Why has Wilmington’s savings dropped by $14 million?

Jan. 03--WILMINGTON -- The city's fund balance is maintained as a rainy day account, intended to help protect from storms -- of natural causes or otherwise -- that blow in unexpectedly.

But even last September's Hurricane Florence proved to a costly storm to weather.

The fund balance, which is essentially a savings account, has taken a hit since the storm. At the start of the 2018-19 fiscal year on July 1, it sat at $36.8 million. Since the storm, multiple funding appropriations from the balance and other sources have reached more than $22 million -- primarily for storm debris removal. A recent legal settlement with Johnny Small, a Wilmington man released from prison after serving nearly three decades for a 1988 murder, has also pulled money from the fund.

Fortunately, it is times like these that keeping a healthy balance is for.

"The reason to maintain a high fund balance is for these instances of a hurricane or an emergency, so we aren't jeopardizing paying our other vendors" said Jennifer Maready, the city's finance director.

Wilmington is required by law to keep it above a certain percentage of its operating budget or face a warning from the N.C. Local Government Commission (LGC). In November, Carolina Beach received a warning for letting its fund balance decline.

Last year, confident in its saving practices and balance, the city increased its fund balance range from 15-20 percent of its fiscal year operating budget to 20-25 percent.

With the multiple appropriations taking $11 million from the unassigned fund balance for Florence so far, that brought the fund balance to $24.970 million -- still within the 20-25 percent range.

As much as 75 percent of the money spent on debris removal and other qualifying expenses will likely be be reimbursed by the Federal Emergency Management Agency (FEMA), Maready said.

Councilman Charlie Rivenbark advocated for maintaining a strong fund balance during last summer's budget deliberations. Following council's final Florence appropriation in December, he said the storm was an unfortunate reminder of why the fund balance is important.

"It is a good lesson for us all," Rivenbark said. "When residents see that money sitting around when we go approving a half-cent increase on taxes, this is the reason why."

Settlement payout

But the city scheduled another withdrawal at the end of December, when it announced it would pay out a $7 million settlement to Small. His life sentence was vacated by a judge in 2016, finding that evidence clearing Small was withheld from the defense and witnesses for the state were coerced into giving false testimony.

The settlement stemmed from a pending lawsuit Small filed against the city, former Wilmington Police Department detective J.J. Lightner, and five other officers, in which Small requested a jury trial for alleged wrongful conviction. The settlement, which will be taken from the fund balance, will be paid out across three years, with the first $3 million set for the fiscal year 2019 balance.

Maready said the city is only expected to cover $2.3 million of the first installment, with Wilmington police insurance handling the rest. Another $3 million will be paid out in fiscal 2020 and the final $1 million the following year.

With the $2.3 million deduction, the unassigned fund balance now sits at $22.67 million -- just under 20 percent of the city's adjusted operating budget.

But Maready said this isn't cause for alarm.

With reimbursements expected from FEMA by the end of the fiscal year on June 30, she said that will keep the city within a comfortable range. There is also the option of looking at cutting back on other expenditures to save money, either in the current 2019 budget or in future discussions on the 2019-20 fiscal year budget.

"We are still looking solid," Maready said.

Reporter Hunter Ingram can be reached at 910-343-2327 or Hunter.Ingram@StarNewsOnline.com.

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