An examination of the Jackson Development Corporation’s property transactions over the last eight years reveals expenditures of more than $2 million for property acquisitions, a mortgage in default, outstanding loans and unpaid taxes.

Three weeks ago, Jackson County Commissioners launched an investigation into local Economic Development Commission activities. Commissioners commandeered both EDC and JDC records with the intent of conducting an audit — a move for which commissioners’ authority has not been clearly established. Commissioners expect to receive a completed audit report next week.

In the meantime, the validity of the JDC’s property investments has been called into question, prompting the Smoky Mountain News to review a series of JDC transactions on record at the register of deeds’ office.

Since 1997, the JDC — the Economic Development Commission’s non-profit property buying entity — has purchased three industrial sites colloquially known as the Buster Brown ($550,000), Drexel Heritage ($700,000) and Tuckasegee Mills ($800,000) properties. Each site was purchased for significantly less than its tax value.

“We were just good negotiators I guess,” said Tom McClure, EDC and JDC chairman.

On May 21, 1997, the Town of Sylva and Jackson County government jointly purchased Sylva’s Buster Brown property following the apparel company’s closure. But the joint purchase was nothing more than a temporary agreement. The May 21 deed states that the county and town acted as interim owners because the JDC was not “duly organized” in accordance with state laws and thereby could not conduct the property transaction.

The EDC consequently put up half of Buster Brown’s $550,000 cost, with the intent of the JDC later assuming control over the property.

However, officials with the Secretary of State, which monitors group’s non-profit status, said the JDC has been considered duly organized since 1987.

Originally, known as the Jackson Committee of 100, the group changed its name to Jackson Development Corporation on May 14, 1997, just a week before the Buster Brown buy. Neither the name change nor the group’s decision to restate its articles would have affected the group’s non-profit status, officials said. For all legal intents and purposes, the JDC would have been allowed to conduct the property transition itself.

McClure said that the reasoning behind the joint Sylva/county purchase was most likely that the JDC members themselves had not yet held a meeting.

“We probably weren’t organized yet,” he said.

Indeed, EDC bylaws were still being amended as of May 5, 1997.

Shortly after the Buster Brown deal in December 1997, the JDC entered into an agreement to purchase the Drexel Heritage property located in Whittier. Vacated when the furniture company consolidated plants, Drexel sold for nearly $300,000 below its $993,700 tax value. Still the JDC mortgaged the property in order to afford its purchase price.

In November 1998, both Jackson County and Sylva relinquished their rights to the Buster Brown property, with the EDC still owing Sylva its approximately $300,000 investment.

The JDC earned $250,000 in July 2001, netting its first two sales of small parcels of property lopped off from the 40.5-acre Drexel site. The parcels, one 2.9 acres and the other slightly more than 5 acres, sold to Florida businessman George Onik and Pepsi Bottling Company, respectively. Pepsi paid $200,000 for its tract of land. Today, the property alone is valued at $238,400. Total tax value reaches more than $1 million.

The JDC mortgaged the Buster Brown property for $325,000 days before selling it to Diversified Exposition Services for $625,000 in July 2001, but financed slightly more than $590,000 of DES’s purchase price.

“It was part of the proposal they made,” McClure said.

In July of 2002, the JDC agreed to buy the Tuckasegee Mills property from Triple S Partnership for $800,000 — slightly more than $200,000 off the tax value. The purchase price was funded by a $250,000 financing arrangement with Triple S and a $568,000 loan issued directly from the EDC to the JDC. The loan remains the only one of its kind.

“There hasn’t been another opportunity for a loan of that kind,” McClure said.

The Tuckasegee Mills property, now home to QC Apparel, is facing foreclosure as the JDC has defaulted on its mortgage. McClure has, at least in part, blamed the impending foreclosure on a struggling economy.

“At about the time we bought it the economy took a pretty good nose dive,” McClure said.

By August 2002, the JDC began renegotiating DES’s financing agreement, adding more than $50,000 of accrued interest to the balance and securing an interest rate 2 percentage points lower. McClure said this week that DES has not paid off the loan but is current in its payments.

In September 2003, the JDC mortgaged the Drexel property for $700,000. The mortgage has yet to be paid off.

In addition to the outstanding mortgages, the JDC has been late paying its taxes on the Drexel and Tuckasegee Mills properties. This year’s bills — nearly $8,000 that was due as of Jan. 5 — are still collecting interest.