One indebted county gets reprieve, but others around state facing financial catastrophe

North Carolina will make sure Tyrrell County won’t default on its debt, but the intervention buys just one year. 

Tyrrell County borrowed millions to build a reverse osmosis water plant and a new water tank to support its state prison in the late 2000s. But the N.C. Department of Public Safety shuttered Tyrrell Prison Work Farm in September 2019, crippling the county’s ability to pay off its debt. 

Tyrrell County has the state’s fewest residents — roughly 4,100 people live in the northeastern county between the Albemarle Sound and the Alligator River. Almost 30% of its residents earn less than the poverty line. The county is bracing for a 35% drop in its sales tax revenue and is fighting to avoid a 30% to 50% spike in its utility rates.  

The prison once accounted for about 30% of utility revenues — paying about $300,000 and consuming almost a million gallons of water a year. Now it pays some $400 a month, but the bonds are still due, County Manager David Clegg told Carolina Journal.

“Every time you open a door, another boogeyman pops out,” Clegg said. “Tyrrell County has been economically fragile for years. It just took this virus to push us off the ledge, and as if we weren’t getting kicked off the ledge, here comes the prison.”

The state plans to send $210,000 in grants to Tyrrell County within weeks. But the cash will only buy a year of financial stability. The county has only made six payments on the 40-year bonds, Clegg said. 

“That does not address the larger issue of the $3.25 million we owe on the bonds. It addresses a year,” Clegg said. “We’re happy about it, but it’s not a panacea. It’s a one-year solution.”

Politicians punted the blame for the county’s financial predicament during a Council of State meeting on Tuesday, June 2. State Treasurer Dale Folwell warned of the county’s financial peril and asked Gov. Roy Cooper to pay the bill of “unintended consequences” from closing the prison. Other members pointed to legislative inaction. 

Cooper called for a regional approach to maintaining water and sewer infrastructure. 

“So many of our rural areas and small towns simply can’t afford upgrading or acquiring water and sewer,” Cooper said at the meeting. “This goes beyond one county. It affects all of rural North Carolina.”

Folwell called upon Cooper to reopen Tyrrell’s County prison during his monthly “Ask me Anything,” also Tuesday.

“The first rule of government should be do no harm. The people of Tyrrell County have been harmed by the actions of the Cooper administration,” Folwell told Carolina Journal. 

If Tyrrell County can’t make the bond payments it will face higher costs on all outstanding debts and future borrowing, said Joe Coletti, John Locke Foundation senior fellow and an expert on fiscal and tax policy. 

“They don’t care. We’re a rounding error,” Clegg said. “These counties like Tyrrell County need more than lip service. They don’t need another study to put on the bookshelf. They need real help.”

Tyrrell County isn’t alone in its financial troubles. Local governments expect sales tax revenue to shrink by 20% to 30%, as well as dramatic drop in hotel occupancy fees. They fear the coronavirus-induced recession will ravage property-tax values, said Scott Mooneyham, a lobbyist for the N.C. League of Municipalities.

Local governments are also losing money from utility nonpayments during the state of emergency. Mooneyham has heard from areas struggling against a 300% increase in nonpayments. 

“These are all potentially very significant problems for municipal budgets,” Mooneyham said. “All those police you see out on the streets right now? What’s going to pay for that? We don’t think the state is taking these issues seriously enough right now. … At some point these numbers are going to have real effects out there in the world.”