Audit highlights potential problems with development authorities

mlee@macon.comJanuary 23, 2014 

ATLANTA -- Tax breaks for someone else are generally something Georgians want their governments to avoid, but a state audit says there are problems with the oversight of nearly 500, mostly low-profile bodies that often have the power to do just that.

As a group, they are called local development authorities. Many counties have more than one. Macon-Bibb has four, with another one being set up.

Even as state Rep. James Beverly, D-Macon, works on final legislation to create the Macon-Bibb Community Enhancement Authority to attract investment to Macon’s poorest neighborhoods, he said there are opportunities for wrongdoing inherent in the set-up.

“That’s why I want an audit” -- an official, independent examination of his authority’s mission and how well it achieves its goals, Beverly said.

A December report from the Georgia Department of Audits and Accounts looked at a sample of LDAs and their oversight agency, the Georgia Department of Community Affairs. Some authorities cover a single city, while others cover multiple counties. LDAs must provide an annual financial audit to the department and a list of any bonds they issue or have outstanding.

Generally, LDA bonds are backed by the companies they are issued for, not the taxpayer. In 2012, LDAs issued nearly $2.2 billion in bonds, down from a high of $5.3 billion in 2008.

LDAs also are eligible for state grants, generally have the power to provide businesses with tax-exempt financing and pay no property taxes on properties they lease or rent to a business.

The point of LDAs is to spur economic growth, and they’re often the ones courting businesses. In return for the help, businesses promise jobs. If the jobs don’t materialize, the LDAs can claw back their assistance.

But the state audit said the DCA doesn’t double-check those job promises with independent verification.

The same audit found that DCA fails to make sure it receives all the financial information it’s due from the LDAs, and that in some cases, the LDAs themselves did not have complete financial records.

“We have been concerned about projects of LDAs for decades,” said veteran Sierra Club lobbyist Neill Herring, because “projects that are environmentally troublesome and promoted by people from dubious business backgrounds tend to find development authorities.”

For example, he mentioned a case about five years ago of a Florida company trying to make a deal involving an LDA to bury coal ash from a power plant in a Ware County landfill. The county commission eventually canceled the deal under pressure from voters.

There are also phantom LDAs -- those that still exist on paper, even though their mission is finished or abandoned.

One bill now in the state Senate would abolish the Georgia Medical Center Authority. The bill’s author, state Rep. Penny Houston, R-Nashville, said the authority doesn’t do anything anymore and it has no employees.

Indeed, the audit says record keeping about LDAs is spotty at the DCA, and its databases of finances and other records do not always match.

It reports both a Houston County Development Authority and a Development Authority of Houston County. They map to the same address, staff and members. The latter may be a relic formed under a now-superseded law.

The DCA “agrees with the DOAA report regarding the benefit to the state for more accurate, complete and timely reporting of authority operational and financial information through the registration process,” reads an agency response. But to do that, “DCA would need a substantial investment in both technology and staff.”

Macon-Bibb County may soon have fewer than its current three single-county authorities. The Development Authority of Bibb County, the Macon-Bibb County Industrial Authority and the Macon-Bibb County Urban Development Authority are all under review by the county’s eight lawmakers, who have the power to abolish or combine them.

“These authorities probably need an audit,” Beverly said.

According to the state audit, statewide, many authorities are missing conflict-of-interest policies and don’t adhere to state open meetings and open records laws.

“The paper trail is pretty interesting” in Bibb, said Beverly, explaining that he sees room for favoritism in contract awards, for example.

Crawford, Jones, Peach, Monroe and Twiggs counties also have their own development authorities.

They, along with Bibb and Houston, also are part of the Central Georgia Joint Development Authority. It handles encroachment at Robins Air Force Base -- buying up land near the runways that the federal government wants to see cleared of residences for safety reasons.

For that, the authority is just a conduit for money coming from federal, state and county coffers.

Meanwhile, Beverly hopes to finish legislation for the Enhancement Authority this year. But once the law is written, the authority members will set up their own rules and decide on polices about conflict of interest, nepotism and ethics.

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