NBC: Mecklenburg County loaned $350,000 to delinquent taxpayers

November 15, 2020 02:50 PM

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MECKLENBURG COUNTY, N.C. — When Mecklenburg County loaned millions of dollars to area small businesses, a WCNC Charlotte investigation found the county unknowingly gave more than $350,000 in low-interest loans to delinquent taxpayers in the process.

Tax records show more than a dozen of the loan recipients owed a combined $21,000 in delinquent property taxes before the pandemic.

"Certainly, there's a lack of control on this program," OpenTheBooks.com Founder and CEO Adam Andrzejewski said. "It's troubling. It's a troubling fact pattern."

The revelation comes just weeks after WCNC Charlotte first discovered the county didn't know which small businesses received the government loans. Thanks to our reporting, Mecklenburg County commissioners improved the program's transparency.

As a result, we now know the names of the businesses that received loans. We cross-checked those business names with Mecklenburg County's tax database. The county and the third-party managing the program skipped that step.

Jerrell is owning up to his role in the miss.

He championed the quick approval of the program and asked that the application process be less restrictive, so often overlooked businesses in underserved communities could qualify.

"I have to take some responsibility around the program parameters that I pushed for," he said. "Now, I'm not going to say I was pushing for tax delinquency. I'm not going to go that far, but I certainly did want to make it as least restrictive as possible... As leaders we're responsible. Period. The buck stops with us and we have to make the right adjustments."

After WCNC Charlotte shared our discovery with the county, Economic Development Director Peter Zeiler sent an email to county commissioners.

"The initial approval process did not include checks for outstanding ad valorem tax balances," he wrote. "It has since come to our attention that 17 loan recipients have unpaid tax balances totaling $21,472. The average balance is $1,431. The outstanding balances range from $13.41 to $5,393.81."

"We have to get it right on behalf of the people. We have to use their money wisely," County Commissioner Mark Jerrell said. "Am I comfortable with where we've had misses? Of course not."

The program lists tax liens and collections over $1,000 as disqualifying factors, but not delinquent taxes.

"Going forward, the County will work with its lending partner, Carolina Small Business Development Fund, to verify whether new applicants have outstanding balances and if so, determine if the balances are material to loan worthiness," Zeiler told commissioners. "The Office of Economic Development will also partner with Office of the Tax Collector to work with the loan recipients with outstanding balances to bring them current on their balances, given the ongoing economic constraints of the COVID-19 pandemic."

When contacted by WCNC Charlotte, several of the delinquent businesses called the late payments an oversight and promised to quickly settle up.

County records show R A Signs Inc received a $31,000 loan, yet racked up a combined $5,000 in delinquent taxes over the span of nine years.

Meanwhile, county records show Pea Island LLC received a $30,000 loan, yet owed more than $5,300 to the city and county dating back to 2017. We've reached out to both companies and are awaiting formal responses.

Mecklenburg County initially used $5 million in reserves to fund its Small Business Stabilization Loan Fund and then replenished those reserves with federal CARES Act dollars.

"We need to be vigilant with our tax dollars," Andrzejewski, whose non-profit aims to document how the government spends tax dollars, said. "All of these federal dollars were borrowed and added to the national debt and local delinquent businesses were receiving those taxpayer dollars. When $5 million is at stake, the citizens need to be able to hold the local politicians accountable for the actions of programs just like this. Now, taxpayers can begin the process of asking even more questions."

County records show Spiracle Media, LLC received a $25,000 loan despite owing more than $4,100 in delinquent taxes.

"To be honest, we didn't know there was an outstanding balance and when you sent your email this morning we reached out to the county to figure out why we had not received those bills," Spiracle Media Chief Executive Officer Tim Baier said in an email. "Everything has been cleared up and paid in full. Appreciate the heads up."

According to the county, North Carolina law makes it clear that it's "the taxpayer's responsibility to know the details of their taxes, including deadlines, if they receive notice (or) not...Failure to receive notice does not compromise the lien or eliminate the taxpayer's responsibility for the tax."

County records show KB Holdings LLC received a $27,000 loan, yet owed more than $3,000 in delinquent county and city taxes. Two phone calls to KB Holdings went unreturned.

County records also show WHY NOT PIZZA LLC received a $25,000 loan despite owning more than $1,800 in delinquent taxes.

"I didn't know about this," owner Maura Trejo said. "I talked to my accountant and she's going to pay it right now."

Mecklenburg County started the loan program in April, putting its full trust in the Carolina Small Business Development Fund. The county is paying the non-profit $1 million to administer and service the loans.

For months, unbeknownst to county commissioners, the non-profit did not share the names of loan recipients with the county, as part of an agreement to protect their privacy.

After WCNC discovered the county gave up full control of the details, commissioners voted to request that information from the Carolina Small Business Development Fund.

The non-profit would not answer specific questions about delinquent taxpayers who received loans, but instead shared this statement:

"The Mecklenburg Emergency Stabilization Loan Fund was created in response to the economic impact of the current COVID-19 heath crisis. The loan fund has afforded numerous county small businesses the opportunity to access much needed funds during uncertain times. The fund is still serving its purpose, especially for minority and women-owned small businesses at this difficult time. The terms of the agreement between Mecklenburg County and the Carolina Small Business Development Fund (CSBDF) for CSBDF to provide funding to small businesses have been met.

To date, more than 200 small and minority businesses throughout the county have received over $4.4 million in loans to help them succeed during this challenging time. Like the County, CSBDF remains committed to ensuring that these businesses have every opportunity to survive and thrive. We are excited about the opportunity to continue disbursing funds to Mecklenburg County businesses in need, across a variety of industries, and once again thank WCNC for its interest."

The newly obtained contract between the non-profit and county shows CSBDF originally agreed to provide the county with monthly updates, including business names.

"Thank you for bringing this oversight to our attention," CSBDF Marketing and Communications Director Alisha Brown said. "CSBDF is committed to providing proper management, and reporting of the loan fund. We will send the updated list of borrowers at the end of each month going forward."

WCNC Charlotte is only naming delinquent taxpayers who owed more than $1,000 in this report.

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NBC: Mecklenburg County loaned $350,000 to delinquent taxpayers