Nearly a year after Juban Crossing’s first state-mandated audit report was due, the development district has hired an outside accountant to review its past two years’ worth of finances.
The belated contracts have raised questions about how such development districts are monitored and who bears responsibility for their financial reporting.
Development districts are created by government to foster economic growth. They allow private developers to qualify for tax-exempt bonds that lower the cost of financing improvements such as roads and drainage. The bonds are typically backed by sales tax revenues or residential lot assessments.
Because Juban Crossing is planned to include a mix of retail and residential development, the Livingston Parish Council in 2007 created both an economic development district and a community development district. Such districts must file annual audit reports with the state, but Creekstone Companies, the developer of Juban Crossing, has failed to do so despite eight warning letters over the past 17 months from the Louisiana Legislative Auditor’s Office.
The Parish Council sits as the districts’ board of supervisors and is responsible for ensuring the audits get done, but it did not receive any warning letters.
In July, the Juban Crossing Community Development District was placed on the legislative auditor’s noncompliance list after it missed the deadline for filing its 2014 report.
The designation makes an agency ineligible for state appropriations and could hinder its ability to get State Bond Commission approval for future debt, said Bradley Cryer, director of local government services for the Legislative Auditor’s Office.
Creekstone attorney Scott Crawford said the company did not have an audit done for 2014 because “the two years (2014 and 2015) needed to be put together because over two years is when the funds were expended.”
Asked whether the company responded to any of the legislative auditor’s letters, Crawford said, “Creekstone responded by engaging LaPorte.”
LaPorte CPAs & Business Advisors will audit both years’ finances under a pair of engagement letters signed on March 16 by Creekstone principal Steve Keller and on April 5 by Parish Council Chairman John Wascom.
Creekstone will pay the $30,000 total estimated cost for the audits, Crawford said.
All development districts must file annual audit reports once activity begins in the district, Cryer said. In certain cases, such as when there is little activity during a year, a district can request to have a two-year audit done instead, but Juban Crossing did not make that request.
Juban Crossing’s activity began after the State Bond Commission approved bond financing for the project in 2013 and construction of the long-awaited development got underway. The bonds are backed by sales taxes generated in the district, including portions of an existing parish road tax and a drainage district tax.
The retail part of the development opened in October 2014, with more stores and restaurants following. Apartments and homes are planned for later phases of the project.
Parish governments are required to include the districts they have created in their annual audit reports or otherwise notify the legislative auditor of their existence.
“But in the case of Juban Crossing, I went back and checked the file, and this was one where we got notification through the Bond Commission based on the bond issues going through in 2013,” Cryer said.
Legislative auditor’s letters asking for an audit of Juban Crossing began in November 2014 and were initially addressed to Keller at Creekstone’s Baton Rouge office, but later went to Creekstone’s chief financial officer, Doris Volentine, in Gonzales.
Cryer said whoever is basically running operations for the development is typically who receives the letters.
Because Creekstone did not respond, Juban Crossing was added to the noncompliance list. Crawford said all the financial activity has been with the economic development district, so it is the one to be audited.
It is unclear why the full Parish Council, as the districts’ board of supervisors, was left out of the loop in hiring the auditing firm. Crawford said Creekstone had to sign the contracts because the developer is paying for the audits and has access to the bank accounts.
Wascom, the district chairman, said he thought his signature on the engagement letters would suffice, without a vote of the full board.
“They just asked that I sign, acknowledging that they’re doing an audit of the EDD,” he said.
Yet when Wascom, as a city councilman, sat on the board for the Denham Springs Economic Development District that oversees the Bass Pro development, the council voted as a board to hire its district auditor in April 2014. Wascom seconded the motion.
Follow Heidi R. Kinchen on Twitter, @HeidiRKinchen, and call her at (225) 336-6981.