ROCKINGHAM — The Local Government Commission notified the Richmond County Board of Commissioners in February of its concern regarding the county’s use of $1,500,000 from the its solid waste fund to subsidize the county’s general fund during the 2019 fiscal year, a practice that the county began in 2013.
Richmond County was given 45 days from Feb. 17, 2020 to respond with a plan to “reduce and eventually eliminate the recurring Solid Waste Fund subsidy to the General Fund.” As of Tuesday, May 5 — 78 days since the letter was sent — Richmond County has not responded to the LGC, according to Dan Way, communications manager for the Office of the State Treasurer, of which the Local Government Commission is a part.
Way said that there is no stated penalty in the rules or statutes for failure to meet this 45-day response requirement, but that “if the county were to come come before the Local Government Commission for debt approval using the 2019 audit the commission members would question why they missed the deadline if they were significantly late.”
In the February letter, which was addressed to Chairman Kenneth Robinette and carbon-copied County Manager Bryan Land and Finance Director Mac Steagall, the LGC detailed their “continued concern” regarding the county’s financial position after analyzing its audited financial statements for the fiscal year ending June 30, 2019.
The letter emphasizes that the solid waste fund is an enterprise fund, meaning that it is meant to be self-sustaining through fees only, and says that an increase to property taxes is needed instead of these continued transfers of funds.
“Solid waste customers and property taxpayers are not necessarily the same groups of people; therefore, it is important for equity reasons to ensure that the General Fund and the Solid Waste Fund are each self-supporting,” the letter explains. It continues, “… the Solid Waste Fund should not subsidize general government operations in lieu of a needed property tax increase to maintain the current level of services and operations.”
This is not the first time Richmond County has been told to stop this practice. On May 22, 2019, the State and Local Government Finance Division (also under the Office of the State Treasurer) notified the county of the “recurring, apparently excessive, amounts” of funds transferred from the solid waste fund to the general fund. This letter specifically addressed transfers of $1,150,000 from the solid waste fund to the general fund in 2017, $1,500,000 in 2018 and $1,500,000 in 2019.
This letter notes that in the county’s 2018 audit, the transfer note for the $1,500,000 transfer to the general fund discloses that this was done to “avoid raising ad valorem taxes,” or property taxes. This practice of using the solid waste fund to support the general fund began in 2013 with a transfer of $500,000, according to Way.
“By design, an enterprise fund operation should run ‘like a business’ and be self-sufficient. It is not considered an industry best practice to use enterprise fund revenues to provide support to another fund such as the General Fund of the government unit,” Way said.
In his budget message for the 2019-2020 budget, Land acknowledged that this was a misuse of an enterprise fund and said this practice “isn’t a sustainable habit.”
“To get out of the rut of transferring from the solid waste fund every year, our ad valorem tax valuations will have to increase substantially, our sales taxes will have to increase substantially or we will need to increase the tax rate again,” wrote Land at the time.
At their regular meeting last month, Land recommended that the Richmond County Board of Commissioners vote to switch to an ad valorem sales tax distribution to give the county a larger share of the total sales tax revenues, of which the municipalities receive a much smaller portion. Land said before the vote that this was done “in lieu of raising sales tax” in the coming 2020-2021 budget.
Land also cited a desire to recoup expenses that the county had taken on from Rockingham and Hamlet, referring specifically to both cities’ having relinquished part of the territory over which they enforce codes in 2019 and the county taking on 911 dispatchers from the cities to staff the new 9-1-1 Center in 2018, the latter of which the county encouraged the cities to do years prior.
The commissioners voted unanimously to change to ad valorem.
Reach Gavin Stone at 910-817-2673 or gstone@yourdailyjournal.com.