If you Danville taxpayers liked paying back US Green Energy’s Tobacco Commission grant money, you’re going to just love paying back more!
We called GOK Furniture and Web Parts as Job Busts a long time ago. Now, it’s official. Say goodbye to $2,000,000, folks.
On Thursday, October 9th, Danville City Council is going to discuss the agreement that’s been reached on how to pay back $1,000,000 in Tobacco Commission grants for both GOK and Web Parts. Here the council letter that discusses it…
SUMMARY
City Council is asked to authorize the City Manager to execute agreements to reimburse the Virginia Tobacco Indemnification and Community Revitalization Commission (Tobacco Commission) for non-performing Tobacco Region Opportunity Fund (TROF) grants of $1 million each issued to Web Parts and GOK, using the approach previously authorized for the U.S. Green Energy TROF grant repayment. Each agreement would provide for 25% of the obligation to be paid upon its signing with an additional 25% amount to be paid each year for the next three years, without interest. Funding would come from the unrestricted cash balance of the General Fund. Law suits have been filed against both companies to recover grant funds.
BACKGROUND
The collapse of Danville’s traditional textile and tobacco industries had a devastating effect on its economy. The City has consequently been aggressively recruiting new businesses to replace thousands of lost jobs. Some of the City’s economic development clients have received financial incentive grants from the Tobacco Commission in exchange for taxable investment and employment commitments over three-year periods.In exchange for a $1 million TROF grants issued in the 2012, Web Parts and GOK committed to taxable investment and employment obligations within a three year period. Both companies have failed and these commitments have not been met. TROF grant agreements require recipients to refund the City if promises are not kept. Whether or not they do, the City is responsible to reimburse the Tobacco Commission for the grant. If outstanding amounts are not refunded by the City, the Tobacco Commission could freeze current disbursements, disallow any future grants, initiate State debt set-off collections, and pursue collection proceedings.
The accompanying Grant Repayment Agreement form calls for the City to make annual payments of $250,000 over the next four years to satisfy this responsibility. The City has filed law suits against both companies seeking full reimbursements of grants paid to Web Parts and GOK.
RECOMMENDATION
In order to meet its commitments and maintain good standing with the Tobacco Commission, it is recommended that the City Manager be authorized to execute agreements to reimburse the Virginia Tobacco Commission for non-performing TROF grants of $1 million each issued in 2012 to Web Parts and GOK, providing for 25% of the obligations to be paid upon signing of agreements with an additional 25% amount to be paid each year for the next three years, without interest.
Well, what can you say? It’s time to get real. The city is hiring outside legal counsel to sue these companies to get the money back from them, but that’s going to be hard to do. GOK’s assets appear to be a good looking sign outside their former building and three lawn chairs. Everything else is in China. As for Web Parts, Brad Mainland was such a good conman that I’m sure that he knows how to be judgment-proof. There’s a better chance in getting something out of him than GOK, but any money recovery is highly unlikely.
And now, my head will explode.
This is exactly what I was talking about when I strongly urged against paying out a bonus to the city retirees from the city’s general fund. I knew this repayment was going to have to be made, and so did any rational member of city council. Fred Shanks & Buddy Rawley were the only ones to also take a stand against the bonus payout and they were damned right in doing so. That amount would have been pretty close to the first year’s installment and now that’s going to come from me and other Danville taxpayers in the long run.
I’m directly calling out Sherman Saunders, Gary Miller, Larry Campbell, Alonzo Jones, Lee Vogler and James Buckner to justify their votes for the bonus now that $500,000 more has to come out of the city’s general fund. I don’t want to hear horsecrap like “The city had a good year.” or “We were running an unexpected surplus.” With their vote, they have eventually put that first repayment installment on the back of all Danville citizens, while only giving that bonus to less than 600 of those citizens.
And to make it worse, there’s more of these repayments coming down the tracks. This isn’t over.
Shame on the process that caused this situation to arise in the first place. Shame on those six Danville City Council members for making this dose of medicine taste even worse.
There will be another payment of $600k that will have to be repaid to the Tobacco Commission for Macerata Wheels that took the cash and did not even open for business. Bruce reported it. How much more are we going to have to keep giving away for free and then forcing taxpayers to repay it?
What a sham!
Don’t forget the City also has to pay back some of the money it got from the state due to the state budget shortfall. This wasn’t a good year for retiree bonuses.
this is insane!
This council and city admin should be held liable. Horrible, horrible leadership from all sides AND they continue to make piss pour deals AND they brag about their track record. Of course average citizens and voters are oblivious so we will be stuck with this bunch of morons for as long as they choose to screw – I mean serve the public. Only in government is this crap tolerated.
PS
And do not forget Norhurst. That bubble will burst soon.
You are so right!!
And I can hear Lee Vogler now if actually questioned – “We don’t want to focus on mistakes of the past. We must look to the future”.
Bonuses were ridiculous anyway…..they cry one minute that funds are short and lay off people who are close to retiring. Then they give out bonuses. They give out bonuses and cry money is short, and want to raise taxes. They are always throwing money around like it is theirs, then wanting residents to pick up their slack.
City Council meets twice a month and has a work session following. Both are open to the public. Until citizens take an interest and show up so they know we take an interest, nothing is going to change. We keep electing the same people expecting different results.
Please go back and review the tapes of that meeting…I alluded to this and noted that the bonus was not appropriate, knowing that this (and more) was coming down the line. You just can’t make this stuff up…the retiree bonus will prove advantageous to thos who voted for this in May of 2016, but it was absolutely the wrong thing to do!
This is not only unacceptable, but an embarrassment to our region and leaders. I knew immediately that Macerata Wheels had not been properly vetted, and they are soon to follow this with similar announcement. If anyone had taken the time to “Google” either Mike Farless or Chris Joy they would have quickly realized that the only real connection between these two were Farless acting as a CPA for Joy’s taxation non-payment troubles over the years. Farless is simply a CPA in Durham, and Joy was said to currently own “Heavy Hitter Wheels” in Raleigh, which was and is non existent. While neither had any manufacturing experience, we apparently were only more than eager to hand over $600,000 as they promised 100 jobs at $40K a year. These two never even got around to creating a web site about their plans or product. Farless even made the incredulous statement that “wheels” are immune to recessionary troubles. Unbelievable!
Another recent unbelievable article on Joy easily found online was how he was a victim of mortgage fraud. He sued because his mortgage payment had increased close to $1000 a month, he could not afford it and had lost his “dream home”. Again, this is whom we thought to be a good investment, capable of creating 100 above average paying jobs and give $600,000 to better our region. Quite simply, this fellow can’t keep his own finances in order. How comical to now file suit against these “companies” to seek reimbursement for the Tobacco Commission money. That money is long gone. Could anyone local have come up with a better plan for the best usage of this money? Without a doubt……
To add what KLRIII wrote I checked on Mike Farless with the NC CPA Board on line. He has not been a CPA since 2010 because his license was revoked by the board. Don’t you think some due diligence could have been done before that amount of money was handed out?, They still held him out as a CPA. What an embarrassment to this city and the taxpayers!
As someone who actually worked for Brad Mainland at Web Parts and have since shouldered the fallout not only as a taxpayer, but also as worker whose career took an nearly fatal hit, I would like to see more transparency from the Commission and the City regarding the process of vetting these companies, releasing the funds, and how they hold them accountable.
Mainland consistently met the requirements to the letter, but not in spirit. I would that someone had paid a visit to his employees and asked a few questions while he was still here. They would have heard a very different story than the one they were being told by Brad.
In addition, I have yet to get a straight answer from anyone as to what individual or committee is ultimately responsible for choosing the candidates for these grants.
It appears that Jeremy Stratton wooed these companies and presented them to the Commission for approval. If so, then we can assume he was one who truly made the decision, not to approve the money, but to offer them up for consideration to the Commission for a grant, presumable with glowing resumes. I went to him (Stratton) before Mainland disappeared and told him that Brad had no viable business plan, was employing only the bare minimum of locals (but plenty of overseas help for pennies) and was running what appeared to be a shady situation. I was told only that Stratton was ‘handling’ it, that he was keeping tabs on Brad, and was actually hopeful that Mainland would lose the building as Stratton had alternate plans for it. He was unconcerned that the city would be out the money, but seemed very concerned that his reputation might be sullied by my outspokenness.
Of course, he is gone now. He conveniently resigned before these companies were found in default and the city had to pay the Commission back. The announcement of his new employ shows very nicely how he vetted several companies and had them commit to jobs, but the timing is impeccable in that he never had to cop to their failure: http://www.myarklamiss.com/story/d/story/jeremy-stratton-named-new-new-president-ceo-of-el/50603/9skKfCPtrUmrsI_jkobhcg
Most of all, I’d like to see this stop happening. If a city employee is recruiting these companies, they need to do a better job of vetting them. Mainland had no technical expertise and had never run a tech company, unless you count surf shops and day care facilities technological. He had never even held a company for any length of time. He was no stellar recommendation for receiving $1,000,000 in taxpayer funds. Also, please, please, please…when one of these ‘approved’ companies comes, stop taking their word for compliance and intent. Speak to the employees. Ask the community. They will know the real story. Mainland was able to get away with this because he was only given the most cursory glance. Some of us knew well before the fact what was about to occur and tried to help, to no avail.
As an upstairs neighbor at the time with a degree in information technology, a legal education on top of that, and a lot of resources available to me through relatives who work in tech, I saw serious red flags when I offered with no expectation of any compensation to lend an ear or any other reasonable assistance in getting stuff up and running at Web Parts and Brad showed exceptionally little interest. I worked at a company in the past that was fleeced by a CIO who hollowed out the company pretty badly awarding contracts to Indian firms for supposedly pennies on the dollar and then watching that money turn into no measurable results. I wasn’t close enough to Web Parts to know for sure that was happening there, but it did sort of look like it to me. Most of all, I joked but was serious, I had a good idea of what a business doing what his was supposed to do looks like. I saw little of it going on.
I am sorry this hurt your career, MB. I narrowly avoided a massive layoff at my prior tech employer by resigning to go to law school a week before it hit. It can be a real disaster.
There seems to be two reoccurring themes in the “job bust”. 1. Money given to people with no experience in running an industrial operation, and 2. Jeremy Stratton! We know there was a lack of oversight in the Danville Utilities Department can we also assume there was little or no oversight in the Economic Development Department. Someone needs to get a grip on the taxpayer money being wasted in Danville.
The other issue seems to be the inability to tell people that have the arrogance to believe they know everything, anything that might disavow them of that notion.
One makes a huge mistake by piling on the crafty Jeremy Stratton who got of town just in time. The elected officials should be forced to accept full blame, though of course they will make every effort to blame someone else, especially if he is long gone.
I wish the FBI would get into all of it while they are investigating corruption in the Tobacco Commission.
this is funny—-city council ALWAYS hounding the school system on bad management of their funds/money/budget and having to pay borrow and pay back money…NOW the city council is doing the same !! HA HA. remember “what goes around comes around” I remember last spring what a grueling and embarrassing workover the city council gave Paulhaymus and superintendent over the school budget. City council should NOT throw any more stones about mismanagement of anyone’s money !!!!!
yes I wonder what pretty boy on city council says. and his damage control
I voted for the new guy on council although I was concerned because he seemed to be aligned with Vogler. O well.
where is lee vogler’s reply on this ??? Bravo on Carter’s reply above. city council members–ALL– should never criticize anyone on bad management of money….
vogler is nothing but a Poser, does the new guy ever talk except to vote?
Going forward, I would only ask that City Council no longer provide monetary incentives to a prospective industry. If the Council wants to build a road or supply real estate (while I’m not a huge fan of those things), ok, but cash should be an absolute 100% no. Here’s a story from Montgomery County, Virginia today that does not mention cash incentives:
http://www.roanoke.com/business/news/blacksburg/inmotion-to-open-manufacturing-facility-in-blacksburg/article_ac13167d-bea8-543b-b64a-a2cf925767a8.html
Cash incentives are a horrible policy.
When “everybody else is doing it”, you pretty much take yourself out of the game if you implement that policy.
Norhurst never created any jobs. Why did City and Tobacco Commission provide $625,000? Anyone checking …
It was based on their business plan.
Checked thoroughly and Norhurst had maximum 1 or 2 employees since inception in early 2000s’ till today. Tobacco Commission and City expected Norhurst to suddenly create 108 Jobs. Fascinating! I would think
they would do proper due diligence rather than wasting tax payers money.
The clock hasn’t ran out on them yet, but they should be able to pay it back from their northern Virginia operations.
Why is Norhurst paying only half the grant back to the City. Did they invest 2.2M to get the waiver for the rest of the grant.
Let’s keep Rawley snd Shanks and make one mayor and the other vice mayor and replace the three bozos Saunders , campbell and the cabin boy Vogler with tried and true sucessful business leaders to straighten this city out . We need people who have made payroll without government grants and subsidies and believe in the old fashion way of creating jobs ,This city has been embarrassed enough by these 3 including late night television.
0%. Squadoosh.