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December 8, 1992

Trickle Down Trickery

by Bill Patterson

Industrial Development Boards (IDB) here voted three years ago to help the public schools. But the checks never arrived at the school system, and officials there are still waiting.

Business construction financed with IDB bonds in Alabama is exempt from property tax. However, the local boards announced in 1990 their clients would pay "sums-in-lieu," a fee equal to the tax dollars lost by the schools. The Boards have since issued hundreds of millions of dollars in revenue bonds.

Charles F. Ratcliffe, Jr., business manager for the Mobile County School System, told The Harbinger last June only $3,400 in checks have ever reached the school system. ("The Check's in the Mail," The Harbinger, June23-July5, 1992) Asked on November 10 about further developments, Ratcliffe said no more money had arrived.

Almost nothing about the sums-in-lieu had changed, Ratcliffe added. No list of payments due had been complied by anyone, he said, nor had a method of payment been set up.

Ratcliffe thinks the School System should receive the money. He wants "a normal relationship" with IDB-financed businesses, and said the sums-in-lieu should "flow to schools and not depend on resolution" by the City Council or the County Commission.

Ratcliffe tried to find the missing checks earlier this year. On January 30, 1992, he wrote to County Administrator W.C. Helveston: "in view of the magnitude of these payments, I would also ask that any such payments during current and future years be forwarded as received, and that you research the past three years (1988, 1989, and 1990) and forward to us any such funds which you identify in those years."

He wrote again on March 25. County Administrator Helveston wrote back on March 26 that the sums-in-lieu received by Mobile County had been deposited in the county's General Fund. Helveston added: "If we receive any funds designed as payment in lieu of 'School' tax, they will be paid directly to the School System."

Susan Morrison, Mobile County Comptroller, says the county budget contains under Projected Revenue a category called Sums-in-lieu. $74,000 is projected for the 1992-93 budget. Asked how this figure was set, she said, "They just take it from last year."

Morrison checked the list of sums-in-lieu that went to the General Fund of the county during fiscal year 1991-92. She said $346,237.81 of sums-in-lieu had been received as of September 30, 1992. Payments from Degussa, Clay Hyder Trucking, Consolidated Company, Hosea Weaver, M&T (formerly AtoChem), and a item named "fees for land management" are listed.

These match entries on a list of billings and payments prepared by the Board's attorney Maury Friedlander last month at the request of The Harbinger. Mobile County IDB officials likely never intended sums-in-lieu to go directly to the school system. The system is never mentioned in the Board's agreements on file at Probate Court.

Citing "impact on the communities and...certain tax savings," the Board's clients agree to make annual payments "to the County" rather than the school system. Payments are calculated like property tax, using a millage rate and the dollar value of the bond issue. Payments are due on September 30 and become delinquent January 1.

The County IDB Board never told the public or the school system about its intentions to keep the money in the county's general fund. Maury Friedlander told The Harbinger last spring that the Board policy was to forward all payments it receives to the schools, though he added, "the Board didn't need to send the money to the schools."

Confusion abounds about the sums-in-lieu. Charles Ratcliffe told The Harbinger last month County Administrator Helveston indicated that less than $100,000 in sums-in-lieu was received last fiscal year "by any governmental agency."

Who's On First?

The situation at the City of Mobile is more complex. Callers to Mobile city hall seeking information about the City of Mobile IDB are told to contact Jay Garner, the Board's secretary (and Mobile Area Chamber of Commerce executive vice-president), or its attorney Mack Binion.

The City of Mobile IDB decided on its sums-in-lieu policy during December, 1989. A Mobile Register article last April reported, "The city IDB has issued bonds totoling $46 million since 1989 and has required school taxes on them, board member Frank McRight said."

But the minutes from the City IDB March 25, 1992 meeting suggest uncertainty: "Appoint committee to ascertain what provisions are contained under lease agreement regarding pay in lieu and if these payments are being made and to whom they are being made." A committee of Ken Lott, Clarence Ball, Frank Schmidt and Walter Hovell as Chairman was appointed at the meeting.

An examination of Probate Court records finds eight projects financed through the City IDB since the sums-in-lieu were required: Pfizer Specialty Minerals, O'Neal Steel, Atlantic Marine, OMNI, Donghae Pulp, Great Southern Preserving, Cove Maritime and Dees Paper. About $200,000 each year would go to the school system if these sums-in-lieu were paid.

Where Is The Money?

Board attorney Mack Binion told The Harbinger last month the school payments are "administratively being worked on."

The wording of each company's agreement with the City Board varies, but payment to the School System is explicit: "the Lessee will pay to the Mobile County School Board payment in lieu of taxes."

Payments are not based on the dollar value of the bond issue but usually require the Board and the company to negotiate an acceptable value. An "Independent Appraiser mutually acceptable to the Lessor and Lessee" may be required.

Companies financed by revenue bonds issued before October 1991 should have sent a check to the School System by January 1, 1992. These firms include Pfizer Specialty Minerals (bonds issued August 1, 1990), O'Neal Steel (issued September 1, 1990), Atlantic Marine (issued April 1, 1991) and OMNI (issued September 23, 1991). Checks for only $3,400 have arrived at the School System, none from the above.

O'Neal Steel's agreement states a specific date its sums-in-lieu become due: "On or before October 1, 1991, and on or before October 1 of each year thereafter..." The other agreements merely specify an annual payment due October 1.

Who Will Assure Payment of Money Due the School System?

A bill passed by the Alabama Legislature last spring ends all school tax exemptions for property funded through IDB after January 1, 1993. A companion bill requires local tax commissioners "to provide for the reporting of tax exempt property by any lessee of the property to the State Department of Revenue" by January 1, 1993.

Mobile County Revenue Commissioner Freda Roberts said last month the mechanism for listing property has not been worked out. She added "vague language (in the IDB agreement) doesn't even say how to send the money," and no provision is written into the agreements "to offset government expenses of collection."

-- December 8, 1992


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