Two reviews of the Fairfax County Economic Development Authority's policies were ordered yesterday following a published report that the agency helped finance the biggest retail furniture store in the area despite a state law prohibiting such arrangements.
One review was ordered by the Fairfax Board of Supervisors and the other by the authority's recently appointed chairman, Charles G. Gulledge, who told the supervisors:
"I think the economic development authority will adopt strict guidelines on the subject."
Both reviews will be directed at the authority's policies on issuing industrial revenue bonds, which companies can use to obtain low interest construction loans for new facilities.
The economic development authority attracted attention after disclosure by The Washington Post last week that in 1979 the authority approved a $5.8 million industrial bond for Marlo Furniture Co. Inc. With the bond, Marlo was able to build a complex in the Shell Industrial Park in the Springfield section of Fairfax that contains the gaint retail store as well as a new corporate headquarters and warehouse.
Industrial development bonds have been used by many states and localities to attract tax-paying and job-providing industry. With a bond, a company can obtain a low-interest loan. A bank can grant an interest break because it doesn't have to pay federal or state income taxes on the profits.
Critics have charged that the bonds are being used for a host of unintended purposes. In Virginia, for example, they have been used to assist in the financing of a golf course, race car speedway and corporate aircraft as well as a variety of retail operations.
Under state law, requested four years ago by the Fairfax authority itself, the agency is not supposed to use any industrial bonds for retail purposes unless they are "incidental" to other uses.
Marlo said only 15.7 percent of its Fairfax complex would be devoted to retail sales. But Marlo arrived at that percentage by counting the furniture stacking area in the warehouse as additional square footage. Even under that formula, the amount of retail space increased by about 75 percent between the time of Marlo's application and actual construction according to county records.
Some of the supervisors expressed private irritation yesterday that the development authority -- which has received strong financial backing from the county for an aggressive industry recruiting program -- is embroiled in controversy about its bond policies.
All the supervisors praised the authority after Gulledge gave an upbeat report on the four-year-old industry recruiting program. Chairman John F. Herrity (R), one of the most effusive supporters, said: "There cannot even be the perception that there was an apparent violation of the state law."
Supervisor Sandra L. Duckworth (D-Mt. Vernon), who proposed the review that will be done by county staff, said she acted both because of the article in The Washington Post and criticisms of the authority's bond policies by some of her constituents.