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  GUEST OPINION
 
Filed 7/15/03

DEVELOPMENT COMMISSION NEEDS REFORM

By C. Paige Gutierrez, Ph.D.
Commissioner, Harrison County Development Commission

            The mission of the Harrison County Development Commission (HCDC) is to uplift the economy through job creation and retention.  When Supervisor Connie Rockco appointed me as commissioner for the Harrison County Development Commission, I was aware of conflicting images of that agency.  On the one hand, HCDC appeared to be an agency with great potential for creative problem-solving in an area that I have long held and interest: the quest for progress with preservation, the balance of those forces that too often are needlessly in opposition to each other.  On the other hand, at the time I joined HCDC, the uproar in Long Beach over the Conrad Yelvington “rock plant” had recently sparked news coverage and legal battles.  People were taking a closer, critical look at various HCDC activities and policies, ranging from Executive Director Michael Olivier’s expense account to tax exemptions for selected industries and the agency’s overall effectiveness in job creation.  I withheld judgment on these topics, knowing that those who know only part of the story can misperceive complicated matters of government.

            I have spent over three years as a HCDC commissioner, learning the rest of the story.  Despite the agency’s successes, at this point I must conclude that there are serious problems with HCDC that must be reformed.  I offer here a partial review of some of the problems and some suggested reforms.  I begin with some observations that illuminate the culture and psychology of the agency, to provide a context for the discussion of tax exemptions and accountability in general.

Disdain for Public Input

            During my first year with HCDC, a representative of the Long Beach neighborhood affected by industrial park operations asked to make a presentation to the Commissioner.  The presentation was granted, but before the man entered the conference room, HCDC staff provided the Commissioners with an introduction designed to completely discredit the man.  I was expecting to hear from an irrational, uninformed fanatic.  Instead, I heard a well-thought-out, reasonable list of questions and observations regarding HCDC matters, with a request that we consider reviewing these matters.  This was the kind of citizen input a governing agency should welcome, not fear.  After the man left, there was a generalized grumbling of disapproval of his remarks.  I said that most of what he said was valuable and that we should follow up on his suggestions.  Michael Olivier later told me that if I held such ideas, I would be “cut from the pack.”

            It appears that too often at HCDC, ideas and projects are judged not by their value but by who originated the idea or project.  On one occasion, one of our engineers reported that a park neighbor had requested that a fence of other barrier be placed between his home and the park, to hide obscene graffiti on rail cars from his family’s view.  The reaction of staff and some commissioners was to ask “did he ask nicely,” with sufficient deference to HCDC.  I have seen prospective park tenants treated unequally, with some groups disparaged or ridiculed in advance by executive staff before their project was presented to commissioners, while another is railroaded through committee meetings with warped parliamentary procedure, even though their project did not meet the criteria usually desired.  Potential good products have thus gone by the wayside.  And the Executive Director makes sure that commissioners and others know who is and who is not acceptable, making sharply critical and sometimes vulgar remarks against people not in the HCDC clique.  Targets of such attacks have included legislators, a governor, supervisors, commissioners, local officials, a college president, media personalities, business and professional persons, and citizens attempting to do business with the Commission.

Yes Men

            Most Commissioners appear to believe that their job is to “just say yes” to Michael Olivier.  Those few who do not march lockstep may be subjected to tongue-lashings, ridicule, character assassination, gossip, attempts to have them removed from the commission, political opposition to the persons who appointed them, and/or reasons to fear if their employers are displeased.  On one occasion a freshly appointed board member wisely stated at a committee meeting that HCDC should make decisions about industrial park usage with residential neighbors in mind, in order to avoid potential problems such as the “rock plant” dispute in Long Beach.  Olivier immediately rose from his chair and angrily dressed down the commissioner for using the term “rock plant” and for criticizing HCDC.  This thus-humiliated member, whose employment happens to be controlled by people closely associated with HCDC staff, apparently got the message--he has never since given another opinion other that to praise and support the executive director. 

Voting in the Dark

            When I joined the Commission I was surprised to learn that HCDC staff did not give commissioners a packet in advance of meetings, containing agenda and supporting documents.  Every board, commission, or council that I know of receives materials to read before discussing and voting on issues and documents.  How else can a member reach an informed, above-board decision and vote in the public interest?  Because decisions at HCDC usually are made at committee meetings rather than at full Commission meetings, it is essential to have materials before the committee meetings.  For a few months I was successful in getting staff to provide a complete agenda packet to Commissioners prior to committee meetings.  This ended and was replaced with incomplete or no packets after several other commissioners objected to receiving materials to read before meetings:  “I don’t have time to read, I have a real job besides this one.”  “I don’t want this extra paper cluttering my office.”  And “The only important decision we make is when we hire Mike Olivier—we should trust him to make the other decisions and follow his recommendations when we vote.”  In other words, our duty is to be a rubber stamp.  Yet these same commissioners who have no time to read, do have time for perks paid for by taxpayers, including fine dining, liquor, V.I.P. receptions, golf games, and travel, sometimes international.

            As director of HCDC, Mike Olivier makes $160,000; the deputy director makes $58,000.  Requiring accurate documents prior to meetings should be well within their abilities. 

            During the time that I received documents in time to read them, I noticed serious errors in contracts, requiring board action to correct these errors.  During this process I observed Michael Olivier actually changing the content of minutes--including how I voted—that had been approved months earlier.  I objected to this inappropriate activity and stopped it in that case.  But I wonder how many other times the minutes have been changed by staff after their approval by the commission. 

Considering Tax Exemptions

            The ability to make wise decisions based on complete data becomes critical in the matter of tax exemptions for selected industries.  These tax exemptions currently total over $800,000.00 a year.  The majority of the exemptions during my tenure have gone to expansions of existing industries.  Unfortunately, HCDC has no requirement that these industries show that “but for” the tax exemptions, the expansion and the creation of new jobs would not occur.  Moreover, there is no requirement that applicants come before the commission, and no requirement for a public hearing before HCDC.

            Instead, staff members are in contact with the applicants.  A ‘formula” is applied to see if applicants qualify, yet the applicant supplies some of the figures that are plugged into this “formula”, and some figures call for subjective judgments by staff.  Staff recommends exemptions to commissioners, who then recommend the exemption to the Board of Supervisors, who grant the exemption, usually for a period of ten years.  Yet the Commission has no procedure for independent auditing or monitoring of the exempt companies to see whether they actually produce the promised net jobs and whether the jobs continue over time.  In a growing number of jurisdictions in other states, legislation requires detailed documentation of this nature, including annual affidavits signed by the company CEO.  Some states have attached additional strings to tax exemptions, such as provision of health insurance to employees.  Yet only last year were we in Harrison County able to get an almost-complete list of the companies with exemptions and the amounts of the exemption, after two years of requesting such a list by Supervisor Connie Rockco and me, and after repeatedly being told that the information was impossible to compile.  Such data is very relevant for supervisors and city officials who must set budgets.

            Tax exemptions are a form of expenditure; what the county spends or exempts in one place must be made up some place else.  The decision to grant a tax exemption is a decision to cut something else out of the budget—except in cases where it is clearly shown that “but for” the tax exemption the new industry of expansion, with its new jobs and new tax revenue, would not occur.  There has been no such case since I have been on the HCDC, although numerous exemptions have been granted.

            For example, two years ago Dupont received another ten-year tax exemption (not its first), in the amount of $167,400.00 a year, for an expansion that would initially create ten jobs.  There is no evidence that this expansion would not have occurred without the exemption, and no indication that our area was in competition with another Dupont site for this expansion.  No one from Dupont came to an HCDC meeting to make a case for the exemption.  However, according to notations on a monthly country club bill paid by HCDC, taxpayers did pay for a golf outing for Olivier and Dupont’s CEO to discuss the upcoming exemption.  In addition, though two years have passed, there has been no evidence given to Commissioners that Dupont has netted ten additional jobs during that time period.

            When I asked why we are giving money to companies as tax exemptions, when business is obviously good enough to warrant expansion, Olivier answered that these exemptions contribute to “a good business climate”.  Good for whom?

Consulting on the Side

            Many people are disturbed by the fact that Director Michael Olivier does consulting work on the side.  One of his patrons is a local business group he helped form and continues to administer through HCDC overhead.  This group supplements his salary, and he has recommended some of its members for tax exemptions.  This fact is disconcerting, as is HCDC’s failure to require Olivier to divulge the names of all of the businesses he has consulted for over the years.  There are simply too many opportunities for conflict of interest in the economic development world, whether intended or not.  We should pay a competitive salary and ban outside consulting.  HCDC should require full disclosure of outside employment by its professional staff.  Private groups, however worthwhile, should not be administered through public employees, using public overhead.

Accountability

            Supervisors Marlin Ladner and Connie Rockco have persisted in asking for accountability from HCDC and other commissions.  For the first time in recent memory, HCDC representatives were required to present their budget requests at a Board of Supervisors meeting at the courthouse, as is required of the sheriff’s department and other county subdivisions.  This setting is different from prior ones, when HCDC provided budget requests to Supervisors in a meeting room at Beau Rivage or at the Great Southern Club, following fine meals.  The budget hearing at the courthouse has been interpreted by HCDC affilites as an attack—even a witch hunt—against Michael Olivier and the commission in general.  I do not see it as an attack, but a reminder that HCDC is a fully tax-supported government agency and not a private club for a privileged few.  As a citizen and a commissioner I encourage our elected supervisors to oversee all county money, including HCDC’s and other commissions.  It is very easy for a commission to lose touch with the needs of the whole county budget, to become lax in oversight and too cozy with staff, especially when staff hands out perks to Commissioners.

            The general public and the business leadership of this community should support the Harrison County Board of Supervisors in an effort to require full accountability of the HCDC and other commissions, and an open, in-depth discussion of the best ways to invest taxpayers money for economic development that will serve the best interests of all the people.  We need the sunshine of open and robust public meetings to light the way to better job opportunities for our children and grandchildren.

Records Destroyed

            When Supervisor Rockco asked for expense records of HCDC—a county agency she is sworn to oversee—we learned that HCDC financial records (credit cards and others) were destroyed by staff after the agency’s annual audit was complete.  Only eleven months’ worth of original financial records existed!  For credit cards, records over eleven months old existed only as the total owed for the month—not the individual purchases or receipts.  The same is true of HCDC country club membership and dining club membership.  What private business would destroy its own financial records on an annual basis?  Until recently, after my repeated requests to have our CPA firm review our procedures, records of expenses such as travel, dining, recreation, and gifts were casually detailed at best.  Without good records, how can we analyze whether a certain activity is bringing a good return to Harrison County in terms of jobs or business growth?  Yet, HCDC staff and some commissioners make it more than clear that they consider it an affront and an intrusion for anyone not in their circle to examine the public records for which HCDC is custodian.  The occasional legitimate need for confidentiality (to protect information from competitors in site selection, or to protect client proprietary data) has grown into a more generalized culture of secrecy.

Spending Your Money

            There is a myth perpetuated by economic development officials that we must wine and dine company representatives—called “prospects”—to persuade them to locate in our area.  According to this myth, prospects are not content to make business decisions in conference rooms, based on hard facts such as availability of trained labor or water-and-sewer service or quality of life, but in addition must have their heads turned by free concert tickets, fishing trips, and gourmet meals at taxpayers’ expense.  Moreover, according to this myth, local business executives also must be entertained at taxpayers’ expense, “to keep businesses here”.  This approach to “business retention” has been used to justify treating selected local individuals and staff to lavish meals at the most costly restaurants, golf games and tournaments, $100.00 birthday flowers, payment of parking tickets, and other perks. While such costs pale in comparison to the cost of tax exemptions, they nevertheless are symbolic of a free-spending attitude that should be replaced by a more conservative approach.  Moreover, I have seen no evidence whatsoever that such spending produces or retains jobs.  Pragmatic businessmen know that businesses prosper because of hard work and attention to market forces

            Moreover, these activities take place behind the scenes, off the radar screen, out of the public eye.  A willing in-crowd is thus cultivated, happy to go along with the decisions of a few while enjoying the perks and “prestige” of the group—an award here, a board membership there, or golf with a politician, or a contract for services, or invitations to special events, or inside information on various matters of government or commerce.  The general public is out of the loop.

The Bottom Line

            While the smaller extravagances are easy to single out for criticism, it is important to focus attention on the “big picture”, where millions of dollars and the long-term direction of public investment in economic development is at issue.

            For example, why doesn’t HCDC put out requests for proposals for large contracts, such as those involving advertising/marketing?  Without comparison, how do we know the taxpayers are getting the best deal possible?  How much are we paying for needless duplication of services among commissions and agencies, especially in terms of marketing and advertising?  How many thousands of dollars do we spend a year in promoting and defending HCDC itself?

            Would we save money if HCDC built an office building—taking the lead by constructing a “green building”—on park land we already own—especially if we could upgrade and use a brownfield—instead of paying monthly rent for office space, plus rent for eight staff parking spaces, plus storage rent, plus substantial outlays for office improvements such as new carpet and paint?

            Forbes says that the Mississippi Coast is hurt as a business destination by its low percentage of college graduates.  How many people could be sent to college on $800,000.00 a year, the amount of the annual tax exemptions given to selected companies?  The $800,000.00 annual tax exemptions, if terminated, would finance millions in bonds for quality-of-life improvements that would benefit everyone.

            What is the cost-per-job to taxpayers for jobs created through the efforts of HCDC and other partnered agencies?  All costs must be considered—salaries, overhead, travel, advertising, memberships, exemptions, land discounts, financing, mitigation, park maintenance, and more, for all tax-supported agencies involved in a given job-creation project.  Would we ultimately achieve more economic uplift if money were shifted to the Gulf Park branch of USM or to Mississippi Gulf Coast Community College, or to a water-and-sewer system for the entire county?

            If we were to consolidate and streamline overlapping advertising and marketing costs of the Coast by HCDC and other commissions, would we save enough money to apply to debt service to finance expansion of the Coast Convention Center, producing an immediate increase in the size of conventions and numbers of multi-night tourists?  Would this investment yield a better return on the public’s money?  Or, could the same money finance another classroom building at Gulf Park for graduate degrees in tourism management, or build a world-class performing arts center, or buy green space and natural drainage areas before they are developed into flood-makers?  Probably there are even better ideas out there to change priorities in HCDC expenditures to get a better yield on the public’s money—if HCDC would solicit general public input.

            It is noteworthy that it was broad-based citizen initiative and action, together with legislative leadership—not HCDC—that spearheaded the biggest economic expansion on the Coast since World War II—the casino industry.  And casinos do not get tax exemptions.

Forbes: Wake-up Call

            The recent Forbes Magazine article placing the Biloxi-Gulfport-Pascagoula metro area at the national bottom of places for business and careers should be a wake-up call to the executives of Mississippi Power Company, Coast 21, and other business “leaders” who dominate the appointments of HCDC Commissioners.  Forbes makes clear that the greatest weaknesses for economic development on the Coast are:

·        Lack of higher education and the resultant low percentage of bachelor’s degrees and graduate degrees in our work force;

·        Crime rate too high for a relatively small metropolitan area.

In addition to these criteria, other experts describe the following Coast weaknesses, particularly when measured against national standards expected by families holding of seeking higher paying jobs:

§         Inadequate infrastructure for transportation, sewer treatment and water production

§         Mediocre elementary and secondary educational institutions

§         Poor to non-existent neighborhood recreational facilities

§         Minimum funding for performing arts and beautiful public spaces

§         Failure to conserve green space and essential ecosystems.

Ironically, Forbes says one of the biggest business attractions on the Coast is low wages, not exactly a criterion we want to continue.

Conclusion

            The mission of the Harrison County Development Commission is to uplift the economy through job creation and retention.  This is a well-meaning mission that has become such a sacred cow that shortcomings of the agency go un-checked.  Problems with HCDC must be faced and solved in order to free the Commission for more creative work, such as the building of the proposed new industrial park, which, if done with state-of-the-art design and sincere attention to public input, could become a model project for the balance of progress with preservation, of industry with  environmental and community concerns.  It is a project that could garner national praise and attention for Harrison County, but it should not be planned in secrecy by a narrow circle of people elected by no one, with only after-the-fact public input.


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