March 26, 1996
by Edmund Tsang
Prior to 1993, businesses financed by industrial development bonds were exempted from paying property taxes, including property tax to the school system. But beginning in 1990, Industrial Development Boards (IDBs) in Mobile began formally requiring businesses financed by their bonds to pay a "sum-in- lieu" of property tax to the school system. However, sum-in-lieu payments made by companies that received financing from the Mobile County IDB did not go directly to the school system. Unlike its counterpart the City of Mobile IDB, the leases signed by businesses receiving financing from the Mobile County IDB specify that sum-in-lieu payments be sent to the county commission instead.
According to Maury Friedlander, attorney for the Mobile County IDB, all the leases of projects financed by its bonds carry the following paragraph concerning sum-in-lieu payments: "In consideration for public services rendered by the County with respect to the Project, the User shall pay to the Mobile County Commission the sum of $________ on _______199__ and on each October 1, thereafter during the term of this Lease Agreement." Leases issued by the City of Mobile IDB, however, are very specific as to the recipient of these payments in lieu of property taxes. A typical lease contains the following regarding sum- in-lieu: "In addition to other rent hereunder the Company will pay to the Board of School Commissioners of Mobile County, upon billing by the Board in the manner provided below, payments in lieu of taxes ("Payments in Lieu of Taxes") in such amounts and at such times as shall be equivalent to the aggregate ad valorem local school taxes...." [As of last month, 14 out of 21 companies receiving financing from the City of Mobile IDB have yet to make a single sum- in-lieu payment to the school system -- see The Harbinger, Vol. XIV, #11, March 5-25, 1996.]
In an interview last week, Mr. Friedlander said he recommended to the directors of the Mobile County IDB the policy of requiring sum-in-lieu payments be forwarded to the county commission instead of to the school system. And when he was the attorney for the Mobile County Commission, a post he held until 1988- 89, Friedlander said he recommended that sum-in-lieu payments be deposited in the county's General Fund and not be forwarded to the school system. "I don't think the County should send the money to the school system," Friedlander said. "This is my personal opinion." There are many unmet needs in the county, Friedlander said, such as paving roads and hiring more police officers. Friedlander said these sum-in-lieu payments should be used by the County Commissioners to address these needs in the county. He considered the policy of sending sum-in-lieu payments to the county instead of to the school system "a step up rather than a step down."
Barbara Drummond, Public Affairs Director for the Mobile County Commission, confirmed for The Harbinger that the "payment in lieu of taxes do not go directly to the school system, but into the county's general fund." From 1992 to 1996, these payments, which totalled more than $1.8 million, were deposited in the county's General Fund. [See table on page 5 for a breakdown of these payments in lieu of taxes.] However, the county has been making voluntary payments of more than $1.5 million annually to the Mobile County Public School System since 1989, Drummond said, which is more than the sum-in-lieu payments that companies have sent to the county through the Mobile County IDB. In addition, the county is mandated by state law to make $1.2 million per year for ten years to the school system beginning with the 1992-93 fiscal year, Drummond added.
John H. Holland, President of the Mobile County School Commissioners, told The Harbinger in a telephone interview last week that collecting the sum-in-lieu payments has been "slow." "But we are making progress," he added. When informed that information provided by the community relations office of the school system indicate that no additional payment had been received since November, 1995, when seven payments had been received so far, Holland said: "I will have to look into that."
When Holland became the president of the school board last year, he told his fellow commissioners in a board meeting in January, 1995: "I can assure you that we are going to continue working on this issue [collecting deliquent sum-in-lieu of school property tax payments] until it gets resolved." Holland also told The Harbinger in January, 1995 that "I'm not going to forget (the deliquent payments)."
-- March 26, 1996