By Emily Ford
eford@salisburypost.com
SPENCER — Aldermen Jeff Morris said he thinks Salisbury’s practice of loaning millions of dollars from the city’s water-sewer reserve fund to Fibrant breaches Spencer’s water agreement.
Salisbury took over Spencer’s antiquated water system in 2000. Several other Rowan County municipalities have a similar arrangement.
Morris said Tuesday night he wants to look at their agreements as well and encourage them to question internal loans to Fibrant, Salisbury’s new broadband utility.
Morris said he believes water-sewer reserves are supplementing general fund dollars to fund Fibrant and replace Salisbury fleet vehicles.
Morris, himself an attorney, pointed to a clause in Spencer’s agreement he thinks has been breached. The agreement states, “All revenues of (Spencer Utility Department) shall be used exclusively by the water and sewer fund and shall not be used to subsidize any other operations.”
After a lengthy and heated discussion, Spencer aldermen voted unanimously to take bids from attorneys to look into the matter. Alderman Jim Gobbel resisted but eventually agreed to consider hiring an attorney.
At Gobbel’s suggestion, aldermen also will send a letter notifying Salisbury of their concerns and asking for a clarification of the water agreement, which Morris called a “perpetual contract that lasts forever.”
Salisbury took advantage of Spencer and other towns that buy water by loaning water-sewer reserve fund money to Fibrant, Morris said.
“They are screwing everybody,” he said. “It’s an equal-opportunity bashing that we’re all getting as rate payers,” he said.
“I don’t think they’re that stupid,” Gobbel said.
“They’re not,” Morris said. “They’re crafty.”
Salisbury is not using current cash from water and sewer sales to fund Fibrant.
Last year, Fibrant borrowed $1.23 million from the water and sewer capital reserve fund to help cover operating costs until subscriber revenues catch up to expenditures. This year, Fibrant will borrow $3.7 million from the fund.
Next year’s internal loan is scheduled to be $2.61 million, but the city has not determined which fund to borrow from yet.
Fibrant can borrow money from three city funds — water and sewer, water and sewer capital reserve and the general fund. When internal loans became an issue in Salisbury last year, city officials said the loans were never a secret and are a good business practice, saving the city from high interest rates.
Fibrant must repay the internal loans, which will total about $7.5 million, at one percent interest. There is no deadline, but the fiber-optic utility repaid $6,118 last year and is scheduled to repay $36,565 this year.
Morris said Salisbury is manipulating money in the water-sewer reserve fund in a “shell game” to support other operations.
“This week it’s Fibrant,” he said. “Next year it could be something else.”
If the town doesn’t take a stand against loans to Fibrant, “there is no limit,” Morris said.
Eventually, internal loans will cause everybody’s water-sewer rate to increase, he said.
“There is a temptation to use something like that, if it goes unchallenged, as a slush fund,” he said.
Alderman Reid Walters said he has heard concern in the community about water revenues.
“We need to make sure the money residents pay to water-sewer goes to where it is supposed to go,” Walters said.
Alderman Kevin Jones said hiring an attorney to look into the matter was less confrontational than filing a grievance.
Spencer should be “nowhere near accusing them of anything,” Jones said. “That’s the last thing we want to do.”
Alderman Scott Benfield said he’s concerned Salisbury has not invested enough money into the water system in Spencer.
Salisbury has invested more than $2.12 million during the last 10 years, said Jim Behmer, director for Salisbury-Rowan Utilities and interim director for Fibrant. The majority of the benefits of the utility consolidation were received by Spencer, he said in an email.
“Salisbury-Rowan Utility ratepayers bore a significant share of these investments in the town’s collection and distribution systems,” he said.
At the time of the consolidation in 2000, Spencer water-sewer rates were about 19 percent higher than Salisbury’s, Behmer said. The consolidation agreement made the rates for Spencer and Salisbury the same.
Contact reporter Emily Ford at 704-797-4264.