Folwell, the state’s top financial officer. So the Local Government Commission added Spring Lake and East Laurinburg to the list of local governments not trusted to make their own financial decisions.
The News & Observer previously reported that in Spring Lake, for instance, the town has no record of dozens of vehicles that DMV records show it owns. No one can say whether the cars are missing, stolen, accounted for, or were previously sold or otherwise disposed of.
How many cities get taken over by the state?
It’s a short list.
Of the more than 1,000 local government units in the state, only seven are currently under state control. Another, Spencer Mountain in Gaston County, ceased to exist after the 2020 Census showed its population had dropped to zero.
And a few others have previously been taken over but later won back the right to control their own money. Those are Enfield in Halifax County, East Spencer in Rowan County and Princeville in Edgecombe County, which has gone under state financial control not once but twice.
Princeville, the nation’s oldest Black-chartered town, was recently the subject of a News & Observer story that focused on its long history of being flooded and rebuilt in increasingly worse natural disasters.
What happens after North Carolina takes over?
For some towns, when they lose financial control they stand to cease existing altogether. The state revokes the town charter, and any services the town had been providing for its residents would either end or be picked up by someone else, like a private company or the county government.
That’s what will happen to East Laurinburg this summer, when it ceases to be a town in June. The town was created in the early 20th century, The N&O reported last year, specifically to let a textile mill pay less in property taxes. But the mill has long since shut down, and the town now has only 281 residents, one employee and few services.
But that’s seen as a last-ditch option. The LGC would rather help local leaders get their town back on its feet and prove themselves able to take back responsibility for their own financial decisions.
Frank Lester, Folwell’s spokesman, told The News & Observer that “the goal is to return control as soon as it is possible and feasible” but that the towns won’t automatically regain control of their spending decisions.
“There is no minimum amount of time involved,” Lester said. “The time needed will vary based on the specific circumstances of the local government. LGC staff is actively involved in both the daily financial operations of the local government as well as engaging with local governing boards or councils.”
But if local leaders show they can work with the commission to hit financial goals and other requirements, he said, then the LGC will vote to give them back control. The main goal, he said, is to “ensure that the local government has taken the necessary steps to maintain its financial stability and is on a solid path to sound fiscal management.”
What types of towns tend to be under state control?
Usually, very small ones, where the budgets are so barebones that even minor errors — or theft — can add up to a substantial percentage of the budget. They’re also typically in rural areas.
Spring Lake is a notable exception on both counts. It’s located in one of the state’s biggest counties and has a budget nearly 10 times bigger than the next-biggest town to have been taken over by the state.
Here is a list of all seven local governments currently under state control, and their most recent budget information from Folwell’s office. Six are towns and one is a “sanitary district.” Many towns have special tax districts, like fire districts or sanitary districts, that collect extra taxes within the boundaries of that district for a specific purpose, like funding firefighters or sewer systems.
▪ Spring Lake (Cumberland County): $13 million annual budget
▪ Robersonville (Martin County): $1.45 million annual budget
▪ Pikeville (Wayne County): $688,379 annual budget
▪ Cliffside Sanitary District (Rutherford County): $194,486 annual budget
▪ Eureka (Wayne County): $176,507 annual budget
▪ Kingstown (Cleveland County): $171,440 annual budget
▪ East Laurinburg (Scotland County): $75,000 annual budget
This story was originally published March 25, 2022 at 3:27 PM.
