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June 7, 1994

There Is No Procedure

by Edmund Tsang

Since The Harbinger published an article in March, 1994 reporting that the Mobile County Public School System has received little of the payments promised it by industries financed by Industrial Development Board (IDB) bond issues, a payment from Donghae Pulp of Alabama has arrived at the school treasury. Charles Ratcliffe, associate superintendent for business and finance, told The Harbinger last week that the check was "twice the amount." Data supplied by Mr. Ratcliffe for the March, 1994 article showed that a payment of $17,500 was due the school system from the wood-chip mill.

The Harbinger called some of the companies idenified by Mr. Ratcliffe and by its own research to find out about these missing payments, commonly known as "sums-in-lieu" of property tax payments for public education. Companies contacted by The Harbinger received financing from the City of Mobile IDB.

Before January, 1993, industrial projects financed by IDB bonds were exempted from property tax to the state, county, city, and the school system. State legislation enacted in 1992 removed the school-tax exemption. Also, the Mobile County and the City IDBs began, in 1990, to require industries receiving financing from them to pay "sum-in-lieu" of school tax.

Ratcliffe brought the issue of the missing "sum-in-lieu" payments to the attention of the School Board in March, 1993. The Harbinger published the first of a series of articles on the non-payment in July, 1992, based on information provided by Dr. Doug Magann, former school superintendent of the Mobile County Public School System.

There Is No Procedure

Kevin Reminido, from the headquarters of Air Products and Chemical in Allentown, PA, told The Harbinger on June 1 that the company has "never received a tax letter or bill." He said he understands that some of the companies identified in The Harbinger article as being deliquent on the sum-in-lieu payment are in the same boat as Air Products. "As soon as we do," Reminido said, "we'll be happy to comply with the payments."

"It's not a dodge," Monty Dees of Dees Paper said. "Until that article appeared, I did not know it has not been paid." Dees added that perhaps Dees Paper "had not put the issue on the front burner" because it was busy making many other payments associated with expanding the company. "We have not been billed for that tax," Dees declared, admitting that he "did not know how it worked, the process of making the payments."

Mr. Ratcliffe from the public school system told The Harbinger last week that he has sent letters to the city and county IDBs to obtain "endorsement" from them for the school system to bill the companies directly for these sum-in-lieu payments. Because the school system is a "third-party beneficiary," Ratcliffe said it has no legal authority to enforce payments from industries and must depend on the IDBs. Ratcliffe said the letters he sent to the local IDB officials were meant to solicit a "sense of direction" from them, but he has received no reply.

Walter L. Hovell, president of the City of Mobile IDB, told The Harbinger in an interview in March, 1993 that a committee has been constituted to identify the companies which have not made the "sum-in-lieu" payments and to develop a "procedure" for collecting the money. In a IDB board meeting in August, 1993, Hovell said, in response to a question raised by a board director, that he was in the process of "tying up the loose end" concerning sum-in-lieu payments and expects to make a report "in 30 to 45 days."

The Harbinger tried unsuccessfully many times to interview Hovell again concerning sums-in-lieu and other City of Mobile IDB matters. Hovell communicated through his secretary on March 1, 1994 that he is "still working on completing the report. It is in the best interest not to discuss it until the report is completed."

Other Explanations

Greg Price said Scott Paper Company's sum-in-lieu payment is "not due until December, 1994." "We have a plan and we're going to be ahead of schedule." While the minutes of the City of Mobile IDB said Scott Paper "will make payments in lieu of taxes with the first payment of $25,000 to be made in 1993," Price told The Harbinger last week that "we'll pay $64,000" to the public school system in December, 1994. "We'll have paid by the year 2,000 a total of $1.8 million for the $250 million bond issue for the recovery boiler," Price added.

[Minutes of the City of Mobile IDB showed that a larger sum-in-lieu payment was originally promised by Scott Paper Company. Minutes of the December 12, 1991 City of Mobile IDB meeting stated: "Scott would like to give $500,000 directly to the Mobile County Public School System and to provide their paper needs for the next ten years. It was agreed that representatives of the Mobile County School Board and Scott Paper Company should get together to arrange the details of this contribution."

N.Q. Adams, school commissioner and chairman of the finance committee of the school board, was a member of the City of Mobile IDB directors until November, 1992, and he was present at the December 12, 1991 meeting. However, school commissioners Dr. Joseph Mitchell, "Sugar" Warren, and Hazel Fournier told The Harbinger in March that Adams never brought the Scott Paper Company sum-in-lieu issue to their attention.]

Bill Blevins of J. William Blevins said "I've never received a notice." He added that his company received IDB financing in 1985, and he is not "aware of any of the [sum-in-lieu] language in the contract. I'll have to look at the contract."

In documents presented to the school commissioners in a school board meeting in March, 1993, the school system's finanical officer Ratcliffe identified J. Williams Blevins among companies with "payments which we feel are due the school system but with some question due to contract working (all with initial payments due prior to 3/1/93)."

Merchants Transfer Co. was another company identified in the same category in school documents. Tom Taul, III, of Merchants Transfer told The Harbinger that he is "not interested in talking to you."

John Week of Gulf Lumber told The Harbinger last week that he is "not familiar with this [sum-in-lieu]" because it happened "before I work here." He telephoned The Harbinger later to add that because Gulf Lumber received "IDB bond before 1990," sum-in-lieu of property tax does not apply to the company. [Minutes of the City of Mobile IDB meeting on November 26, 1990 stated that, in approving the Gulf Lumber $2 million bond issue, "Company will make a service payment equal to the local school tax portion."]

In response to a Harbinger inquiry, Dr. Richard Leister from Hul's America's corporate headquarters in New Jersey faxed a reply on May 31: "In 1991, the Mobile IDB approved a $45 million bond issue for Huls America to construct a nylon plant. This project was never built. Consequently, the bonds were never issued, and there were no payments due on them."

-- June 7, 1994


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