Preparing an annual budget is one of the most basic functions of any organization.
Yet the South Jersey Economic Development District, which has been leading the development of a multimillion-dollar technology park, has never enacted a formal spending plan.
“I deserve a black eye on this as much as anybody — even more so for me actually,” said Steve O’Connor, the district’s interim executive director who also was a board member representing Cape May County for eight years. “What’s troubling to me is that I was sitting on this board as a county administrator, and I didn’t see the weaknesses.”
In a corrective-action plan presented to the board Monday, O’Connor said that the only budgeting the district has ever done was tied to a $70,000 annual planning grant from the U.S. Economic Development Administration, which requires a spending plan.
Other money was never formally accounted for in a budget, including any of the $7 million spent on infrastructure installation at the NextGen Aviation Research and Technology Park in Egg Harbor Township. Funding for that project was supposed to come from various grants and loans, but the district still owes its contractors more than $600,000.
With no budget in place, the district accumulated significant debt as it was not even bringing in enough money to cover personnel expenses. To close the shortfall, former Executive Director Gordon Dahl improperly used restricted federal loan money and tapped into the district’s savings. Meanwhile, Dahl received consistent raises as his salary climbed from $79,000 in 2005 to $112,000 in 2011.
The district’s $228,000 in annual revenue is derived from $48,000 in county membership fees, $70,000 from a federal EDA planning grant and about $110,000 in grant-administration income. Meanwhile, in 2011, the district spent $305,946 on payroll, health benefits and pensions alone. Those figures do not include any spending for district projects.
Common sense might dictate that the agency approve a budget, but no state regulations required the district to do so. Typically, public entities must submit their budgets to the state Department of Community Affairs.
“This is a unique organization that doesn’t have to follow the typical standards,” O’Connor said. “I think there had always been enough revenue so it wasn’t something that was looked at.”
The district includes Cape May, Cumberland and Salem counties. Earlier this year, Atlantic County pulled out of the district after pointing out mismanagement, but it continues to send representation to SJEDD’s meetings and maintains a working relationship with the district.
SJEDD’s fate as a functioning organization remains in flux. It is more than $1 million in debt. Some of that money can be recovered, but the bulk of the burden remains with the district, which does not have enough money to cover its own operational expenses of about $27,000. It currently has only $7,000 in its bank accounts.
O’Connor’s corrective-action plan outlines a framework for revamped oversight mechanisms and board membership. To keep the organization alive financially, the four member counties would have to up their contributions from $12,000 a year to as much as $22,500 a year, the plan states.
On Monday, board members said they were reluctant to consider disbanding an organization that has brought considerable financing into the region. The federal Department of Agriculture and the federal Economic Development Authority have urged the organization not to dissolve.
“This district has directly supported much of the economic development we’ve been able to successfully complete,” said Cumberland County Freeholder Bill Whelan. “We have a responsibility to work through it.”
O’Connor also told the board the district can no longer afford his full-time services. According to a six-month contract that expires in September, O’Connor earns $9,500 a month and works 40 hours a week. On Monday, the board voted to cut back his time to 100 hours each month rather than the roughly 168 hours a month at full time.
Freeholder boards in each of the counties, including Atlantic, will now be asked to vote on whether they want to move forward with the district. Only Salem County has paid its $12,000 membership fee for 2012.
“The decision has to be made now. … There is no tomorrow,” O’Connor said.
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