Forum to address audit questions

Hendersonians will get a chance to help dissect city finances at a special forum before the City Council’s regular meeting Feb. 28.

Mayor Pro Tem Bernard Alston, the chairman of the City Council’s Finance and Intergovernmental Relations Committee, scheduled the forum for 5:30 p.m. on that Monday to give the council and the public two hours for questions and answers about how the city has slipped into the financial situation detailed in the annual audit.

City Manager Eric Williams forwarded the audit to council members from accountants William L. Stark & Co. on Jan. 28, more than two months after a Nov. 17 letter from Stark informed Williams that the auditors had all the information they needed from the city.

The delay in receiving the audit is one of several issues Williams and council member Elissa Yount have batted back and forth the past three weeks.

More significant are questions about how the city’s general fund balance fell from a projected $1,295,021 on June 20, 2004, to an actual audited amount of $464,163 on that date; how much money the city has poured into Embassy Square; and how the state’s Local Government Commission is going to handle the city’s financial problems.

All of those questions play into the most important issues confronting the city in this municipal election year: Williams’ two decades of management of the city; Mayor Clem Seifert’s efforts to control much of what the city government does; and the long-term effects of Embassy Square.

It could be a lot to cover in two hours, but the council will at least make a start, thanks to Alston and Yount.

Williams, city Finance Director Traig Neal and auditor Curtis Averette attended Thursday’s FAIR Committee meeting with plans to discuss the audit, but Yount cut off those plans.

She read a two-page statement that laid out “grave concerns” about the status of the city’s finances and complained about a lack of information given to council members and the rarity of FAIR Committee meetings (only one between Oct. 22 and Thursday).

Those concerns include a $395,704.48 increase in the city’s capital budget for the cultural side of the Embassy Square project (the side that wasn’t supposed to cost the city anything) to $1,794,454.48. Yount said the money appears to have been moved from the general fund without any approval from the council.

“Where are the documents spelling out how and when these revenues, almost $1.8 million, will be replenished in the next three to five years as noted in the audit?” Yount asked.

She also criticized the declining general fund balance, which was used to balance the city budget for each of the past five years.

Williams has regularly cited several factors in the decline of the fund balance, including the decision to push ahead with projects such as Embassy Square and Gov. Mike Easley’s seizing of money earmarked for local governments so he could balance the state budget.

One complication with the Embassy Square is that even after the capital costs are accounted for, the operational costs of the H. Leslie Perry Memorial Library are expected to double. That would mean an additional $250,000 a year from the city and the same amount from the county.

The problem with blaming Easley is that comparable cities in North Carolina, those with 10,000 to 49,999 residents and no municipal electric utility, have maintained an average general fund balance of more than 30 percent of annual expenditures. That’s roughly four times what the Local Government Commission requires; Henderson has a fund balance that’s less than half the state requirement.

In an exchange of correspondence with Yount in the previous two weeks, Williams defended his claim that the fund balance in the audit was not “particularly alarming or unexpected” and added that the auditor’s findings were better than expected. That’s his position even though the audited fund balance June 30,2003, was $1,332,014 and the City Council made growth of the fund balance one of its priorities last year.

The fund balance is simply the accumulated surplus money the city has raised over the years. The city uses that banked money to pay its bills during the months before people pay their property taxes. The LGC sets a minimum fund balance level to ensure municipal solvency.

The LGC staff, city staff and Averette talked by phone about the financial problems in the fall. The state commission is preparing a letter informing Henderson of what it must do, Williams said at the start of Thursday’s meeting. He expects to receive the letter this week.

Yount has forced Williams onto the defensive. She thinks his responses to her questions have been evasive if not condescending (he resorted to quoting a dictionary on the meaning of “alarm” in a memo he sent Wednesday). Williams seems to be offended by Yount’s tone and implications of wrongdoing (he complained Thursday about Yount’s request that he, Neal and Averette be questioned separately to keep Williams from influencing the others’ answers).

But Yount is not alone in her concerns.

“I think the dissection should take place,” Alston said in calling for the forum Feb. 28.

Williams said some of the answers that day will be simple; others won’t satisfy the questioners. He agreed with Yount, however, that the full history of how the city got to this point must be discussed before deciding how to move on.