AG releases opinion on Square on Carter project

Published 12:01 am Wednesday, December 30, 2015

VIDALIA — The Louisiana Attorney General’s Office released Monday an opinion that says moving forward with Vidalia’s Square on Carter project would lead to at least three state constitutional violations.

City officials disagree, and said they will seek a second opinion after attorney general-elect Jeff Landry takes office.

The 15-page opinion, written by Assistant General Richard McGimsey and addressed to State Bond Commission Director Lela Folse is meant to address several questions about funding, cooperative agreements between the city and the Carter Street No. 1 Economic Development District and about the project itself.

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The Square proposal is for Vidalia to borrow up to $7 million to purchase and improve 65 acres of land near the western end of town in an effort to woo developers. The Carter Street No. 1 Development District is a special tax district within Vidalia created in part for such projects.

The plan has drawn endorsements from the Northeast Louisiana Economic Alliance, the Louisiana Municipal Association and the Ports Association of Louisiana, but has faced significant pushback both locally and from some members of the bond commission.

The FBI has also requested information about the project after public allegations of a conspiracy — as yet unproven — were leveled by former Secretary of State Al Ater in August. No official word about the FBI request has been released.

The opinion released Monday essentially affirms an earlier memo — which was not an official opinion — from the attorney general’s office to the bond commission that questioned the so-called “public purpose” of the project.

“The Carter Street No. 1 Economic Development District and the Town of Vidalia may not spend public funds in order to engage in the private enterprise of commercial real estate development, as such would be a violation of the prohibition against the use of public funds for private enterprise,” the opinion says.

“The District and the Town may not expend public funds to acquire and improve immovable property for sale or lease to private parties without objective evidence that economic development or growth would result from the project or without agreements in place with the private developers receiving the benefit of the use of public funds, as such would result in a violation of (the) Louisiana Constitution.”

Concordia Economic Development Director Heather Malone, who has worked extensively on the project, released a statement Tuesday saying the opinion is only advisory and is limited to the facts presented by the official who requested the opinion.

Several attorneys have advised the town on the project, and it has acted on that advice to be confident the project was legal, she said, citing how the I-20 Economic Development District in Monroe received a favorable opinion from the attorney general for a similar project only two months before the Vidalia opinion was requested.

“Unfortunately, we believe that politics has affected this process and this opinion,” Malone said.

“Our advisors strongly disagree with the current opinion. We look forward to seeking a second opinion from the new, incoming attorney general, with the hope of having a fair and impartial review of the project.

“The Town never has, nor will they, violate the law in any way. However, this opinion does not constitute law. We are hopeful that this will all be reconciled with the new administration and the Town can proceed with its current and future economic development projects.”

The opinion states that while the Town and the Carter Street District have the authority to enter generally into economic development activities under the state’s cooperative endeavor laws, information provided to the bond commission does not allow the commission to determine that economic development or growth would be achieved through the project.

According to the information provided, the project — if approved — “would essentially result in the District or Town acting as commercial real estate developers and would put the District or Town in direct competition with private real estate development companies that traditionally are the private business sector parties that engage in such private enterprises,” the opinion says.

“Private real estate developers invest their money, or that of their business partners, in the acquisition of property in order to develop it for sale or lease.”

Developing real estate is “an inherently speculative enterprise,” the opinion says, and the attorney general’s offices does not believe that public funds “are intended to be used in the risky and speculative business of real estate development in the name of economic development.”

The opinion cites the development of the Cabela’s Retail Center and Sportsman Park Center in Gonzales, which was a cooperative endeavor between the state, the City of Gonzales and Cabela’s, as a way in which public funds can be spent in economic development efforts in which the private sector benefits.

In that instance, Cabela’s was required to provide upfront financing for the bonds, obligated to ensure the store would be open for five years, obligated to employ residents of Gonzales, obligated to hire at least 300 workers and maintain the facilities at its own expense.

“Unlike the development project in Cabela’s, neither the District nor the Town has any agreements in place with any private developers that would allow a court to conclude that the District or the Town would not be in violation of (the state Constitution),” the opinion says. “No private developers exist in this transaction at this point, and thus, there is no objective evidence in the form of agreements that would establish the non-gratuitous nature of the use of public funds.”

While officials have said the town will receive its investment back, there has to be “some objective evidence, in the form of agreements with the private developers” to demonstrate the expense is not gratuitous and the town will be supplied with an equivalent value in returns from the project, the opinion says.

The Square on Carter proposal is part of a wider master plan for the city and calls for the purchase of adjacent parcels of property near Walmart on U.S. 84. Third-party consultants with the Orion Group developed the plan after a series of public meetings in 2014.

The parcels of land in question are 31.67 acres owned by Scroggins Investment Co. and 32.72 acres owned by BCHT, LLC.

The BCHT property falls within the Carter Street No. 1 boundaries, but the Scroggins property does not. As part of an agreement the city entered with the district, any shortfall in revenues the district experiences while paying for bonds will be provided by the city.

Mayor Hyram Copeland and City Engineer Bryant Hammett were members of a partnership with Mark Taunton and H.L. Irvin that bought 33 acres across the highway from Walmart in 2006. Copeland, Taunton and Irvin sold their portions of the partnership in 2010, and the land is now owned by Hammett and Brad Dutruch of Baton Rouge.

When Ater made the accusation of conspiracy, all of the parties he alleged were involved denied it, and Hammett and his business partner threatened a civil lawsuit in response, though one has not been filed at this point.

Copeland has repeatedly maintained that — once the property was entered into the equation by the third party consultants — he stepped away from any planning and had no involvement, especially in regard to discussions or negotiations with property owners, appraisers or developers.