FRONT ROYAL — Members of the Front Royal-Warren County Economic Development Authority presented their case on why the county should provide a life preserver if the EDA runs out of money in March.
EDA Vice Chairman Jeff Browne told the supervisors during a Tuesday work session that a worst-case scenario has the EDA depleting its funds in two months.
This comes as details of an alleged embezzlement scandal within the authority continues unfolding. That scandal includes a special grand jury that has handed up a litany of indictments, most of which are against former EDA Executive Director Jennifer McDonald. Meanwhile, the EDA has claimed $21.3 million of damages against her and 14 other individuals and companies in a civil suit.
The town and EDA have also battled over how much interest is owed for the Police Department’s headquarters, which has resulted in the town opting not to pay the EDA over $8 million for construction costs. The town has also allocated debt payment services owed to the EDA for its $15 million civil lawsuit filed against the authority.
As a result of the controversy, Browne said, “we have all learned the danger of having power and information concentrated in a small group of people without adequate accountability or transparency.”
“Never again,” he said.
Browne noted that the EDA now has a well-organized board and employees with the experience and motivation to move forward. While that may be the case, he said the EDA’s financial woes will not immediately vanish. He noted that the EDA board is “faced with more crises than we had board members” but they “created a committee structure to follow issues and make recommendations.”
“It’s worked well and what was a necessity for us should be a virtue for all future boards. With an active board to support him, [EDA Executive Director] Doug Parsons is able to devote most of his time to marketing and developing leads,” Browne said. “When he has prospects, he’s got professionals on the board he can turn to for support. EDA is too busy and complex for one person to run it well.”
To move beyond the controversy and operate as an EDA should, Browne said two issues must be addressed. First, he said a solution must be determined regarding how to deal with the EDA’s debt and ongoing operating expenses. He added it also must be pointed out what the EDA is doing to stimulate business growth in the town and county.
Regarding debt, Browne said that the EDA has loans and credit lines totaling about $41 million and monthly debt service payments totaling $150,500. Of those debt service payments, he noted that ITFederal pays $42,000.
ITFederal and its developer Curt Tran are two defendants in the EDA’s civil case. The EDA gave Tran a 30-acre plot of land for $1 and a $10 million loan with stipulations that he invest $2 million in that land. The $42,000 referenced by Browne is Tran’s monthly payment on that $10 million loan.
In efforts to decrease debt, Browne noted that the authority is actively marketing its properties, negotiating with the town regarding the police headquarters and pursuing settlements in its civil lawsuit. He added that the authority projects $58,800 in rental income annually.
Even if the EDA does sell all of its properties, however, he said that the authority will be an estimated $8 million in the hole regarding debt service. He noted this to point out that the issues must be worked out over time regardless of what happens with the properties.
Meanwhile, he said the EDA’s preliminary 2020 budget contains monthly expenditures totaling $40,000.
Browne said over the phone Wednesday that he was “trying to be as brutally honest as possible” to let the supervisors know that the EDA will need county assistance to survive.
“To summarize our debt strategy, it is to simplify and create breathing room until long-term solutions can be figured out,” he said.
While the EDA needs county assistance for the “foreseeable future,” he said, “the long-term payback will be new economic development and increased commercial tax revenues.”
“We know there’s a lot of work to do. There are a lot of problems to fix. But there is also a lot of opportunity to right this fiscal ship and grow our communities through strategic economic development. If we work together, we can make it happen,” Browne said.
Supervisor Cheryl Cullers said that patience is necessary and the EDA needs to be given the opportunity to right its ship.
She also asked: “How many people really thought about the EDA before the scandal started?” Not many, she answered, because it was operating smoothly. She added that there has been a lot of development over the years thanks to the authority, noting that the EDA was responsible for helping the community when the Avtex plant closed.
Supervisor Archie Fox said he is “happy and delighted” that there is a positive outlook on the future.
Supervisors Chairman Walter Mabe said the town and the county need an EDA that’s willing “to be a total part of the community.” He added that all governmental bodies need to work together and every dollar spent on a lawyer “is a dollar out of our pocket.”
“And I don’t want to pay any more,” he said.
So far, the county has paid over $1 million for legal representation in the EDA’s civil suit and a forensic audit of the authority’s finances. Resident Kristie Atwood noted during the meeting that the audit did not examine millions of dollars worth of questionable transactions and was conducted in a targeted, unfair manner.
Supervisor Delores Oates said that while the EDA gave an “excellent presentation,” it was a lot of information to consume. She said “we have to roll up our sleeves” and have more discussion regarding how to continue “but at least we know what we’re dealing with.”
“We might have a black eye, but that’s alright, we can recover from a black eye,” she said.