Millions of Tax Dollars In Danville Could Be On The Hook If New Companies Fail
Danville, VA - The city of Danville has reached an agreement to repay $1.6 million to the Tobacco Commission on behalf of US Green Energy.The company, which received the grant in 2010, failed to meet job creation goals and will be responsible for paying the city back in installments.
A US Green Energy representative says they will have no problem returning the money.
If a business can't pay, though, officials say it's your tax dollars that pay the Tobacco Commission back.
"It's an absolute last resort that it comes to that, " said Councilman Lee Vogler.
Former Danville start-up Web Parts LLC dismantled last year after receiving $1 million from the commission. Vogler says, so far, the city hasn't recouped any of that money.
"We're doing everything we possibly can to go through every avenue we can to get the money from them."
The city is also keeping a close eye on GOK International, the Chinese furniture company that announced plans to "restructure" in March.
The company's owner, Kevin Liao, also received $1 million on the condition of 300 jobs. After two years, the number of employees has never grown past 10.
"We took chances on companies that were too weak and we're going to pay the consequences for that, " said City Manager Joe King.
King says 50 percent of these new companies fail, and post-recession statistics paint the same picture across the country.
While city leaders plan to continue going after new businesses, they are reconsidering the idea of giving so much money up front for start-up ventures.
"I'm in favor more of performance based incentives: the better you do, the more money you get, " Vogler said.
"The lessons we're learning are that you have to more thoroughly vet companies and probably have to turn down a lot more companies than you would like because you can't afford to take the risk, " said King.
Some council members say the former Economic Development Director - who left earlier this year - did not make it clear that the city would be responsible for paying those funds back to the Tobacco Commission.
City Officials plan to work with a new firm that will help them better vet new companies during the recruitment process.