County commissioners planned on tapping $382,000 in interest from the account to help plug a budget shortfall.
But the N.C. Department of State Treasurer, which manages the trust fund on the county’s behalf, indicated the county couldn’t draw down the interest as hoped.
“In their opinion they felt we didn’t need to take any interest money out. In their opinion, it should be left in the account in case we had some downturn in the fund,” said Swain County Manager Kevin King.
The trust fund has earned more than $1.5 million in interest since 2010 when it was initially set up with a principle sum of $12.8 million. Some years have seen better returns than others.
The past year was a bad one — it made only $30,000 in interest. But thanks to bigger earnings the previous two years, the account still had $780,000 in accrued interest.
However, the state thought it should be left in there as a cushion to safeguard the account from dipping below the principle of $12.8 million should markets take a dive.
That put the county in a quandary. County commissioners were banking on interest from the trust fund to balance this year’s budget, which was crafted and passed in June before the new fiscal year began.
Two months later, however, the county got a letter from the state advising it not to take any money out.
“Each year, according to the law, the state treasurer’s office is to present the board an opinion letter that states what their perception is — can you take money out or not and the methodology for why they felt that way,” King said.
“That has been the controversy the last two years. We pass a budget in June with a number we are expecting to get, but we don’t get the opinion letter until August or September.”
Last fiscal year, the county wanted to tap $750,000 in interest from the account. The state issued an opinion letter advising them to take out no more than $300,000. But the state remitted $637,000 in the end — nearly what the county had wanted.
But technically, the state could refuse to turn over the interest money, even though the trust fund is in Swain’s name. That’s why King got nervous when the state issued an opinion that no interest be touched.
But in the end, the state agreed to release the $382,000 after all.
There is still almost $400,000 in interest left in the account that will remain there as a cushion against losses.
What’s the North Shore Settlement trust fund?
The trust fund was created in 2010 with a $12.8 million payment from the federal government intended to compensate Swain County for a road that was flooded by the damming of Fontana Lake in the 1940s for hydropower.
The federal government was supposed to build back the destroyed road — one of the few arteries in and out of the isolated, mountainous county — but doing so became financially and environmentally problematic since it passed through a remote, backcountry area of the Great Smoky Mountains National Park.
So, the government instead made a cash payment of $12.8 million to Swain County in lieu of building the road.
The money was put in a trust fund that has earned more than $1.5 million in interest for the county over the past three years. Here’s a summary of the fund:
• 2010: $12.8 million trust fund created
• 2011: $150,000 in interest taken out
• 2012: $637,000 in interest taken out
• 2013: $382,000 in interest taken out
The remaining balance is around $13.2 million.