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August 31, 1999

"The Rule Was, 'Don't Blow the Whistle'"

by Bill Patterson

It is not often that a Mobile County legislator questions local industry. But at a meeting of the City Industrial Development Board on July 21, one did. Rep. Joseph Mitchell, from Alabama's District 103, asked the Board about the missing sums-in-lieu, money pledged to the Mobile County Public Schools by industries that had received property tax waivers from the City IDB. The Harbinger first learned about the missing money from former school superintendent Dr. Doug Magann in June 1992. An investigation by the Harbinger revealed that an accumulated total of several million dollars in sums-in-lieu have never reached the school system. In the seven years since 1992, the preponderance of the money has still not reached the schools.

The City IDB held its July 21 meeting in the Hearin Room at the Mobile Area Chamber of Commerce. After the Board had completed its agenda, Mitchell asked to speak to the directors. Mitchell stated: "I want to inquire about the letter I sent you requesting information about the sums-in-lieu. I asked for information addressing each one of the companies." Rep. Mitchell provided the Harbinger with a copy of a June 21 letter he had sent to Jim Apple, the assistant secretary of the City IDB and vice president for economic development at the Chamber of Commerce. In his letter Mitchell wrote: "It has been brought to our attention that several companies doing business in Mobile County have not paid their respective sum-in-lieu of property tax to the school system." At the meeting Mitchell asserted to the Board that some of these payments went back to agreements signed as far back as 1977.

Mobilians who hope Mitchell learned something about the missing sums-in-lieu at the City IDB meeting will be disappointed. The Board offered no information. According to one Mobilian who attended the meeting, the City IDB's attorney apologized for not replying to Mitchell's letter, pleading that it was summertime and the Board needed more time. On August 20, a month after he appeared at the City IDB meeting, Mitchell told the Harbinger that the City IDB still had not responded to the questions he asked in his June 21 letter, and that no one from the City IDB had contacted him after he spoke at its July meeting.

On August 25 Jim Apple told the Harbinger that the vice president for governmental affairs committee of the Chamber of Commerce had written Mitchell soon after Apple received Mitchell's June 21 letter. Apple said that Mitchell's questions about the sums-in- lieu had been forwarded to City IDB attorney Mack Binion. It was Binion who responded to Mitchell at the City IDB meeting, Apple indicated, but he did not remember what Binion said at that meeting. Asked if he could remember another local legislator attending a Board meeting, Apple said he did not remember any. Phone calls by the Harbinger to Clarence Ball, president of the City IDB, were not returned by press deadline.

An active pursuit of the sums-in-lieu by a local legislator is significant because it was the Alabama legislature that created industrial development boards when it enacted the Cater Act. Last week the Harbinger asked Mitchell why, over the decades, Mobile's legislators had not kept closer track of the City IDB's actions. Mitchell declared that "the legislators were not asleep, but they were engaged in a choreographing process" in which they allowed the City IDB to operate with no oversight. Mitchell believes Mobile's legislators, whom he termed "the old guard and the up-and-coming new guard . . . conspired not to discuss" the actions of the City IDB, including why so many industries never paid their sums-in-lieu. "The rule was, 'Don't blow the whistle'," Mitchell held.

Asked what he will now do to get the sum-in-lieu money to the public schools, Mitchell says he will continue to remind the City IDB with letters about the missing money, and he also intends to ask the State Examiners Office to investigate whether companies have written off payments to the school system on their tax returns though they never paid the money. Asked if the present Mobile County legislative delegation might be ready to pressure the City IDB to get the missing sums-in-lieu, Mitchell is not hopeful: "I can't get my colleagues in the legislative delegation interested in the sums-in-lieu". Mitchell held hope the current Mobile County School Board members would work to collect the sums-in-lieu. Mitchell asserted that, in the past, local school board members were affluent Mobilians "in cahoots with local banks and industries." He added, however, the current school board is "cosmopolitan" and that its members "may have nothing to lose" by demanding that the sums-in-lieu be paid.

The story behind the sums-in-lieu began in 1949 when the Alabama legislature passed the Cater Act. This law allowed cities and counties to set up a new type of public board, called an industrial development board, with the authority to issue municipal bonds for private companies, thus using low-cost financing and tax breaks to recruit new industry. Since its founding in 1962, Mobile's IDB has written into some of its incentive agreements a requirement for annual fees, called sums-in-lieu, to compensate for some of the local property taxes lost through the board's incentives. The local school system was usually the beneficiary of these payments. In many cases the board's contracts specifically named the schools as recipients of the fees, but in other cases, the language was ambiguous. After 1990 this "in lieu of school taxes" was always written into agreements between the City IDB and the companies. Beginning in January 1993, as a result of Alabama's Tax Reform Act of 1992, industrial development boards could no longer waive school taxes.

Only within the past decade, as pressure grew to find more money for the local school system, do records of the City IDB meetings show the Board beginning to look into whether its industrial clients were making their annual payments to the schools. The minutes of the City IDB meeting on March 25, 1992 indicate that the Board appointed a committee to find out if its clients were paying the fees to the public school system. Six years later the Board has not completed its investigation. Mitchell told the Harbinger he believes only a lawsuit will force the local industries to pay up. "Anyone who lives in the city or county has a property right to the money due the schools" Mitchell said, and thus citizens should "file suit against the IDB to live up to its agreements."

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