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Unusual loan prompts scrutiny of Brunswick Development Corp.

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Unusual loan prompts scrutiny of Brunswick Development Corp.

BRUNSWICK — The Brunswick Development Corp. is being criticized by two town councilors and some residents after it made an unprecedented, forgivable loan to a business owned by the husband of a former town councilor and BDC board member.

The criticism raises questions about the BDC's role, whether elected town officials and town administrators should serve on the private development corporation's board, and the nature of the relationship between the town and the BDC.

BDC board members and Joanne King's husband, the owner of Brunswick Taxi, have responded by denying there was a conflict of interest when BDC in July gave the company a $247,000 loan that will be completely forgiven if several requirements are met.

But critics say there's too much potential for a conflict because of the relationships between the town, BDC and Brunswick Taxi.

Joanne King, wife of Brunswick Taxi owner Dale King, ended her tenure on the Town Council and BDC board last December. She also served as the treasurer for the 2010 gubernatorial campaign of Town Councilor John Richardson, who also currently sits on the BDC board.

Dale King, who ran for one of the School Board's at-large seats last year, holds an appointed seat on the Planning Board. He previously sat on the town's Personnel Board, which provides input on hiring and promotion in the town's police and fire departments.

Councilor John Perreault, a critic of the BDC loan, said while he's sure the BDC's action was legal, it still "doesn't pass the straight-face test."

"Everyone I've talked to has been beside themselves over this," Perreault said, adding that he has talked to between 20 and 30 people about the loan. "They can't believe it was done."

But Dale King and his consultant said they're concerned about the effect the criticism could have on local business development. And Town Council Chairwoman Suzan Wilson called the issue a "tempest in a teapot."

"I think (making comments like Perreault's) is an abuse of power," Wilson said, adding that neither of them ever called the BDC for an explanation. "If you use your power to cast aspersions on people, that's not right."

The BDC board includes several people actively involved in town government. Board members who voted to grant the loan were Wilson, Richardson, Town Manager Gary Brown, Joanne Favreau and BDC President Larissa Darcy.

Board member William Morrell opposed the loan, but did not respond to requests for comment. Brunswick Finance Director John Eldridge, who is also a member of the board, was absent when the action was taken.

Councilor Benet Pols said he was "at a loss for words" and called the deal "appalling," but declined further comment.

Dale King called the comments by Pols and Perreault "uninformed and unfortunate."

He said his wife was not part of the loan application process and that he didn't even consider BDC as a potential funding source until his business consultant, Scott Howard, made the suggestion.

BDC's president said the board saw no conflict of interest in issuing the loan, which could be completely forgiven by August 2016.

Darcy said Brunswick Taxi's loan application satisfied all of BDC's criteria, which include whether the loan will help satisfy a community need, create or retain jobs, and improve the quality of life for residents and visitors.

“We looked at it as a Brunswick business that was looking for funds to help retain jobs in the Brunswick market,” Darcy said, noting that BDC has issued funds to other area businesses and developers, including a nearly $92,000 loan to Brunswick-based Gelato Fiasco, and a $250,000 grant to the Midcoast Regional Redevelopment Authority to match a grant from the U.S. Economic Development Corp. to develop Tech Place, MRRA's upcoming business incubator.

While half of Gelato Fiasco's loan will be forgiven if the business creates and retains four new full-time jobs within the loan's duration, Darcy said she could not think of any other loans BDC has made that, like Brunswick Taxi's, are completely forgivable. 

For that to happen, the business must retain existing jobs, create two jobs within three years, and purchase a handicapped-accessible minivan, a 14-passenger van, and six new energy-efficient taxi cabs.

All vehicles must be outfitted with GPS systems "to improve efficiency, safety and tracking capabilities," and with natural gas conversion kits to reduce emissions and operating costs.

King said he was originally going to seek a grant from a federal or state source, but went to the BDC after a recommendation from Howard. Although his original request was for a grant, the BDC ultimately decided to give him a loan with the strings attached.

King said his wife was not involved in the loan request and even discouraged him from seeking it. He also said she did not want to discuss the matter with a reporter.

"I get why someone might be a little skeptical," King said, "but Joanne had nothing to do with it. And believe me, when my business consultant came back to me (with the suggestion to use BDC), she said I shouldn't do this."

He said criticism of the loan is unfortunate, because expanding taxi service to the area should be seen as a positive development.

"People are happy that I'm getting into the para-taxi business," King said, adding that he will consider purchasing another handicapped-accessible vehicle if there is more demand. "This money was a good economic development thing."

Howard said he is worried that the councilors' comments will discourage businesses from seeking BDC services "if they think they're going to be subject to negative inquiries, comments and articles."

A review of the BDC's by-laws show that, unlike similar agencies in other towns, the Brunswick corporation does not have policies that address potential conflicts of interest.

For instance, the Freeport Economic Development Corp. has its members sign a conflict-of-interest policy and code of ethics every year. However, unlike the BDC, the FEDC does not provide loans or grants. FEDC also receives annual appropriations from the town of Freeport, while the BDC operates on its own capital.

When asked if BDC would consider adopting a conflict-of-interest policy, Darcy, its president, said "certainly," but added no further comment.

Wilson said a policy could be considered, but noted that, regardless, all corporations must abide by a legal definition on conflicts of interests.

But the differences don't stop there.

A review of similar agencies in nearby towns shows that the BDC gives town staff and councilors more influence in the organization's decisions than other local agencies, though some of them, like Bath Development Corp., are more similar in nature.

The BDC board has seven voting directors. The town manager and finance director serve as long as they retain their staff positions. The Town Council holds two appointed seats that expire annually on Dec. 31. And the last three seats are for citizens with development, law or banking backgrounds, who are appointed by the Town Council.

In Freeport, the FEDC board has no more than 13 directors selected by the agency's executive director, Keith McBride. All of the current members are from Freeport's business community and are not elected officials; the town manager and a town councilor hold non-voting seats.

At Topsham Development, the board includes six voting members from the business community. The town manager, planning director and economic and community development director hold permanent, non-voting positions.

Topsham Economic and Community Development Director John Shattuck said the town's Board of Selectmen has the ability to discharge the TDI board and reconstitute it.

Perreault, meanwhile, said his solution to the conflict of interest issue would be to reduce the town's influence on the BDC.

"We as a town shouldn't be the primary controller of the BDC," he said. "We shouldn't have the majority of votes."

Dylan Martin can be reached at 781-3661 ext. 100 or dmartin@theforecaster.net. Follow him on Twitter: @DylanLJMartin.