(The Center Square) – Years of financial struggles in Elizabeth City could result in a state takeover, perhaps as soon as this week.
The Local Government Commission will meet on Tuesday to continue a conversation about finances in Elizabeth City after state Auditor Beth Wood in July suggested the commission should initiate the process to take over the city’s finances.
Elizabeth City is on the commission’s Unit Assistance List over ongoing financial struggles that date back to at least 2017, when the city fired its finance director over issues with the city’s utility payment system. In the years since, city officials have missed audit deadlines and failed to reconcile financial books in a timely manner. Inclusion on the Unit Assistance List prompts stricter oversight of local borrowing and financial decisions.
An audit of the city’s finances for the 2020-21 fiscal year submitted to the state in April listed more than a dozen deficiencies in financial oversight that ranged from failure to properly document a repayment to the U.S. Coast Guard for two years of overcharged utilities to nearly $1.5 million in spending beyond what was included in the budget.
Wood, a member of the Local Government Commission, in July cited state law that spells out the responsibilities of local finance officers and suggested Elizabeth City is “already severely non-compliant.” She urged the commission to step in to help the city correct course, suggesting the situation “can’t be cleaned up until the leadership changes.”
Wood’s comments follow a letter from state Treasurer Dale Folwell, chairman of the Local Government Commission, to city officials in March that outlined numerous concerns with local finances, dealing with everything from grant budgets to utility billings to bank account reconciliations.
“Overall, the financial records are inadequate, leaving the governing board with no reliable information for financial decision-making,” Folwell wrote. “This is concerning as the Board continues to make new expenditure decisions for hundreds of thousands of dollars.”
Folwell suggested city officials voluntarily seek intervention from the Local Government Commission to “make the necessary but hard decisions needed about staffing, tax rates, utility rates, utility billing and collection policy, appropriations, etc. that are necessary to provide the financial foundation upon which the City can prosper.” Other calls for a state takeover have come from nearly two dozen citizen letters to the commission in recent months.
Elizabeth City Mayor Kirk Rivers has rebuffed the call for state oversight, telling the media he will not make the request. Rivers instead cited efforts to catch up on late audits and implement new policies to get the city’s books in order.
State law allows the Local Government Commission to take over finances if commissioners believe a local government is heading toward default on debt service, or if local officials refuse to heed warnings about noncompliance with state law. Commission officials say Elizabeth City has not yet defaulted on debt payments.
Wood in July urged action before the city faces possible bankruptcy.
In total, there are 138 municipalities and 12 counties on the Unit Assistance List. The commission has assumed financial control over four municipalities and a sanitation district.
