Here comes the Clown Car again | Eastern North Carolina Now

    Publisher's Note: This article originally appeared in the Beaufort Observer.

    "Basically," does Al Klemm know what he's talking about?

    During the Public Hearing on the jail financing there was a "side issue" addressed that the voters in Beaufort County should take note of. It shows, once again, that this lame duck one-vote majority on the County Commission has not done its homework and raises serious questions about whether they really know what they are doing.

    Here's how the ball started rolling:



    Here's the background. Article V, Section 4 of the N. C. Constitution mandates that any increase in the county debt that is supported by a pledge of the "faith and credit" of the county must be approved by the voters in a popular referendum. The full faith and credit is a legal term meaning the taxing authority of the county.

    But in recent years the Democrat leadership in the Legislature, intent on borrowing money that they knew the voters would never approve, enacted several "exceptions" to the referendum requirement in Article V. Those exceptions have been tested in prior appellant courts but changes in the composition of the N. C. Supreme Court have raised questions about just how firm those precedents actually are.

    Most of the exceptions were originally upheld by the courts because they provided for servicing the new debt with some other means than raising property taxes. But one such provision does appear to allow that. However, there are legal scholars that question whether the existing precedents on NCGS § 160A-20 are still valid, both because of later rulings and changes in the N. C. Supreme Court. So the issue becomes whether Beaufort's case is distinguishable from the previous cases. The only way to actually determine that is to test the statute as applied to a different factual basis.

    For these highly technical reason, Commissioner Hood Richardson proffered a question at the beginning of the Public Hearing on July 7 asking: "under what legal authority are you (the Gang of Four) proposing to incur this debt?" In the video below you can see that the County Attorney was not prepared to give a definitive legal opinion on the question. So Commissioner Al Klemm offered one. He did so by purporting to read from what he said was a letter from the other County Attorney David Francisco. Klemm cited NCGS 160A-20 as the authorizing statute and the case of Wayne County Citizens v. Wayne County Board of Commissioners. 328 NC 24 (1991).

    Here's Mr. Klemm pronouncement of the legal basis for their proposed financing of this project:



    Interestingly, § 160A-20 says this about the Public Hearing: "Limit of Security. - No deficiency judgment may be rendered against any unit of local government in any action for breach of a contractual obligation authorized by this section. The taxing power of a unit of local government is not and may not be pledged directly or indirectly to secure any moneys due under a contract authorized by this section. (emphasis added). Moreover, § 160A-20 also provides: "Before entering into a contract under this section involving real property, a unit of local government shall hold a public hearing on the contract." (emphasis added). You note in the video above that the County Manager says specifically that this public hearing is not on a loan contract.

    Thus, it does not take a Wall Street lawyer to see that Beaufort County is headed into a legal minefield. At the public hearing it was documented that no "contract" exists. So the public was not afforded an opportunity to comment "on the contract." And presumably there is no way the proposed debt can be serviced without using the taxing authority of the County.

    And remember, the controlling case Mr. Klemm cites is nearly 25 years old. As best we can tell, the case has few citations applying it to more recent cases. And much has changed since then, not the least of which is the will of the Legislature which just outlawed such contracts for state government building projects.

    And there are other legal technicalities involved, which we can be assured by the time the gaggle of lawyers hauling in buckets of legal fees are finished with this matter it will become much more complicated than we have imagined here.

    So what you have here is an obvious violation of the statute cited by Mr. Klemm. It clearly requires a public hearing on the loan contact, and they clearly say this is not a public hearing on the loan contract. No such contract exists.

    Stay tuned. With this bunch that enters into multi-million dollars contracts that have not been read by their attorney nor themselves you can just about count on another train wreck for the taxpayers of Beaufort County and a bonanza for the lawyers.

    Bless us and save us.

    But remember: We get the quality of government we deserve.