Opinion: Carolina Beat

CJ Editorial: So Long, Rural Center

A version of this editorial appeared in the August 2013 print edition of Carolina Journal:

For more than a quarter-century, the North Carolina Rural Economic Development Center and its President Billy Ray Hall seemed invincible. Every year, the General Assembly gave the nonprofit millions of dollars that Hall — acting like a ward heeler in a corrupt political machine — doled out to benefit politically connected developers and local officials across the state. In return, he expected, and typically received, their support.

In mid-July, Hall’s shakedown operation came to a sudden demise. A scathing state audit appeared a few weeks after a devastating series of investigative reports in the News & Observer. Hall resigned less than 48 hours after the audit went public. Days later, the General Assembly enacted a budget cutting off state subsidies to the Rural Center, shifting most of its functions and funding stream to a new Division of Rural Economic Development in the Department of Commerce. Before signing the budget, Gov. Pat McCrory ordered the center to stop spending any state money and suggested that the state may try to seize funds from the center’s bank accounts.

The waste, fraud, and abuse that permeated nearly everything the Rural Center touched should not have been news to any regular reader of Carolina Journal. An investigative report in the August/September 1998 issue of CJ by Don Carrington and Andrew Cline previewed many of the outrages unearthed in the audit and the N&O stories, including: excessive salaries for senior staff; inflated claims of jobs created by center grants; lax oversight of projects funded by the center; and a board of directors that acted as a rubber stamp for Hall and his associates.

Since then, CJ has reported that the Rural Center gave a $500,000 grant to the infamous Randy Parton Theatre in Roanoke Rapids; collected $3.4 million from Golden LEAF to underwrite a loan program for high-tech start-ups that were too risky to get credit from private lenders; and offered a $480,000 grant to a Canadian steel company that was hoping to relocate in Sanford, where it would have competed with a local steel fabricator that had taken no government subsidies.

State Auditor Beth Wood used her access to financial records to learn that the Rural Center had accumulated $20 million in interest by socking away money in its private bank account rather than giving it to grantees. Center officials claim the interest is the property of the center, rather than a public asset — a point of contention with the governor, the state Commerce Department, and legislative leaders.

Wood also discovered that the center’s board had carved out a $241,000 severance package Hall could take whenever he chose to leave. Thanks to pressure from the governor, the General Assembly, and the media, Hall did not receive the severance.

The Rural Center flourished because misguided people believed government should meddle directly in private business decisions. Those people are still around, and it’s up to those of us who believe in free markets rather than government planning to keep them in line.