Airport: City's auditors say nonprofit has 'crossed threshold'

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So, there are all these companies floating around out there, all tied to HAS Development Corp., which is tied to the Houston Airport System, which is an arm of the city government. They're using public employees' expertise to do business, and sometimes using Houston city facilities or other resources, and they're supposed to be generating money for the city-run airport system.

So, we asked Parker, the city's top financial officer, how much the nonprofit keeps her office in the loop about what they're up to. "They don't," she said.

For weeks now, the controller's office has been trying to gain access to HASDC's financial records, Parker said, but “they have refused to give us the information," adding that the development corporation has been “very direct” in asserting that it has no responsibility to open its books to the city.

The city's outside auditors, Deloitte and Touche, have told Parker's office that the development corporation's work has crossed a threshold and should now be considered a "component unit" of city government -- like the city workers' pension system and the city library board -- and brought into the city's auditing fold.

Government-connected nonprofits aren't uncommon, but without transparency and oversight, they can go off the rails and stick taxpayers with the repair bill -- witness the scandal that shook San Diego's nonprofit Southeastern Economic Development Corp. last year. The press revealed that the head of the corporation had paid herself and her top lieutenants $1 million in bonuses and extras over a five-year period after the city got lax about doing fiscal oversight; she wound up being fired, and the mayor of San Diego has moved to put the nonprofit's activities under closer review by the city.

But it's not just salaries or bonuses at stake in the case of HASDC -- the nonprofit is involved in overseas deals that involve millions upon millions of dollars being borrowed. Building an airport isn't cheap, even in South America.


At left: The Andes Mountains surround Quito's Mariscal Sucre International Airport.

The Quito airport project went forward after the Overseas Private Investment Corp. -- a federal agency -- offered up to $200 million to HAS Development Corp. and Corporacion Quiport; the Export-Import Bank of the U.S. also lent money for Quito, including putting up $70 million to ship Caterpillar equipment to Ecuador. OPIC, the Inter-American Bank and the International Finance Corp. are putting up another $100 million for the work HASDC and its partners are doing to expand the international airport near Costa Rica's capital city. A review of Vacar's 2008 calendar by Texas Watchdog last month showed the airport chief routinely met with potential investors and others, such as investment bankers Goldman Sachs, for projects related to HASDC and the companies in its orbit.

Parker said this week that the airport and its officials never notified her office about their involvement in any of those loans or the potential risk they carried.

The city itself should not be on the hook for those loans, she said. She said she believed a third party could not palm off a debt obligation on the city.

Vacar told Texas Watchdog the city had no liability at all for the debt undertaken by the nonprofit and its related entities. But documentation of how much HAS Development Corp. owes, to whom, and the terms of the loan repayments were among the records that Texas Watchdog requested from the nonprofit and which the nonprofit declined to release.

Continued on ...
Page 5: Despite public employees' labor, nonprofit says it's private

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Photo of Quito's airport by flickr user stromo, used via the Creative Commons license.

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