Friday, October 17, 1997

Safeguards would prevent incident in Abilene

By ANTHONY WILSON / Abilene Reporter-News

Abilene city officials said safeguards in their economic development efforts should prevent large payments to business executives for expenses such as housing costs.

The Amarillo Globe-News on Wednesday reported Stempel Manufacturing owner Hugh Stempel and president Jerry McGuire received $135,000 from a $1.5 million grant from the Amarillo Economic Development Corp. for "cost differential in housing." Stempel, formerly of Coleman, used his $65,000 in Amarillo tax dollars to buy a home in Longview.

Development Corporation of Abilene officials said that while companies lured here could spend financial assistance on executive housing, they would have to commit fraud to do so.

Assistant City Manager Mike Morrison said the DCOA, steward of the city's half-cent sales tax, stipulates how companies must spend their assistance and follows up to verify expenditures.

The DCOA also negotiates "absolute maximums" for relocation costs per employee, assuring that no individual receives an undue amount, he said. Companies are required to share in moving costs to keep expenses low.

"We'll assist on reasonable relocation costs, such as moving, but not on price differentials on buying a home," said Morrison, a former economic development director.

"We don't have an open-ended invitation of 'Here's the money. Do what you want with it,' " he added. "Companies don't have carte blanche on how to spend their assistance. It all goes into the project."

Stempel moved its operation from Coleman to Amarillo in February, lured to the Panhandle by a $3.85 million incentive package from the AEDC. It also loaned Stempel an additional $500,000 in August.

Last month, the company filed for bankruptcy to reorganize its finances.

Stempel previously approached Abilene officials several times about moving his company here. Local leaders declined to a deal after investigating Stempel's operation and financial strength.

"We've always seen red flags when we looked at that company," DCOA board chairman Tucker Bridwell said.

"This is sure a good education for the DCOA," he added. "I never want to get on a high horse and say it couldn't happen here. But we take lots of precautions and always have lots of strings attached to assistance."

City officials are curious how Amarillo's economic development efforts may change in response the Stempel deal. They know a similar revelation in Abilene would provoke "quite an uproar," as Bridwell said.

"I hope that never happens in Abilene," he said. "But economic development is a high-risk business. An when you take risks you get burned sometimes. We're going to make some mistakes."