Fairfax County supervisors sidestepped efforts yesterday to give them more responsibility over a controversial and fast-growing program that lures private busineses to the county with tax-free loans.
Instead, the supervisors voted to hand power over the program over to Circuit Court Clerk James E. Hoofnagle, whose primary job is to maintain court records and administer the county courthouse.
The supervisors' action, which must be approved by the General Assembly, drew swift criticism from Common Cause of Virginia, whose director accused the board of skirting the intent of a new federal law that encourages stricter local controls over the loans.
"The clerk is a funny person to be giving this power to," said Gordon C. Morse. "It's clear that the federal government intended to open up the process and make it more accountable . . . . We say: 'Get it right in front of the whole board of supervisors so they can justify why they're giving all these tax-free loans.'"
The Fairfax Economic Development Authority, a semi-independent county agency, has approved more than $100 million in low-interest loans this year alone to organizations ranging from the Central Fidelity Bank to the Army Times Publishing Co., publishers of the Journal newspapers in Fairfax and other suburban areas. Unlike its counterparts in Montgomery and Prince George's counties, the Fairfax board of supervisors plays no part in deciding who will receive a loan, because the supervisors say they fear any bad loans they approve might tarnish the county's credit rating.
A new federal law, which takes effect next month, seeks to place limits on the industrial revenue bond program, which has been used in Virginia for everthing from golf courses to fast-food restaurants. Among other provisions, it mandates increased local government control over the loans by requiring that they be approved by a publicly elected body or an elected official. The supervisors yesterday decided they could satisfy the requirement by having Hoofnagle, an elected Democrat, sign off on the loans.
"Clearly, using the clerk to the Circuit Court would minimize even the implication of any involvement by the board of supervisors in the approval of these bonds," James P. McDonald, deputy county executive for management and budget, wrote in a memorandum to the board.
"Why not make it the Northern Virginia Soil and Water Conservation District?" Supervisor Audrey Moore asked sarcastically. "Congress and the White House want local governments and their leaders to take responsibility for these debts."
Moore, who has long argued for more board control of the program, was joined by fellow Democrats Martha V. Pennino and Sandra L. Duckworth in voting for the board to sign off on the loans. The board voted 6-to-3 that the county's credit rating would be better protected if it stayed away from the program.
Unlike some jurisdictions, which approve loans to fast-food restaurants and massage parlors, the Fairfax authority has been careful to limit its loans for the most part to industries, association headquarters and small, non-retail business establishments -- a pet cemetery recently failed to qualify, for instance. Nonetheless the program has grown dramatically, from three loans in 1976 and one in 1977 -- worth a total of $6 million -- to this year's total of 22 with final approval, for $36 million, and 22 with initial approval, for another $69 million.
The authority sells bonds to banks or other financial institutions, which lend the proceeds for expansion or construction to the firms that win the authority's blessing. Because the banks do not have to pay federal and state income taxes on the interest they collect, they can charge below-market interest rates on the loans.
Several county officials said yesterday they are opposed philosophically to the program but believe Fairfax must offer the loans to be competitive with other jurisdictions.
The board will seek legislation from the General Assembly to allow Hoofnagle to sign off on the loans. Federal regulations say the state must approve if the county chooses anyone other than its chief executive officer.