Saturday, December 14, 2013

Going Down a Well Worn Path: The Economic Development Partnership of NC

Going Down a Well Worn Path:  The Economic Development Partnership of NC

North Carolina State Auditor Beth Wood might as well gear up to investigate the Economic Development Partnership of North Carolina.  The non-profit agency doesn’t exist, and Governor McCrory may not have the legal authority to create it.  However, Secretary of Commerce Sharon Decker has already identified an Executive Director, named a board, and determined that she’ll need $1.6 million in severance to terminate affected state employees.
 
Scattered Meetings II (2008)
Why should Auditor Woods prepare to investigate the EDP?  North Carolina has a rich history of privatizing economic development agencies and then having good reasons for clamping down on them after an audit.   Here’s a quick history:

·      In 2013, the North Carolina Rural Economic Development Center was cited for poor oversight and excessive executive compensation,[1] which led the General Assembly to cut off funding.   The Chairman resigned and the Executive Director was fired.

·      In 2009, the Golden Long-term Economic Advancement Foundation (LEAF) was cited for poor oversight, failure to adhere to the public meeting laws, and failure to follow state rules governing the investment of funds.[2]  Golden LEAF is an economic development organization charged with investing money and making grants using money from tobacco settlements.

·      In 2001, the North Carolina Technological Development Authority was cited for  unauthorized loans, excessive executive compensation, improper contracts, improperly documented travel and entertainment, and exorbitant lobbying costs (yes, an authority funded with state money spent $550,000 on lobbyists).[3]  The NCTDA was supposed to foster venture start-ups.  The General Assembly cut off funding, and the NCTDA went bankrupt.  I made a cameo appearance in cleaning up the NCTDA, when Auditor Campbell asked Treasurer Moore to evaluate the authority’s investments.

I read all three audit reports to refresh my memory, and there’s a distinct pattern of lax controls, excessive spending, and hubris.  I also looked at some old press clippings about the activities of all three agencies, and it’s evident much of what passes for economic development is really politically tinged projects.  These agencies seem to create more opportunities for politicians to cut ribbons than sustained economic development.

The Economic Development Partnership of North Carolina is heading down a well worn, treacherous, and bi-partisan path.  Republicans and Democrats both set up these kinds of initiatives.  The fact that Secretary Decker is proceeding with this new entity without legislative approval is a bad sign.  The Secretary appears to believe she has the legal authority to act unilaterally.  You have to wonder why she sought legislative authorization in the first place.[4]    The Partnership would cover business development, marketing, small business and entrepreneurship, international trade, tourism, and film and sports development. When the state spends money on these types of activity it should be done inside a government agency.   Freed from direct government scrutiny, you can  imagine the private contracts, junkets, and compensation schemes that will be fodder for Auditor Woods investigators.

As the News & Observer points out, all of the proposed board members for the Economic Development Partnership were contributors to the McCrory campaign.[5]  Sixty-one positions will be eliminated at the Department of Commerce.  I’ll bet identical positions will be created at the Partnership, but they’ll be filled with the politically connected instead of civil servants.  The Auditor’s hotline is (800) 730-TIPS.




[1] http://www.ncauditor.net/EPSWeb/Reports/fiscalcontrol/fca-2013-7901.pdf
[2] http://www.wral.com/asset/news/local/2009/11/02/6329974/goldenleafaudit.swf
[3] http://www.ncauditor.net/EPSWeb/Reports/investigative/inv-0244.pdf
[4] http://www.ncleg.net/Sessions/2013/Bills/Senate/PDF/S127v5.pdf
[5] http://www.newsobserver.com/2013/12/12/3455814/decker-says-changes-at-commerce.html

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