After waiting for years to get the money promised to them, the Swain County commissioners made a unanimous decision last week to sue the federal government for $38.2 million.
“It’s about our only option left,” said Commissioner Steve Moon.
It has cost Canton half a million dollars to keep ownership of a piece of property it already owns.
Swain County is one step closer to getting $4 million in “Road to Nowhere” funds after a bill introduced by U.S. Congressman Mark Meadows, R-N.C., advanced through the House Committee on Natural Resources last week. Though the bill, H.R. 3806, is not yet on the House calendar, Meadows’ office expects it to come to a vote sometime this week.
A $4 million payment to Swain County for the so-called Road to Nowhere cash settlement may soon be freed of the bureaucratic purgatory where it’s been parked for more than two years.
The N.C. Department of Revenue is holding money belonging to Swain County captive, according to county officials.
Swain County’s uphill battle to get the federal government to make good on its promise of a $52 million cash settlement may have just gotten tougher.
The federal government is supposed to pay Swain County $4 million a year over the next decade — a deal intended to finally compensate the county for a road that was flooded when Fontana Lake was built in the 1940s. But after an initial down payment of $12.8 million in 2010, Swain hasn’t seen a penny since.
And now, with the federal budget process barely out of the starting gate for 2013, Swain is already starting from behind. Its promised $4 million was left out of President Obama’s budget for next year.
Congressman Heath Shuler, D-Waynesville, said he is baffled at how or why the $4 million cash settlement appropriation was left of out of the Presidential budget, pledging to press the White House until resolved.
“White House officials acknowledge that the omission of North Shore Road funding in the 2013 budget is problematic and have pledged to work with us to deliver the funding as promised,” Shuler said in a statement.
Shuler has twice gotten the annual $4 million payment appropriated for Swain County as part of the National Park Service budget — but both times it failed to actually reach Swain County. In 2011, the payment was rescinded after being caught up in an across-the-board clamp down on earmarks. So far in 2012, the National Park Service is refusing to release it, citing bureaucratic procedures that it wants followed.
For 2013, the payment could still make it in Congress’ budget even though it didn’t show up in the president’s. The president’s office has signed on in theory to support the funding even though it was somehow left out of its own budget document.
“I have been working closely with the administration to resolve this issue swiftly as well as release the $4 million in already-appropriated fiscal year 2012 funding currently sitting in the National Park Service’s account,” Shuler said.
But, Shuler is a lame duck now, having announced his retirement at the end of this year.
Shuler was perhaps one of the best advocates for the cash settlement Swain could hope for — at least in his willingness to expend political capital trying to land the appropriations each year. Growing up in Swain County, Shuler was unavoidably immersed in the raging battle over the road that hung over the county like a black cloud for so many decades.
Now, it will be up to his predecessor to carry the torch for Swain or not.
The Democrat running for Shuler’s seat, Hayden Rogers, said he supports the cash settlement and would fight for the annual appropriations as Shuler has.
“If elected, I will work to ensure that the remaining funding owed to Swain County is delivered as promised,” Rogers said in a written statement.
Rogers, who grew up in neighboring Graham County, served for six years as Shuler’s chief of staff, and is likely well versed in the political maneuvering behind the cash settlement appropriations.
The leading Republican candidate for Shuler’s seat, Mark Meadows, said it is a sad state of affairs indeed.
“We have an obligation we agreed to many, many, many years ago that wasn’t fulfilled and so we did another agreement and now we are not fulfilling that. At some point, we have to be good to our word,” Meadows said.
But, Meadows questioned how genuine it was for Shuler to lead Swain County to believe that he could land these appropriations each year in the first place.
“A current Congress can’t really obligate a future Congress to appropriations and therein lies the problem with the agreement,” Meadows said.
Meadows said it is unfortunate the cash settlement has fallen victim to the earmark ban, even though in principle the ban on earmarks was necessary to rein in federal spending and pork. But, it begs the question how Rogers plans to carry the torch.
“For Hayden (Rogers) to say he is going to continue to fight for that when we have an earmark ban, that is problematic,” Meadows said. “It is like saying ‘I’ll do my very best.’”
Meadows said Rogers, as Shuler’s right hand man, had his chance and didn’t perform. At this point, a strategy of meting out annual line item appropriations will continue to be difficult. A better strategy may be to get a larger, one-time budget allocation.
Meadows still faces a special primary election run-off July 17 against fellow Republican Vance Patterson to decide who will ultimately advance to face Rogers in November.
Shuler and Swain County leaders hold out hope they can convince the National Park Service to release the $4 million that was appropriated in 2012 budget. Specifically, it was included in the National Park Service’s construction budget, a total of some $159 million.
But, the park service claims it needs specific authorization — special language spelling out that $4 million should be handed over to Swain County.
When it comes to the rest of the $154 million construction budget, the passage of the appropriations bill itself counts as authorization, according to Jeffrey Olson, a spokesperson for the park service in D.C.
But as for the $4 million cash settlement contained in that same construction budget, simply passing the appropriations bill doesn’t cut it, Olson said. For that one particular line item out of everything else in the $159 million construction budget, the park service wants special language passed by Congress saying they really meant for the money to be spent that way.
“As I see it this as a problem with Washington, D.C.,” Meadows said. “You have money both people acknowledge was probably put in there for Swain County, and now we can’t release it because it doesn’t have the proper authorization.”
The fate of the $4 million at this point isn’t clear. The park service can’t spend it on anything else. If the money isn’t turned over to Swain County, the park service would give it back unspent to the federal government’s treasury.
Meanwhile, those who never stopped fighting for the road — and were opposed to the idea of a cash settlement in lieu of building it — have been quick to chime in with an “I told you so.”
“I never thought we would get the money to start with,” said David Monteith, a Swain County commissioner who was for the road and against the cash settlement.
Monteith believes the cash settlement was a sell out. He wanted to keep fighting for the road, hoping that eventually one day it would get built. By signing the cash settlement, the county gave up its claim to the road in exchange for cash — but it is contingent on the federal budget process and comes with no guarantee.
“It’s ‘if and when’ they want to release the money. That’s pure stupid,” Monteith said.
Of course, there was a similar caveat in the original agreement by the federal government promising to rebuild the road it had flooded. The government promised to rebuild the road “if and when” Congress appropriated the money to do so. The nation was in the throes of WWII, so it seemed reasonable to give a war-embroiled nation a little wiggle room on building back a flooded road in remote Appalachia. Seventy years was obviously more wiggle room than the people of Swain County expected, however.
The latest double-cross by the National Park Service is par for the course, according to Mike Clampitt, a Swain County resident who also sided with the “build the road” camp.
“Again we have an empty broken promise to the people of Swain County by the federal government,” Clampitt said. “I am not surprised that there are these complications getting the money to the people of Swain County because of quote ‘red tape.’ It is insult to injury.”
Swain County leaders have been hoping Shuler could fix the hang up with the National Park Service. So far, they’ve not waded into the bureaucratic quagmire to demand that NPS release the money and instead let Shuler do the heavy lifting. Clampitt said they should be more proactive at this point.
While Swain County fights to secure the rest of the $52 million cash settlement its owed by the federal government for the North Shore Road, the $12.8 million already in the bank is generating hundreds of thousands in interest every year.
Since the initial payment of $12.8 million to Swain County in 2010, it has made nearly $1.5 million in interest.
The cash settlement money is held in a trust fund managed by the N.C. Treasury Department. Every year, the state remits a portion of the accumulated interest to the county. The principle itself is safeguarded, and can only be tapped if two-thirds of Swain’s registered voters agree to do so in a special vote, per the terms of the trust fund.
So far, Swain has gotten $150,000 of the interest generated on the account. Even though the actual interest earned on the fund is much higher, some has been reserved as a cushion, intended to safeguard the principle $12.8 million.
Should interest rates take a dive, or even post a lost, the cushion that has been held back should prevent an erosion of that principle sum from dipping below the $12.8 million.
The fund currently stands at just over $14 million, according to the state treasurer’s office. Now that a sizeable cushion has been built up, Swain can expect to see more interest flowing to it each year and less held back. This year, the county could expect as much as $500,000.
How to spend the money is ultimately up to the county commissioners. The current board of commissioners don’t want to merely dump the money into the county’s general budget, but instead want to see it go toward special projects, so the public can see the good the money is doing, according to County Manager Kevin King.
“They didn’t want to see any of the money going to the operational budget because it gets lost in the shuffle,” King said. “We want to be able to identify every penny that goes to every project.”
Likewise, the commissioners are hesitant to use the money for a big-ticket item, like a new school. Dedicating the money to that kind of recurring expense — such as annual debt payments on the same large construction project year in and year out — would tie up the cash settlement interest on a single project for the foreseeable future, King said. Instead, the county is interested in special projects that otherwise would be taxing, if not impossible, for the county to undertake.
So far, the county has spent its cash settlement interest money on public restrooms at a downtown riverside park in Bryson City, a series of historical monuments, a new trash truck and renovation of the historical county courthouse for a museum.
The commissioners have dedicated $50,000 so far for a cultural heritage museum being constructed inside the iconic Swain County courthouse, and have pledged another $100,000 from future interest payments.
The National Park Service is refusing to let go of a $4 million payment Swain County is due as part of the cash settlement over the North Shore Road.
The federal government is supposed to pay Swain County $4 million a year over the next decade — a deal intended to finally compensate the county for a road that was flooded when Fontana Lake was built in the 1940s.
Swain has had little luck getting the government to make good on the pledge, however.
Swain didn’t get the money in 2011 after Congress clamped down on earmarks. This year, the money was supposedly included in the National Park Service’s construction budget by both the President and Congress, but the park service isn’t releasing the money.
“It is currently sitting in the National Park Service’s account,” said Whitney Mitchell, spokesperson for Congressman Heath Shuler, D-Waynesville. “It is unclear why the National Park Service has delayed transferring the $4 million payment out of their budget into the Swain County trust fund.”
The National Park Service claims it doesn’t have proper authorization to make the payment.
Simply including the money in its budget isn’t enough. The park service claims it needs specific authorization — spelling out that $4 million should be handed over to Swain County — included as part of the budget bill that was passed by Congress last December.
“While the funding was included in the final bill, the necessary language was specifically excluded,” said Jeffrey Olson, a spokesperson for the National Park Service in Washington, D.C.
Without that language, it won’t turn over the money, Olson said.
“Everybody agrees the $4 million for Swain County was passed,” said Leonard Winchester, a Swain County resident who has been working on behalf of the cash settlement for years. “Why this money can’t be turned loose because someone at Department of Interior said they didn’t have the proper authorization, I don’t know.”
Shuler’s office, meanwhile, claims the money included in the budget carries clear instructions to be handed over to Swain County.
Olson was unable to address the apparent stalemate, simply reiterating that the park service lacked authorization to release the money.
“That is the end of the question for us,” Olson said. “If a member of Congress says ‘Yes it is,’ and we say, ‘We don’t have it,’ that’s as far as I can take it. It either shows up in the language of the appropriation bill or it is not there.”
Specifically, the money for the cash settlement was included as part of the National Park Service’s construction budget, a total of some $159 million. That’s something even Olson agrees with.
But where he differs is whether the $4 million for the cash settlement needs its own authorization before it can be released.
Olson said everything else in the construction budget carried the necessary authorization. That authorization usually comes in the form of an itemized list of approved construction projects.
“When we have a construction budget, it often includes a list of projects. It is my understanding that list of projects is our authorization,” Olson said.
However, that itemized list doesn’t show up in the appropriation bill passed by Congress in December. The list was left out of the final bill.
“Where it went astray was they didn’t keep the list. It just devolved to a single number,” Winchester said. “Whatever wording the National Park Service thought ought to be there went away, and they ended up with a lump sum number for their construction budget.”
That begs the question: Can the National Park Service not spend any of the $159 million in its construction budget this fiscal year because it too lacks authorization due to the absence of the list? Or is Swain’s cash settlement is being held to a double standard?
Olson said the National Park Service doesn’t need specific authorization for the rest of its construction budget. When it comes to the rest of the $154 million construction budget, the passage of the appropriations bill itself counts as authorization even though the list was left out of the final budget bill, Olson said.
“There is no requirement that this list of construction projects be attached to the appropriations bill Congress passes and the President signs before we proceed with the projects,” Olson said.
But as for the $4 million cash settlement contained in that same construction budget? The park service wants Congress to pass specific language saying its OK to pay it out.
Apparently, even though the money was included in the park service construction budget, the park service isn’t willing to consider the cash settlement as “construction.”
Leonard points out that the cash settlement is a substitute for constructing the road itself, and so in a way, it is kind of construction — since it is “in lieu of” construction.
At one point, there was indeed an itemized park service construction list circulated in budget talks. The cash settlement was allegedly on the list. The list was even referenced in budget committee documents as the “go-to” list for what the National Park Service should spend its construction budget on.
“The amount provided will fully fund the NPS construction projects as prioritized by the Service pursuant to the Administration’s revised request list provided to the Committees on June 24, 2011,” according to a draft version of the National Park Service appropriation bill.
Olson didn’t want to talk about what type of authorization the National Park Service needs at this point to fix the situation.
“Those are conversations that happen between a congressman and the National Park Service,” Olson said. “We are not going to use your newspaper as a way to communicate with Swain County.”
However, that’s exactly the question that has stymied everyone working to secure the cash settlement.
“Somebody, somewhere, has to know if there is something missing, what it is,” Winchester said.
Winchester has followed the labyrinthian appropriations process through Congress. He even flew to D.C. in 2010 along with a delegation from Swain County to meet with Ken Salazar, the Secretary of the Department of the Interior, to remind him of the cash settlement promise.
Winchester said it is disappointing to fight so hard, to see the money included in the budget, but to come up empty-handed.
The cash settlement was intended to resolve a festering decades-old dispute between Swain County and the federal government over a road flooded during the construction of Fontana Lake back in the 1940s. At the time, the government promised to rebuild the road one day, but never did.
Nearly seven decades later, the government instead promised to make good on its broken promise by paying Swain the cash value of the road that was destroyed — a value pegged at $52 million.
The money was supposed to be appropriated by Congress to the tune of $4 million a year until the obligation was settled. But after an initial down payment of $12.8 million in 2010, Swain hasn’t seen a penny since.
The cash settlement was supposed to make right on the long-standing obligation to Swain County citizens. The federal government signed a memorandum of understanding amid great pomp and circumstance in 2010, a ceremony attended by some 200 people at Swain County High School, pledging to reimburse Swain County for the road.
If it’s authorization the park service wants in order to release the $4 million included in this year’s budget, how about that memorandum of understanding, signed by the Secretary of the Department of Interior Ken Salazar, promising to pay it? Winchester said that ought to be good enough.
“Each individual subsequent appropriation does not require a new additional authorization,” Winchester said. “These joint acts by the federal government and by Congress constitute the authorization, recognition, expectation and plan for future payments, if and when they are appropriated.”
Congressman Shuler has been a champion of the cash settlement. He grew up in Swain County and rode his football stardom there and at nearby Tennessee to his congressional seat in Washington.
Shuler had to lobby for the appropriation on two fronts. He worked closely with the Obama Administration to get the $4 million payment included in the National Park Service budget this year, Mitchell said.
He also had to shepherd the line item through Congress to make sure it remained intact during the budget process.
“Rep. Shuler worked closely with House leadership to ensure the $4 million annual payment the President promised and requested as part of the North Shore Road settlement was fully funded in the 2012 Appropriations bill,” Mitchell said.
Shuler is remaining optimistic.
“Rep. Shuler fully expects the National Park Service to fulfill the President’s request and uphold the federal government’s legally-binding obligation to Swain County by making the payment before the end of this year,” Mitchell said.
Mitchell pointed out that the government signed a “legally-binding” memorandum with Swain County.
Even with an ally in Shuler fighting for the cause, the cash settlement seems to have stalled out almost as soon as it was promised. Shuler is now serving his last year in office, however, having announced this winter he would not seek re-election.
Whether Shuler’s successor will fight with the same vigor for the settlement leaves the future of the payments in even greater limbo.
Shuler’s office says he will impress on whoever comes along after him to carry the torch.
“Our office will fully brief the incoming 11th District representative to ensure they have the information and resources they need to follow in Rep. Shuler’s footsteps and continue his leadership and hard-fought efforts on this front,” Mitchell said.
For now, Swain County leaders haven’t gotten actively involved in hunting down the $4 million that allegedly has their name on it somewhere in the National Park Service budget. Instead, they were counting on Shuler to fight that battle for them.
“The money is in the account ready to go but nobody is willing to sign the check,” Swain County Manager Kevin King said, proffering his version of the cash settlement’s status.
But Swain County commissioners might need to start rattling some cages.
“We might have to at some point in the future,” King said.
The so-called “Road to Nowhere” is a source of bitter resentment for the people of Swain County. Before it was flooded, the road traveled for more than 30 miles from Bryson City to Tennessee. The route was dotted with homes, farms, schools, churches, cemeteries and general stores of numerous Appalachian settlements going back generations.
When Fontana dam was built in the 1940s, what wasn’t consumed by the rising water of Fontana Lake was folded into the Great Smoky Mountains National Park. Hundreds of people were forced to leave their homes forever.
The federal government promised in writing at the time to rebuild the road, but after pecking away at a dozen or so miles in the 1950s and 1960s, it was abandon due to the exorbitant costs and environmental hurdles of building the remaining 20 or so miles.
It became a symbol of Washington’s failure to keep promises to rural Appalachia. Swain County, after all, had paid to build the road in the first place — and had to keep paying off the construction debt for years after the road didn’t exist anymore.
A deep-seated distrust and disillusionment set in over the intervening decades.
After a decades-long battle to get it, the first interest payments on Swain County’s North Shore Road settlement are finally starting to trickle in.
Now to figure out what to do with it.
Of the $52 million payout, given to the county by the federal government as a consolation prize for a road that was promised in the 1940s but never built, $12.8 million is already in the bank. There’s another $4 million that’s promised this year — it’s in President Obama’s budget, anyway — although it could be a while until it finally makes its way into the county’s hands.
But after the long and arduous negotiations that led to the settlement, and speculation from all sides over what should be done with the money, there is, as yet, no plan for the interest that’s accruing on the settlement cash that’s already in the bank.
When an agreement was reached last summer, the idea of a steering committee peopled by community members was bandied about, with the intent of directing the county on the best use of the money. County Manager Kevin King said it’s a concept that has been mentioned in the intervening year by a few commissioners and community members, but no one’s formally proposed it in the commissioners’ twice-monthly meetings, so the cash is still sitting there. No committee has been formed, either.
But, said King, there’s not much money to spend yet, anyway. He estimates the fund will make around $200,000 in interest this fiscal year, which will be paid out at the end of June.
“Of course right now, with the economy, it's not drawing a lot of money,” said King. “It'll take a while to increase to the point at where they could do something with it.”
The funds are held in trust for the county by the North Carolina Department of the Treasurer, with only the interest remitted to the county each year. This year the interest has averaged less than 2 percent.
“If it was making more interest, it would probably be further on the front burner,” said Leonard Winchester.
Winchester is the chair of a group called Citizens for the Economic Future of Swain County, and he’s been instrumental in getting the money secured for the county and wants to see citizen input on how it is spent.
“I am in favor of a committee doing it. It's just that there's not that much interest there to be dealt with and so it's not been a hot topic,” Winchester said.
Commissioner Robert White concurs. He’s one of the commissioners in favor of a citizens group.
“We haven't accrued enough yet, but I assure you what I would love to see would be a citizen committee to look at this particular situation,” said White.
His vision is that the money would be used for special projects in the county, things that could never be done otherwise.
“My vision for that North Shore money is once we get enough accumulated, I want to see things that are going to improve Swain County in whatever manner that it may take. You also really have to look and see about things that could really step the county up another level,” said White.
A small portion of the interest money has already been spent, going to erect five commemorative granite pedestals in front of the county’s administration building, one detailing the North Shore Road saga. The project cost around $20,000, with $7,500 covered by a National Heritage Area grant and the rest of the bill footed by the interest money.
Nothing bigger, however, has been proffered as a potential project. King said he’s in no hurry to rush a decision on the funds, especially in this economy.
“At this point, we're just trying to let this grow,” said King. “And with the economy like it is, it's almost impossible to bank on any investments right now.”
The former CEO of Haywood Regional Medical Center will get $150,000 from the hospital after settling a lawsuit claiming he was wrongfully fired.
David Rice was at the helm during a near meltdown of the hospital in 2008. At the time, Rice publicly said he resigned, but in a lawsuit filed two years later he claims he was forced out.
Settling the suit was a business decision, according to the current CEO Mike Poore.
“We felt that it was best not to spend any more money on attorneys and complete that chapter,” Poore said.
In his suit, Rice demanded 20 months of his salary, back pay for accrued vacation and sick time, bonuses he had been promised and lost benefits. While Rice’s salary was $199,000, benefits included a car and health insurance, extra bonuses and other perks.
Although Rice left in the spring of 2008, he claims the hospital board verbally promised him his salary and benefits through the end of 2009 when his contract expired. In exchange, they asked him to publicly announce that he resigned instead of labeling it a termination.
Rice claims he was tricked, however, and that the hospital board had no intention of keeping its verbal promise. Rice had been the CEO for 15 years.
Many in the community blamed Rice for the hospital crisis back in 2008. The hospital failed federal inspections causing it to lose its Medicare and Medicaid status, triggering an exodus of private insurers as well. The hospital essentially shut its doors for five months except for the most essential services.
Rice kept the brewing crisis a secret, attempting to quietly fix the underlying issues, but it eventually imploded. Observers believe that Rice’s failure to address the citations early on led inspectors to make an example out of Haywood, pointing to other hospitals with more egregious problems that didn’t get shut down.
Regardless, hospital board members and community leaders said they were blindsided and condemned Rice for failing to keep them in the loop.
The hospital leveled a countersuit against Rice. Even though the hospital maintained that Rice resigned, the countersuit claimed there was good cause to fire Rice had that not been the case.
The countersuit claims Rice failed to “communicate with the board, medical staff and administration in an effective and timely manner, or otherwise concealing and distorting material facts and circumstances concerning the operation and affairs of HRMC.”
In the countersuit, the hospital claimed Rice’s actions leading to decertification caused “significant loss of HRMCs patients and revenue placing the future operation of the hospital in jeopardy.”
The hospital shutdown had major economic consequences for the community. For starters, the hospital burned through more than $10 million in reserves it had built up over the years.
Doctors lost business when patients went elsewhere. Many of the nurses and staff were put on temporary unemployment. The county saw a substantial increase in ambulance costs for ferrying patients to hospitals in Asheville or Sylva. Patient numbers still have not fully returned to normal.
Last month, a group of emergency room doctors was awarded $1.6 million in a lawsuit against the hospital dating back to Rice’s reign. Haywood Emergency Physicians were wrongfully ousted by the hospital in 2006 and replaced with a corporate physician staffing company. Rice helped orchestrate HEP’s replacement because he saw them as a threat to his insular power structure, according to the doctors involved.
Settling the suit with Rice marks the final chapter in the saga, allowing the hospital to move forward with its mission, Poore said.
“We are moving forward and focusing on our hospital’s mission of providing compassionate, quality and cost-effective healthcare,” Poore said.
The two sides went to mediation in November. The only ones present were Poore, Rice and his wife, and their respective attorneys.
While out-of-court settlements are not publicly filed in the court record, Poore elected to share the information in the interest of transparency.