March 28, 2000
by Edmund Tsang
Frank Taylor, an attorney representing the Board of School Commissioners of the Mobile County Public School System (MCPSS), told The Harbinger in a telephone interview last week that he had met with Charles Wilcox, assistant superintendent for business, on March 10 to discuss the topic of sum-in-lieu. Sums-in-lieu of property tax were the promised payments to the school system from companies that received financing by industrial development boards (IDB) in the early 1990s. Since the sum-in-lieu topic was first brought up in a school board meeting in 1993, when the school system was facing a financial crisis, a majority of the companies still have not made a single payment as of March 2000, when the school system faces yet another serious financial shortfall of about $10 million.
Prior to January 1993, industries financed by bonds issued by IDB's were exempt from all property taxes, including school property tax, over the period of the bonds. But between 1989 and the date when Alabama's Tax Reform Act of 1992 became effective, which ended IDB's power to grant school-tax exemption, IDBs in Mobile began requiring businesses financed by their bonds to make "sum-in-lieu" payments. However, unlike common, standard contracts, no mention was made in these IDB contracts on when and where to make the sum-in-lieu payments.
Research provided by MCPSS's former business manager Charles Ratcliffe and carried out by The Harbinger discovered IDB contracts with sum-in-lieu language as far back as 1981. Mr. Taylor told The Harbinger last week that he plans to set up a meeting with Mack Binion, the legal counsel for the City of Mobile IDB, and Maury Friedlander, the attorney representing the Mobile County IDB, and with the school board president and Mr. Wilcox representing the school system. "Let's stay in touch," Taylor said.
The minutes of a November, 1991 meeting of the City of Mobile IDB shows Mr. Binion being tasked to produce a status report on the sum-in-lieu payment; it stated: "Board Counsel [Mack Binion] look into where the service payments are going and the feasibility of future payments being made directly to the Mobile County School System. Motion passed unanimously."
Thomas Hinds, the current City of Mobile IDB president, told The Harbinger on March 17 that he was present at the meeting at which Joseph Mitchell, a state legislator who was a former school board member, asked the IDB directors during a meeting last July on the status of the promised payments that were never made by the companies financed by its bonds. Mitchell told The Harbinger in early March, 2000 that he still has not received any information from the City of Mobile IDB on the missing sum-in-lieu payments. Mitchell said that prior to attending the July 1999 meeting of the City of Mobile IDB, he sent a letter to its assistant secretary, Jim Apple, inquiring about the missing sum-in-lieu payments.
In a telephone interview on March 17, Hinds said he has been a director of the City of Mobile IDB for four years but is unfamiliar with the status report on sum-in-lieu, since he only became its president in Fall, 1999. Hinds said he will direct Mack Binion to contact The Harbinger on the status of the missing sum-in-lieu payments. As of press time, Binion has not yet contacted The Harbinger.
At the conclusion of a City of Mobile IDB meeting in June, 1994 Binion told The Harbinger, when it inquired about a cost-benefit study that Binion was tasked to perform, "If I have any confidence that you and your group could ever report anything accurately, I might respond to you. This board does not require me to respond to you, and I'm not." Previously, Binion claimed the cost-benefit analysis was "confidential." According to the minutes of a November 1993 meeting, Binion stated "a cost-benefit analysis is required on the economic impact" of a bond request that had come before the City of Mobile IDB. In October 1992, the Alabama Legislature added a provision to the Code of Alabama governing IDBs, requiring them "to make a reasonable cost/benefit analysis as to the proposed industrial development property and to determine the maximum period of tax abatement." Prior to October 1992, such cost- benefit analysis was not required to be performed by IDBs. The "confidential" study that Binion cited was the first such cost-benefit analysis required by the legislation.
Five IDB directors told The Harbinger that they had not seen the cost-benefit analysis, including its current president, Thomas Hinds, when they voted for the approval of the bond in 1994 [Harbinger, Vol. XII, No. 18, 6/21-7/11, 1994]. At the time, Mr. Hinds told The Harbinger "I haven't seen it" but assumed that "it [the cost benefit-study] "has been done," when he voted to approve the $60 million bond issue. The bond issue, with a tax exemption to city, county and state property taxes totaling $400,000 per year for the duration of the bond issue, did not create any additional jobs.