Just how accountable is the Economic Development Commission and the Committee of 100? | Eastern North Carolina Now

Board of Commissioners simply accept what is offered without questions

    Publisher's Note: I enjoy Warren's missives about the governing of Beaufort County. He projects a well-considered opinion, which must be the product of a curious mind.

    This opinion piece, in the guise of a letter to the Beaufort County Commissioners, comes to us by way of our friends at the Beaufort Observer.

Dear Commissioners:

    I believe that the Economic Development Commission (EDC)

      •  inefficiently allocated county funding

      •  needlessly undertook to develop real estate

      •  heavily encumbered the county's finances

    I recommend that the County Board of Commissioners

      •  redefine and strictly limit the mission of the EDC

      •  dramatically reduce its budget

    As far back as June 22, 2009, a Beaufort County Commissioner wrote:

    "One item not in the budget is the million dollars the County has in the industrial development building located in the Washington Industrial Park. This is a two million dollar building with the other million coming from various grant sources. It is the blue striped building. We have no serious prospects for the sale of the building.

    Another item not in the budget is the cost of the Chocowinity Industrial Park. With all the frills we have a little less than one million in the park. At the moment there are no serious industrial prospects for any part of this park. There is some talk about moving the Sheriff, and the jail along with a new public safety complex complete with a gym to this industrial park. Who would want to build a new industrial plant in a park with a jail? Depressing."

    Actually, the Economic Development Commission Report (December 2010) refers to the Chocowinity Industrial Park as a county-funded "land purchase" for $1,836,926. The property consists of 270 acres ($6,666/acre). There have been significant additional grants, i.e., $400,000 for partial development of the infrastructure. The Commissioner of Economic Development believes these grants have enhanced the value of the property, but the property is still otherwise undeveloped and unused. Time is not friendly. The longer the site sits idle, the less relevant new technologies will make the added infrastructure.

    Earlier this month, Paul Spruill tempered his optimism for the budget by saying that $198,294 of his proposed savings depended on "the possibility of a potential sale" of the Quick Start II Property at the Washington Industrial Park (pages 22 and 34 Beaufort County Budget). The Quick Start II project is referred to in the Economic Development Commission Report (EDCR) as a property completed in 2007 having a total cost of $2,432,485. The county's contribution was $800,000 and the county has a continuing liability for interest on the loans. The expected budget saving will not be a profit on the property, but rather a mortgage payment spared. If we do not close on a sale of this property, then the budget deficit will worsen by $200,000. If it closes with a loss, then we need to deal with a writedown. Every year the building sits empty brings it closer to obsolescence.

    The Washington Industrial Park (WIP) itself is difficult to price. Examination of the EDCR gives some idea of the total amount of federal, state and local grant money put into the project, i.e., $6,250,000 (68% of which is county funded: $4,285,000). However, several years ago one building was sold to a client for $1,400,000. The remaining $4,850,000 also includes the Skills Center which might plausibly be partially costed to the overall mission of Job Training. As of July 2010 the EDCR reported three tenants with a total of only thirty-eight jobs at the WIP. With nearly a decade of history and millions of dollars spent, the industrial-park concept has attracted only thirty-eight jobs. The property-tax value attributed to clients in the EDCR was roughly $4,700,000. This created less than $25,000 in taxes for Beaufort County. This is a very poor return for the risk. It is fair to question whether the revenue even covers the maintenance costs on the rest of the Industrial Park's space. The EDCR claims that its entire program has created a "yearly contribution to tax base of $157,904." (View this in reference to the $334,657 required to run the Economic Development Commission in 2011.) WIP has contributed less than 15% of Economic Development's "yearly contribution to tax base" while requiring millions in funding and interest charges.

      •  Industrial Park development has been the county's least effective tool for job creation, but the one that           EDC has most used. Only 3% of the jobs the EDC credits itself with adding or retaining are at the           Industrial Park. Of the $16,000,000 which the EDCR claims to have put to use traditionally, as much           as or more than 50% has been idled in illiquid real estate over the last four years. Dead money. Good to            no one.

      •  Ninety-seven percent (97%) of the good EDC claims to have done was done outside of the Industrial          Parks.

      •  The capital invested in real estate actually lessens the Economic Development Commission's own           ability to fulfill its mission. Idle real-estate investments mean less money available to help businesses           which request other forms of assistance.

    It is difficult to see the Industrial Park concept as anything but discredited. Even if the potential sale of Quick Start II, referred to by Mr. Spruill, is completed on favorable terms, the strategy has tied up substantial amounts of money for long periods of time and required ongoing programs to find a way to accommodate the capital demands made on the overall budget by the Industrial Park. The Economic Development Commission itself has required funding of $1,662,000 since 2008. In the 2012 budget it will use $91,780 from the City of Washington, $195,031 from the county and approximately $25,000 from the municipalities (Budget 2012: pg. 171). The experiment should never be repeated.

    The Director of the EDC strongly disagrees with my assessment and has said: "We have no more good industrial buildings. We either build some and sell them or give up."

    I believe he is on to something there. Let's give up. Let's at least stop all site development and construction. Whenever we finally get the opportunity to sell Quick Start II off, let's do it and move on. Limit the Economic Development Commission to assisting in grant-writing and locating funding. Build a reputation for low taxes and pinpoint assistance to attract businesses. Leave industrial parks to private entrepreneurs. Contrary to the Director's peculiar belief, there are plenty of good buildings and private builders put more up all the time. The EDC has not done well with real estate. Initially they anticipated that Honeywell would be a favored tenant. This resulted in the Quick Start II building being designed in Honeywell's corporate colors: blue on light blue. Honeywell never came. Even a simple color choice went sadly wrong, but beyond the tragic comedy of the color scheme is the hard fact that EDC got itself caught at the market top. Whatever the real-estate rationale was at the time, things have obviously changed since. The EDC had no business using taxpayer monies to speculate in real estate. Yet, the Commission continues on with a "build 'em and sell 'em" philosophy.

    There is a lesson here for taxpayers, commissioners and civic employees: If you stand by while your department heads and superintendents waste cash on brick-and-mortar projects, then budgetary reality will eventually impact programs, tax rates, payrolls and salaries. In normal times you can cut payrolls by attrition or postpone raises, you can even raise the deductible on a benefit program, but bonds need to be paid down on time and with cash. Bonded debt creates immediate havoc during an economic slowdown. There is very little wiggle room with a mortgage.

    The construction fiefdoms at Beaufort County Schools, the hospital and Economic Development have harmed us deeply.

    The funds thrown away on the ill-planned budgeting of the school-construction program and the corresponding school bond issue are impacting teacher hiring, pay and benefits. The ungoverned expansion of the hospital has cost the county a fifty-year investment in local health care. The monument building of the Economic Development Commission has drawn a great deal of money away from other county programs and is threatening to increase tax rates. We are heavily mortgaged by construction projects which the EDC boasted of as "Raleigh-like" in their scope and promise just a few years ago, but were actually ill-conceived, pretentious and disastrously timed. It is as if we have awakened from a dream and found ourselves in a nightmare.

    If a plan has not worked, then change the plan.

      •  Redefine and strictly limit the mission the of Economic Development Commission.

      •  Make significant cuts in the EDC budget.

      •  Use half of the savings for deficit reduction.

      •  Use half of the savings to protect social programs.

    Begin cutting waste where the waste was generated.