Another Job Bust! AllergEase has left town! Their phone has been disconnected! The sky is falling! However, this could be a case of “Not so fast, my friends!”
Next Tuesday night’s Danville City Council agenda was released yesterday and local media swarmed on this…
CL- 1151 New Business Item #: C.
City Council Regular Meeting
Meeting Date: 06/02/2015
Subject: Appropriation of unexpended Tobacco Funds held by the IDA
From: Cynthia Thomasson
COUNCIL ACTION
Business Meeting Dates : 06/02/2015 – First Reading – Public Hearing
06/16/2015 – Final Adoption
SUMMARY
The Virginia Tobacco Indemnification and Community Revitalization Commission (the “Commission”) provided a grant to AllergEase, Inc. in the amount of $1,125,000. Of this amount, $425,000 has not been distributed to the company and is being held by the Industrial Development Commission (IDA). AllergEase, Inc. has failed to meet the terms of the Performance Agreement and therefore the Commission is requesting a refund of the grant. The Grant Repayment Agreement has been approved by City Council and the repayment is scheduled for four equal payments in the amount of $281,250 over the next four years.
BACKGROUND
The attached ordinance provides for the return to the City of the unexpended funds held by the IDA and these funds to be reserved for the repayment of the grant to the Commission.
RECOMMENDATION
It is recommended City Council approve the attached ordinance appropriating $425,000 to be transferred from the IDA to the City and reserved for repayment of Tobacco Commission grant to AllergEase, Inc.
(Editor’s Note: I fixed one typo in the letter.)
Yep, AllergEase is gone from Danville. They closed their office over a week ago. They’re a Job Bust because they’re not going create 150 jobs. The city is on the hook if the company doesn’t repay the money. But we’ve got a big difference between AllergEase and other job busts like GOK and Web Parts here.
AllergEase is still a solvent company as of now. They still have products in retail stores and they still have assets that could be recovered by means of lawsuits if necessary. This is currently the same situation as EcomNets was in a few years ago. EcomNets is paying back their Tobacco Commission grant for failing to produce 200 jobs. The city isn’t yet on the hook for AllergEase.
This ordinance is only a financial move to take the leftover $425K from the IDA and to move it back to the city’s accounts. The next month or so will tell whether or not this becomes another liability for the city.
Don’t Panic. At least not yet.
et.
Hopefully the damage to the taxpayer isn’t too bad. But this just proves the point that incentive-based development is a poor idea. No more incentives. None.
Your plan only works if everyone stops incentives. That will never happen.
My plan would be for Danville to rethink itself into a bedroom community for Greensboro. Greensboro’s over 280K people now and home prices are much more expensive down there. Let’s face it. The world has changed and small cities aren’t very competitive. Thus they throw around gov’t $ to try and land wild bets like a besotted blackjack degenerate.
Better idea? Market yourself with Greensboro. Improve transportation infrastructure b/w Danville and G’boro. Market yourself as a nice, inexpensive place to live for Greensboro commuters. Work and improve the G’boro economy and be a region with them. While not quite the same, Colonial Heights is a good 35 minutes from downtown Richmond. They have no problem being a bedroom city for Richmond.
I’m not sure that would work once Reidsville saw what we were doing and said “me too”.
At my core I’m with you on opposing incentives, but in today’s environment it’s pay to play.
Incentives are fine but if I’m going to invest my money in something I thoroughly research the investment. I’m not sure who’s responsible for giving these companies money but it looks like they are just swinging at every pitch. At least wait for one that can be hit. Typical government – has no problem throwing the taxpayer’s money around.
Any update on this? Did the City recover the money from AllergEase?