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January 10, 1995

New Year, New Officials, Better Luck?

by Edmund Tsang

Will the new officials of the Mobile County Public School System have more luck in collecting the overdue money owed the schools from industries financed with bonds issued by area's industrial development boards (IDB)?

The Mobile Register reported last month that School Commissioner John H. Holland requested Charles Wilcox, assistant superintendent for business operations, to arrange meetings with IDB officials to discuss the overdue payments. "School officials estimated overdue payments of more than $720,000 alone from development contracts negotiated since 1982 through the Industrial Development Board of the City of Mobile," the daily reported, and "Payments on contracts with other municipal development boards also are overdue, although those estimates were not provided at Tuesday's meeting."

Wilcox became the school system's business manager last fall upon the retirement of Charles Ratcliffe, who brought the issue of the missing payments to the attention of the School Board at a board meeting in March, 1993, and who had tried unsuccessfully to collect the money owed the schools.

Holland and Charles E. Jordan were elected to the School Commission last November, replacing "Sugar" Warren and N.Q. Adams, who decided not to run for re-election. Adams, who voted for many of the contracts containing sum-in-lieu language, was a director of the City of Mobile IDB until November, 1992; he served on the School Board's Finance Committee until his retirement last November.

Down The Same Trail

IDB was on the agenda of a School Board Finance Committee meeting on January 4, 1995. Holland, Vice-President of the School Board, told the other four commissioners: "Mrs. Fournier has made contact with the County Development Board president Mr. David Wright, and Maury Friedlander, their attorney. I have contacted Mr. Walter Hovell, the out-going president of the City Development Board, and their attorney Mack Binion. I have also met with Freda Roberts, the Revenue Commissioner. Everyone has been cooperative, and everyone wishes this matter could reach a conclusion for the school system...I can assure you that we are going to continue working on this issue until it gets resolved."

Contacted earlier, Holland said Revenue Commissioner Freda Roberts told him that in Mobile County, properties financed by IDB bonds represent a potential school revenue of $6 million annually, if these properties were taxed. Holland said such income would go a long way towards meeting the needs of school construction.

Concerning the missing payments, Holland said Walter Hovell, President of the City of Mobile IDB from 1992 to 1994, agreed to meet with him again after Christmas to discuss the overdue payments. According to Holland, Hovell told him that since Hovell is retiring from the position as President of Mobile Gas Service Corporation, Hovell would have time to look into the issue.

When informed that Hovell told The Harbinger in an interview in March, 1993 that "About a year ago the IDB appointed a committee to check into this [sum-in- lieu payments to Mobile's schools]," Holland said: "I've just been elected to a six-year term. I'm retired now, and I have time to work on issues that are important to our students' education. I'm not going to forget [the missing payments]."

Wilcox, while admitting that he is new to the game of sums-in-lieu, said he is certain that the money will be collected. "We have a new group working on it," he told The Harbinger last week. "One of our school commissioners, Mr. Holland, is very actively pursuing the matter. The President of the School Board, Mrs. Fournier, has maintained a continual interest."

Wilcox said he cannot give an exact number of companies from which payments were overdue, because "while some IDB contracts have language that is black-and- white in terms of payments, others fall into a grey area." He added that no payments were received since last August, when Ratcliffe told The Harbinger that only seven out of 23 companies have sent payments to the school system.

Wilcox also said that as of January 3, 1995, 17 or 18 companies have yet to make a payment to the school system. 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. The Mobile County and City of Mobile IDBs began, in 1990, to require industries receiving financing from them to pay a "sum-in-lieu" of school tax. The Harbinger reported about the missing sum-in- lieu payments in July 1992, based on information provided by Dr. Doug Magann, former Mobile County School Superintendent. (See "The Check Is In The Mail," Vol. X, No. 18)

Bite The Dust

Jerry Pogue of Prichard and David Underhill of Mobile tried to collect the missing sum-in-lieu payments for the school system by petitioning Alabama Circuit Court Judge Eugene Reese, who is the presiding judge in the Alabama school equity lawsuit, to join the plaintiffs as intervenors, and to add the Mobile city and county IDBs as defendants. In a brief filed with the Circuit Court in Montgomery in January 1993, they argued that the sums-in-lieu were merely a "device deliberately designed to avoid paying taxes," because of the "highly peculiar fact that the Mobile IDBs (and perhaps others elsewhere) seem incapable of drafting contracts that plainly establish a payment and accounting structure for sums-in-lieu. Yet these same IDBs have proven themselves consistently capable of producing the detailed and complicated documents and accounting procedures necessary to market bond issues totalling well over a billion dollars, to distribute the proceeds to the appropriate parties, to collect lease payments, to pay interest due to bond holders, to pay attorneys', brokers' and other fees in timely and correct amounts, etc." They petitioned the state to collect all revenues from companies using IDBs to escape taxation for schools first, before asking taxpayers to pay for school reform. In a ruling handed down March 28, 1994, Judge Reese denied the petitions of Pogue and Underhill.

-- January 10, 1995

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