News: CJ Exclusives

Stanly College Restaurant Raises Ethics Concerns

Critics: proposal to have culinary school run eatery could violate law

ALBEMARLE — A plan by prominent Stanly County government and private institutions to place a profit-making community college culinary arts program in a vacant building faces scrutiny, as critics say the proposal may violate state law.

According to an inquiry filed with the North Carolina Ethics Commission, Stanly Community College wants the city of Albemarle to purchase the former Big Al’s restaurant in Albemarle from Stanly Heritage Properties, then lease it to the private Stanly Community College Foundation. The inquiry suggests that the deal runs afoul of the state Umstead Act, prohibiting state agencies from establishing commercial operations that compete directly with private businesses.

The purchase and lease of the restaurant would erase Stanly Heritage Properties’ debt on the property, which has had trouble keeping tenants. Stanly Heritage Properties is a subsidiary of Uwharrie Bank. Stanly Community College Board of Trustees chairman Nadine Bowers, and members Thomas Hearne, Joe Brooks, James Nance, and Todd Swaringen are directors of Uwharrie Bank, its parent corporation Uwharrie Capital Corp., or both.

“My local community college was trying to find a way around the Umstead [Act] that would basically allow them to open up a restaurant and catering business to compete against privately owned restaurants and catering businesses” in downtown Albemarle, said state Rep. Justin Burr, R-Stanly.

Burr, whose mother is a trustee of the college, said he was aware of the Ethics Commission inquiry.

The Umstead Act declares it unlawful for state entities “to engage directly or indirectly in the sale of goods, wares or merchandise in competition with citizens of the state, or to engage in the operation of restaurants, cafeterias or other eating places in any building owned by or leased in the name of the state.”

Stanly Community College “even came up with a business plan, listed out local caterers that they would be competing with, and they had a strategy of basically taking business away from the private sector,” Burr said. “I just have a fundamental problem with government using … our tax dollars … to compete with privately owned businesses.”

Burr offered an amendment to the state budget bill that passed 80-34 in the House preventing Stanly Community College from opening the program off campus.

The Senate budget did not include Burr’s amendment. Its fate will be decided in budget negotiations.

“I don’t know how it got gone. I’ve learned in the process of government that things move in strange and mysterious ways,” said state Sen. Tom McInnis, R-Richmond. “I did express my lack of enthusiasm for that issue” to some House members.

“We don’t need to be micromanaging the Stanly County Community College Foundation or the college,” Albemarle, or the Stanly County Board of Commissioners from Raleigh, McInnis said. If the deal goes through and voters don’t like it, they can remove their elected officials, he said.

North Carolina State Board of Community Colleges spokeswoman Megen Hoenk said the board approved the Stanly Community College culinary arts program at its March meeting. It is one of 25 such programs now approved. Hoenk said the state board does not track whether those programs are on campus or off campus, nor does it evaluate them for compliance with the Umstead Act.

“The problem at the community college, and the reason that being on that board was so frustrating for me, is that nothing was ever done in open meetings. There were clearly meetings between meetings that not everyone was invited,” said Karen Mock Phillips, who did not seek reappointment after her first term on the Stanly Community College Board of Trustees expired June 30.

The trustees voted to approve the concept of a culinary arts associate degree program at their Dec. 11, 2014, meeting. Phillips said she was “very frustrated” upon learning of the proposal to put the program in the Big Al’s building.

“I’m on the Facilities Committee, so I should not have learned about that by listening to the local news radio station. But that’s where I learned of it,” Phillips said. “That’s a real big problem.”

Phillips said when she began asking questions about the proposal, “each and every finance or facility committee meetings that we had scheduled after that was canceled. … They definitely wanted to keep me out of knowing what was going on.”

Another person familiar with the proposed purchase and lease who did not wish to be identified for fear of retaliation corroborated Phillips’ statements.

City Manager Michael Ferris downplayed Albemarle’s involvement.

“There has never been a formal proposal or even a presentation on the matter made to the City Council,” Ferris said. “There have been ideas, discussion, and comments from other entities about what the city might or could do, but none of this has come from the city.”

However, minutes from a Feb. 2 special meeting of the Stanly County Board of Commissioners at which community college President Brenda Kays presented a business plan for the culinary arts program, casts a different light.

“The City of Albemarle plans to purchase the building at a cost of $225,000 and offer utilities to the community at a reduced rate,” with the commissioners asked to allocate $300,000 to $500,000 for renovations, the minutes state.

“There’s been some talk by them that they would help with the program,” if it located in the Big Al’s building, Stanly Community College Trustee Joe Brooks said of Albemarle.

Brooks also is the registered agent for Stanly Heritage Properties. He is a director of both Uwharrie Bank and Uwharrie Capital Corp.

Asked if the bank would benefit from selling the vacant, nonrevenue-producing building to the city by getting out from under outstanding loan payments, and obtaining charitable tax deductions for donating the equity in the building, Brooks responded: “I assume so. I really don’t know how that works.”

But Brooks denies his community college and bank ties are a conflict of interest.

“It would be if there was any kind of a vote coming up, but there hasn’t been,” he said.

The county commissioners never took a vote on the proposal.

Commissioner Gene McIntyre questioned the wisdom of offering a two-year degree program that projects potential earnings of $9 per hour. And he opposes using government money to compete against the private sector.

“Some of these restaurants struggle as it is, and some of these folks have worked hard for years, and years, and years to build their businesses, and this would take some of that away,” McIntyre said.

“There’s just lots of things in the business plan that just didn’t add up,” he said. A lending institution would “throw it in the garbage,” business professionals told him after they reviewed the document.

Kays said the business plan was a preliminary draft involving one of “several scenarios.” She said it was Stanly Heritage Properties that approached the city, county, and Stanly Community College Foundation.

The college and private foundation “are two separate entities,” Kays said.

Kays said community college attorney Connie Josey consulted with Norma Houston and Frayda Bluestein, faculty members at the UNC Chapel Hill School of Government, and Shante Martin, general counsel of the North Carolina Community College System, and concluded the off-campus restaurant and catering facility would not violate the Umstead Act.

In a memorandum, Josey said the act would exempt the city and the foundation. Further, she said, the Umstead Act would exempt the culinary arts program as a “live project” because it would produce goods or services for sale that are “the normal and necessary product of learning activities of students.”

Josey also met with North Carolina Ethics Commission staff attorney Kathy Edwards, Kays said.

Josey issued a memorandum saying college trustees serving as Uwharrie Bank directors must “abstain from ‘official action’ related to the catering and banquet facility which would result in a ‘reasonably foreseeable financial benefit’ or would impair the Trustees’ ‘independence of judgment.’ ”

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.