JEFFERSON CITY — Missouri economic development officials may soon have to deal with stricter due diligence standards while investigating projects if legislation filed Monday passes through the General Assembly.
Rep. Jay Barnes, R-Jefferson City, who filed the bills, said the legislation serves the purpose of trying to prevent the failure of future economic development projects. The legislation largely follows recommendations put forth by the House Committee on Government Oversight and Accountability. The recommendations include mandating higher standards of due diligence from the Department of Economic Development and local economic development officials while looking into future projects.
"This legislation is aimed at ensuring adequate oversight by DED and private bond industry professionals so they actually do their due diligence," Barnes said.
The legislation would require:
- A five-star rating system: The department would use the rating system to let local officials know the department's approval of businesses involved in economic development projects. Barnes said the House legislation took the idea from the Senate committee report, which was released two days after the House report.
- Municipal governments provide bond insurance: Local governments that issue appropriation bonds will have to supply insurance in case the government defaults on the bonds.
- Better communication between economic development officials: The legislation would make it necessary for the Department of Economic Development to share all information about a company looking for economic development incentives with all local government and development officials. Municipal governments would also have to share all negative information it receives about companies involved.
- Public hearings over bonds: Political subdivisions would have to hold hearings and listen to public testimony before issuing bonds.
- Restrictions on third-party consultants: Project consultants would not be allowed to represent a foreign country in front of the department if they also have a relationship with the state government. Barnes said this was a matter of whether a consultant represented Missouri taxpayers or other interests.
As the chairman of the House committee, Barnes led the House's review of the project, which collapsed after Mamtek U.S. Inc., failed to make a $39 million bond payment to the city of Moberly, which has since said it will default on the bond. The city's credit rating was also downgraded by Standard & Poor's 500 index. State legislators officially closed their investigations into the financial collapse of Mamtek last week when House and Senate committees released their findings and recommendations on the artificial sweetener project.
In its report, the House committee suggested the Department of Economic Development focus on working with Moberly to help the city recover from the project failure. Barnes said he was not sure this could be put in to law, but the department had been doing a better job recently of working with Moberly officials in overcoming the impact of Mamtek.
Barnes, who sponsored five of the seven bills, said he does not know when the House will take up the bills but plans to continue to move as fast as possible on the legislation. Sen. Jim Lembke, R-St. Louis County, led the Senate's investigation into Mamtek and has yet to introduce legislation to the Senate chamber.