New Edinburg EDC board has lots of questions about projects, lobbyists

EDINBURG, RGV – An Edinburg Economic Development Corporation board of directors meeting started at 6 p.m. on Monday and did not end until 11:24 p.m.

The board, which has a completely new look following the recent city council elections, spent many hours grilling EEDC executive director Gus Garcia over various economic development projects and the lobbyists the group has been using in Washington, D.C., Austin, and Mexico.

“We spend over half a million dollars on lobbyists and we want to review and discuss whether their services are actually required,” EEDC President Gilbert Enriquez told the Rio Grande Guardian, at the end of the meeting.

“With regard to the projects we looked at, the common denominator is, we don’t know if taxpayer money is being spent correctly. I am a firm believer that you should not pay a bill unless you have confirmation that the services were rendered. If they weren’t, then you don’t pay the bill.”

Among the lobbyist contracts the EEDC board of directors dissected were those of Holland & Knight, Signature Advocacy, Inc., Pathfinder Public Affairs, Troutman & Sanders, and Guillermo Canedo. Among the projects the board zeroed in on were Santana Textiles, the Bert Ogden Arena, The Shoppes, La Sienna, Parks & Recreation Wellness Center, and city’s soccer practice fields.

Lobbyists

Edinburg City Council Manager Richard Hinojosa spoke about the work Washington-based lobby firm Holland & Knight did for the city. He said the firm had good connections with former Vice President Joe Biden and the Obama Administration. EEDC Executive Director Garcia said Holland & Knight had tried to get grants to help with Edinburg’s downtown revitalization and the expansion of its airport but without success. In total, Holland & Knight received $144,000 of local taxpayer money, the board heard.

With regard to a contract EEDC had with Signature Advocacy, Inc., and its owner Obie Salinas, Enriquez asked Garcia why EEDC would need Salinas to work with Edinburg CISD, McAllen ISD, Weslaco ISD, PSJA ISD, Sharyland ISD, Hidalgo County and its drainage district, various local non-profits, and the cities of McAllen, Pharr and Mission.

Miguel “Mike” Farias, an ECISD board member and vice president of EEDC, said he believed Salinas had billed EEDC for biweekly meetings with ECISD that never happened. “I know for a fact he reported fraudulent meetings. I am very concerned about that,” Farias said. “I am going to recommend we investigate and look into those meetings. I want to get to the bottom of what is going on.”

Garcia said the contract with Signature Advocacy had been “contentious” and that at this point, Mr. Salinas’ services were no longer needed. However, he said Salinas had been helpful on a project for Eisenhower Park and a foreign trade zone project being developed by Hidalgo County.

The EEDC board voted unanimously to terminate Salinas’ contract following 30 days of notice.

With regard to Pathfinder Public Affairs, Garcia said he was “very pleased” with the lobby firm’s work. Garcia said Pathfinder gets $150,000 a year from EEDC and the City of Edinburg when the legislature is in session and $120,000 a year when it is not.

One of the projects Pathfinder helped with, Garcia said, was legislation that allowed EEDC to get reimbursed for a project involving the city’s soccer fields. Garcia said Pathfinder also helped on three enterprise zone projects, one involving South Texas Health System and two involving Doctors Hospital at Renaissance.

Enriquez, who was recently elected to Edinburg City Council, countered that he could not justify Pathfinder’s contract doubling over a seven-year period when the scope of work was about the same. The board of directors voted to terminate Pathfinder’s contract following 30 days of notice. The contract was up for renewal at the end of the year.

In the case of Troutman & Sanders, Garcia said this was a lobby firm that works at the federal level and the EEDC’s and the City’s point-person with the firm was H.R. “Bert” Peña. Peña was being paid $3,000 a month by EEDC. Garcia said Peña had strong ties with the Republican leadership in D.C., and that he was working on a project for the city’s airport. Garcia said EEDC was no longer paying Peña.

In the case of Canedo, EEDC’s consultant in Mexico, Garcia said his $100,000 contract ended in July. However, he said there were some conferences in Mexico in August that the EEDC wanted representation at and Canedo attended. Garcia said Canedo has been with Edinburg for approximately ten years and helped land the Santana Textiles manufacturing plant in Edinburg. “Santana Textiles has had a significant economic impact on this region,” Garcia said.

Garcia said he believes Edinburg should have a presence in Mexico, just like its competitors do. Enriquez, however, said he did not see anything of value in the work Canedo has been doing. “In my opinion, it is money just thrown,” Enriquez said. “I want to see every expense report. I want to see what we have paid out in reimbursements.”

Santana Textiles

The EEDC board of directors spent a long time discussing loans totaling millions of dollars that EEDC had provided Santana Textiles. The company still owes EEDC $4.2 million, Garcia said. Nonetheless, Garcia maintained the Brazilian denim manufacturer has had “a significant impact,” with $50 million invested in equipment, and $5 million in salaries. The average wage rate at Santana is $14.50 per hour, Garcia said.

Garcia acknowledged Santana had “struggled” and that production did not start until 2016. He said Santana was often late in its loan repayments to the EDC, sometimes by as much as six months. Because of this, Garcia said he had to threaten foreclosure.

“They were struggling, that is why we went into the new market tax credit program, in order to get funded… to get them operational,” Garcia said. “Part of our job is to help struggling companies so that hopefully they can get back to speed. They are currently back to speed. When we first helped them, they had approximately 30 employees. In fact, at one point they had 17 employees. They now have 167 employees. They are paying $5.5 million in annual salaries. I find that to be a significant economic impact to this community.”

Enriquez did not have such a rosy view.

“We are digging a bigger hole for these people. I can go from experience. When I had my pizza place in Edinburg, I kept putting in money every month just to keep it operating. There came I time when I just had to bite the bullet and say, you know what, I’ve got to close it down. It is not doing me any good. It is not making me a return. It is not being profitable, I’ve got to cut all ties,” Enriquez said.

Enriquez said in the case of Santana, EEDC has been renewing its contracts year after year after year. “When is it going to be enough?… When is it Mr. Garcia says, you know what, we cut our ties with this individual, we have got to foreclose on this property.”

Garcia said in the seven years Santana was not in production, the company continued to infuse money into the project. “Penalties, loan payments, have never been forgiven. They have always paid,” Garcia said.

Enriquez said the previous EEDC board did not negotiate “tough enough” with Santana. He said the new board of directors will be tougher. “We are going to call everybody’s bluff. A lot of people see Edinburg and they see dollar signs. It is not fair. It is not fair for our taxpayers and it is not fair for our local businesses,” Enriquez said. “The people that need it (financial help) don’t get it and the people that don’t need it, get it,” Enriquez said, to applause from the audience.

Asked how much Santana owes in full, Garcia said: “It is a $9 million note. It is interest only for seven years. So, it is approximately $1.9 million. However, the new market tax credit is for $26 million. So, they pay down the interest for seven years on the $9 million and after seven years it is forgiven. So, we become first lien holders after year seven, provided they are not in default.”

Farias responded: “It’s scary man. It’s a lot of money, a lot of money.”

The board of directors asked Garcia to provide a more detailed report on the contractual agreement EEDC has with Santana. Some members said they would like to visit the Santana plant to see if the company is at full production. They also said they want a workshop to discuss in more depth EEDC’s involvement with Santana.

The EEDC board also discussed the Bert Ogden Arena, The Shoppes, La Sienna, Parks & Recreation Wellness Center, and city’s soccer practice fields. They had many questions about the contractual obligations EEDC has with these projects, with a lot of discussion on the Bert Ogden Arenas.

After the meeting, Farias told the Rio Grande Guardian: “We have a lot of projects going on right now. We want to see what the terms of the contracts are. Some of them were extended, extended, extended. Some of them, I still don’t have the answers of why. Today was the beginning of that, to see if it was in the best interests of our city.”

Editor’s Note: Rio Grande Guardian reporter Patricia Martinez contributed to this story from Edinburg, Texas.