102420-du-EDC investigation

A $162,000 compensation package paid to an economic development director who does not live in the county has some people questioning if the community is getting the best bang for its buck — others support and defend the expenditure.

The Geary County Economic Development Commission receives about $308,000 taxpayer dollars a year. The responsibility of overseeing how those funds are spent falls to the EDC board and the Chamber of Commerce board of directors.

This year the city’s contribution to the EDC was $174,000 and Junction City Mayor Jeff Underhill expressed his satisfaction with the direction EDC Director Mickey Fornaro-Dean is taking the organization.

“I've served in various chamber roles and on different boards and commissions in Junction City for a long, long time and, to be honest, this is the best Economic Development director that we've had since God knows when,” Underhill said.

On the county side, however, Geary County Commission Chairman Keith Ascher isn’t as quick to give his approval — he questions the effectiveness of the EDC. The county contributes one half mil, this year that was $134,000. He said he is working with a “professional,” whom he declined to name, to help him understand how to measure the effectiveness and return on investment.

He said he is exploring this because he frequently has citizens coming to him with questions about how the EDC operates and if there is a fiscal return to the county.

“Just me personally, based off public comments and the citizens I talked to, I think we need to be doing a better job,” Ascher said. “We need more business, and we need it now. With all the potential that (Fornaro-Dean) talks about, and the opportunities that we have in this community with I-70, and the rail system and highway 77 and the military base — somebody is just not tapping into the right channels.”

He said the problem is longstanding and precedes the current leadership. He has lived in Geary County his entire life and has watched one EDC director after another not produce results.

Underhill however, said Fornaro-Dean has produced results. The problem, he said isn’t with her lack of progress, but rather with the speed in which people expect that progress.

“People want immediate results and in the economic development game, there aren't immediate results,” he said. “It just takes time, patience, and we've had several large wins. Whether it be Camso, or Twin Valley, or Billy Sims, or whatever … everything's continuing to grow and beginning to steamroll.”

It’s not just the projects Fornaro-Dean can mark off as a success in her prospect report, it’s about having Junction City information in the hands of business and industry leaders across the world that might want to relocate here, Underhill said.

Prospect report

Fornaro-Dean maintains a color-coded prospect report, which she shares with her boards and the city and county commissions. Of the 176 entries on the list, starting in March 2017, 20 are marked as a success, 35 are closed and the rest are listed as open, new activity or pending/on hold.

The projects range in scope from helping an existing business explore financial options to working with a company like Camso, which recently sold to Michelin Tires, build a plant in Geary County.

“Camso … was probably one of the largest economic development (projects) in the state of Kansas —probably in the last three or four years,” said EDC Chairman Mark Powers.

Large or small, proprietary issues limit how much EDC staff and board members can reveal about the companies they work with.

“For example, we had a business here, that was struggling and thought that if they could get a loan that it would help them with their cash flow,” Powers said. “They came to the EDC; Mickey … knows of all the programs that the state offers for small business. So, we helped them get a loan. They don't want people to know that they're having financial issues — it's a personal thing for them and their business.”

There have been times that he told Fornaro-Dean to not even tell him because he doesn’t want to risk accidentally slipping up, he said.

Not all businesses that open in Geary County have contact with EDC. Family Dollar, which recently opened a new store off Kansas Highway 77 on property they purchased from Powers, never approached the EDC or received any input from them.

Powers, who has owned several businesses in Geary County, said his original plan when he purchased the land in 2009 was to build a convenience store on the property. Nearly 10 years later that project hadn’t transpired and he included the land in a package deal to the person he sold all his stores to. Because the buyer didn’t want the lot either, they put it up for sale.

“(The realtor) called me and said that she had somebody call her who wants to buy the lot,” he said.

The realtor maintained the company’s privacy and Powers said he wasn’t privy to who was interested in the land. However, knowing some of the earmarks of Dollar General’s operations, it didn’t take him too long to guess who it was. Corporations like Dollar General have their own procedures, which often do not include contacting the EDC where they are building. They have enough of their own staff to conduct market searches based on their company’s needs.

For example, Powers said he cold called Tractor Supply Company to inquire if they would be interested in Geary County. It didn’t take long to get an answer.

“I heard typing on a keyboard,” he said. “They said ‘You only have X number of horses in your county, we're not interested.’ And that was it. Big companies pay lots of money for all of that information.”

If a business had no or minimal contact with EDC, it will not show up on the prospect list. Those that are on the list come to the EDC in many ways. Some of them Fornaro-Dean actively recruited while others made the first move after learning of Geary Country from any number of different sources.

Camso for example was involved in a nationwide search for a new location. Through networking connections Fornaro-Dean learned of their search and reached out to them, Powers said.

Regardless of how the business makes first contact or the scope of the project, one consistency is privacy.

“In the economic development world everything is competitive — everything,” Powers said. “Everybody's trying to grow their town so, when we chase after a business, we want to keep it quiet so nobody knows that we're chasing after them. It's not necessarily so (the deal) gets disrupted by the town but if we're going after a business and Manhattan finds out about it, or Salina finds out about it or Topeka finds out about it (those towns) are going to approach them as well.”

He spoke of the recent loss of a business in Dickinson County. A commercial business from Washington County looked at expanding out by Russell Stover. Word leaked out and other communities inundated the company with competing offers and the deal fell through.

“When Billy Sims came to town they said ‘If it leaks out before we're ready to make that announcement, we won't come out’” Powers said. “Camso, they told us ‘We will not let people tour our facility — ever. Everything is proprietorial; we don't want anybody to see something that might leak out’ So, there are no tours. They won't even let us say how much people are making an hour.”

The conversations EDC has with business and industry must stay under wraps until the company is ready to make an announcement, sometimes that can take months, if not years.

Ascher said that is where many of the citizens’ questions that he receives are about.

“I tell the citizens that question me, ‘The ED director will tell me that, ‘Hey, you have to be patient. These things take time. You have to nurture communication and relationship with businesses,’’” he said. “The citizen says, ‘Yeah, but I'm running out of patience. I've heard that for years. And we're still just the way we were years ago.’”

Bang for the buck; or not

With the EDC using $308,000 of taxpayer money, Ascher said he is getting more questions about whether the investment into the EDC is worth it or not.

“I would say yes, that they’re producing results,” Ascher said. “But the public wants to know, ‘Is that enough?’ That's why I want to talk to an expert, which I think I'm on the right track to find out how do you quantify return on investment?”

At a recent Kansas Association of County Commissioners conference, during a break-out session with commissioners from about 10 counties with a comparable population, Ascher said he asked how much their counties contribute to economic development.

“It ranged from zero to ours — we were the highest paying,” he said. “I asked that question and the comment was made that economic development is more of a function of the cities in a county.”

During that conversation, one commissioner also floated the idea that it might be more feasible to go after several small industries and businesses rather than banking on large ones.

“He said, ‘I can absorb losing a few of those numerous small businesses and industries versus the one big industry going defunct,’” Ascher said. “So, my question would be, based off that, are we trying to swing for the fences? Are we trying to hit the home run or are we missing out by not just trying to get base hits?”

Powers contends the county is getting a return on their investment. In the past 18 months, according to an EDC report, the businesses they successfully worked with have created or retained 126 jobs and made investments in the local community to the tune of $66 million. Those numbers are based on reports from the businesses the EDC had direct involvement in and do not include any form of multiplier, he said.

“The money Camso spent rehabbing a building is included in that 66 million,” Powers said. “The monies that Billy Sims, Ventria, Superior Electric — all of those companies that we have brought to town have spent that much money in (the area).”

The $66 million reflects direct expenditures. The job creation is the number of new positions that the companies filled and have on their payroll.

“If we're getting $20 million a year brought into our community for $160,000, that's money well spent,” Powers said.

EDC Governance

Underhill and Ascher both said they have fielded questions about the way the EDC and Chamber operates, the compensation package paid to Fornaro-Dean and if there is co-mingling of private and tax dollars.

The Junction City Area Chamber of Commerce has an executive committee and a 17-member board of directors, which oversee the budgets and operation of its divisions — EDC, Military Affairs Council, and Membership; the Geary County Convention and Visitor’s Bureau had been a division until the county commission removed them effective Dec. 31, 2017.

Each division maintains its own budget and board, however there are some shared expenses such as rent, cleaning, insurance and office supplies.

“When it comes to consolidation, there is no doubt that when you throw it all into a pot, that is comingling,” Ascher said. “In my opinion, you cannot help but comingle funds.”

Speaking to how the finances work today, Powers said each entity has their own money and their own bank accounts. They do not share funds but will divide the cost of some agreed-upon expenses if that expense is something they all share — like the copy machine.

“They each have their own budget,” Powers said. “They each have their own account. They have their own board, it’s an advisory board but every board member looks at the financials. They all have a treasurer on their board. They all have executive boards. Our funds are scrutinized. Each one has three boards that … look at everybody's finances again.”

Varney’s and Associates in Manhattan also conducts an annual audit and helps with their monthly financials, which adds another set of eyes, Underhill said.

The EDC and MAC receive public funding while private dollars raised through membership dues and fundraisers support the membership division.

The MAC has its own director and Fornaro-Dean serves in dual positions as president of chamber operations and director of the EDC. Her combined compensation package is $162,0000 a year. The Chamber pays $24,000 of that.

She is not an employee, rather the chamber and EDC have a contract with her through her company, Kanwin Solutions LLC.

As a contractor, she does not receive a benefit package. Underhill said he understands the way it is set up because he operates in a similar situation as an insurance agent.

“I had to form a company just like she had to in order to be able to prepay taxes and file taxes and that sort of thing,” he said. “Because she doesn't get a paycheck from the city, or the EDC per se, that's just the tool that's necessary for a contract employee to do things right with the IRS. We pay her no benefits, no taxes, no FICA match, nothing like that.”

Those expenses she pays on her own out of the $162,000.

She is also a member of several professional organizations through her company. When she attends conferences on behalf of the EDC there have been an occasion when she had to registered under her company name, or she would not have been able to attend, he said.

“Part of the benefit of hiring Mickey Dean was her years of experience and her relationships and memberships that she has with various organizations and partnerships across the country,” Underhill said.

Powers also points to her resume, which includes her holding master practitioner’s degree in economic development. She is one of about 50 or 60 people in the nation who have earned that degree and the only one in Kansas.

Powers said the EDC and Chamber boards chose to go the route of contracting with her rather than hiring a new director, partly because of the difficulty they had over the years in finding qualified and competent directors.

When agreeing to her compensation package they looked at comparable economic development organizations across the state, he said.

“You will find that as a rule, economic development directors are the highest paid group,” he said.

Emporia, for example, pays its director $125,000 a year plus a benefits package that includes family health insurance, a retirement plan, a car and country club dues, said Jim Kessler chairman of the Regional Development Association of East Central Kansas.

Fornaro-Dean’s contract requires full-time work but permits her to conduct some of the work remotely. Her contract also includes an overnight lodging allowance for up to 12 nights a month. Because she lives in Halsted this allows her to not have to commute 200-plus miles each day.

“Mickey doesn't live in our community and that is a hot point,” Underhill said. “I think all of us would love to have her live here and buy a home and move her husband up here. But you know, I get it — she has a phenomenal property where she lives. I can't say that I'd be in a rush to leave something like that myself.”

Fornaro-Dean said in the 21st century it is “absolutely not necessary” for someone to live in the community where they work.

“It doesn't mean you're any less committed to that community,” she said. “I am very dedicated to Junction City, Geary County. I have said since the day I was hired that I think the community has a tremendous amount of opportunity. And because I so much believe in the community and the opportunities that it has for economic development, and where we can take the community going forward — that is why I'm committed.

“I leave my family every week and I stay in Junction City because I want to see good things happen for it as much as other residents do,” she added.

Not being physically present in the Junction City office every day does not mean she is not working five or more days a week, Powers said.

He knows people have questions about the EDC and understands that when an agency uses tax dollars, they have the right to know how those monies are spent. While there is proprietary information he cannot share, he invites people to speak to him and ask questions.

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