2005 Rural Partners Forum
Remarks by Jeffrey Morse, Manager of Valdese
I am probably one of the oldest rats left in the barn managing small towns. I have been a small town manager for 31 years, started out in Virginia and have been blessed to be at Valdese for almost 26 years. I'm going to give you my summary first. There is one common theme that comes across to me as a professional manager and that is unless you have dedicated, qualified good leadership, elected officials, you can not accomplish anything. That's the key to the whole thing about managing local government, good people running for office with good integrity because in most cases in North Carolina - North Carolina is known across the country as a well managed state, our local governments are well managed and we have good people running for office. There are some small towns and large towns as well that have their uniqueness in councils, but we have lasted 25 years because I have been very fortunate to have great leadership from the elected officials.
Now first a briefing on Valdese. Valdese is a small town, 4,500 people. We have 15 municipal departments from the utility fund to the general fund, 85 full-time employees. We are surrounded by mountains and a lake on our north and southeast and on the west by other towns, so we can't grow. We are pretty much land-locked. So annexation, we are not interested in. We were formed in 1800. We have a rich history and culture, and we are heavily reliant on industry. Valdese was founded by industrial people. We have primarily furniture and textiles, which are what we are composed of today. That is our base, with a scattering of residential homes. We are primarily a mill town with little box houses that the companies built for their employees. That's what Valdese looked like about 25-30 years ago. We have transformed quite a bit of the place.
Life in Valdese prior to 2000 was fantastic. When I first came in 1980, things were prosperous. It was easy to manage from my standpoint. When you have revenue sources coming in for paying for those services that your citizens demand, it is not hard to be a good manager. Prior to 2000, let me just give you a little idea of what we had to deal with - the good things, remember revenue-sharing? That source of federal funds that used to come down with no strings attached, 75 percent grants for water and wastewater facilities, water and sewer lines. We also had 15 percent matching grants, not loans that you don't have to pay back. In our area of the country, we had ARC grants, EDA grants. Also, do you remember things called the inventory tax, remember the intangibles tax? All these sources of revenue that, especially for small towns, were vital to our ability to deliver services. Here's another thing to think about - what mandates did we have to have 20 years ago? We did not have stormwater rules, we didn't have the Neuse River rules for those of you that live in the eastern part of the state, we didn't have this thing called TNDLs to be concerned about, sewer collection permit programs, watershed protection rules, increase in training requirements for police and fire. We also did not have the General Assembly telling us how to treat our local government employees. A few of the things we did not have prior to the last 15 years. But what we have to do today, in 2005, well we have those things I just said we did not have before but we are also facing a significant loss of revenues, loss of state shared revenues. We are losing our traditional sources of revenue such as sales tax. And another thing to think about is the utility franchise tax. We rely heavily on the utility franchise tax. We are now entering the Internet market for service delivery, and you will start losing your sales tax and utility franchise tax because the Internet is not taxable. Accelerated depreciation schedules that our businesses and industries are being afforded to help spur economic development - well, when that happens, there is a reciprocal impact to local government unless you get new businesses to replace it, and we are not there yet. Increase in homestead exemptions - our General Assembly is always watching out for our senior citizens, and rightly so, but it does have an impact on our local government's ability to provide services.
With all those things I have just mentioned, what challenges does the town of Valdese face? Like everyone else, our tax base is dwindling. In 1980, Valdese was a very prosperous, growing town with a great industrial base. We relied primarily on the textile industry and furniture. Today, in fact just yesterday, one of my textile firms announced that they are closing and will be removing half their employees to one of their other plants. Over the last four years, I've lost five major industries. Valdese in the 1980s went to the state, extended our wastewater treatment plant to 14 million gallons a day because we rely heavily on the dye and finishing operations in the textile industry. We now have over 6 million dollars worth of debt incurred when we expanded our facilities and provided enough water to keep these plants open and provide these jobs. Our national economy has changed, our national policies on trade have changed, and the textile industry is no longer a strong, viable industry. It's still there, but it's struggling. While we have lost over 35-40 percent of our water and sewer flows as a result - I still have that debt service, I don't have those revenues to help pay for that debt service and we are not getting any relief from the federal government. Looking at that issue - Marion and Morganton and the cities around Charlotte like Bessemer City and Cherryville - those towns are all facing these significant issues because our whole economy was built on dyeing and finishing plants and textiles and furniture. We all know what's going on.
So how is Valdese going to deal with this significant loss of revenue base especially our tax base, because the last thing our citizens want is a tax increase? The reason they don't want one is most of them have lost their jobs and are working in service-related jobs. They are working at McDonalds or Hardees to make up for the loss of their family income, and the last thing they want to do is pay more property tax. That's the challenge we have as managers and you as elected officials or appointed officials. We can't raise our water and sewer rates because we do have some remaining textile firms, and they are on such small margins, if we go up 30 or 40 percent, we could close the rest of them down. So what we do - last year we prepared our budget, and our county is usually late in giving us our tax rolls. After we prepare our budget, they give us the estimates, then about a month later we get our tax rolls. They are usually off 30-40 percent, so last year when I established my tax rate, we got a little letter from our tax office saying your assessed valuation is going to be down about $20-30 million. So I had to go back and draw our budget and figure how I am going to scrape that out. One of our strategies in Valdese - during the good years, we made sure we put money away for a rainy day fund, and that's what we have done. We have been very frugal in our spending, we don't have any capital debt in the general fund, and we do have a significant amount of debt in our utility fund and that has enabled us to kind of manage the fiscal crisis as of today. But we keep going back to what is known as the fund balance. We rely on that fund balance to balance our annual budget, and we are robbing from Peter to pay Paul, but eventually it is going to get caught up. I hope I'll be retired by the time they have to deal with it, but we are developing a strategy to deal with it and that strategy is this: We no longer accept that we have to rely on the traditional industrial base. Economic development is no longer just going after major industry. What we see now as economic strategy is looking at new markets for Valdese. We are capitalizing on our tourism. Because of our rich culture, we have a museum in our community. We also have a fantastic winery and a performing arts center, one of 10 outdoor dramas in the state of North Carolina. We have established a position of tourism director for our community, and this year we were chosen by the League of Municipalities to be one of the day visits for the convention that was just recently held in Hickory. So we are bringing people to Valdese. They are shopping, they are buying, and that's helped spur some small businesses in Valdese.
One of the things I am very proud of - we are looking towards regionalism. We can no longer just be Valdese and compete against Morganton and the other towns in our county. You have got to rely on working together and avoid a lot of duplication. One of the best projects I have been involved with and I am so proud of is that we brought all of our cities together in the county rather than Valdese to build an industrial park. We all agreed to set aside one penny of our property tax put it into a pool. We just bought 89 acres of land off Interstate 40, and we are about to have a regional industrial park that we are all paying the debt service on collectively. The local government commission helped us get that approved. We are the first one in the state of North Carolina that was able to establish this cooperative agreement, and we are under construction on a regional industrial park. The citizens ask me what good is building a park on the western end of the county that will help our citizens. Well, as we heard today, most people travel to work, so with our interstate network, it doesn't matter if you are traveling to the east part of the county or the west part. The jobs stay in Burke County to help our citizens. So we ventured into that regional approach.
One last thing I want to mention is that especially for small towns - the ones that have part-time mayors or full-time mayors that act as managers - small towns need to rely on help. Leah Martin works for the council of governments for the western piedmont - all the grants that the town of Valdese has received over the last 25 years that I have been there, over $20 million, maybe more, have come as a result of Leah and her staff helping us with all the grants that we have written. So, rely on your regional council of governments and rely on the league, and rely on the professionals that are out there to help your small towns with the technical issues. They have creative ideas about where to help you get money to help you do these things that the town of Marion just demonstrated.
Let me give a quick plug for the Rural Center. Valdese has been extremely fortunate to be looked upon favorably by the Rural Center. Over the years, we have had several outstanding grants that helped us keep from having to borrow to go further in debt in extending our utilities to keep jobs in Valdese. Most recently, working together with Burke County, we got a grant from the Rural Center to develop a small business incubator. This is not a facility, but we hired a small business entrepreneur developer, and he is working with our economic development association to create small businesses in Burke County. I think he has been successful. He has helped several businesses start up in Valdese. So organizations like the Rural Center are key to small towns being successful.
Last, but not least, I would like to compliment the rural development agency of the U.S. Department of Agriculture. We have relied on them on several occasions. We had to buy a very large and very expensive fire truck. We did not have the money for the capital outlay, so we went to our local banks. They wanted to finance over 10 years at high interest rates we could not afford, so we went to agencies like Rural Development, and they were able to give us a loan at very competitive interest rates spread over 20 or 30 years.
Small towns do have resources to meet these challenges that we are going to be facing every day. The future of Valdese is bright. We are going to have to control spending, keep employment down, for that is your highest cost. Keep your costs down, try not to go in debt, and utilize the resources that are out there. That's our strategy for the future. Thank you.
