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Incubator board members admit to lax involvement

For nearly 20 years, Jerry Plemmons’ hour-long drive from Hot Springs to Waynesville every couple of months for a Smoky Mountain Development Corporation board meeting afforded him plenty of time to ponder the group’s purpose.

When he joined the organization, its plan was to create jobs by housing start-up companies in a small business incubator, the latest rage in economic development at the time. It would also serve as a liaison and vehicle for the brand-new Small Business Administration loan program, promising much-needed capital to spark economic development. Its partner would be Western Carolina University, which agreed to pay for an executive director under the auspice of economic development outreach.

But 20 years later, Plemmons saw an organization that was past its prime.

Instead of fostering entrepreneurs, the incubator had housed the same five companies that for years had taken advantage of the discounted rent. Most of the corporation’s SBA loans were contracted out to a loan officer in Asheville. Western Carolina University had backed off its economic initiative and quit paying the salary of the group’s executive director.

“Sometimes non-profits continue long past their useful purpose,” Plemmons said. “I for one felt like there were other entities that could do the job that Smoky Mountain Development had been doing.”

Scattered across a 10-county area, Smoky Mountain Development Corporation’s other board members were having similar doubts, witnessed by declining attendance at the board meetings.

“We had a tough time getting a quorum in the last two years,” said Peggy Melville, a long-time executive with Home Trust Bank and a Smoky Mountain Development Corporation board member.

So last fall, corporation board members decided to dissolve the organization. They would transfer the incubator to Haywood County’s Economic Development Commission, which would be more vested in its success. SBA loans in the region would continue to be made by the loan officer in Asheville. Roughly $300,000 in Smoky Mountain Development Corporation’s bank account would be divvied up among each of the 10 counties considered members of the group.

“When we could take that money and give it back to all the counties, I just couldn’t see the need for the continuation of the company,” said Melville. “My opinion is why do it when there other entities out there that can do exactly what you are doing that don’t need a board and don’t need an executive director.”

Other board members said the group’s purpose had devolved over the years.

“To me, it is not right to keep it going to just to pay somebody’s salary when you know the entity isn’t going to work anyway,” said Bill Forsyth, a board member from Murphy and the economic development director of Cherokee County.


Out of the woodwork

In November, the Smoky Mountain Development board voted 6 to 1 to dissolve the corporation. True to form, four of the 11 board members did not show up for the vote. Dissolving a corporation is irreversible and considered weighty enough that it called for concurrence by the all the corporation’s members — around 38 people. A second and final vote was scheduled for December.

The general membership knows little about Smoky Mountain Development Corporation or what it does, according to a sample telephone poll of members. Most are members in name only. They were invited to be a member by the group’s executive director, Tommy Fouts, and agreed. Members range from bankers and government officials to Fouts’ friends, brother and son.

Fouts, the executive director for 17 years, had resigned in September amid early signs of internal turmoil. But Fouts remained active and kept going to the group’s meetings. He was the top proponent of keeping the organization together and lobbied members not to dissolve.

Less than a third of the members ultimately participated in the vote to dissolve, which was as simple as sending in an absentee ballot. The final vote was 9 to 9. The organization wasn’t dissolving after all.

“Most every business goes through a failure period,” said Gaylerd Davis, a board member and retired president of the Apple Growers Cooperative in Hendersonville. “You learn by your mistakes and pick up and go on. You have to go through this trial and error period.”

Some board members were confused whenmembers who had little involvement in the past suddenly wanted to rejuvenate the organization.

“I am not a quitter,” Davis said of his reasoning. “It would work if we get smart enough to do it.”

Larry Ammons, a retired banker and Haywood County commissioner who is a member of the corporation,also voted against dissolving.

“If people want that opportunity to keep it going, they should get that chance,” Ammons said. “You could always dissolve it in a few months if they can’t do anything with it.”

At a meeting last week — their first since the vote to dissolve failed — board members divided into committees that will explore avenues for the organization’s future and report back at the end of the end of the month.

“I see this as a positive step,” said Bill Ragland, a board member from Transylvania County and owner of an electric supply company. “We know we aren’t perfect in the past. Organizations occasionally need to examine themselves. That is what we are doing.”

None of the board members, including those who want to keep going, claimed the group’s track record was good.

“I can’t tell you we have done an excellent job,” said Jim Crawford, a board member from Clay County with the Western North Carolina Development Council.

Crawford said the original intent of the organization has fallen by the wayside. But it could be jump-started again.

“It can do so many other things if it is pursued,” Crawford said of Smoky Mountain Development Corporation.

Board members who want to keep going disagree they would only be duplicating existing economic development services.

“Just because somebody else is doing it is no reason to back off,” Davis said. “The problem is we just weren’t doing it better before.”


In the dark

Davis said the board’s lack of involvement is what hurt the organization.

“The board didn’t pay enough attention to what was going on,” Davis said. “The board was charged with helping economic development in the 10-county area and we grossly failed.”

Melville said there was little incentive for board members to come to meetings.

“Tommy would present the financial stuff and give us an update on the tenants in the incubator, and since we weren’t moving tenants in and out, there wasn’t much to review. They probably thought, ‘Why come over here?’” Melville said of board members from counties like Cherokee, Clay, Henderson and Transylvania.

Most board members were unaware that they had $300,000 saved up in the bank. With WCU bankrolling Fouts salary all those years, the commission made on SBA loans grew into a sizeable bank account.

“We didn’t go over that every much,” Davis said after learning the group had cash reserves, which were listed on the organization’s annually financial forms if the board had reviewed them.

Board members thought the surplus money was subsidizing the incubator.

“The money collected on the incubator is not enough to cover the costs,” said Crawford. “Somebody has to pay the power bill.”

But in fact, each tenant pays their own power bill. And the rent covers overhead — namely maintenance, landscaping, cleaning and building insurance — with several thousand to spare.

Board members also said they did not know how Fouts spent his time.

“Running the incubator took up a great deal of time,” Ragland said of Fouts’ job. But Fouts said he did not spend a lot of time on the incubator because his main focus was the SBA loans.

Some board members did not know that Fouts contracted with a loan officer in Asheville to process the majority of the SBA loans that went through the Smoky Mountain Development Corporation. Most board members also did not know that Fouts had gotten a $99,000 grant from the USDA Rural Development Program to establish a revolving loan fund.

“That is something that is new,” Crawford said when asked about the revolving loan fund, which is actually 10 years old.

Where the group will go from here remains to be seen.

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