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Trying to get most out of North Shore funds

Swain County finally received the final $32.8 million payment from the federal government for the North Shore settlement. Swain County finally received the final $32.8 million payment from the federal government for the North Shore settlement.

Now that Swain County has finally received the entire $52 million from the federal government for the North Shore Road settlement agreement, county commissioners want to make sure they’re making the most of that money. 

The $52 million, which was awarded to the county after the federal government didn’t keep its promise to rebuild the road that was flooded during the 1940s in order to build Fontana Dam, is sitting in an account in Raleigh through the North Carolina Treasurer’s Office. 

“One of the things some people don’t understand is that the Swain County government doesn’t have $52 million sitting in the bank across the street — there’s complications in getting it,” said Swain Commission Chairman Ben Bushyhead. 

The law established with Senate Bill 1646 only allows Swain County to draw on the interest accrued in the fund each year while the principal can be touched only if county voters overwhelmingly approved a countywide referendum specifying a certain purpose. 

Before the county received the final payment of $38.2 million last summer, the account was earning only $200,000 to $300,000 in interest a year, but with the full amount now sitting in the fund, commissioners anticipate the interest to be in the millions. However, Bushyhead said a new interpretation of the law could keep the county from drawing on all the interest each year. 

“The new state treasurer and his staff are interpreting the law differently than the previous treasurer,” he said. 

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That interpretation is twofold — that the county can only invest its fund in a Bond Index Fund or the Short Term Investment and that the county can draw down on the interest each fiscal year but the amount can’t exceed the amount drawn in the last fiscal year. Now that the fund has grown from $13.8 million to $52 million, the interpretation of the law would keep the county stuck at only drawing around $300,000 a year. 

“And then they’re taking any interest left over and putting it in the principal and we can’t touch that,” Bushyhead said. 

That process is not going to help Swain County tackle its growing list of infrastructure needs, which is why commissioners recently passed a resolution requesting that the North Carolina General Assembly modify SB 1646 to clarify the interpretation and allow the Swain County to earn more interest and draw on all the interest each year. 

“We think it’s going to help us for two reasons — if we get it changed the way we want it we can invest the principal in the state’s Equity Investment Fund and right now we can’t,” Bushyhead said. 

Bushyhead said the funds the county can utilize — the BIF and STI — are not making the county much money. At best, it’s getting a 2 percent return when the EIF is making about 6 percent. 

“As the government of Swain County in order to do business we need to borrow money to make some things happen and we’re paying around 3.75 to 4 percent in interest on loans, so we’re basically losing money because we’re paying out more than we’re getting back in interest,” Bushyhead said. 

According to the resolution, Senate Bill 1646 establishes the methodology and accountability of the State Treasurer to manage and distribute funds to Swain County on an ongoing basis and details the amount of interest funds that can be drawn down each year. Specifically, the law states, “disbursements to Swain County under this subsection in any fiscal year shall not exceed the total interest and investment income earned by the Fund in that fiscal year.”

Swain commissioners are asking the state to allow the county to use the EIF like other counties and entities with similar funds are allowed to do and also to draw all the interest each year so as not to lose it to the principal that can’t be touched. 

In discussions with Sen. Jim Davis, R-Franklin, Bushyhead said it should have a good chance in passing since it’s only to clarify the language of the law that applies to only Swain County anyway. 

The county’s North Shore fund was started in 2011 after commissioners received the first $12.8 million payment from the Department of Interior. To date, the interest drawn annually has been used for projects the commissioners have deemed beneficial for the entire county, including the heritage museum located in the historic courthouse, purchasing new ambulances and patrol cars for the sheriff’s office as well as other large capital needs. 

Commissioners are now working on budget planning for 2019-20. They will only be able to draw around $300,000 in interest this year but are hoping the law will change and allow a larger sum of money for the 2020-21 budget year. 

When it comes to how the county plans to spend the additional income in the future, Bushyhead said the county is beginning a strategic planning process to see what the county’s needs are for the next five to 10 years. That process, which will include a lot of public input, will determine how the county should spend the interest money from the North Shore fund. 

Swain County voters approved an additional quarter-cent sales tax in November that the commissioners have earmarked for Swain County Schools’ capital needs, but Bushyhead said the schools will still need more funds to be able to complete everything on its priority list. 

The descendants of the Swain families that were forced off their homesteads when the North Shore was flooded would also like to see some of the funds put toward maintaining the many cemeteries in the area that can now only be reached by boat. 

Because a majority of Swain County is occupied by national forest and national park and owned by the federal government, the county has a low tax base and a growing list of critical needs. The hope is that the North Shore funds will help the county prosper in perpetuity. 

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