FRONT ROYAL – As the Front Royal Economic Development Authority faces a dire budget, it is counting on coming to terms with the town and recovering more than $8.7 million it spent on the new Front Royal Police Department building.

During its first meeting of the year on Friday, EDA members looked at a budget prepared by EDA Treasurer Marjorie Martin and the stark picture it painted. To keep a ship that has been leaking water for years tight, Martin said she did not count the police department bill as paid.

Doug Parsons, the executive director, said there has been a communication breakdown in what the town understood it would be responsible for paying and the invoices the EDA produced.

An invoice presented to the town on Thursday shows the EDA requesting $8.7 million. To get the funds to start the project, the EDA took out two separate loans, one from First Bank and Trust and then another from United Bank.

The contention, Parsons said, comes down to the interest rate the EDA paid and what the interest rate former Executive Director Jennifer McDonald allegedly told the town it would be responsible to reimburse.

“The town only wants to pay us 1.5% interest on this project because my predecessor allegedly maintained that they were going to get 1.5% interest through the New Markets Tax Credit program,” Parsons said. “She told them that verbally.”

“Those New Markets Tax Credits never came to fruition,” Parsons continued. “In real life, it's 3% and that’s what we want to be reimbursed for.”

The New Markets Tax Credits program is one of several areas McDonald is accused of having embezzled more than $21 million from while she led the EDA.

The extent of embezzlement that took place in recent years continues to develop as the EDA works its way through an audit of its fiscal year 2018 projects.

During the meeting on Friday, Parsons said audit preparers found more fraudulent transactions from 2018 in the Leach Run project. That project, Parsons said, was a joint effort between the town, county and EDA.

One of the reasons to perform audits, Parsons said, is to ensure invoices the EDA submit for reimbursement are above board.

Most of the money in the EDA budget comes from the county, Parsons said, with a fraction coming from rental properties. The job of an EDA is to leverage taxpayer dollars into properties and projects that attract business to the area and turn a profit for the locality.

Warren County is set to provide a little more than $406,000 for the EDA for its 2020-21 fiscal year.

Parsons said he doesn’t have the confidence in the books for the Leach Run project to turn around and begin asking for reimbursements, but the police department is another matter.

“The Front Royal Police Department project is, thankfully, very straight forward and we know the invoice we’ve produced is legitimate,” he said. “This is what has truly accrued and what’s truly owed in our view.”

Contact Max Thornberry at mthornberry@nvdaily.com