Rocky Mount Council 3

Former Rocky Mount Mayor David Combs

A report of the findings of a probe of the City of Rocky Mount by State Auditor Beth Wood and her team said the municipal Engineering Division failed to comply with the code of ordinances in a case of a subdivision development.

The report said that could cost the city $31,000.

According to the report, engineering did not properly review an expiring letter of credit.

Generally, a letter of credit comes from a bank and guarantees a purchaser’s payment to a seller is going to be on time. If the purchaser cannot make a payment, then the bank has to cover the full or remaining amount.

The state audit report, which was made public on Friday, identified former Mayor David Combs as a partner in the development company in the case.

Combs, who is in the real estate business, was mayor from December 2007 to December 2019.

The report said in October 2007, the developer obtained a one-year letter of credit for $32,868 to complete remaining improvements to a 31-lot subdivision.

The report said the Planning Board approved the final plat. The final plat is the document providing a description of the subdivided land for a filing of record.

The report said in this case in October 2008, engineering allowed the developer to renew the letter of credit for an additional year.

The report said in October 2009, engineering allowed the letter of credit to be renewed again, this despite the developer not completing improvements within a required two-year period.

According to the report, no work was performed between October 2010 and August 2018 and because of this, the total cost of needed improvements to the subdivision increased.

The report said the city in 2019 entered into an agreement with another developer.

The report said the city agreed to provide an amount not to exceed $31,000 of an estimated $123,270 of needed improvements to the subdivision.

The report said calling on the $32,868 letter of credit approximately a decade earlier could have been used to offset the costs of those improvements.

The city, in response to a draft report by state auditor’s office, said the ordinance does not address the question of whether the two-year time period can be extended.

And the city does not view the ordinance as requiring all improvements to be completed within that two years.

And the city said the two-year time period has routinely been extended in instances if the developer continues to maintain adequate security and is working in good faith to get a subdivision completed.

The city said this practice is consistent with the practices of other local governments throughout North Carolina, particularly amid downturns in the real estate market.

The city said the only other option would be to collect on the security and complete the improvements, which is something most local governments are not equipped to do.

The city anticipates a reimbursement obligation under the contract with the new developer is going to be $13,000 and said all work has been completed except for one patch.

The city is pledging to amend the code to state that the time period for guarantees on subdivisions may be extended beyond the initial two-year time period.

And the city said that enhanced procedures have been put in place to improve tracking letters of credit.

The state audit report made public on Friday said the city failed to acknowledge the lost funds in this case that could have been collected if the letter of credit had not been allowed to expire.

The report recommended the engineering director should ensure the city complies with the code of ordinances requirements regarding letters of credit, as well as performance bonds. A performance bond guarantees a contractor is going to complete a construction project according to a contract.

Wood’s probe of the city began in response to 213 complaints about alleged misconduct by city elected officials and city employees.

The major part of the state audit report said multiple city officials prevented the municipal Business Services Center from trying to collect $47,704 in utility bills owed by a City Council member.

The council member is not identified by name in the report, but published reports and social media postings indicate Councilman Andre Knight is the elected official at issue. Knight was first elected in November 2003 and is presently mayor pro tem.

The state audit report also said City Manager Rochelle Small-Toney disregarded established city policy regulating spending while traveling.

The report also said there were failures to follow the guidelines of city programs designed to help developers and property owners replace roofs of downtown buildings and renovate downtown buildings.