The state legislature cut funding to the N.C. Rural Economic Development Center as well as another prominent economic development organization, AdvantageWest. Instead, the state will put the millions in funding toward a single, yet-to-be-created nonprofit that will address economic development statewide.
“The money will still be there, but what will be the vehicle by which it’s applied?” Leatherwood said.
Few details of the state’s new approach to economic development are known. N.C. Gov. Pat McCrory has appointed 39 people from across the state to sit on a committee tasked with crafting a long-term economic development plan.
With little to go on, many in WNC fear that the decline of its economic development advocates, the Rural Center and AdvantageWest, will essentially mute the region’s voice and ability to attract and grow businesses. They wonder who will be there to pick up the slack.
“If you don’t have a spokesman, then you are not at the table,” said Waynesville Mayor Gavin Brown, who is also on the Haywood Economic Development Commission.
If the Rural Center is one of WNC’s economic development arms, then AdvantageWest is the other. The Rural Center awarded grants and loans to businesses to expand and create jobs, partially as an incentive to stay in a rural part of North Carolina rather than move to a big city or different state.
“These small businesses in the rural areas are what the Rural Center was all about,” said Brown, who also heads the council of governments for the seven westernmost counties. The center was “set up so we didn’t have to compete with the Raleighs and the Durhams.”
The Rural Center recently came under scrutiny after a state auditor released a report questioning how it invested and tracked state grant money (see related story). Meanwhile, AdvantageWest sniffed out leads and tracked down businesses that might be interested in locating in WNC.
“I have gotten a lot of leads from them,” said Mark Clasby, Haywood County’s economic development director. “They have done so many unique things for our area.”
If the Rural Center and AdvantageWest dissolve or take on a lesser role in the region’s economic development efforts, then leaders in the rural counties will need to make sure state officials keep their word and don’t neglect WNC when the state implements its new economic development plan.
“I think we are all just going to have to work harder,” said Cece Hipps, the executive director of the Haywood County Chamber of Commerce and a member of the Rural Center board of directors. “We will have to hold them to that promise.”
Not everyone can cram his or her business into a big city nor would they want to, said Hipps. There will still be economic development opportunities available for rural North Carolina.
“Not everyone can move to Charlotte and Raleigh. I don’t feel like we are going to dry up and blow away,” Hipps said. “I am going to try to be positive.”
‘A pig in a poke’
Currently, state officials are trying to bring all N.C.’s economic development efforts under a centralized entity in Raleigh. To help guide that process, McCrory created a 39-person economic development board that will draft a roadmap for job creation and establish a private, nonprofit to take over many of the Department of Commerce’s economic development duties.
Brown took issue with the fact that the new state economic development organization would be a private entity.
“What the Republicans are going to set up is (a program) that is not subject to public scrutiny,” Brown said.
Despite cuts to rural economic development groups, lawmakers in Raleigh have assured Western North Carolinians that they would have a say in that process. Tony Almeida, the governor’s senior economic adviser, recently spoke at the annual meeting of the Southwestern N.C. Planning and Economic Development Commission, the council of governments for the seven westernmost counties. He said that WNC would not be forgotten.
N.C. Rep. Joe Sam Queen, D-Waynesville, remains skeptical.
“What we have is a promise — a pig in a poke,” he said, adding that he will be the first to admit he was wrong if the new state approach is actually a positive for WNC. “I’ll be the first one to say ‘By golly, you are on the mark.”
However, only one person west of Statesville is on the new state economic development board — John Cecil, president of Biltmore Farms in Asheville. While Cecil is a knowledgeable businessman, Asheville is the big city compared to the small towns and rural landscape of the seven western counties. The problems in Asheville are not the same as those of its neighbors to the west.
“Western North Carolina and southwestern North Carolina are quite different from Asheville,” said Ryan Sherby, head of Southwestern Commission. “Once you cross west over Balsam, we are distinctly different.”
Because there is no one farther west than Asheville on the economic development board, many public officials in the region feel that the state has already gone back on its word.
“There’s no representation in WNC to speak of, and that’s a problem. I think it’s not good at all,” said Jackson County Manager Chuck Wooten. “Everyone is disappointed.”
At the annual Southwestern Commission meeting, it is customary to present the guest speaker with a present to thank them for their time. At the end of Almeida’s speech, though, Brown said he invited the state leader to return in four years and show the crowd of area government officials how economic development has improved in WNC.
“It doesn’t speak well for WNC,” Wooten said. “But the jury is still out on that.”
With so many details up in the air as to how a new state system for economic development will work, Western North Carolinians will have to wait and see how everything will pan out.
“Then we will figure out if it’s going to be good or bad,” Hipps said.
After passing a state budget that included no funding for the Rural Center, the N.C. General Assembly seemed to do everything but shut off the lights and lock the doors to the center. The Rural Center board will talk later this month about whether to forge ahead or dissolve.
If the Rural Center continues operating, it will have a tough row to hoe. State funding to the tune of about $25 million a year made up around two-thirds of the Rural Center’s budget. The remainder came from grants, donations and other sources.
“The state just cut off the Rural Center,” Clasby said. “That is really big.”
Clasby said he is currently in talks with three local companies that want to expand. However, without money from the Rural Center, those plans may or may not move forward.
“All of them have a desire to expand and create jobs,” Clasby said. “It would curtail, or certainly bring a to halt, those expansion plans.”
Others in the region also decried the state’s decision.
“My opinion is all Western North Carolina and Haywood County is a better place because of the Rural Center. It has funded things that have to absolutely be addressed,” said Pat Smathers, former Canton mayor and a recipient of a Rural Center grant. “Water quality would be down. Property taxes would be up.”
During his time as mayor, Smathers secured a Rural Center grant to help Canton expand its water and sewer system, which the town hoped would entice new companies. The Rural Center has also helped MedWest Haywood renovate its psychiatric wing, funded the expansion of Sonoco Plastics in Waynesville, which added 35 new jobs, and supported projects at the Jackson County Green Energy Park.
It gave money to the renovation of the Imperial Hotel in Canton, which leases space to a restaurant. The center supported the construction of Stonewall Packaging, a recycled cardboard packaging manufacturer in Sylva. Its funding helped make the longtime wish for an inpatient hospice service west of Asheville a reality.
A grant from the Rural Center paid for part of the Haywood Vocational Opportunities facility in Hazelwood, which provides jobs for the disabled. Its money allowed Maggie Valley to hire a consultant to draft a town business plan — and those are just the grants.
The Rural Center also has a loan program, which offers business owners in the region better than reasonable interest rates. Frog Level Brewery owner Clark Williams has firsthand knowledge of how a low interest rate loan from the Rural Center can lead to exponential business growth.
Williams received a $25,000 loan from the Rural Center’s Microenterprise Loan Program in March 2012 to purchase additional equipment for his brewhouse and thereby produce more beer. Right around the same time, representatives from the Charlotte-based Millennium Beverage had “secret-shopped” the brewery and wanted to distribute Frog Level brews across the state. Without the additional brewing equipment, Williams would not have the capacity to supply a statewide demand.
“Without that loan, we would still be a very tiny dot,” Williams said. “There is no way we could distribute if we didn’t have that brewhouse. That loan was everything.”
As a condition of the loan, Williams had to spend all the money in North Carolina.
“I had to show receipts where this money was spent in N.C.,” Williams said. “My feet were held to the fire.”
He would have qualified for a bank loan, Williams said, but it would not have come as quickly as he wanted or with such a low interest rate. His interest rate now is a 3.15 percent. Plus, the Rural Center offers budgeting help.
“This loan also comes with support,” Williams said. “There is a wealth of knowledge there because they obviously want you to succeed.”
Since joining the loan program, Williams said he has told other small business owners to check it out for themselves. However, along with the grant funds, the loan program is currently frozen. While the state is still collecting money on current loans, it is not giving out new ones.
Ever since a state audit questioned the center’s internal operations, things have continued to decline from the Rural Center. The governor froze its funding; both the center’s president and board chairwoman resigned; and the state slashed the nonprofit from its budget.
Hipps said the course of events is particularly heartbreaking given the positive impact the center’s grants have had in WNC.
“It has been disturbing to be a part of this and watch the demise of the Rural Center, knowing all the good things it’s done,” said Hipps, a member of the Rural Center board.
The outlook is somewhat brighter for AdvantageWest, which is not caught up in the same political turmoil as the Rural Center.
Although it also lost its state funding, the money did not comprise the majority of AdvantageWest’s budget. Slightly less than half the organization’s revenues came from the state, whereas the Rural Center’s budget was two-thirds state funding. Last fiscal year, AdvantageWest’s total budget was about $2.2 million; of that, $1.2 million came from grants, foundations, donations and other sources. The rest was allocated from the state budget.
Scott Hamilton, president and CEO of AdvantageWest, said he thinks that AdvantageWest can stay open; it will simply have to adapt.
“I see it continuing,” Hamilton said. “Will we be different and look different? I think the answer to that is yes.”
The AdvantageWest board will hold meetings to determine its future and will try to find a place in the state’s new economic development framework — however it ends up working. In fact, all economic development entities, including the Southwestern Commission, which remains intact, will need to find their place.
“We are trying to figure out what role our organization needs to play as the new administration and legislature change the way the state deals with economic development,” Sherby said.
Another silver lining for AdvantageWest is that it will have a year to figure out how to adjust. While the organization will only receive $250,000 this year as opposed to its usual $1 million allocation, it is not completely cut off right away. Starting next fiscal year, AdvantageWest lose all its state funding.
Queen noted the impact AdvantageWest has had on the region.
“It has helped us with heritage tourism. It has helped us with film,” Queen said. “It is very local specific.”
AdvantageWest enticed “The Hunger Games” executives to shoot the movie in WNC, created a small business incubator specifically for farmers and food entrepreneurs, spearheaded one of the first regional clean energy coalitions in the U.S., and assisted with bringing Sierra Nevada and New Belgium breweries to the area, among other achievements. The nonprofit is often first point of contact for companies that want to do business in WNC and an advocate for the region.
Queen said he hopes to see AdvantageWest continue in some capacity because of its microeconomic focus.
“We have never had any attention like that from Raleigh,” Queen said. “It is absolutely mythical to think it’s going to happen.”
State decision could shutter Rural Center
Operations at the North Carolina Rural Economic Development Center are effectively stalled after the Office of the State Auditor released a report in July showing a lack of oversight within the nonprofit organization.
The Rural Center has awarded millions of dollars in grants to organizations, towns and companies in the state’s 85 rural counties — including Haywood, Jackson, Macon and Swain — for the past 26 years.
However, the nonprofit, which receives about two-thirds — or $25 million — of its total annual budget from the state, came under fire earlier this year after it was found that it did not always exercise proper oversight.
The state audit looked at grants disbursed during fiscal year 2012, how the Rural Center monitored them and how it dealt with reported administrative expenses charged to state grant funds. The audit did not evaluate the effectiveness of the Rural Center’s grant programs nor did it verify whether a project met its required goals set up as a condition of the grants.
Theoretically, a grantee may have met a grant’s benchmarks; it just was not verified by the Rural Center. Then again, the grantee’s project may have failed completely.
A review of 38 grant files showed that the Rural Center did not independently confirm that five of the projects had met their goals, according to the audit. As an example, the document states that the center did not check to see if the city of Marion had created 100 jobs as promised, even though the grant period ended 18 months prior.
It also found that 28 out of 48 grantees did not turn in progress or final reports on time, yet they were not given notice of tardiness or forced to repay the grant monies. The audit states that the Rural Center did not sufficiently document how it identified what risks could inhibit a grantee from meeting the grant’s goals.
The Rural Center argued in the audit that it did not have enough personnel to sufficiently monitor each grant nor did it have the money to hire them.
The audit also scrutinized the salaries of the nonprofit’s executives, bluntly stating that the salaries of the Rural Center’s top officials were unreasonably high. In the end, the audit said the center did not properly address the report’s recommendations and offered up no plan for corrective action.
“The Rural Center comments suggest it will keep doing what is has been doing,” the audit stated.