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March 31, 1998

Something About the IDB You Might Not Know:

The School System Still Hasn't Received All Promised Payments From IDB-Financed Businesses

by Edmund Tsang

According to information provided by the Mobile County Public School System, the number of companies that promised to make sum-in-lieu-of-property-tax payments to the school system in order to receive financing from the City of Mobile Industrial Development Board (IDB) but had not paid, remains at ten since the last count in March, 1997. When former associate superintendent for business, Charles Ratcliffe, first brought up the issue of sum-in-lieu in a school board meeting in March, 1993, only 3 out of 17 such promised payments had been received.

Figures provided by Charles Wilcox, the current business manager of the school system, show that the sum-in-lieu-of-property-tax payments made by seven companies during the 1996-97 fiscal year amounted to $560,946.87. The four payments received between September, 1997 and March, 1998 amounted to $189,791.89. The value of the ten missing payments is unknown.

[Prior to 1993, businesses financed by industrial development bonds were exempted from paying all property taxes, including property tax to the school system. Beginning in 1990, IDBs in Mobile began requiring businesses financed by their bonds to make a "sum-in-lieu" payment to the school system, but research by The Harbinger shows that lease agreements signed as early as 1981 between the City of Mobile IDB and companies contain language alluding to payments of school tax.]

[According to a 1993 report by the Alabama Department of Revenue, IDBs in the state had issued a total of $10.4 billion of bonds to finance companies to relocate to the state or expand their operations, and exempted a total of $77.1 million in property tax, of which $24 million was school tax. Mobile County led the state in IDB financing with $1.339 billion, according to the report, which would have generated $13.7 million per year in tax revenue to the city and county, with $3.75 million to the school system, were the taxes collected.]

When The Harbinger made inquiries in March, 1997, J. Bruce Jones, president of City of Mobile IDB, wrote back to say that "During 1996, two such issues were resolved...In these two cases, all outstanding 'in lieu' payments have been made." The letter continued: "As I have indicated to you, the Board intends to continue to provide assistance to the Revenue Commissioner and the Mobile Board of School Commissioners in resolving any outstanding issues relative to the 'in lieu of' arrangement. We will continue to work toward resolution of additional outstanding issues and it is our hope that the remainder of such issues will be appropriately disposed of in the not too distant future."

Several attempts made over a three-week period to reach the current president of City of Mobile IDB, Clarence Ball, to find out about the status of collecting sum-in-lieu payments were unsuccessful by press time. The Harbinger was also unsuccessful in obtaining answers to the following two questions about sum-in-lieu:

Who Have Not Paid?

Based on documents presented by Ratcliffe to the school board in March, 1993, minutes of the City of Mobile IDB meetings, and Probate Court records, the following ten companies have not yet make sum-in-lieu-of-property-tax payments: Great Southern Wood Preserving; Dees Paper Company; Belcher Company of Alabama; Robert Meadow Warehouse & Distributing; J. Williams Blevins; O'Neal Steel; Tonsmiere Construction Corp., Pfizer Specialty Minerals; Gulf Lumber; and Big Bee Chemical.

The 1985 lease agreement between the City of Mobile IDB and J. Williams Blevins calls the sum-in-lieu payment "a municipal service fee in an amount equal to the full amount of ad valorem property tax that would otherwise be payable." The lease signed in 1981 between Tonsmiere Construction Corporation and the City of Mobile IDB called the payment Tax Equivalent Rent: "the Company will pay to the herein-after identified taxing authorities installments of Tax Equivalent Rent in such amounts and at such times as shall be equivalent to the ad valorem taxes which would be levied."

While the contracts of the City of Mobile IDB did not spell out specifically how such sum- in-lieu payments were to be collected, the contracts of Mobile County IDB stated that such payments should be made to the Mobile County Commission.

In an interview last year, Barbara Drummond, public affairs director for the Mobile County Commission, confirmed for The Harbinger that "payments in lieu of taxes do not go directly to the school system, but into the county's general fund." From 1992 to 1996, $1.8 million of such payments were deposited in the county's General Fund, according to Ms. Drummond. The county has been making voluntary annual contributions of more than $1.5 million to the school system since 1989, which is more than the value of the sum-in-lieu payments, Drummond said, and the county is also mandated by state law to make another $1.2 million per year to the school system beginning with the 1992-1993 fiscal year.

Who's Looking Out For The Students?

Charles Wilcox of the school system said in a telephone interview last week that a reason for the difficulty in collecting the remaining delinquent payments was "lawyers representing both sides were at the table, but there was no one representing the school system."

Mr. Wilcox is incorrect, technically. N.Q. Adams, a member of the Mobile County Board of School Commissioners and the chairman of the finance committee from 1989 to 1995, was a director of the City of Mobile IDB when the provision of requiring companies to make sum-in-lieu of property tax were discussed in early 1990. According to minutes of IDB meetings, Adams was present in meetings where the issue of sum-in-lieu was discussed. Adams' presence did not lead to mechanisms for collecting the promised school-tax payments, however. Adams resigned from IDB in November, 1992.

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