09-20 and 09-21-10 Special Called Regular Meeting of Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Agreed Upon Procedures - Five Points Town Center Project (Continued) September 21, 2010 thereof, the placing of the same in operation, and the financing or refinancing of any such project, including the refunding of any outstanding obligations, mortgages, or advances issued, made or given by any personfor any of the aforementioned costs. " Expenditures for the Project appear to fall into these allowable costs. Allowable costs incurred include: . Engineering - payments made to URS for engineering and architectural services. . Acquisition and cleaning of land, property rights, and easements - payments for purchase of Triangle property and Parks and Wildlife building, appraisal, removal of buried fuel tanks and soil testing and remediation. . Raw materials and other supplies - various supplies purchased or issued by the City warehouse. . Construction - payments made to the contractor on the Project (CF Jordan) and to Centerpoint Energy for removal of streetlight and running power. Promotional expenses are also allowable costs under section 4B(b), provided they do not account for more than ten percent of revenues collected. This would cover the EDC's purchase of banners, buttons, and other promotional items for the Project's completion. The loan made to East A in order to secure the right of way and to facilitate securing the Triangle property appears to be allowable. According to section 23(a)(6), development corporations have the power to make secured and unsecured loans and collect interest on these loans "upon such terms and conditions as its Board of Directors may deem advisable and not in conflict with the provisions of the Act. " In addition, the expenditures of sales tax proceeds must be made pursuant to a contract or other arrangement sufficient to ensure that the funds are used for the intended and authorized purpose according to Texas Attorney General Opinion JC-O 118. The intended purpose of the loan was to allow East A to purchase property at 109 and 111 San Jacinto Street according to the memorandum of understanding (Exhibit 7). What the developer was to do with this property is not spelled out in the memorandum of understanding. In 2007, Sections 40(a) and 40(b) were added to the Act requiring written performance agreements with business enterprises when development corporations provide funding or make expenditures on behalf of business enterprises. These agreements require a schedule of payroll or jobs to be created or retained, capital investment to be made by the business, and repayment terms if the business should fail to meet the terms of the agreement. However, these sections did not take effect until April 1, 2009 and do not apply to the loan for this Project. 3A. Finding The EDC appears to have lacked a written plan detailing exactly what East A was to provide in exchange for the loan of funds. 3A. Recommendation We recommend the EDC implement policies and procedures to ensure that written performance agreements are prepared in any future projects involving funding of or expenditures on behalf of businesses. 10