FRONT ROYAL – The town and Front Royal-Warren County Economic Development Authority remain at a stand-still regarding how much is owed for construction of the Front Royal Police Department’s headquarters.
During a special Tuesday EDA meeting, Board Member Marjorie Martin said the EDA has paid invoices totaling about $7 million with about $400,000 that will soon be due.
The town is now seeking to completely take over financing, but Martin said the EDA and town must first agree upon what is owed on the project.
According to previous reports, the EDA has acted as a middleman on the project between the town and contractors. This arrangement was set up because town officials have stated they were misled to believe that the EDA was needed to facilitate a low-interest loan through New Markets Tax Credit — a program that finances construction in economically distressed areas.
The EDA, however, never obtained that loan as the projects did not qualify.
Town Finance Director B.J. Wilson pointed to a January 2018 email from former EDA Executive Director Jennifer McDonald to Town Manager Joe Waltz as one of the times the town was misled regarding the tax credits program. In that email, she states that the authority secured New Markets Tax Credit funding for projects that included the police station. There is also an August 2016 memorandum of understanding between the town and EDA stating that the authority had obtained the loan to finance a series of town projects
Wilson explained that the police headquarters project was originally financed through an EDA line of credit obtained for Leach Run Parkway, the headquarters and other projects. In October, he said the EDA got a separate loan for the police station and $4.8 million was transferred from the line of credit to pay for that loan.
What is owed on the headquarters has been disputed for several weeks, during which time the town has entered several closed sessions to discuss the matter. EDA Board Member Greg Harold said there is no reason the town should not know what is owed on its project.
Wilson said that the majority of disagreements regarding the financing revolve around “duplicate draws” made in January 2019 and what interest rate the town should pay.
Regarding the duplicate draws, he explained that a $2.8 million draw was made from the EDA’s loan for the police station on Jan. 8.
On Jan. 30, he said a $1.1 million draw was made.
He said that on Jan. 8, the amount the EDA had drawn on the loan exceeded the town’s invoices by $1.4 million.
So, on Jan. 30, he said the EDA should have had enough money to cover invoices without making another draw.
A Jan. 30 notice from United Bank to County and EDA Attorney Dan Whiten states: “Per your draw request,” the EDA will receive about $1.1 million.
Wilson, however, said that Whitten stated in a recent email: “‘I didn’t request any draws personally.’” Whitten could not be reached for comment.
After the EDA’s special Tuesday meeting was adjourned, authority and town officials held a meeting that was not open to the public to discuss the headquarters’ financing.
Asked if the town and EDA arrived upon an agreement during the meeting, Wilson said “no” and there was no reason the public should not have been allowed to attend.
“No real major updates or anything like that. Still, same response that we’ve gotten in the past regarding the duplicate draws,” he said. “I’m still not sure how it transpired.”
Wilson noted that the draws were made after McDonald’s resignation. She has been charged with 28 felony counts including embezzlement, obtaining money by false pretenses and money laundering stemming from her decade tenure at the authority.
“That’s the part I truly don’t understand on how that came to be is Jennifer McDonald had left, there was not an interim director,” Wilson said.
Wilson said another “point of dispute” regarding the police headquarters is what interest rate the town will pay when it takes over financing. He said while the EDA’s loan for the project carries a 3% interest rate, the town should only have to pay 1.5% interest because the town was falsely informed that is what it would pay.
In a September 2016 email to Wilson, McDonald stated that the town would pay “interest-only for the first 7 years at 1.5%.”
Wilson said the interest rate is one facet of the town’s multi-million civil lawsuit against EDA, a case for which a first hearing will be held Thursday.
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Correction: This story has been updated with the full name of Town Finance Director B.J. Wilson.