Atlantic, Cape May, Cumberland and Salem county taxpayers will pay the bill for the indiscretions of the South Jersey Economic Development District.
More than $1 million in debt resulting primarily from the financial mismanagement of the NextGen Aviation Research and Technology Park, the district’s member counties have been told that, legally, they cannot walk away from the agency’s financial obligations even if they choose to dissolve it.
“Counsel’s preliminary research indicates that the counties would be legally bound to pay the district’s outstanding debts upon dissolution,” SJEDD Interim Executive Director Steve O’Connor wrote in the district’s corrective action plan. “Additionally, the counties should collectively determine the public policy implications of county governments attempting to ignore the debt of a district that they created to secure federal and state funds for public infrastructure improvements.”
SJEDD board members from Cape May, Cumberland and Salem counties are recommending that the district continue to exist and are seeking approval from their freeholder boards. If the boards agree, as Cumberland’s did last week, that will mean that in addition to funding the SJEDD debts, the counties will sink more money each year into the district, which needs added revenue to continue its daily operations. Atlantic County Executive Dennis Levinson is awaiting a decision from freeholders regarding how to proceed.
With $7,000 in its bank accounts and monthly expenses exceeding $27,000, O’Connor has recommended that the counties increase their annual contributions to the district to keep it running. Annual dues are currently $12,000, but that would increase to somewhere between $18,750 and $22,500, depending on the executive director’s salary. The district encourages development by obtaining funding for projects in its member counties.
The SJEDD hired O’Connor in April to sort out the financial mess; his contract expires in September. Member counties demanded by resolution that the district make sense of its situation and consider the possibility of dissolution. Initially a June deadline was set, but the board said it needed more time for audits to be completed.
Discussion of the district’s future has dragged on for months since its financial problems were brought to light earlier this year. Audits hadn’t been completed in three years; NextGen contractors hadn’t been paid. Meanwhile, longtime Executive Director Gordon Dahl’s salary had increased by more than 40 percent in six years.
The board voted Dahl out, after which the magnitude of the agency’s problems become more apparent. Nearly $150,000 was still owed on an air traffic control simulator that was supposed to be financed through grants already received. Nearly $400,000 was missing from revolving loan funds, inappropriately used for the agency’s operating expenses.
Board members say they were unaware of it all, and assumed Dahl — one of three paid employees of the district — was handling the district’s business appropriately. Meanwhile, the district had never even compiled an annual budget.
“I would ask that we stay to thing that are moving forward. Let’s not go back,” board Chairman Len Desiderio said at the beginning of the district’s latest meeting, which included a two-hour executive session, now common at district gatherings. “We know how we got here. We know what caused us to get here. Let’s move forward.”
Because the member counties will be responsible for the district’s debt regardless, it’s likely that the district will remain intact, officials say. The district is also bound to pay back nearly $400,000 owed to the U.S. Economic Development Administration and the U.S. Department of Agriculture from money wrongfully removed from the district’s loan programs. Board members met with representatives of USEDA and USDA this month and say they were told that both of the federal organizations want the district to continue.
Those agencies have told the district that if it stays intact, graduated repayment options can be arranged, but if it disbands the money must be paid back immediately.
Representatives of USEDA have not responded to several emails and phone calls from The Press of Atlantic City posing questions about the district’s viability and the possibility of dissolution.
“We are at some peril if we were to decide immediately to dissolve the district. It could trigger the immediate repayment of substantial amount of funds,” said Don Ayres, a board member representing Cumberland County. “(USEDA and USDA) also made it clear that their focus now going forward is on regional planning and that a district is in keeping with that focus. If we dissolve, we would be doing a disservice to the community.”
Just how much each county would have to put toward the district’s debt remains in question. Of the $1.2 million owed, the district hopes to recoup $220,000 for the architectural plans for the NextGen park, which could be purchased by the park’s potential developer, New Vistas. The district could get additional reimbursements for the work done on the NextGen project, but what those amounts might be isn’t clear, O’Connor said. The district, which holds the lease for the park’s land, is still negotiating a transfer of the lease to the park’s board.
Beyond that, it remains unclear if the counties would split the remaining debt evenly or if the counties that received more money from the district over the years might take on a larger portion of its debt, O’Connor said.
Matthew Chase, executive director the National Association of Development Organizations based in Washington, D.C., said that once a district dissolves it is exceedingly difficult to regain its designation. Cases of dissolution are rare, he said.
“I’d encourage them to work though the problems and maintain the designation,” he said.
Chase was familiar with the South Jersey district only because it was one of a handful of the more than 300 development districts nationwide that never participated in training or networking opportunities offered by his organization.
“Over time, many districts have expanded their mission to include things like transportation. The South Jersey district is one of the handful out there that never took on additional development responsibilities,” Chase said.
The responsibilities the district did take on left it saddled with more than $1 million in debt. Atlantic County voted to withdraw from the district in January after it began to questions about the district’s financial status and had a difficult time obtaining any answers.
But because the county was a member of the district while the financial problems occurred, it will still be responsible to pay its share, O’Connor said
“From a public policy implication, I don’t see how counties who created a district for public infrastructure improvements can ignore a debt that the district incurred,” O’Connor said.
Howard Kyle, chief of staff to Atlantic County Executive Dennis Levinson, said the county will pay its share of what’s owed, but any decision to rejoin the organization will be left to the county board of freeholders.
“It was never Atlantic County’s intention to dump the project on the district and run away from it,” Kyle said. “Atlantic County would be willing to meet whatever obligations we have from our time as members. As for rejoining the district, the county executive will go along with the recommendation of the freeholders on that.”
O’Connor recently made a presentation to the Atlantic County Board of Chosen Freeholders, which has not yet made a decision as to how to move forward.