City Manager Eric Williams could be in for a rough Monday evening if a radio audience Wednesday morning was representative of city residents’ reaction to Henderson disappearing fund balance.
With the state Local Government Commission’s critical letter on city finances in hand, City Council member Elissa Yount was the guest for the full 55 minutes of “Town Talk” on WIZS-AM (1450).
Under questioning from the radio station’s proprietor and the show’s host, John Rose, Yount explained that the fund balance is essentially the city’s savings account and emergency reserve, that the unrestricted general fund balance was down to 3.16 percent of spending when fiscal 2004 ended June 30, and that the LGC is demanding Henderson raise that fund balance to at least 8 percent.
Perhaps most important, Yount tried to show how the city has fallen into such tough financial straits while comparable cities in North Carolina have maintained healthy fund balances averaging about 35 percent of general fund spending, and she presented a bleak picture of the tough choices the city faces to improve its situation.
“It’s the public’s money, it’s the public’s business, and unfortunately it’s the public’s debt,” Yount said.
Yount followed the LGC’s lead in pointing to the Embassy Square cultural project as a huge part of the financial problem.
The city has spent more than $1.7 million on land acquisition and other expenses for the planned cultural center, Yount said. The LGC noted in a letter to Mayor Clem Seifert this week that the Embassy spending includes hundreds of thousands of dollars transferred from the city’s general fund to close a deficit in the capital project fund; the City Council never passed budget amendments approving those transfers.
“Our cash-flow problem comes from fact that we had to pay that money upfront,” Yount told a caller to “Town Talk.”
The 2004 Henderson audit, delivered last month by William L. Stark & Co.’s Curtis Averette, says the city expects the money to be repaid in three to five years, but the Embassy Square Foundation has never promised to do more than try to raise enough money to pay back the city.
That uncertainty about the city’s cash contribution to Embassy Square — whether it’s a no-interest loan, a donation , a down payment on an $8 million library or something else entirely — was a major source of aggravation for most of the 10 people who called the radio show.
“The citizens of Henderson have loaned $1.8 million to the Embassy with no interest and no guarantee of being paid back,” the first caller summed up after quizzing Yount.
Another caller, reiterating that the city might get the deed to the state-of-the-art library and no cash in return for its money, said: “It sounds like there’s no end to this fund balance problem.”
Former “Town Talk” co-host Tom Hannon called to recount his questioning of the three mayoral candidates about Embassy spending in 2003. He recalled that Clem Seifert, the eventual winner, and E.C. Terry said they trusted that the Embassy foundation would repay the money, even though they had nothing in writing to that effect.
But the third candidate, Embassy critic Jeanne Hight, said, “Tom, you’ll never see that money.”
Hannon called for the city and the foundation to draw up a repayment schedule to reassure Hendersonians that the money will be restored. “The Embassy people led everyone to believe that no public funds would be expended,” Hannon said, adding that the loss of nearly $1.8 million “is strangling this city.”
Picking up on one of Hannon’s favorite topics when he was a radio regular, Yount said Henderson and Vance County also must confront the higher operating costs for the new library. A presentation from the library’s board of trustees in October indicated that the annual operating expenses of the new building will roughly double to $1 million, meaning that the city and county would each need to find an additional $250,000 a year if they maintain their 50-50 split of those expenses.
“There’s just a lot of questions out there that … I believe need to be answered,” Yount said.
She said the problem goes beyond the Embassy project. She noted that at the end of fiscal 1999 the city had more than $4.6 million in its fund balance, equal to 43.72 percent of the general fund spending that year and well above the state average. In the five years since, the city burned more than $4 million from that fund balance to prevent a budget deficit.
“I think the management of this city fumbled, and they’re the ones who can walk away,” Yount said. “We’re the ones who live here.”
Several callers picked up on that theme, calling for a change in the city management without naming Williams.
“We should change that management, in my opinion,” one caller said.
“This is a prime example of why we don’t have any industry coming into this area,” another caller said, complaining of bad management and a willingness to let people have jobs for life regardless of how well they perform. Williams has been city manager far longer than any of the city’s nine elected officials have held office.
Neither Williams nor anyone from his staff appeared on the show or called in. Nor did any other council members or Seifert join the discussion.
Yount emphasized that she was not accusing anyone of malfeasance but did not discourage an inference of incompetence.
“It sounds to me like you’re saying our city has been managed very poorly by our financial managers,” one caller said.
“I think you’re dead on,” Yount replied.
Yount said the good news is that Monday’s public forum on the audit, which opens the floor to all city spending, will provide an opportunity to air all of the problems and to start brainstorming for solutions four months before the fiscal 2006 budget is due.
“I encourage everyone to come to the meeting Monday,” Hannon said.
The forum, called by finance committee Chairman Bernard Alston, will begin at 5:30 p.m. in the council chambers at the Municipal Building. Alston promised an open floor for up to two hours for council members and private citizens to question Williams, Finance Director Traig Neal and auditor Averette about city finances.
Williams said he will provide as many answers as possible, although he added last week that he suspects no answers will satisfy some questioners. He also plans to discuss the LGC letter during the forum.
Yount said Wednesday that if the city tried to boost the fund balance to the 8 percent minimum using nothing but increased taxes, the property tax rate would jump by 14.25 cents per $100 of valuation.
“If we don’t have enough extra money … I think we would appreciate cutting some spending” instead of raising property taxes, Rose said.
Yount said the city needs to explore any and all possibilities to cut spending and find new revenue. She said the steps should include separating essential services from those that are conveniences and using competitive bidding to minimize costs.
“We’re going to have to move some mountains,” Yount said. “We are going to have to rebuild this fund balance.”