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September 27, 1994

Losing Institutional Memory?

Will the Missing Sum-in-Lieu Payments Owed the School System be Forgotten with the Official Retirement of Charles Ratcliffe?

by Edmund Tsang

For those who are concerned that the institutional knowledge about the missing sums-in-lieu of payment of property tax owed the fund-straped school system would be lost forever with the official retirement effective August 31 of Charles Ratcliffe, school system's associate superintendent for business, don't fret. Hazel Fournier, President of the Mobile County Board of School Commissioners, has been quietly pursuing the missing payments since Mr. Ratcliffe first brought the issue to the attention of the school board in a March, 1993 meeting. Ratcliffe told the school board that the school system had received few of the payments promised it by industries financed by Industrial Development Board (IDB) bonds. The Harbinger first reported about the missing payments in July 1992, based on information provided by Dr. Doug Magann, former Mobile County School Superintendent. (See "The Check Is In The Mail," The Harbinger, Vol. X, No. 18)

[N.Q. Adams, a School Commissioner and a director of the City of Mobile Industrial Development Board (IDB) who voted for many of the contracts with sum- in-lieu language, is not seeking another term in the upcoming election in November. Adams resigned as a board director of the City of Mobile IDB in November, 1992.]

Before January, 1993, industrial projects financed by IDB bonds were exempted from paying property tax to the state, county, city, and the school system. State legislation, Act 92-599, enacted in 1992 removed the school-tax exemption. Also, the Mobile County and the City of Mobile IDBs began, in 1990, to require industries receiving financing from them to pay a "sum-in-lieu" of school tax. According to a 1992 report of the State Department of Revenue, IDB financed projects in Mobile County have a total property value (real plus personal) of $1.339 billion. This represents a potential revenue loss of $4.7 million annually to the public schools in Mobile County if the properties were taxed, with another potential revenue of $7.7 million per year lost to city and county.

Persistence Pays Off

Mr. Ratcliffe and Mr. Robert Campbell, school board attorney, met with the legal counsel of the City of Mobile IDB, Mack Binion, on September 12, after School Board President Fournier sent a letter on September 1, 1994 to Campbell, requesting him once again to seek information about the missing sum-in-lieu payments. As of August 31, 1994, only seven of the 23 companies identified by Ratcliffe and by Harbinger research have sent checks to the school administration, and the school system has yet to receive an accounting from the City of Mobile IDB.

Campbell wrote Fournier on September 12 and reported that he and Ratcliffe will attempt to "determine the status of the IDB contracts and, where applicable, to seek some resolutions as to the collection of past due service fee payments in lieu of ad valorem taxes." In the letter, Campbell said Ratcliffe sent a status report in January, 1994 about the non-payments to the president of the City of Mobile IDB, Walter Hovell. "Mr. Ratcliffe attempted on various occasions to obtain a response to his letter of January 4, 1994, however, it is my understanding, to this date, Mr. Ratcliffe has received no written response to his inquiries," the letter said.

Concerning his legal research on the sum-in-lieu matter, Campbell wrote in the September 12 letter to Fournier that "I have found that many of the contracts failed to properly identify a school tax and failed to direct payments of any kind to the Mobile County School System. Many times the formula for determining the payment in lieu thereof is incorrect. During my research I did, however, find some good working language."

The September 12 letter from Campbell to Fournier ended with the following recommendation: "I recommend that the President of the Board of School Commissioners of Mobile County and the Chairman of the Finance Committee consider a meeting with the representatives of the Industrial Development Board in the near future. It appears that there are political aspects to our concerns regarding the IDB Board which I feel can more properly be addressed by the elected officials of the Board of School Commissioners of Mobile County and the representatives of the Industrial Development Board. I think the presence of the President of the Board at a future meeting would be extremely beneficial and carry more political influence than any statements made by either Mr. Ratcliffe or myself regarding these issues."

In an interview with The Harbinger in March, 1993, Hovell said he recognized there was "no mechanism" for collecting the payments, but "about a year ago the IDB appointed a committee to check into this [sum-in-lieu payments]." Later, in an August, 1993 meeting of the City of Mobile IDB, Hovell told board directors that he was in the process of "tying up the loose end" concerning sums-in-lieu and expects to make a report "in 30 to 45 days." Then in March 1, 1994, Hovell, through his secretary, told The Harbinger that he is "still working on completing the report. It is in the best interest not to discuss it until the report is reported." Hovell's secretary also said "he doesn't know when it [the report] will be completed."

We'll Meeting Again on September 27

Ratcliffe declined to discuss the substance of the September 12 meeting with Mack Binion, legal counsel of the City of Mobile IDB, other than to say that it was "a wide ranging discussion with the IDB counsel." Ratcliffe said he and school board attorney Robert Campbell will meet with Binion again on September 27, and will probably make a report to the school board in early October.

Campbell said he brought up, at the September 12 meeting, the issue of "lack of definition in bond documents, that the language of the contract was cryptic and formula for calculating payments was not there." Concerning the inquiry as to why many of the companies had not sent payments, Campbell said Binion told him that "he got little response and the response is unfavorable."

[In June, 1994 The Harbinger contacted some of the companies which have not yet sent sums-in-lieu payments to the school system. Of the five companies contacted, three said they were unaware of sums-in-lieu and that they had not received a bill, but they said they are ready to make payments.]

At the September 12 meeting Campbell said Binion told him that the directors of the City of Mobile IDB would most likely approve a proposal by the school system of adding a uniform amendment to the original contracts with sum-in-lieu- of-property-tax language. The amendment would identify the mechanisms on "how to calculate payments." "We would have some input into the language of the amendment," added Campbell in a telephone interview on September 19. "We will also get assignment from IDB to collect these payments, with the authority to directly file lawsuits against companies with IDB financing but have not paid up -- like a collection agency. With the idea of assignment, I think they will make payments to the school system instead of facing a lawsuit."

-- September 27, 1994

Sum-In-Lieu Payments Received by the School System (through August 1, 1994):

COMPANYAmount of Payment
Atlantic Marine$59,675.07
Clay Rider$1,650
Dauphin Product$52,500
(formerly Donghae Pulp)(3 year catch-up)
World Omni$9,000
(G&B Hillcrest)
Georgia Crown$3,400
O'Neal Steel$14,535
Scott Paper$2,545

Source: Charles Ratcliffe, Associate Superintendent for Business, MCPSS

-- September 27, 1994

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