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 Slippery Business VI - GCN Special Report

An Agency in Crisis - Taxpayers Losing Out on Sales of HCDC Property

By Keith Burton         filed 8/9/04

More problems are surfacing regarding the operations of the Harrison County Development Commission, particularly in light of its operations at the Biloxi Commerce Park. Bargain-priced land deals and a potential conflict of interest issue involving its current president are evident.

In this report, part of GCN’s Slippery Business series of reports on the HCDC, evidence mounts that the commission runs more for the benefit of a few than for taxpayers who are concerned about the growth in jobs for the Coast. The HCDC has been the focus of reform for poor performance by the Board of Supervisors and citizens concerned about economic development in the county.

MARKET VALUE

Biloxi’s Cedar Lake Corridor near I-10 is the city’s fastest growing area. New businesses, medical services, restaurants and a new Home Depot are all benefiting from a wider Cedar Lake Road and the recently widened Popps Ferry Road. As a result, property near the area is selling at a premium, unless you are talking about property owned by the Harrison County Development Commission.

At a recent Harrison County Board of Supervisors meeting, questions were raised as to why the Development Commission is involved in a business park when its primary mission is to develop and retain industry, and create jobs.

“We are in direct competition with private investors,” said Supervisor Larry Benefield as reported in a July 27, 2004 Sun Herald news report. The Board of supervisors approves HCDC land sales based on the commission’s recommendations.

Kim Compton, the deputy director of the HCDC told supervisors as reported in the Sun Herald story “that the original intent of the Biloxi Commerce Park was to help owners of businesses who were displaced by the Caillavet Street widening project. However none of those businesses relocated to the park.”

According to land records, taxpayers are getting short-changed for property sold by the taxpayer-supported HCDC when compared to property right next door. In other words, the HCDC property is a bargain at taxpayer’s expense.

The HCDC owns and operates the Biloxi Commerce Park, a planned 107 acre light business and office park community that opened in October, 2000. The park is located just west of Cedar Lake Road and north of Popps Ferry Road.

The land for the Biloxi Commerce Park was purchased by the HCDC for $5-million. Approximately half, or $2.5 million, was paid for with funds generated by the Development Commission from land sales in its other industrial parks. $1 million of the project was funded through a low-interest loan from the State of Mississippi to the City of Biloxi and the Harrison County Board of Supervisors. The remaining cost, $1.5 million, utilized the bond proceeds authorized in 1994 by the Board of Supervisors and supported by a one-cent fuel tax.

Among the park’s first residents were BancorpSouth, located on the west side of the park’s main Popps Ferry Road entrance-in what is a prime, high-visibility location.

On the HCDC’s board of directors is Elmer Williams, who is an officer at the Ocean Springs Branch of BancorpSouth. Williams was on the HCDC board as a commissioner during the purchase of the HCDC land by BancorpSouth in 2001, and became the current President of the Harrison County Development Commission this year.

The Biloxi Commerce Park includes land on either side of Tommy Munro Road, which is the main entrance to the park from Popps Ferry Road. The second road, Medical Park Drive, provides access to the Biloxi Commerce Park from Cedar Lake Road, near the Interstate 10 interchange. There will be more on these roads later in this story.

On Cedar Lake Road there is a sign that marks the entrance to what appears to be the Biloxi Commerce Park; the sign actually sits on property that is not owned by the HCDC. The appearance of the sign suggests that the entire corner of Popps Ferry and Cedar Lake west is part of the park, but that is not the case. That property between Cedar Lake Road and HCDC’s property is in private hands and is being marketed by Sam Martin Realty, an Ocean Springs realtor.

This property looks all the world like it is included as part of HCDC’s Biloxi Commerce Park, but it is not.

This distinction also makes a world of difference. The property Martin is representing sells for as much as four times what the HCDC is getting for their property, according to land records reviewed by GulfCoastNews.com.

Where Martin is selling one-acre lots for between $325,000 to $500,000, the HCDC is selling its property at the  rate of $135,000 an acre. The low prices for property are a good incentive for speculators to buy lots and sell them at a huge profit. The HCDC doesn’t usually lease its taxpayer-paid for property, but sells the land. After that, the land is no longer county property.

 It also means that this business property is not priced, or taxed correctly, something that puts a greater burden on what you pay for taxes. Every dollar in taxes a business doesn’t pay, comes out of your pocket.

The HCDC’s property value is not following market trends for property in the area. Just in the past couple of weeks, the HCDC has sold property in their park for between $150,000 and $160,000 whereas less than a few hundred feet away, Martin sold a lot to bank at a reported $425,000.

GCN contacted HCDC President Elmer Williams about the huge differences in values between the HCDC property and the property just adjacent to the Commerce Park.

“I am not aware of them,” Williams said.

When asked if he would seek to ask the HCDC board to increase the prices to reflect market values, Williams replied, “I may.”

The board of directors for the HCDC consists of 12 appointed citizens; one appointment from each of the county’s five cities, one appointment each from the county’s five districts, and two appointments from within the county by the governor.

BANK GETS IN EARLY

Before the Biloxi Commerce Park opened, BancorpSouth, which operates branches throughout the Coast, entered into a purchase option agreement, this was in April of 2000. The Biloxi Commerce Park didn’t open for business until October of 2000. The HCDC voted to allow BancorpSouth to purchase a six-month renewable purchase option to buy two lots at the west corner entrance of the park.

The bank literally “cornered” the market for one of the highest visibility locations in the entire park and in Biloxi’s fastest growing area. There is no record in the minutes of the HCDC that indicate that the land was for sale, or that the HCCD sought bids for the property, which is how most governmental entities sell public land. But not the HCDC.

BancorpSouth was not the only company that got in early. According to a Sun Herald newspaper article published October 13, 2000, the newspaper reported that 23 of the 64 available acres at the Biloxi Commerce Park had already been sold before it had opened. “About 25 percent of the property is just south of Interstate 10 has been sold for as much as $100,000 an acre,” the newspaper reported.

According the HCDC’s records, the commission even agreed to allow BancorpSouth to purchase options to buy the property before the HCDC property lots were actually platted, or officially recorded on county land records. And then, the HCDC extended the time of the options were to begin until after the land had been officially platted.

The bank eventually acted on its options in 2001 and purchased the two lots for a total of $276,134.40, or just over $135,000 a piece. Thereafter, the company constructed its Popps Ferry branch at that location. Also since that time, BancorpSouth appears to be prospering from its new location. Several of the businesses that are now under construction at the Biloxi Commerce Park are being financed by BancorpSouth.

Clearly, the bank is benefiting from its proximity to the park.

According to a press release by the HCDC, other early participants in the park were:

J & R Properties
Dr. Richard Chance
Plantation Homes
South Mississippi Home Health
Dr. Terry Smith
Cedar Lake Medical Group

A CONFLICT OF INTEREST?

During the BancorpSouth land purchase, HCDC board member Elmer Williams, who is a bank officer with the BancorpSouth branch in Ocean Springs, recused himself from voting and left the HCDC board room when the contract was discussed. In recusing himself from the contract, Williams demonstrates a potential conflict of interest in the matter since it involves the company he works for. But is there a conflict of interest?

The BancorpSouth land purchase was raised at a July 12th meeting of the Board of Supervisors by Pass Christian resident Henry “Tut” Kinney. Kinney had won a court case earlier this year against the HCDC, which had sought to block Kinney from obtaining HCDC records.

Kinney told the supervisors that in any other state, the land issue would be “front page news.”

GCN asked Williams about how the bank became involved with the HCDC.

“I had nothing to do with the negotiations at all,” Williams said. Williams added that a representative of the bank’s Biloxi office was involved in the transactions.

“I had nothing to hide in that transaction,” said Williams. “I recused myself from that transaction. I don’t think I have done anything wrong. I sought a legal opinion, and did what I was told to do.”

GCN asked Williams if he had received legal advice before the transactions with BancorpSouth had occurred. He said that he did from the HCDC’s board attorney. The HCDC is represented by Allen, Vaughn, Cobb & Hood in Gulfport.

According to Section 109 of the Mississippi ethics laws:

 “No public officer or member of the legislature shall be interested, directly or indirectly, in any contract with the state, or any district, county, city, or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member, during the term for which he shall have been chosen, or within one year after the expiration of such term.” 

A public officer is defined as:

  • (i) Any elected or appointed official of the government;
  • (ii) Any officer, director, commissioner, supervisor, chief, head, agent or employee of the government or any agency thereof, or of any public entity created by or under the laws of the state of Mississippi or created by an agency or governmental entity thereof, any of which is funded by public funds or which expends, authorizes or recommends the use of public funds; or
  • (iii) Any individual who receives a salary, per diem or expenses paid in whole or in part out of funds authorized to be expended by the government.

According to Scott Rankin, director of the State Ethics Commission, a recusal does not exempt someone from the provisions of Section 109.

Regarding the nature of William' situation, Rankin said, "It clearly has the potential of triggering the conflict of interest laws because he works for the company."

ROAD BUILT ON PRIVATE PROPERTY

In another HCDC issue examined by GCN, the City of Biloxi in helping to develop the Biloxi Commerce Park used public money to provide an access road that appears to cross private property. The city was a partner in building the HCDC's Biloxi Commerce Park

In a Sun Herald news story published in October, 2000, the newspaper reported that the City of Biloxi had built two access roads for the Biloxi Commerce Park, and identified only the Tommy Munro road in the story. Medical Park Drive was not mentioned in the story. An HCDC press release of the same period also mentions Biloxi constructing the roads.

Medical Park Drive is not within the Development Commission’s property, but is within private property and provides access from Cedar Lake Road to Martin’s high-dollar property, as well as to the HCDC’s property farther back.  Municipalities and governmental bodies cannot build roads on land they do not own. Cities cannot build roads on private property.

GCN contacted Biloxi’s public relations director Vincent Creel for details on the city’s road building, but a response has not yet been provided at the time of this report. Creel said to submit a public documents request as the HCDC issue was “controversial.”

AN AGENCY IN CONFLICT

The HCDC’s problems and method of operation has been described by Harrison County supervisors Connie Rockco and Marlin Ladner, August 2nd, as “systemic.”  The two supervisors have spearheaded calls for reform in the HCDC.

The commission is currently without a director. The former director, Michael Olivier, resigned to take a job in Louisiana as that state’s top economic development director after being appointed by Louisiana Governor Kathleen Blanco June 24th. The Harrison County Board of Supervisors was not going to extend a contract with Olivier, who had been the HCDC director for more than 16 years.

Olivier’s name does not appear on any of the HCDC documents regarding the sale of the Biloxi Commerce Park property to BancorpSouth. The documents do show that Deputy Director Kim Compton signed-off on the correspondence with the bank.

Supervisors are seeking an independent audit of the HCDC and have also voted unanimously to take control of the HCDC finances. Their unanimous vote came following a presentation by retired FBI agent Royce Hignight who presented documents summarizing the problems at the HCDC.

Hignight is a Biloxi resident concerned about good government on the Coast.

"In view of the issues raised, it is imperative that a full compliance audit be done of the HCDC to determine whether the HCDC is complying with the laws and procedures that govern it, as well as general accepted financial practices. In addition, a performance audit must be done to determine how well public resources have been utilized by the HCDC. In other words, what has the public gotten for its money," said Hignight.

Some of Hignight's research has contributed to the background of this GCN report.

"It's quite apparent that these questionable activities have gone on for many years without any state or local authorities, such as the State Auditor, or Chancery Clerk who is the county auditor, stopping those activities," Hignight said.

The State Auditors have been knowledgeable of the HCDC's activities since 2002, but apparently put little effort into their audit investigation. Repeated attempts by the news media to get the state auditors to confirm the status of their activities with the HCDC have been rebuffed.

The HCDC voted Thursday, August 5, not to comply with the takeover effort by the supervisors. Williams says the HCDC attorney believes the commission has the authority to decide what to do with its money, which is generated from land sales and fees. The commission reportedly has a fund surplus of $6 million.

Regarding the conflict with the supervisors, Williams told GCN that it will be up to the Board of Supervisors to pursue the issue in the courts.

The HCDC's latest action suggests that the commission has no plans to submit to any supervision by the Board of Supervisors.


Related:

GCN's "Slippery Business" Archive of stories on the Harrison County Development Commission

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