The Maryland Economic Development Corporation was faulted for lax monetary controls, incomplete reporting on troubled investments and ballooning debt in a state audit released Thursday.
MEDCO?s non-recourse debt increased almost 200 percent from 2000 to 2006 to almost $1.9 billion, according to a state audit released Thursday.
Their overall portfolio, however, remains relatively healthy, said MEDCO Executive Director Robert Brennan. More than $1 billion of the debt consists of revenue bonds issued to projects by MEDCO.
“The debt is due in part to our operating issues and our ongoing growth,” Brennan said. “It?s not uncommon to see large deficits in a real estate portfolio ? they?re always upside down.”
The audit, performed by the General Assembly?s Department of Legislative Services, highlights that the Rocky Gap Lodge & Golf Resort in Cumberland, which MEDCO issued bonds for in 1996, is operating with a $26.9-million deficit.
Legislative services recommended MEDCO, the Department of National Resources and the Department of Business and Economic Development “develop a long-term comprehensive plan to address the troubled financial condition of the facility owned by MEDCO.”
“The legislature has been tracking this for a while ? it?s a problem,” Bruce Myers, legislative auditor, said of Rocky Gap.
“It?s been a struggle for many years,” Myers said. “They?re trying to get people up there, but they?re still struggling.”
In a written response to legislative services, Brennan defended Rocky Gap, saying the facility generates $20 million a year for the region.
MEDCO, which assists in the expansion and retention of existing Maryland business and attracts new businesses to the state, has undertaken 187 projects since 1996. From 1984 to 1996, MEDCO provided assistance to 43 projects.
“They have looked to help counties and local governments do a lot of things,” Myers said. “There has been an increase in volume, no question about it.”
That increase in volume has led to an increase in debt. The audit points out that four MEDCO projects were “financially troubled” from November 2003 to December 2006.
Along with Rocky Gap, two nursing homes had $17 million in debt as of June 2006, according to the audit.
The Chesapeake Hills Golf Course in Calvert County also totaled a $1.3 million debt, but the facility was not reported by MEDCO as “troubled” in its annual report, the audit reported.
Legislative services recommended MEDCO “establish formal guidelines that define a troubled project and the appropriate follow-up actions be taken.”
“There wasn?t anything wedisputed,” Brennan said. “The recommendations they made are prudent.”
