On February 7, 2022 at the monthly meeting of the Board of Commissioners for the Town of Farmville, auditor Jay Parris reported that we had 60 days to address the NC Local Government Commission with some answers. The Town now has to spell out how we will rectify several financial problems highlighted in the fiscal year 20/21 audit.
- A $400,000 deficit in the General Fund after transfers and reimbursements
- The Electric Fund operating at a deficit for the past three years
- A statutory violation each year for at least the past three years. (The Town of Farmville went over the legal limit for transfers from the Electric Fund to the General Fund. In fiscal year 20/21 the Town went approximately $54,000 over the legal limit for transfers when they shifted $82,500 for economic development from the Electric Fund to the General Fund.)
- An undesignated fund balance below 34%
The Town of Farmville’s undesignated fund balance plummeted from $2,100,000 in the previous year to $1,400,000 in fiscal year 20/21. It went from 46% to 23% (or to 33% by an alternate calculation). The Local Government Commission mandates this balance to be at least 34%. The undesignated fund balance went down partially due to capital improvements to town-owned property. Somehow, the Town of Farmville included the agreement to pay $340,000 to pave a private individual’s parking lot in exchange for 14 months’ rent as capital outlay for the Town. Usually, capital outlay is only considered for property owned by the municipality.
Before the Town of Farmville will be allowed to seek a loan to build the much-needed new fire station, we will have to prove to the Local Government Commission that we are in good financial standing to repay an additional loan. The LGC will take into account that the Town of Farmville has now depleted all monies from fundraisers and grants secured for the construction of the new library. The Town paid $480,333 in July 2020 and then $470,533 in July 2021 as the first two of 15 annual payments for the $5,000,000 loan. Now we are out of library money. (The total cost for demolition and construction of the library was $5,314,497. The total amount brought in for construction from fundraisers, grants and the sale of the small business incubator was approximately $968,902.)
In three months the Town of Farmville will have to come up with $460,733 to make the 2022 payment for the library construction loan. As of today, we owe a remaining total of $5,200,000. Where will we get this money?
In summary, the NC Local Government Commission will have to consider the plan which was recently submitted by the Town of Farmville regarding how we will deal with our $400,000 budget deficit, the three years of deficits in our Electric Fund and the money transferred for economic development exceeding the statutory limits. These difficulties would be bad enough on their own, but taken into consideration with the $5,200,000 left to pay on the library loan, they seem almost insurmountable. How wise would it be for the LGC to allow the Town of Farmville to borrow millions of dollars to build a new fire station? How could we possibly pay off two loans? The financial outlook is bleak as far as the new fire station is concerned. We should know soon if the construction of the new fire station is in the budget for the fiscal year 22/23, which begins in less than three months, on July 1. It already has been put on hold for several years. Where are Farmville’s priorities?