EDINBURG — The city council approved the proposed budget for the Edinburg Economic Development Corporation this week — but not before the director had to answer another round of questions.
EEDC Director Gus Garcia again defended his proposed budget, which reflected more expenditures than revenues. The council rejected his first proposal — which didn’t include those figures — earlier this month.
According to information provided in the agenda packet, the EEDC expects to receive approximately $6.9 million in revenue during the upcoming fiscal year and budgeted $7.4 million in expenditures.
“I’m noticing that we’re in the red … because we have a $500,000 contingency plan,” council member Richard Molina pointed out Tuesday. “Is there a reason for that?”
“We have a reserve that we budget in the event that there’s a bad debt (or) there’s project overruns,” Garcia said. “We take on construction projects; sometimes they’ll be project overruns. At the end of the year there might be appropriations that we need to make, and so that’s what it’s for.”
It has historically been added to the budget, Garcia added.
“The reason I’m saying it is because Finance 101, I mean, we’re already in the red before we’re doing our budget,” Molina said. “Is there a way we can eliminate that $500,000?”
“As you know, we’re not a political subdivision, so we’re not a public entity. We operate as a corporation, and occasionally corporations they will budget with a net shortfall or they’ll have a net profit. So Finance 101, you can operate with a net shortfall,” Garcia said. “We can certainly adjust it, but that’s not what we’ve done, and that’s not what the board approved. But we can certainly approve it without the contingency — if that’s what the council likes.”
Molina then questioned the EEDC’s expenditures on this year’s state of the city address. The nonprofit spent over $35,900 on the event. About half of the cost went toward the rental of the new IMAX theater where the event was held.
“That’s how we kind of end up in the red,” Molina said.
“The board wanted to promote the IMAX theater as part of the event,” Garcia replied. “So we used those marketing dollars to promote the theater.”
Molina then turned his attention to Santana Textiles, a denim manufacturing plant that owes the EEDC $13.8 million. The business loan became a huge point of contention during the previous city meeting, where the discussion escalated to a screaming match between the council and the company’s CEO.
Santana recently obtained a second loan that operates through a tax credit system in partnership with the U.S. Treasury. The loan, however, means the IRS placed a lien on the company, giving the federal government first dibs, should the company default on the loan, leaving EEDC with a larger financial risk.
“I have a delinquent tax statement summary that Santana is back on taxes,” Molina said.
Garcia was not aware of the delinquency.
“This is something that you can pull off the internet,” Molina said.
The council member questioned why the information had not been included in EEDC’s audit.
“The company audits the EDC, not Santana,” council member J.R. Betancourt said, adding it would be out of the audit’s scope.
“This is why I’m worried about this,” Molina said. “We loan them $13 million and we don’t get to audit them.”
Betancourt, a certified public accountant, then pointed out the delinquency was not on property taxes, but on furniture and fixtures.
“But it is delinquent, council member?” Molina replied.
Council member David Torres questioned several large line items that didn’t offer much information, particularly a $19,000 allotment for travel to Mexico.
During the previous meeting, Torres requested information about the EEDC’s consultant in Mexico and the services being provided to the city at a cost of $100,000 per year. Garcia said he would provide him with the information.
“You never sent me anything,” Torres said Tuesday. “I have issues with that — just making it public.”
“I know at the last meeting you requested a report,” Garcia replied. “We’re actually having the consultant for Mexico prepare a presentation for this council.”
Put to a vote, all but Molina and Torres voted to approve the development corporation budget.