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 We also viewed what was represented, by the City Secretary, as all documents provided to Mrs. Aguilar through public information requests. Original documents were also provided to us by the City through the City Secretary's office. Documents provided to us included: . City emai1s, memos, and other correspondence . Genera11edger detail for the Proj ect . Invoices, purchase orders, check requests, and other support documentation for all transactions related to the Project . Contracts related to the Proj ect . The appraisal report for the Triangle property . Loan and purchase documents related to land transactions This review allowed us to gain the understanding of the Project needed for us to aid the City in determining a reasonable scope for our work. 2. Review All Expenditures Coded to the Proiect and Compare to Applicable Policies: One concern voiced by citizens was the possibility that Project expenditures may have violated applicable City or EDC policies and procedures or Texas Local Government Code. We began by interviewing the City Controller and Purchasing Manager to determine applicable purchasing policies and procedures. We also obtained a copy of the City's purchasing policies and procedures (Exhibit 1) and EDC bylaws (Exhibit 2). We then reviewed a project detail report (Exhibit 5) provided by the City Finance department represented to contain all transactions related to the Project and assessed those transactions for compliance with policies and procedures and state statutes. Although transactions belong to the EDC and are not subject to City policies and procedures unless it is specified in the EDC's own bylaws or policies and procedures, City personnel follow the more strict City policies as summarized in Exhibit 42. Economic development corporations are generally considered nonprofit corporations rather than governmental entities and, as such, are not subject to many of the legal requirements that cities fall under including purchasing requirements. According to the 2010 Texas Municipal Procurement Laws Made Easy (Exhibit 3), issued by the Texas Attorney General's office: The duty to comply with procurement laws is generally derived from some statute that specifically requires an entity to make its purchases through such a procedure. The implementing legislation for development corporations (the Development Corporation Act) does not contain a provision that subjects economic development corporations to municipal procurement requirements. These corporations are considered and treated for most purposes as nonprofit corporations. Therefore, some legal analysts argue that if a development corporation (a separate entity from the city) makes an expenditure, it would not be required to follow municipal procurement requirements. Neither the Texas Attorney General nor the Texas courts have directly addressed this question. However, the Texas Supreme Court has found that a county park board must comply with the competitive bidding requirements applicable to counties. The court found that the park board was not autonomous and was under the supervision of the county to at least some degree. Thus, the court reasoned that the park board should be treated as part of the county for purposes of competitive bidding requirements. 7