WILMINGTON, N.C. (WECT) - After news broke that a WAVE Transit finance employee had informed city and county staff that the system needs a $700,000 loan, Mayor Bill Saffo said he immediately had a lot of questions.
“It’s a concern of mine because there’s a lot of people, a lot of citizens, that depend on that transportation system to operate. It puts them in a precarious position, it puts us in a precarious position because we are responsible to the taxpayers,” the mayor said during a break at the city’s all-day budget session.
He said primary concerns aren’t why WAVE hasn’t been reimbursed by state and federal authorities, but why WAVE’s budget has so little wiggle room, and why he and his fellow elected officials didn’t hear about the cash flow issues sooner.
WAVE Executive Director Albert Eby told Cape Fear Public Transportation Authority members Thursday that the transit system has nearly $1.2 million in receivables. About $700,000 of that is due to the North Carolina Department of Transportation having its own cash flow issues, and the remaining $500,000 due to delayed federal grant funding.
Both funding sources are guaranteed, Eby said, meaning WAVE will eventually get the cash — but an email originally obtained by Port City Daily showed WAVE finance staff telling city and county staff that buses could be parked as soon as Feb. 15.
In a press release, WAVE later denied there would be a service interruption.
Saffo said his concerns and frustrations lie in the fact that city and county leaders set WAVE up with a fund balance — a reserve slush-fund public agencies often use as reserves for unexpected expenses — in 2014.
At that time, he said, they set it up with the target fund balance amount of 8% of WAVE’s annual budget.
If WAVE were to have that amount based on its 2019-2020 budget, it would need $700,000 in its fund balance.
Instead, the transit system went into this fiscal year with just $111,036 or 1.25% of its budget after needing to pull $390,275 from the fund to cover an expected continued drop in fare revenue and federal reimbursements.
“Appointment of fund balance also reduces revenues available to maintain a healthy cash flow. This was a decision not taken lightly and continuation of this method of balancing the budget is unsustainable past FY 2020,” reads the budget document Eby submitted to the CFPTA board in May 2019.
The rest of the budget memo for 2019-2020 painted an increasingly dire picture of WAVE’s finances — partially as a result of a 2019 study that showed continued financial decline at the agency.
The document reads: “As we look to the future of transit in the region we remain anxious of the road ahead. The community and our elected officials have an opportunity to improve public transportation in the region in response to rapid growth or minimize our efforts to little more than an afterthought. We trust that after careful consideration they will consider the former and provide our citizens with a transit network that is a viable asset to the citizens of Southeastern North Carolina.”
In the budget memo, it is also noted that without a vehicle registration fee implemented at the county level, WAVE would have to cut routes — something that occurred in December after the New Hanover County Commission voted to pull its funding from the service.
Saffo said the city will carefully consider WAVE’s request for a loan, but that he anticipates the conversations won’t be easy.
“We have a lot of unanswered questions,” he said. “We set up a fund balance for emergency appropriations just like this. In the event that they would have some kind of a delay in funding from the state or the federal government or even with fuel issues, that there would be money there that they could obtain ... and we wanted them to use that fund balance in that way for emergency purposes, and emergency purposes only.”
Now that the reserves are so low, Saffo said he doesn’t understand why the city wasn’t made aware sooner.
“If there was an issue where the fund balance was going to be drawn down, that we would hope that the executive director or board members would come to the city council or county commissioners and alert us as to why they were going into fund balance and tell us that there was a possibility that they were going to ask for additional funding.”
Eby said by email Friday afternoon that the cash flow problems that prompted the request to the city and the budgetary constraints that led to the dip in fund balance are unrelated. He added the agency hopes to release a document explaining WAVE’s financial situation in the coming days.