Colorado

Aug 28, 2014 8:51 PM by Andy Koen

Report: $10 million lost from PEDCO sales tax fund

PUEBLO - The City of Pueblo has released a report card on loans made from that Pueblo Economic Development Corporation half-cent sales tax fund which shows nearly $10 million in public money is unrecoverable.

Companies who receive the money agree in contracts with the city to hire a certain number of workers. They make quarterly reports to the City Finance Department and every time their employment targets are met, the city then credits their loan balance until it is paid off.

The spreadsheet posted on the city's website shows $9,777,166.47 of the $34,612,179.76 active loan balances was given to companies who have either gone bankrupt or terminated their contracts without paying.

"Accounting standards say that if a receivable is probable that it's not going to be collected, we have to fund it as a bad debt," explained Finance Director Deb Morton.

She plans to post quarterly updates online reflecting updated loan balances and employment numbers from active accounts. Morton said the City had always kept track of those numbers internally, but it wasn't until councilwoman Ami Nawrocki pointed out that ordinances require them to be published that they were put online.

"This information is available if asked for," Morton said. "We just haven't been asked for it recently."

News 5 brought the spreadsheet to PEDCO President and CEO Jack Rink who says the numbers are accurate, but need some context.

"Some of the companies that are shown as having a balance, actually ended up returning a building to the city of Pueblo that has a lot of value," Rink said.

A good example is the biggest bad debt on the list. Millions were loaned to the HMO company Qual-Med in the late 1990's to convert the Pope Block building downtown into their new company headquarters. However, shortly after getting the cash, the CEO retired and his successor kept the company out of town.

Pueblo now owns that building and leases it to Receivable Management Services.

"Unless you know some of the other factors that go into these loans, it really doesn't represent the whole story," Rink explained.

Another element missing in the report is how often companies restructure their contracts. Those amendments usually allow for more time to hire the agreed upon number of employees or make other concessions.

The ballot language of the current half-cent sales tax contains no requirement for either the City of Pueblo or the Pueblo Economic Development Corporation to provide taxpayers with an annual report of how their money is spent. The tax expires December 31, 2016 and voters will likely be asked to renew it for another five years in November 2015.

 

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