A recent evaluation of the South Jersey Economic Development District’s finances shows that the district’s financial problems extend beyond its debt in the NextGen Aviation Research and Technology Park.
In addition to $611,789 in outstanding costs from the NextGen project, the district also owes $193,880 to other vendors. The bulk of that debt comes from $147,770 owed to Adacel, the company that manufactured an air traffic control tower simulator being used in a program at Atlantic Cape Community College.
SJEDD secured a $281,000 federal Economic Development Agency grant for the purchase of the simulator, but it appears some of the money was never used for that purpose. Instead, it was shifted to other accounts — likely to pay off infrastructure work at the NextGen park, SJEDD interim Executive Director Steve O’Connor said.
Meanwhile, in March 2011, the district presented the college with a plaque commemorating its investment in the simulator. A press release at the time said the district provided more than $280,000 in federal funding for the system.
Earlier this year, the agency’s former Executive Director Gordon Dahl told The Press of Atlantic City that the system had been paid for. O’Connor said he couldn’t speak as to what payments may have been made to the company and by whom prior to the equipment arriving at the college. He said he did not believe the shifting of the money presented any legal issues because the federal grant was to be used for aviation purposes.
“So much of what was done here Gordon kept to himself. I can’t find the files to back things up, so it’s learning as we go,” O’Connor said. “I don’t believe there are issues with the grant, but I haven’t really gotten that far yet.”
Meanwhile, the district has just $14,301 in available funds among its operating, savings and payroll accounts. Its total monthly operating expenses are $28,059. The district will likely take in a little more than $100,000 in project administration fees this year. Other accounts receivable total $177,282, but that includes money from an EDA grant that has not yet been secured
O’Connor took over as the district’s interim director last month after the board voted to oust Dahl, who had been the district’s director for 25 years. Board members said they had been unaware of the decisions he was making.
On Monday, O’Connor gave the board his first impressions of the district’s finances but stressed that his calculations are unaudited. His next step will be providing the district with a business plan to pay its debts. He hinted that he may suggest an increase in contributions to the district by member counties — Cape May, Cumberland and Salem. He said he will explain why the investment will pay off.
SJEDD was two years behind in its audits when Atlantic County voted to withdraw from the district earlier this year. An audit extending through March 2011 is expected to be complete by the end of the month, and board members said they would like a 2012 audit to be complete by the end of July. Atlantic County will not consider rejoining the district until reviewing the audits, Atlantic County Chief of Staff Howard Kyle said at the meeting.
Atlantic County paid for its auditors to evaluate the status of the NextGen project through October 2011. At that time, contractors were said to be owed nearly $500,000. Some payments have since been made, and O’Connor calculates $419,780 is still owed.
The district’s total debt in the project, including bank loans secured to finance infrastructure construction, totals $611,789 after reimbursement from a federal EDA grant. Typically, the EDA requires that contractors be paid first and then reimbursements are made. However, the EDA recognizes the district’s difficult financial position and has agreed to make payments to the contractors, O’Connor said.
“This problem that we have is solvable. We’ve been in a negative cloud now for so long,” O’Connor said. “We can work through this and get what we have to get done.”
Board members at the meeting said they were hearing of some of the district’s projects and accounts for the first time. Some asked if all the projects listed as income had received board approval,
The board voted to end its involvement in one of the projects — affordable senior housing planned for 145-147 Philadelphia Avenue in Egg Harbor City. The district had planned to build housing units and sell them for $134,900 each, according to plans developed by Dahl.
“It seems to me this was a NextGen No. 2,” board Chairman Leonard Desiderio said of the potential financial risk involved.
SJEDD plans to turn the project over to Egg Harbor City, but some questions about the transfer remain. The property is in the district’s name but the agency always planned to turn it over to the city. The funding path used to purchase the land is unclear, but state Department of Community Affairs funds were involved.
“I feel we were railroaded into the NextGen project. Every meeting it seemed we were in deeper,” board member Arthur Bretnall said. “As a policy, we shouldn’t be a board that’s a builder and developer.”
The board also voted to put Dahl’s former company car up for sale. The district has been making payments of $522 a month on the Saturn hybrid with $7,317 still owed. The district plans to sell the vehicle for $9,000.
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