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Economic development authorities: The antithesis of transparency

By Staff | Oct 4, 2019

According to Antonio Olivo’s Sept. 25 story in The Washington Post, the director of the Warren County, Va., Development Authority is charged with embezzlement and money laundering. The head of economic development in St. Louis pleaded guilty to steering contracts to political donors. An economic development official in Montgomery County, Md., pleaded guilty recently to embezzling $6.7 million. A New Jersey grand jury is investigating $500 million in tax incentives that seemingly went to firms that lied on their applications.

Every one of these incidents involves a local “economic development authority” after whose structure the Jefferson County Development Authority is modeled. Well.

Every county development authority in West Virginia is based on this model. Indeed, much of the country operates on this model. So, you ask, just what is this “model?”

The general governing body of a county or city creates a “development authority” consisting of any number of citizens who decide what businesses to attract to their area and what incentives to give these businesses. These citizens are paid little to nothing and are tasked with hiring a director, who is usually handsomely paid.

The development authority is given tremendous power (some say in violation of some state constitutions). And the citizen members of the authority are often unaware of the activities of the director. They tend to take his or her word about what they should do when making a decision. Those decisions must usually get the assent of the elected general governing authority (in Jefferson County’s case, the Jefferson County Commission). But often that general governing authority tends to defer to the “expertise” of the members of the development authority (many of whom have already deferred to the “expertise” of the director).

This structure turns the concept of transparent government on its head.

Sometimes, unelected citizens begin to think of themselves more as members of the board of a private company, than as public officials. They’re almost entirely good people, but they don’t always realize their fiduciary responsibility is ultimately to the people of the county or city they serve.

And they are often encouraged by the director to “keep things quiet” when it comes to recruiting businesses.

I’m fully aware that businesses need to keep some things (like trade secrets) private. But the public has a right to know what its government is doing.

Whenever corruption is discovered in government, many people presume the problem is the people involved, not the structure. I certainly agree that a good structure will not improve the performance of bad government officials.

But a bad structure can interfere with the performance of good public officials. And the structure of development authorities is seriously bad, because it encourages secrecy.

We need an economic development structure with much greater transparency. Greater transparency could have prevented all of the cases Antonio Olivo mentioned in his article.