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Cash infusion eyed for deal closing fund
SoVaNow.com / March 06, 2014Members of the Virginia Tobacco Commission will meet today in Richmond to vote on a plan to shift $5 million into the deal-closing fund for companies that open new plants or expand existing sites in Southside and Southwest Virginia.
The Tobacco Commission’s TROF budget — the acronym stands for Tobacco Region Opportunity Fund — is the go-to source for cash incentives to companies that promise to create jobs in the region. TROF money was used most recently to help lure Kilgour Industries, a British aerospace firm, and 150 new jobs to the Martinsville area.
However, the TROF balance is nearly tapped out, and commissioners must decide how to replenish it.
Tim Phohl, acting director of the Tobacco Commission, said the issue is a good one for the group to have to tackle — the result of stepped-up requests for the economic development incentive money.
“I see it as a good sign in that it signals an economic upturn for Southside Virginia with more companies looking to relocate or expand in the area,” said Phohl, “and proof that economic development trips to encourage European companies to the area are starting to pay off.
The Tobacco Commission’s chairman, Del. Terry Kilgore, informed members by e-mail this week that the $5 million would come out of the Research & Development grant program. The R&D fund has a $33 million balance and staff felt that it could easily absorb the $5 million loss this year, said Phohl.
The special call meeting in Richmond today will be devoted solely to the proposed fund transfer to increase the TROF budget.
Without additional cash, the TROF budget could be depleted before the end of the fiscal year in June. “We did not want to be in a position of having to shut down the program or notifying applicants that they were approved contingent upon receiving the funds in fiscal year 2015,” said Pfohl.
Shifting money between funds also means the commission can avoid having to invade its endowment.
The Virginia Tobacco Commission was created in 1999 out of proceeds from the Master Settlement Agreement, negotiated between 46 states and U.S. cigarette companies. Virginia gained some $4 billion out of the MSA and set aside 40 percent of the funds for use by the Tobacco Commission, which was established to revitalize the state’s traditional tobacco growing regions and compensate growers for their losses in the wake of the $206 billion settlement with cigarette companies.
The Tobacco Commission’s net position, once well north of $1 billion, had fallen to $655 million at the end of the 2013 fiscal year. The endowment money available for revitalization efforts was substantially less, $426 million, at the end of the previous fiscal year.
By shifting funds between grant programs, the Tobacco Commission can avoid drawing down its endowment even further. Annual withdrawals are more than twice its interest earnings of 4 percent.
“We’ve been trying to keep our annual rate of invasion at 10 percent,” said Pfohl.
Tobacco Commission members adopted stricter guidelines last year to qualify for TROF grants. Grants are awarded based on several criteria, the most important being job creation.
Comments"deal-closing fund" Come on! Merriam-Webster: Crime of giving a benefit (e.g., money) in order to influence the judgment or conduct of a person in a position of trust
- By How about "bribery fund"? on 03 / 06 / 14
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