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March 25, 1997

Update on Sum-in-Lieu

School System Received Two Additional Payments in 1996

by Edmund Tsang

Four years to the month after Charles Ratcliff, former business manager for the Mobile County Public School System (MCPSS), told the school commissioners that the system had received only two out of 26 promised payments in lieu of school tax by companies financed by bonds issued by the City of Mobile Industrial Development Board (IDB), only eight remain on the list of those who have not paid. Two additional companies made payments in 1996, bringing the total number of such payments to 10 companies. In 1993, the public school system was in the grip of a financial crisis, and Ratcliff's report prompted one school board member to exclaim: "This makes the headline."

Another eight companies that also promised to make such payments have made the payments, not to the school system but to the Mobile County Commission. In response to a request for an interview, J. Bruce Jones, vice-president of Alabama Power-Mobile Division and president of the City of Mobile IDB, sent a letter to The Harbinger stating, "During 1996, two such issues were resolved...In these two cases, all outstanding 'in lieu' payments have been made."

"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," the letter continues. "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."

[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, IDBs in Mobile began formally requiring businesses financed by their bonds to pay a "sum-in-lieu" of property tax to the school system. According to a 1993 report by the Alabama State Department of Revenue, IDBs in the state have issued a total of $10.4 billion of bonds to finance companies to relocate to Alabama or to expand their operations in the state, resulting in a total of $77.1 million in tax revenue loss, of which $24 million were targeted for public schools, if the taxes were collected. Mobile County ranked first in that report, with $1.339 billion of property value financed by these IDB bonds, with a loss of $4.7 million in school tax, if collected. (We're Still #1, The Harbinger, September 28, 1993)]

The letter does not address, however, the question communicated on March 20 to Jones through his secretary -- why the City of Mobile IDB did not grant the school system the "endorsement" it needs to collect the payments directly from the companies. His secretary said Jones has gone on a business trip before she had an opportuntiy to forward the question. Ratcliffe, before he retired from the school system in November 1995, tried to obtain "endorsement" from the City of Mobile IDB so the school system can collect the deliquent payments directly. The request was denied. In a telephone interview last week, John H. Holland, school commissioner and chair of the finance committee, stated that he plans to continue to work toward collecting from those who have not make the payments described in the IDB-lease contracts. When Holland became the president of the school board in 1995, he said in a board meeting: "I can assure you that we are going to continue working on this issue [collecting the deliquent sum-in-lieu- of-school-tax payments] until it gets resolved." Holland also told The Harbinger in January, 1995 that "I'm not going to forget [the deliquent payments]."

Last week, Holland referred all inquiries about specifics and updates to Charlie Wilcox, business manager of the school system, saying he is not involved in the process of collecting the payments. Efforts since Fall, 1996 to reach the business office of MCPSS for information on these sum-in-lieu payments were unsuccessful. Beginning in September 1996, requests were made to Tom Salter, the school system's communications director, first verbally and then in writing as suggested by Salter. The Harbinger has been unsuccessful in obtaining a response to its requests. A written request and several requests directed to Salter and Wilcox last week did not yield any result by press time.

WHO HASN'T PAID

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 Minerials
Gulf Lumber
Big Bee Chemical

Sources: Documents presented to the Mobile County Board of School Commissioners by then business manager Charles Ratcliff on March 15, 1993; minutes of the City of Mobile Industrial Development Board; and Probate Court records.


Past accounts of the sum-in-lieu issue reported by The Harbinger are available at The Harbinger web site at http://www.TheHarbinger.org/articles/index.html


The Harbinger is a biweekly newspaper published through the effort of The Harbinger, which consists of area faculty, staff and students, and members of the Mobile community. The Harbinger is a non-profit education foundation. The views expressed here are the responsibility of The Harbinger. Contributions to The Harbinger are tax exempt to the full extent of the law and create no liability for the contributor.