The most remarkable thing about the Galveston Economic Development Partnership’s settlement of a lawsuit over its administration of a city program was how little information was disclosed to the public.
That’s troubling because the partnership, which is a private, nonprofit business organization, does handle public money.
It receives $75,000 a year in city sales tax revenue from the city’s Industrial Development Corp.
It also was entrusted to run the Galveston Business Recovery Loan Program after Hurricane Ike hit in 2008. That program was funded by public money — $2.5 million of the city’s Community Development Block Grant Disaster Recovery funds.
The Galveston Business Recovery Loan Program was designed to help small businesses after the storm. It offered a limited number of forgivable loans of up to $50,000.
The trouble began when some businesses claimed that partnership members were given preferential treatment.
The accusation was that an organization subject to politics was bending the rules to help its own.
The lawsuit characterized the Galveston Business Recovery Loan Program as “a ‘good ole boy’ system where insiders of the GEDP were given preferential treatment; recipients of the loans were allowed to skirt standing and published rules; loan review criteria was added at the last minute with little notice to the public; and businesses who were clearly not deserving of loans were given loans to the detriment of more deserving businesses.”
The partnership settled those claims.
Ralph McMorris, owner of Yogurt Technologies, filed the original lawsuit. He said he’d be glad to tell how much he was paid but that the Galveston Economic Development Partnership had specified that the amounts be kept confidential.
The partnership has emphasized that money for the settlement came from insurance, rather than from the public money that funded this program. If that’s an excuse for not providing the public an account of settlements involving a program that was fully funded by public money, it’s not a good one. The public should have been informed of the settlement amounts.
The City Council is a notoriously political group, but there’s a body of law that requires it to be accountable and open to the public.
The laws requiring public disclosure by this nonprofit organization are less robust. Perhaps this episode is a lesson that the city should be slower in handing off responsibility for programs that are publicly funded in the future.
There was one more bit of secrecy that’s puzzling.
While the partnership informed city staff about the settlement, the City Council was not informed. This was, after all, the city’s program, funded by the city’s share of federal money to help rebuild after the storm.
Had the Galveston Economic Development Partnership been an ordinary contractor, the city manager would have given the council a report and an accounting of this affair. But the partnership is a political force in a way that most contractors are not. No such disclosure was made before the council — at least not in a public forum.
That, too, is troubling.