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Selling off a high-speed internet system of fiber optic lines in Sylva that belonged to the now-defunct Metrostat Communications is coming up short.

The 10-year-old company provided Sylva high-speed Internet and phone service until going under late last year. Metrostat had about $250,000 in outstanding economic development loans with Jackson County and town of Sylva.

Metrostat had put up its fiber optic lines as collateral. The county and town are in process of selling off those fiber lines — but it appears even if they manage to sell them they won’t recoup the full balance owed on the loan. Metrostat’s former system also includes towers that provide high-speed internet service via wireless signals to customers many miles away.

Frontier Communications Co. recently notified Sylva town leaders that the company isn’t interested in making an offer on Metrostat’s network after all. That would appear to leave BalsamWest FiberNET, a joint venture funded by the Eastern Band of Cherokee Indians and Macon County businessman Phil Drake, as the most likely buyer of the defunct company’s assets.

BalsamWest has a 300-mile network of fiber optic lines in the far west designed to bring high-speed access not otherwise available in rural, remote counties. While BalsamWest provides a backbone, the cost of building the “last mile” to businesses wanting to hook on to the high-speed lines has proven a hurdle, and as a result the network hasn’t been tapped as well as it could.

Metrostat’s network of fiber through Sylva’s central business district and wireless towers reaching outlying areas could bring solve some of those “last mile” issues and bring new customers to BalsamWest’s table.

Ironically, Metrostat owners Robin and John Kevlin cited BalsamWest’s combination of grant-funded, public-private partnership that enabled the company to run high-speed fiber lines through rural mountain counties as a major reason for Metrostat’s demise. The large-scale nature of the telecom business made it difficult for small start-ups serving only hyper-local areas.

The county was hoping to unload the entire network, which also includes towers to deliver high-speed internet signals wirelessly to customers several miles away, but might reconsider.

“I’ve recommended we sell this entire enterprise rather than break it into components,” County Manager Chuck Wooten told Jackson County commissioners this week. “But, maybe it would be best to break out some parts.”

Cashiers Chalet Inn owner George Ware has asked commissioners to let him lease a tower on Kings Mountain that once beamed out high-speed wireless internet service so he could provide internet to his guests.

Jackson County, two failed attempts to the contrary, looks poised to once again hold hands with the county’s four towns when it comes to crafting a new economic development strategy.

How this will actually look and play out isn’t yet known. Six months were allotted to hammer out the best method of attracting and keeping jobs in this hard-knock economy.

County Commission Chairman Jack Debnam expressed impatience with efforts to date on the issue. He told leaders from Jackson County, Sylva, Dillsboro, Webster and Forest Hills who gathered Monday night at his behest that time they might have used to undergird the local economy has been frittered away.

“We have everything in place and we need to decide where we want to go for a change instead of where we are going to be led,” Debnam said. “I feel like I’ve wasted my first year in office. I want to look back and say: ‘We got something accomplished.’”

Debnam, who ran and won in 2010 as an unaffiliated candidate, campaigned in part on promised future leadership for job retention and creation.

In name only Jackson County still has an Economic Development Commission. But County Manager Chuck Wooten indicated that it might be time even to change that.

“I try to avoid using E-D-C, it has a bad connotation or bad vibration to many people in this community,” he said. “But we are at a point that we need to decide what our next steps are. Do we wish to activate it, do we wish to activate it in some other form, or do we wish to dissolve it.”

 

The strategy

Jackson County is paying Ridgetop Associates, which is the husband-wife team of David and Betty Huskins, $3,500 a month for six months to help them develop a strategy. The Huskins are primarily known for work in the tourism industry through the regional entity Smoky Mountain Host, but they have extensive experience in local government and economic development issues, too. Betty Huskins is currently at work on N.C. Tomorrow, a state economic development effort by regions that she said would dovetail nicely with Jackson County’s current push into that arena.

Among other duties, the couple has been hired to conduct a county economy assessment, listing what exactly — positive and negative — the county has in terms of economic development potential.

Mayor Jim Wallace of the Village of Forest Hills said he believes that’s critical: “We need a good catalogue of what we’ve got before we can move ahead.”

County Commissioner Doug Cody said that in meetings with BalsamWest FiberNET he’d learned that Jackson County is on par “with the level of Silicon Valley, Atlanta, any major urban network” in terms of connectivity speed.

But, Cody warned, that competitive advantage would last just three to five years before other rural areas in the nation catch up or surpass Jackson County. Bill Gibson of the Southwestern Development Commission went even further, asserting that Jackson County has “the best rural (fiber) backbone in the world,” but noted that the use is limited. “Because what we don’t have is off-ramps to businesses,” Gibson said.

In other words, the network exists for amazing connectivity, but BalsamWest isn’t or can’t make the technology available to everyday business Joes because of the “last mile” challenge — the short but often costly run of fiber from the trunk line to an industry’s front door.

Still, Cody said, the capability is there, and it being there enables Jackson County to look beyond such polluting development dinosaurs as “smokestack industries.”

Time is critical, Commissioner Charles Elders said.

“It’s kind of like a drag race. We’ve got a short time to get there and we’ve got to move through the gears,” he said.

 

The plan

Debnam, typically freewheeling in his comments, urged the county’s two towns — Webster and Forest Hills — that limit commercial development in their zoning laws to get on board the now moving train of economic development.

“We’ve built our little silos when times were good. But times aren’t so good now,” Debnam said, adding that everyone “needs to get off their butts” and start working together on job creation and retention.

“You’ve got to take a good look at what you’re doing to help Jackson County move along,” Debnam said.

Mayor Larry Phillips of Webster verbally supported the economic development efforts, though he did not speak directly to whether his town might consider removing some of its commercial restrictions.

“I think it’s great what we have heard and I’m very excited,” Phillips said. “Let’s get going on this … I just see all kinds of potential for Jackson County.”

Debnam indicated he would meet with the mayors from each of the four towns in coming days. The plan is to develop a five-year strategy to tackle economic development. Wooten indicated the county would likely move toward hiring someone in-house to oversee economic development.

 

Same tune, different verse?

Technically Jackson County has an Economic Development Commission. It exists in name only, however.

About four years ago a joint EDC formed by Jackson County and the four towns imploded amidst bureaucratic turf wars. The director resigned; the board quit meeting; members resigned one by one and replacements by the county and towns weren’t forthcoming.

It actually marked the second EDC meltdown in Jackson. The prior EDC fell apart in 2005 amid controversy and allegations of financial mismanagement.

There’s still money in the pot, though, a total of $425,000, which includes a transfer of $335,000 from the 2005 failed EDC plus money from each entity involved. Jackson County and the four towns were contributing $1 for each resident.

Here’s what each Jackson entity, percentage-wise, has “bought” in terms of equity for their contributions to the EDC pocketbook:

• Jackson County: $382,064.84, or 89.79 percent.

• Dillsboro: $2,850.91, or .67 percent.

• Forest Hills: $4,042.34, or .95 percent.

• Sylva: $29,743.10, or 6.99 percent.

• Webster: $6,808.15 or 1.60 percent.

There is a refinement to Catherine Carter’s poetry, a sense that each poem is finished, polished and complete, worked exactly the right amount and not a jot too much. There’s also in Carter’s poems an edge, a whiff of wild abandon lurking just beneath the placid surface.

This accomplished poet once published a romance novel under a pseudonym. And Carter remains fascinated by this often-maligned genre: She hopes one day to write another romance novel.

“It really was fun, and I would like to do it again,” Carter said. “I might have to try other genres first, though — it’s the generic conventions that make genre fiction most fascinating, the what-can-I-change and still have it be genre? Is it still romance if the big good-looking dominant guy is a villain? Still mystery if the detective’s kind of a goof who doesn’t solve the puzzle by intellect? Still a western if the hero talks about his feelings without being tied to a stake first, or isn’t white, or doesn’t like horses? The only way to find out is to write the book, unless someone else has already done it for you.”

These paradoxical crafted-with-care, you-better-watch-out qualities permeate Carter’s just released book of poems, The Swamp Monster at Home, just as they did her previously published book, The Memory of Gills. That book won the 2007 Roanoke-Chowan Award for Poetry.

Carter lives in Jackson County and teaches in Western Carolina University’s English department. She directs the English Education program. Carter is married to Brian Gastle, the English department’s head and a specialist in both medieval literature and professional writing.

Louisiana State University Press published The Swamp Monster at Home. The 68-page book was released Feb. 13.

Dive into Carter’s poems, and you know instantly that here is a person who takes form seriously, even — or most especially — when writing free verse. Carter writes knowing, respecting and honoring the rules of her craft, and she knows exactly when she should consider breaking them. The poems she writes are influenced by traditional poetic form.

That respect for craft shines through the selection of poems in The Swamp Monster at Home.

Carter sounded amused and bemused when talking about students who buck learning form because they fear doing so will “cramp” their style.

“Imagine a carpenter saying that learning to use a plane is going to ‘cramp’ his style,” Carter said, shaking her head in disbelief.

Carter’s poems generally begin as a solitary line that she hears in her mind’s ear.

“If I hear iambic pentameter, I know this is going to be a more formal poem. If it is loose, that tells me something else about the poem,” Carter said.

At age 44, Carter’s poetry is more reflective and perhaps more inwardly open and vulnerable than those pieces she’s published previously. And sense of place is strongly evident, whether Carter is writing about her tidewater home of Greensboro, Md., or about living here in Western North Carolina.

“The sense of place has been a preoccupation from the beginning, but it is a story I can’t seem to stop telling,” Carter said.

Take some of the imagery in the poem “Hydro Plant Accommodates Rafting Industry:”

 

“All the long drive upstream,

the rocks were knobby-dry,

the stream lay sullen, low and slow,

in broken symmetry.

Its mortal bones exposed.

Its quivering, glinting flesh

was gone to feed the power grid,

its slender nervous fish

cringing in too-warm pools ...

“The temporary flood

was short as autumn love,

with months of dust on either side

no torrent could remove,

but lit the day as love will.

Briefly the stream put on

its spangled flesh to resurrect

the shrunken skeleton.”

 

Carter grew up in a family that cared about literature. Her father was a biologist and her mother an English teacher. Both are now retired.

“My parents really rock, they are world-class parents,” said Carter.

Asking a writer who has influenced their work isn’t a very fair question, though it’s not unexpected in an interview. The truth is, of course, that everything a writer has ever read influences their subsequent work. That acknowledged, Carter in particular selected the work of Thomas Lux as shaping her later development as a poet. Lux is an internationally recognized writer who teaches at Georgia Tech.

“He has a dark and funny sensibility that really speaks to me,” said Carter, adding that one of her most productive and fulfilling periods as a writer occurred during a workshop/retreat led by Lux.

Carter also spoke with admiration about fellow Jackson County poets and writers Ron Rash and Kay Byer. She credits Byer for persuading LSU Press to seriously consider her first book of poems.

“That they even looked at it was because of Kay, and I owe that to her,” Carter said.


Carter to read at City Lights

Catherine Carter will read from The Swamp Monster at Home at 7 p.m. Friday, March 9, at City Lights Bookstore in Sylva.

 

A sampling

That Time Again

While I wake in the black

Early morning, the morning

star is Saturn, burning

yellow and steady in the window’s

icewater square like a warning

flare. You lumber toward the shower

and returning day, while in the winter

night Saturn and I

stare at each other, wary,

cold as two diamonds.

You have left your shirt

on the quilt, its warmth

turning thin in the chill.

After a while I lean

out stealthy and quick and catch

it under the cover by its collar,

hide it against my side

where Saturn won’t see.

 

November Evening, Splitting Firewood

A neighbor drones his leaves away

with a leafblower, another combs

his with a rasping rake, while in my leaves

I stand ankle-deep, braced to the slow

swing of the axe. The damp heavy logs

are splotched bright with fungal jelly

like orange marmalade, like flesh if flesh

were the color of goldfish. Witches’ butter:

in old stories it means a hex.

Maybe I’ll scoop it off the log.

Spread it on my neighbors’ toast,

act for the lost leaves.

Maybe there’ll be a golden quiver, an alien

taste, and then leaves

sifting over their quiet bodies,

slowly covering them under. But I

am the only witch here now,

writing dark thoughts

on the dry paper that whispers

under my soles, changing cold weight

and wood into heat, into light the color

of witches’ butter.

 

Promise Land

They’ve never seen it spelled,

I guess, only heard it said

in church: so when they write it down,

the Promised Land, heaven, becomes this other

thing, the Promise Land. Their heaven

is the land of promises, where

eternal checks are always in the mail

and every morning finds us in the gym.

Where those jeans, you swear, make me look small.

Where of course Monsanto doesn’t plot

to own each seed of every spear of corn.

Where your senators really read your mail. Where

we’ll see the beloved dead again, and never wish

we hadn’t. And it’s the land where you and I

can each admire and like and love the other

forever, forever, I promise, forever.

A review of rules in Jackson County that guide development along the roughly five-mile stretch of U.S. 441 leading into the Cherokee Indian Reservation is steaming along but possible changes can’t come fast enough for some business owners and residents.

A petition with just fewer than 200 names protesting the current land-use ordinance landed in county commissioners’ laps this month.

David Brooks, a general contractor in the area and one of those who believes the regulations are stifling potential work opportunities, gathered the names contained in the petition. Brooks said this week that doing so was easy — he just drove along the corridor, told people what he was doing and had just one individual opt not to sign her name.

“I started at one end and came to the other,” Brooks said. “The people want it lifted.”

The petition calls on the Jackson County Board of Commissioners “to immediately repeal” the U.S. 441 corridor ordinance adopted in August 2009.

That’s unlikely to happen, however, County Manager Chuck Wooten said.

A task force was appointed last fall to review the development guidelines. It will recommend any changes to planning board, which in turn will recommend changes to county commissioners. The task force has not finished with its review, let alone kicked suggestions up to the planning board yet.

“We are at the very beginning of the review process,” Wooten said.

The development regulations were intended to prevent unsightly or out-of-character sprawl. The current regulations don’t particularly limit where development can occur along the strip of highway leading to Cherokee. It instead lays out aesthetic standards, such as architecture and landscaping, to ensure any development that does occur will be attractive. It also limits billboards and overly large signs, which was a source of contention when it passed.

But property owners believe their options are being limited.

“We believe that the ordinance was adopted with little input from the affected property owners, and that the ordinance causes undue hardship on property owners with the district,” the petition states. “The appearance standards, landscaping rules, and five-acre minimum lot sizes place a burden on property owners and serves to reduce property values for the citizens in this part of Jackson County.”

 

Pre-made decision?

The Gateway land-use plan was a landmark event when passed five years ago. It marked one of the first attempts by a county west of Buncombe to undertake what is essentially spot zoning.

Commissioner Joe Cowan, who served on the board when the ordinance passed, defended the rules recently as having been developed by people who lived in that community. The Whittier/Gateway community in a series of hearings developed a long-range vision and plan for this critical stretch of four-lane highway.

But, Brooks said in response, “a lot of people think the decision was made before they ever had those public meetings.”

County Planner Gerald Green last fall initiated a planning board based review of the rules. A task force of people who live and work in the corridor are involved in the examination. Green said he believes the group will have recommendations ready for the planning board this spring. Revised regulations likely will make their way for commissioner consideration in the summer.

“We’re moving forward,” Green said, adding that he does not believe goals of protecting the corridor’s character and allowing development are exclusive ones.

Currently, some older motels, a consignment shop, service stations and a few businesses dot the corridor. A couple of art galleries and craft shops are at the nicer end of the spectrum. Businesses catering to tourists are few and far between, but many see the corridor, which has water and sewer, as primed for growth.

Green explained in a previous interview that he believes stipulating “nodes” of concentrated development might actually work better instead of allowing growth to sprawl along the entire strip. Sprawl actually could under-gird, not weaken, another goal of the original plan — traffic management.

Monday, Green said the U.S. 441 subcommittee has indeed identified some potential “nodes.”

Also being reviewed were:

• The section of the rules now in place that dictate any new parking lots go behind buildings, not in front. Green also was concerned that the ordinance failed to stipulate that developers couldn’t just “flip” their new businesses around, with the parking lot facing the highway anyway.

• The possibility of being able to get to several shops from a single access road instead of having a long smear of strip development along the entire corridor. Green has said that discourages pedestrian movement between shops, he added.

“It was designed for flat lands, not the mountains,” Brooks said of the ordinance.

In May, Jackson County residents will vote on whether to allow the sale of alcoholic beverages countywide. In April, Cherokee residents will vote on whether to allow the sale of alcoholic beverages reservation-wide. A “yes” by both or either of those communities is likely to trigger some development along U.S. 441.

“Growth will come, sooner or later, and I do think we need some regulations,” Brooks said, adding that he believes the ones now in place, however, are too restrictive.

The battle of the Joneses is about to commence in Jackson County.

County Commissioner Mark Jones will appear on the ballot alongside challenger Marty Jones in November. Mark Jones is a Democrat, Marty Jones a Republican.

The Joneses will fight for the right to represent the Cashiers area.

Marty Jones and Mark Jones were on the opposite side of a heated countywide debate five years ago over mountain development regulations. Commissioner Mark Jones was part of the board that ushered in progressive regulations aimed at protecting the beauty and quality of life in the mountains.

Marty Jones, a real estate broker/owner, was a vocal opponent of the regulations, claiming they were too restrictive and deterimental to the economy.

He formed the Property Owners of Jackson County, a private-property rights advocacy group.

“Everything we predicted came true,” Marty Jones said Tuesday shortly after filing as a candidate. “I am running because I want Jackson County to get back to work.”

He said he’d help ensure that by working with the sector most flattened, such as builders and real estate agents plus the county planning department.

Democrat incumbent Mark Jones first ran and won election in 2006 and again in 2008, defeating Republican challengers each time.

But that was then and this is now. During the last election, following 16 years of Democratic domination, Republicans Doug Cody and Charles Elders successfully won election. Chairman Jack Debnam, an unaffiliated candidate who received GOP backing and advertising support, also won against a Democrat incumbent.

A phone message left for Mark Jones went unreturned by press time.

Jackson County has been down this road before, but that isn’t stopping leaders from taking another look at forming a local economic development commission.

Or, to be more precise, reconstituting the county’s current Economic Development Commission.

“Because technically, there is an EDC in Jackson County,” County Manager Chuck Wooten said.

The county’s current EDC exists in name only, however. It has an office but no director. By-laws but no members. A mission statement but no budget.

The former EDC, which functioned as an independent entity outside county oversight, went defunct in 2005 amid controversy and allegations of financial mismanagement. Three years later, county commissioners formed a new EDC, this time under county control although representatives of each town had seats at the table.

The new attempt fell apart after less than a year, however. The director resigned. The board quit meeting. Members resigned one by one, and neither the county nor towns appointed replacements to fill their seats.

While the EDC technically exists on paper and could be restarted at any time by simply making fresh appointments to the board, Wooten believes that the county’s phantom EDC should probably be dissolved because of what he termed “bad connotations for people.” But, something needs to take its place to spur economic development in Jackson, the county manager said.

A joint meeting of county and town leaders is set for March 5 to discuss the topic. Sylva town board member Harold Hensley, for one, is happy that the county is initiating work again on the economic front.

“I know there’s been a lot of controversy about the EDC,” Hensley said. “But, I think that it could be a good thing if it is run right.”

Hensley emphasized that he’s uncertain in his own mind whether the same EDC structure used previously in Jackson County should be tried again, however.

Dillsboro Mayor Mike Fitzgerald also said he’s pleased county leaders are moving toward formal economic development efforts. But, like Hensley, he was unsure about the form he’d want to see such an effort take.

“But, it needs to be investigated,” Fitzgerald said.

 

Rough history for EDC

When it comes to EDC boards, Jackson County’s version is extremely unusual among counties in Western North Carolina. While most EDC’s are county-led entities, Jackson County has included town leaders in economic efforts with their own seats on the board. Wooten said he still believes that “you do need to have the municipalities at the table.”

When the EDC was thrust into turmoil in 2005 amid allegations of financial mismanagement and a lack of oversight, town representatives remained at the table even though the county pulled out. It limped along until the county opted to become re-involved.

When the board was reconstituted with a new set of bylaws, a power struggle played out between the county and the towns over who would hold the most authority. Even though the amounts of money being contributed by the county and town to the “joint” effort were disproportionate.

Jackson County kicked in $105,000 for economic development efforts. Each town put in just $1 for each resident, amounting to a few hundred for Dillsboro, Webster and Forest Hills, and $2,500 for Sylva.

The county’s new EDC director, Dorothea Megow-Dowling, resigned after less than a year, calling the entity dysfunctional. She said the county missed an opportunity by agreeing to reconstitute the board under the same structure rather than dissolving the EDC and creating a new one from scratch.

In response, the then-mayors of Sylva and Dillsboro accused the county of stripping the EDC board of its power and relegating it to a mere advisory role. Additionally, EDC ghosts from the not-so-distant past continued to haunt this newest reconstitution.

A watchdog group called Jackson County Citizens Action Group dogged the county and the members of the EDC, accusing them of financial cover-ups and a lack of diligence in safeguarding public funds.

It remains to be seen what exactly Jackson County and the four towns will do this time around.

It will be several more weeks at best before Sylva AM radio station WRGC gets back on the air, pending approval from the Federal Communications Commission to grant the station a license.

Word that the station would resume broadcasting around Valentine’s Day were rumors, said Roy Burnette, who is trying to revive the radio station. In addition to securing the license, Burnette is waiting on a final piece of funding in the form of a Jackson County economic development loan.

WRGC went dead last August, a victim of dwindling advertising dollars in a hard-knock economy. WRGC was owned by Georgia-Carolina Radiocasting Co., which currently operates radio stations in Franklin.

Burnette wants to buy the station and expand its reach from east of Canton in Haywood County to Topton in Swain County, which in theory also would expand advertising-revenue possibilities and make the station financially feasible.

Burnette, CEO of the new 540 Broadcasting Co., asked county leaders for a $289,000 loan to make his dreams come true. Jackson County commissioners have approved $179,000 of the loan outright and are poised to extend the remainder — if the county can figure out reasonable collateral to cover the loan if the radio station owner defaults. Efforts to protect the county by joining Burnette as a co-license holder on his FCC permit were rejected by the federal agency.

Of the total $289,000 loan, Burnette wanted $250,000 to purchase the actual radio license from Georgia-Carolina Radiocasting Co. Some $39,000 was designated for acquiring the equipment needed to install the 5,000-watt station. Burnette would provide $100,000 in his own dollars for working capital.

The county has agreed that payments on the loan would be deferred until May 2012 and then be paid during the next 10 years in 40 quarterly payments at an interest rate of 2 percent.

County Manager Chuck Wooten said that Jackson leaders “are still having to work through” possible collateral and that Burnette might be asked to pledge personal assets.

“He seems amenable,” Wooten said.

For his part, Burnette said he’s simply “waiting on the FCC to grant the license for a transfer.” That will also allow him on moving forward with building a new transmitter.

“Everything will be top quality — the signal and service,” Burnette said.

An audit of REACH of Jackson County’s finances received by the nonprofit’s board last month show the money situation had become even more dicey than was previously made public.

The agency, which worked with victims of domestic violence and sexual assault, shut down last week amid accusations of internal financial irregularities. Jackson County women and children seeking help from abusive situations are now reliant on other counties’ agencies to provide services and emergency shelter.

What primarily triggered the sudden closure was the nonpayment of payroll taxes for three quarters in 2011 to the Internal Revenue Services. The board last week fired the agency’s executive director and finance officer. The seven remaining employees were laid-off.

The audit, reviewed this week by The Smoky Mountain News, reportedly played a huge role in the board’s decision to pull the plug on the 33-year organization. Here were some of the findings of the financial review, which was dated Dec. 28 and prepared by the Waynesville firm of Gahagan, Black and Associates:

• The organization lost $128,216 in net assets for fiscal year 2010-2011.

• At the time of the financial review, REACH’s assets totaled just $58,104, but the agency had current liabilities of $200,863. That included long-term debt totaling $100,789 and unpaid payroll taxes of $76,752 (that number continued to climb, totaling about $81,000, including penalties, by the time the agency closed).

• The situation was so dire the amount of assets held by REACH couldn’t even cover its temporarily restricted obligations of $10,295. These are funds restricted in use, with dollars required to be spent in a certain timeframe or be spent for specific purposes only.

“These conditions make it uncertain as to whether the organization will be able to continue as a growing concern,” the auditors noted.

 

End was quick following audit release

In an interview last week, fired REACH Executive Director Kim Roberts-Fer said she waited to tell the board about the payroll tax issue until receiving the results of this audit. Roberts-Fer indicated she’d learned about the IRS problem in October. She said that she’d been in contact with the federal agency to try to work out a payment plan.

Roberts-Fer said her delay in relaying what was happening to the nonprofit’s overseeing board was justified because she wanted to give board members a complete picture of the situation, one that included solutions. Roberts-Fer said she had successfully worked out a compromise with the IRS that would have enable REACH to continue serving the community.

REACH’s board still hasn’t made any public comment except for the release of a small, prepared statement last week expressing their regrets over closing the agency.

But the auditor’s findings, coupled with the sudden appearance of an IRS agent who demanded personal financial information from board members, clearly influenced the decision to finally end the protracted death writhing of the virtually financially insolvent group.

According to Roberts-Fer, fired Finance Director Janice Mason was working within a financial system long in place at the agency. Mason has declined to comment through her former boss.

The auditor noted the following “client response” to the issue of the nonpayment of IRS payroll taxes: “The client was unaware of how to classify expenses through the accounts payable function and wrote the checks to classify expenses.”

 

A crisis agency in crisis

REACH’s financial practices encompassed monkeying around with paying various bills because of an ongoing funding crisis that had threatened the agency’s survival for two years. The agency put off paying payroll taxes in hopes of catching up but instead fell more and more behind.

The root of the problem started before then, however. REACH in 2001 opened a $1.1-million transitional-housing complex for victims trying to escape abuse. It was a questionable financial venture from the get-go: The nine-apartment village could not actually generate the funds to pay the loans, much less keep pace with general repairs and upkeep. The loan amount owed was $840,074.

The REACH village went into foreclosure. Recently control of that housing complex shifted to Mountain Projects, a nonprofit that administers programs to benefit the needy and elderly in Haywood and Jackson counties.

The IRS put a lien on the property in early February because of REACH’s nonpayment of taxes. That almost boogered up last week’s scheduled transfer to Mountain Projects. But, the U.S. Department of Agriculture (which was one of the original loan makers to REACH) persuaded the IRS to knock the $81,000 down to $51,000. REACH has agreed to be responsible for that debt if Mountain Projects would go through with taking over the property title.

Additional questions surfaced this week about whether REACH would even have been able to apply for and receive federal and state grants anymore since the agency both defaulted on a government loan and failed to pay the IRS. An estimated 90 percent of the nonprofit’s funding base was dependent on grant money.

 

Macon bailing out Jackson

In the short term, which could mean at least a couple of years, REACH of Macon County will provide services in Jackson County, including key legal services for domestic violence victims. The agency has been given a temporary office and phone at Jackson County’s social services department.

“It has seemed fairly seamless at this point,” said Ann VanHarlingen, executive director of REACH of Macon County. “We realize that Jackson County and the people of Jackson County will devise a system by which they will take this project back over; we also realize this is a process, not an event.”

REACH of Macon County expects to move into more permanent office space in Sylva March 1. That nonprofit will provide three staff members to Jackson County to ensure a continuation of services, said Andrea Anderson, director of client services for REACH of Macon County.

“The debt of gratitude the people of Jackson County owes REACH of Macon County is quite large right now,” Jack Debnam, chairman of the Jackson County Board of Commissioners, told VanHarlingen and Anderson during Monday’s commission meeting.

For now, victims fleeing abusive homes will be housed in emergency shelters in Haywood, Macon or Swain counties. That could change, however. Bob Cochran, director of the Jackson County Department of Social Services, said Mountain Projects via Patsy Dowling has offered Jackson the free use of the old emergency shelter in the former REACH Village.

VanHarlingen told Jackson County commissioners that it requires 18 to 24 months to fully setup a nonprofit agency to serve victims of domestic violence and sexual assault.

Cochran said in an interview with The Smoky Mountain News that “the dust needs to settle” before the community can chart its best course of action.

“It is still early in determining the status and the final outcome of the current REACH,” Cochran said. “We hope there will be some assets left that can be used toward a rebuilding process.”

Given the audit findings, that scenario seems increasingly unlikely.

In addition to not paying the IRS, REACH failed to pay several months rent for the space housing its thrift store. A lien seeking payment on back rent has been filed with the Jackson County Clerk of Court, and there is the possibility of more creditors seeking payment. Also, some of the employees of REACH are owed back pay.

Asked if Jackson County wouldn’t be better served by simply eliminating REACH and starting anew with a different name and no baggage, Cochran responded that he couldn’t answer that question yet.

“I don’t know. I think that conversation has yet to take place,” he said.

A $10 million line of County credit intended to bridge short-term cash flow problems at MedWest-Haywood hospital has hit a snag.

A loan taken out by the hospital offers up the hospital building as collateral but legally it needs approval from county commissioners to do so.

The MedWest board failed to seek necessary approval from the county before taking out the loan, however. The hospital had already signed on the dotted line and promptly begun spending some of the loan money before the oversight was realized, prompting the hospital to seek the county’s retroactive blessing.

But, county commissioners apparently have not been willing to rubber stamp the loan. The hospital came to the commissioners six weeks ago for their approval on using the hospital building as collateral.

Since then, county commissioners have held three private meetings, which were closed to the public, citing attorney-client privilege, to discuss the loan conundrum.

Formerly known as Haywood Regional Medical Center, the hospital has a clause in its deed that prevents any transfer of the property without county approval. In the unlikely case the hospital defaults on the loan, the lender could not in fact take the building, making the current loan documents partially invalid unless the commissioners give their blessing.

Commissioner Chairman Mark Swanger said commissioners are working with the hospital to come to a suitable arrangement that helps the hospital move forward but still safeguards the building in the event of a default.

“We generally have two goals,” Swanger said. “One is that there be a viable thriving hospital in Haywood County and the second is to protect the county’s interest in the property.”

Meanwhile, the Jackson County medical community has expressed dissatisfaction that their hospital in Sylva, which is part of the MedWest system, ended up on the list of collateral for the loan.

A shorter list, in fact, might be what didn’t get listed as collateral. In all, the loan documents list enough collateral to pay the $10 million many times over. Accounts receivables are at the top of the collateral list — essentially every payment coming into the hospital could be garnished to cover the loan, which in itself would be more than enough to cover the debt. Collateral also includes all the medical equipment in the hospital, as well as the MedWest Health and Fitness Center.

The actual hospital itself, along with the MedWest-Harris and MedWest-Swain hospitals, are far down the list.

So why even list them as collateral? It’s the nature of financing these days, with skittish lenders requiring everything but the kitchen sink, and in some cases even that, to secure a loan, according to Mike Poore, CEO of MedWest-Haywood.

MedWest-Haywood has spent $4 million of its $10 million loan so far. The hospital has no other debt. And that’s why Poore is confident the debate over whether the building is included as collateral is a largely a moot point.

“There are several dominoes,” Poore said, listing all the collateral that would be tapped first in the event of a default before the hospital itself would ever become an issue.

Even then, the loan would merely take the form of a lien against the hospital, as the hospital is worth far more than the $10 million loan.

Indeed, the debate over whether the hospital should have been used as collateral on the loan seems to be playing out more on a matter of principle.

“If we thought there was much chance of default we wouldn’t be doing this. We felt we would be in and out of this moment,” said John Young, vice president for Carolinas HealthCare’s western region.

In an unusual financing arrangement, Carolinas HealthCare System has agreed to act as a bank and put up the money from its own reserves for the loan to MedWest-Haywood. MedWest-Haywood is under a 15-year management contract with Carolinas HealthCare, a network of 32 hospitals under the flagship hospital of Carolinas Medical in Charlotte.

Despite the large number of hospitals under the wing of Carolina’s management, it has never stepped in to provide financial help for an affiliate hospital.

“It has never been done before,” said Young. “I don’t know we will ever do it again, but at the time, it was the right thing to do.”

Young said Carolinas made an exception given the circumstances. For starters, the Haywood hospital desperately needed the money to bridge a short-term cash flow crisis brought on by a perfect storm of financial hits.

MedWest-Haywood had to spend $1 million to replace a broken generator, $1.6 million on a wrongful firing lawsuit by group of emergency doctors and $8 million on a new computer system to handle electronic medical records.

The hospital will actually be paid back for part of the cost of electronic medical records system by the federal government in coming years, Poore said.

“These are what you would consider one-time expenses. We knew we would have to get some kind of financing to help us through,” Poore said.

The hospital also spent an undisclosed sum buying up private doctors’ practices during the past year. It didn’t have the budget to do so, but the practices were being courted by Mission Hospital in Asheville. MedWest-Haywood feared long-term repercussions of a patient drain if it didn’t make a competing offer.

While the hospital was in the black last year, its margin was so slim — around 1 percent — it didn’t have the cash flow to cover the unexpected one-time costs.

“It is not a symptom of the engine being dysfunctional in any way,” Young said. “We realized this liquidity issue would go away, so we decided to lend them the money to get through this moment.”

 

Smoothing out the wrinkles

Meanwhile, the newly formed MedWest allegiance — a merger of sorts of the hospitals in Haywood, Jackson and Swain under an umbrella organization — need help finding its footing.

“Coming together under MedWest was trying to happen in a very difficult time under a very difficult set of circumstances,” Young said, offering further explanation of why Carolinas stepped up to the plate financially.

The recession was taking its toll on hospitals everywhere, particularly smaller, rural hospitals. And here, the hospitals in Haywood and Jackson were facing tougher competition than ever from Mission Hospital in Asheville.

Meanwhile, the relationship with the Jackson County medical community toward MedWest was strained. A large number of doctors in Jackson County had come forward to express concerns about how their hospital was faring under the new MedWest entity.

Carolinas has been asked for help many times by cash-strapped hospitals operating on razor-thin margins. It’s a frequently asked question by smaller hospitals when weighing whether to join Carolinas’ umbrella.

“One of the things that usually comes up is would you be willing to put capital in. Our answer is always ‘no,’” Young said. “That is not our model. Our business model is to help local hospitals find economies of scale and have the expertise to be successful in a very difficult marketplace. It is hard to do it alone.”

Poore said the financial problem faced by MedWest-Haywood is partly inherited. The hospital couldn’t get a traditional loan from a lender.

The once deep-reserves of MedWest-Haywood were spent up during a faltering time four years ago when the hospital failed federal inspection, largely on technicalities, but the resulting decertification by Medicare, Medicaid and several major insurance carriers forced the hospital to essentially shut its doors for five months. Its reserves were depleted as a result.

“I wish it could have happened a different way,” Poore said of the need for the loan from Carolinas. “I wish we had all the credit in the world and everyone was knocking down our doors to give us credit.”

Poore sees the loan more like a line of credit, a very common financial tool used by corporations both large and small.

“The line of credit is helping us pay for a lot of one time expenditures we’ve incurred this year,” Poore said.

Poore said it wasn’t altogether clear initially whether they actually needed county commissioners to sign on the dotted line.

“At one point, we had 11 attorneys on the phone trying to put this deal together,” Young said. “It is unusual for one hospital to loan another hospital money.”

Poore pointed to the proactive steps MedWest-Haywood has taken during the past two years that will start paying off. It has employed doctors practices, has an outpatient surgery center under construction on its campus, has a new urgent care slated to open in Canton in the spring, and has recruited several new doctors, including a new urologist, cardiologist and neurologist just recently.

These days, it is all about fighting for market share against Mission, and that’s what Poore has been positioning Haywood to do.

“There is a demand, and if we can meet that demand, we can keep those patients here,” Poore said.

News that Jackson County Commissioner Joe Cowan won’t run for re-election this year has set the stage for a high-profile Democratic primary showdown between two well-known Democrats, Vicki Greene and former board Chairman Stacy Buchanan.

Greene had let her intentions be clearly known months ago that she would pursue the seat. Buchanan was something of a surprise, however, when he showed up at the county election office Monday — at the same time as Greene no less — to file for the race on the opening day of candidate registration.

Complicating the race is a bid by local builder Cliff Gregg, who Monday started the petition process necessary for unaffiliated candidates in North Carolina.

To run in November, Gregg must get the signatures of 4 percent of Jackson County voters, or roughly 1,400 names.

A second Jackson commissioner’s seat is up for election this year as well, the seat held by Democrat Mark Jones, who is expected to seek re-election.

So far, no Republicans have stepped up to run for either of the two commission seats.

GOP Chair Ralph Slaughter said Monday that he is hunting for members of his party to challenge for both seats. Candidate registration began this week and runs through the end of the month.

“I’ve talked to two or three people, but I’ve not had anyone agree to file. Talking and filing are two separate things,” Slaughter said, adding that he believes there might — emphasis on might — be a GOP candidate to vie for Cowan’s seat.

He was even less optimistic about finding anyone in the GOP to challenge Jones.

“Everyone has encouraged me to run, but I’m too old,” the 72-year-old Cashiers resident said.

The absence of Republicans is somewhat surprising given their success in the 2010 election. Following 16 years of Democratic domination, Republicans Doug Cody and Charles Elders successfully won election. Chairman Jack Debnam, an unaffiliated candidate who received GOP backing and advertising support, also won against a Democrat incumbent.

Jones first ran and won election in 2006. Jones, a Democrat, defeated challenger Nathan Moss in the Democratic primary. He then beat Republican challenger Geoff Higginbotham to win his seat.

Greene, though new to active political campaigning, has been a visible figure in Jackson County and the region for years through her work as assistant director of the Southwestern Commission overseeing government initiatives in the six western counties, a position she recently retired from. Greene cited her nearly four decades of work with various local, state and federal agencies, saying she believed that her extensive experience would serve the county well.

Buchanan would like to pick back up where he left off six years ago.

“I wanted to be able to finish a lot of things that we started,” Buchanan said in explanation, such as helping work on infrastructure that would attract new businesses to Jackson County.

Buchanan resigned in the middle of a term in March 2005 after six years on the board of commissioners. Buchanan, at the time, cited his acceptance of a position as assistant head football coach and co-offensive coordinator at Smoky Mountain High School, and an inability to split time between his school and public service career. Buchanan now works for America’s Home Place, a turnkey homebuilding company.

Buchanan said he believes the county, through local and higher educational efforts, has prepared a great workforce but now more jobs must be created. He pointed to small startup companies that would support the work of larger companies based in nearby cities such as Greenville, S.C., and Spartanburg, S.C.

He emphasized on Monday that he believes Democrats on the board can work with Republicans. When Buchanan was a commissioner, Democrats ruled. That all changed in the last election when an Independent, Jack Debnam, won the chairman’s position and two Republicans took seats.

“I don’t see that there would be any problem working together,” Buchanan said of the conservative board members now in office. “I think we all have the best interests of Jackson County at heart.”

Like her rival, Greene pinpointed economic development as the primary issue in the race for commissioner, indicating water needs in the Cashiers area would be one area she’d want to work on improving. Other job creation efforts are also needed, she said.

Greene said that she does support current commissioners’ recent decision to hire outside consultants to help develop an economic plan.

There has been a resurgence of interest in Jackson County to reconvene an economic development board.

Interestingly, Buchanan was board chairman when a brouhaha erupted that ultimately resulted the county’s economic development commission being dissolved, partly due to lack of results. Just weeks before resigning, Buchanan called for a “restructuring” of that board, which had run afoul of commissioners amid questions about $1.2 million in unpaid loans and generally questionable lending practices.

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