July 31, 2013
Local governmental officials are worried that the hammer appears ready to drop on the North Carolina Rural Economic Development Center. They have good reason for their concern.
Or do they?
The Rural Center, a private nonprofit, has for years administered taxpayer dollars through grants to local governments to help with economic development. There is a long list of area projects that have benefited.
However, a state audit found that there wasn’t proper oversight of taxpayer money by the Rural Center, claims of the number of new jobs created were exaggerated, the executive director’s salary was excessive, and money was provided for iffy projects, including fast-food restaurants, golf resorts and big-box retailers.
A scathing report by the Raleigh News and Observer, not exactly the water boy for conservatives, found that the center’s claim of having created 20,000 jobs in North Carolina during the last five years was off by 2,100 percent, and that only 950 jobs had been created.
We will add that the center’s staff, with 53 employees and a $2 million annual salary, was bloated.
The day after the audit was released, the executive director of the center for 26 years, Billy Ray Hall, resigned, giving up his $221,000 salary, but taking with him a severance package that included a check for $241,000. Gov. Pat. McCrory responded by suspending funding for the center.
The state budget office is considering recovering as much as $100 million in state funds from the center, according to its director, Art Pope, who asked for a “detailed and truthful response” to the audit and that “corrective actions” be implemented immediately. That raises the question of whether promises of funding for local projects will be honored.
There are two things that can be possible at once — that the Rural Center has benefited the state’s economic development efforts, and that has been accomplished clumsily and at too high a cost to taxpayers.
Local officials will tell you that the scrutiny of the Rural Center — and its likely demise — is another front on a new battlefield in North Carolina, one that pits the urban cities against the rural counties. It’s clear that rural counties don’t have the tax base for infrastructure that is often needed to attract new industry, and that playing field can only be leveled with state funding, typically through grants.
The question is how best to deliver that money.
Critics of the Rural Center say that the funding can be provided through the Commerce Department, and indeed, the budget about to be adopted provides for $24 million over the next two years to be available through the department to the state’s most distressed counties.
It also puts a cap on administrative costs at 5 percent, which would be about $1.1 million to distribute that $24 million — a much cheaper delivery system than the Rural Center.
Our only concern is that these distressed counties continue to get help — and see no reason the money must be funnelled through a nonprofit that is siphoning off such a huge chunk of cash.