A letter from the Local Government Commission abruptly changed the public conversation around the City of Greensboro’s finances this week, leading to a tense emergency meeting of the Greensboro City Council Thursday afternoon.
The Local Government Commission (LGC), an agency of the Office of the State Treasurer, has for years warned the city that it wasn’t following the commission’s guidance to maintain a fund balance—a “rainy day fund” for emergencies—equivalent to at least 25% of its expenditures. It has also warned against using the fund balance for its regular operating expenses.
The commission doesn’t recognize a specific percentage requirement for all cities, instead making its recommendation based on a number of financial factors including peer city fund balances. In 2022, when the city’s fund balance was at just above 18%, the council passed a resolution committing to the commission that it would get to 25% by 2030.
The city seemed on track to get there, increasing the fund balance to 22.5% and then 23.3% over the next two fiscal years. But last year, for the 2024-2025 fiscal year, the fund dipped to 22.9%, and the council tapped it to cover spending increases. After looking at last year’s budget, expenditures, and fund balance, the commission informed the city on Wednesday afternoon that it was placing Greensboro on the Unit Assistance List. That signals state concern about the city’s financial management and triggers a series of restrictions and greater state oversight.
Having landed on the list, the city will face a few immediate consequences:
- City Manager Nathaniel “Trey” Davis will be required to complete a minimum of six hours of education, including fiscal management and the requirements of Chapter 159 of the General Statutes (the Local Government Finance Act).
- The city must obtain approval from the commission for financing contracts relating to the lease, acquisition, or construction of capital assets with terms of at least 3 years and $50,000 (and which meet other criteria).
- The city must obtain commission approval of financing contracts for the purchase, lease, or lease with option to purchase of motor vehicles where the contract amount equals or exceeds $50,000. That amount would preclude the purchasing of additional police and emergency vehicles without prior approval.
Mayor Pro Tem Denise Roth, herself a former Greensboro city manager, sounded the public alarm on the commission’s letter in a social media post in the early hours of Thursday morning. She called the letter “an extremely serious development” that required “urgency, transparency and accountability.”
“This notice was not anticipated and is not consistent with the tenor of our recent conversations with State officials,” Davis wrote in an email to council Thursday morning. “As I previously shared, we have been directly engaging State leadership regarding the concerns raised about our fund balance position, including our recent meeting with the State Auditor and our planned meeting with the State Treasurer’s Office.”
“We will be following up with the LGC promptly to better understand the basis for this determination, the specific concerns that resulted in Greensboro’s placement on the list, and the expectations for moving forward,” Davis wrote.
In a Friday press release, the commission said it is now putting even larger cities to which it gave more leeway on its Unit Assistance List.
“Historically, larger units that met the criteria for the UAL were not always included on the list if LGC staff believed those governments had sufficient resources to address financial concerns without additional state assistance,” the commission wrote in the press release. “The LGC is changing that approach.”
“Financial concerns should be taken seriously regardless of the size of the local government,” said Brad Briner, North Carolina State Treasurer, in the release. “Rocky Mount is a good example of how larger units can benefit from the additional monitoring, oversight, and support that our staff provide to units on the UAL.”
Rocky Mount, Zebulon, and Cary were added to the list along with Greensboro, which is by far the largest of those municipalities.
During Thursday afternoon’s emergency meeting, Roth and other council members were visibly angry at what they characterized as attempts by the city manager and other city staff to downplay the seriousness of or shift blame for the situation.
“The reality is we’re the third largest city in the state and what we’re talking about now is having an outside review entity looking over our shoulders,” Roth said. “That’s not where we want to be. That’s not acceptable.”
Davis and Don Warn, the city’s financial and administrative services director, emphasized the city’s overall financial health as evidenced by top scores from bond rating agencies and timely and clean annual audits from the state. They also characterized the commission’s letter as coming suddenly and unexpectedly.
But council members pushed back with a series of questions about communications between staff and the commission in June, July, and August that they believe should have been relayed to council as it prepared the city’s latest budget. Council members pressed Davis and Warn to answer where the communication had broken down with the commission and why they weren’t more informed.
“Clearly, in the conversations in June and July, there were a lot of signals that concerns were coming,” Roth said.
“It’s not the case that this just jumped up and surprised us yesterday,” Roth said. “And I’m actually learning for the first time that we heard two weeks ago that there may be a problem. With items that are of this magnitude and seriousness, for this governing body to not be informed is atrocious.”
Among concerns expressed by the council were $41.5 million in bond referenda already printed on ballots that will go out Friday to military and overseas voters. If approved by voters, the bond money would go toward vital infrastructure like repairing roads and bridges and building more fire stations to keep response times low as Greensboro continues to grow and develop.
Had they realized the seriousness of the state’s concern over the city’s finances, several council members said they could not in good conscience have supported the bonds. Some questioned how the city would be able to move forward with taking on further bond debt, even for essential projects, while under state restrictions.
Warn, the financial director, said the commission may let the bonds move forward if voters pass them at the ballot — but they will likely have a lot of questions for the city, which will need to show serious improvement to its fund balance.
The conversation comes in the wake of the council’s controversial passage of a city budget that dramatically increased the tax rate. While most of the conversation on council was then about tension with state government over property revaluations, several members said they would have had very different conversations—with each other, staff, and constituents—had they been made aware of the level of the state’s concerns for the city’s financial health.
“I’m struggling with why this was not part of the discussion in June,” said City Councilmember Adam Marshall. “If we were going to talk about the tax rate and the aggressive need to go up in the tax rate, I sure as you-know-what would have liked to have been communicating with my constituents that part of the reason that we’re going up in the tax rate is so that we can get our financial ‘house in order’ as the LGC has required.”
“We knew that information in June,” Marshall said. “We could have had some of those communications with our constituents, and we weren’t able to do that. Why? Because we didn’t have all the information. And that’s not okay.”
Marshall said he was disappointed by what sounded like a downplaying of the crisis by city staff, who should have been aware of the seriousness of the situation and communicated it clearly to the new council.
“I’m extremely disappointed that we’re even in this position,” Marshall said. “We’ve been in these seats for eight months. We didn’t get here in eight months. This is something that has been going on for years and hasn’t been appropriately addressed in years.
Tensions were also apparent between council members and Mayor Marikay Abuzuaiter, who began the meeting by framing the commission’s letter as having come suddenly and unexpectedly. It should have been expected, Roth said, and encouraged Abuzuaiter and others to listen to audio of the commission’s August 4 meeting, which made it clear consequences were imminent.
When Abuzuaiter said she had gone back to listen to the audio, Roth interjected that was because she had brought it to Abuzuaiter’s attention.
“I’m giving you credit…” Abuzuaiter began to say to Roth.
“I’m not looking for credit,” Roth said. “What I’m looking for us to be on a better path.”
“We are trying to get there,” Abuzuaiter said. “We know where we are right now. It is something very serious, and we need to see what staff can do to bring it forward so we can get out of this situation and what LGC wants us to do to get out of this.”
Davis told the council he is meeting with an external firm Friday, the first step in getting an independent review of the situation, an assessment of city government structure and a 30-, 60-, and 90-day response.
In a historic November election, a majority of the council’s nine seats turned over as a number of long-time council members retired or were voted out. Voters chose to return just three incumbents to the council—Abuzuaiter, who was elected mayor; Hugh Holston, a popular at-large member; and Tammi Thurm, who retained her seat in District 5.
While the resulting council has worked well together and weathered controversies without much visible conflict, Thursday’s meeting exposed tensions between new council members and members who were part of previous councils, who they said should have been asking some of these financial questions earlier.
“We can’t move forward and talk about what’s next because it seems like this new council would like some more accountability and ownership,” said Councilmember April Parker. “Because we cannot trust them moving forward without such.”
“Overcommunication is the standard for the newly formed council,” Parker said. “Undercommunication is not tolerated anymore at all. So I would rather get more information that is ad nauseum than ever not get sufficient information on anything that we’re voting on.”
Particularly on budget matters, Parker said, she would like to see more detail presented earlier rather than toward the end of the process as part of discussions of the manager’s proposed budget.
Systemic change is needed, Roth said.
“Budgets are about making choices,” she said. “It is okay to increase salaries. It is okay to buy fire trucks. It is okay to do all of those things. But the balance is: what are you trading off, and are you taking care of the key parts before and as you’re making those decisions? And we simply were not.”
Davis assured the council he is not downplaying the severity of the situation.
“I take it personal that our financial health and our financial ability to maintain not only the operations but the forward movement of the city are the foremost of importance to me and the team of the city of Greensboro,” Davis said.
“I reiterate my commitment to ensure we manage that, keep you the council informed as well as members of our community,” Davis said.
It seems evident that previous councils may also have been missing some information staff should have given them, Roth said.
Roth focused several pointed comments at Davis, who has largely been supported by the new council as he weathered a series of criticisms from his choice of a new police chief to the unpopular roll-out and abrupt shelving of a plan to create a downtown pedestrian plaza.
“I have to say, Mr. Manager, and I hate to say it, but I am not comfortable with the same people that managed us into this position to manage us out,” Roth said.
Davis assured the council his office is being proactive, having already identified $1 million in vacant positions, some now frozen, that can be eliminated. His office has also identified about $1 million in budget reductions that can be made through eliminating “outstanding contract encumbrances,” he said.
The council will discuss the city’s financial position further in a work session scheduled for next week, ahead of a meeting with the treasurer in two weeks.
The idea that bonds the new council supported to make up for deferred maintenance may now be in jeopardy is particularly hard to swallow, Councilmember Crystal Black said.
“I would like to have some transparency,” Black said. “Because those bonds were satisfying a lot of maintenance. It was to answer some of the calls that weren’t answered. This council was left with millions of dollars of deferred maintenance, and yet still we managed to overspend.”
“I’m concerned about what the spending actually was for,” Black said of previous councils. “I want to know what prior council spent money on and why we overspent when we weren’t taking care of the basic things we haven’t taken care of.”
“We need to be able to show, this is where we screwed up,” Black said. “That doesn’t fall on this council.”
Editor’s note: This story has been updated to reflect new information released by the Local Government Commission on Friday morning.
