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NRV Competitiveness Center faces insolvency

Unless New River Valley Development Corporation receives enough moral obligations from its eight founding jurisdictions to back a $2.6 million refinancing loan, it could become insolvent by the end of June.
Insolvency would threaten the New River Valley Competitiveness Center business incubator off Viscoe Road at Fairlawn. The Center, which is operated by the Development Corporation, currently has 19 tenants (including several regency agencies) and 65 employees.
Pulaski County Board of Supervisors voted recently to enter into a moral obligation to support half ($1,317,500) of the refinancing loan under the condition at least one other jurisdiction partner in sharing the obligation.
Christiansburg Town Council voted Tuesday night to provide up to $350,000 in moral obligation.
However, Pulaski Town Council voted 5-1 Tuesday night to hold off on making a commitment until a work session to be held later this month. The vote was on a motion to have town staff develop a draft resolution of moral obligation to cover one-seventh of the amount for consideration at a later work session.
Several council members said they would like to think about the request and see what action other jurisdictions take.
Councilman Joel Burchett Jr., on the other hand, cast the dissenting vote saying the town already was obligating 30 percent of the loan by virtue of the fact town citizens are also county citizens. If town council also approves a moral obligation, he said, town citizens would be “paying twice.”
Pulaski Economic Development Director John White suggested the town consider obligating one-seventh ($184,450) of the other half of the loan even though the county requested a $325,000 obligation.
White said the Center is being considered as a site to start businesses for the town’s proposed Nanotechnology Park. Without town support, he said he is afraid the town will lose participation in the Center.
White said the Center is facing the same difficulties many small businesses are facing in the present economy.
Councilman Robert Bopp asked White if the one-seventh obligation would only work if the remaining six localities agree to “sign on” to the obligation.
White said that is correct. If some jurisdictions refuse, he noted, the participating jurisdictions would need to increase their obligations. He said town council would need to specify a limit to its obligation if it chooses to participate.
Pulaski Finance Director Sherry Boyd assured Mayor Jeff Worrell participation would not affect the town’s financial rating.
Councilman Dave Clark said he would feel more comfortable backing one-seventh of the obligation than $325,000.
White pointed out that the refinancing would allow the Center to remain open “without any cash contributions” from the localities.
Council needs to act on the request by May 25, White said.
Burchett expressed concern that none of the businesses that have graduated from the center have located within the Town of Pulaski.
However, White said that doesn’t mean the Center hasn’t been a benefit to the town. He recounted some of the “success stories” that came out of the Center.
Worrell pointed out that the Center has an 80 percent success rate, which he noted is pretty good for small businesses.
Burchett said he has seen “moral obligations” too often turn into “financial obligations.” He suggested maybe the center’s usefulness has “come and gone.”
Bopp said he thinks the Center has provided “great benefits to the area as a whole,” but a possible failure needs to be considered in making a decision.
Worrell said each jurisdiction is partly to blame for the Center’s financial situation in that when a new business is opening “we all want it on our Main Street when it probably needs to be there to start with.”
In a letter to the town from Pulaski County Administrator Peter Huber, Huber indicates that the Development Corporation is in a “difficult situation” because graduating businesses and the current economy has left the Competitiveness Center with a 57 percent occupancy rate.
“As a result of (the reduced occupancy) and the interest on our current debt, the Corporation will not be able to remain solvent past June 30, 2009 when a $20,000 interest payment becomes due,” Huber states. He points out that the Corporation currently has a cash balance of $254.39 and owes $41,248.45 to a reserve account being used “to pay utility bills and other critical expenses.”
Huber said the Corporation’s Board of Directors “believes that the continued operation of the Center is critical to rebuilding the economy of the New River Valley and has been working on resolving the financial difficulties of the Center for some time.”
Huber points out in the letter that the Center has been “operating without local government support or financial involvement for the past 10 years.” He says the Center’s services are “likely to become more critical as residents affected by recent layoffs begin to consider use of their talents in making a living by starting a small business.”
The shared moral obligation would allow the Competitiveness Center to reduce debt service costs by $30,000 per year, according to Huber’s letter. In addition to the moral obligation, the Corporation is asking the localities to also provide “in-kind operational support” such as mowing, accounting, management services and light maintenance for the Center.
Any jurisdiction participating in the moral obligation also will have a “proportionate say in the management and operation of the facility, an equity position in the Center and potential prospects for revenue generated by the Center as occupancy increases,” Huber’s letter states.

NRV Competitiveness Center faces insolvency

Unless New River Valley Development Corporation receives enough moral obligations from its eight founding jurisdictions to back a $2.6 million refinancing loan, it could become insolvent by the end of June.
Insolvency would threaten the New River Valley Competitiveness Center business incubator off Viscoe Road at Fairlawn. The Center, which is operated by the Development Corporation, currently has 19 tenants (including several regency agencies) and 65 employees.
Pulaski County Board of Supervisors voted recently to enter into a moral obligation to support half ($1,317,500) of the refinancing loan under the condition at least one other jurisdiction partner in sharing the obligation.
Christiansburg Town Council voted Tuesday night to provide up to $350,000 in moral obligation.
However, Pulaski Town Council voted 5-1 Tuesday night to hold off on making a commitment until a work session to be held later this month. The vote was on a motion to have town staff develop a draft resolution of moral obligation to cover one-seventh of the amount for consideration at a later work session.
Several council members said they would like to think about the request and see what action other jurisdictions take.
Councilman Joel Burchett Jr., on the other hand, cast the dissenting vote saying the town already was obligating 30 percent of the loan by virtue of the fact town citizens are also county citizens. If town council also approves a moral obligation, he said, town citizens would be “paying twice.”
Pulaski Economic Development Director John White suggested the town consider obligating one-seventh ($184,450) of the other half of the loan even though the county requested a $325,000 obligation.
White said the Center is being considered as a site to start businesses for the town’s proposed Nanotechnology Park. Without town support, he said he is afraid the town will lose participation in the Center.
White said the Center is facing the same difficulties many small businesses are facing in the present economy.
Councilman Robert Bopp asked White if the one-seventh obligation would only work if the remaining six localities agree to “sign on” to the obligation.
White said that is correct. If some jurisdictions refuse, he noted, the participating jurisdictions would need to increase their obligations. He said town council would need to specify a limit to its obligation if it chooses to participate.
Pulaski Finance Director Sherry Boyd assured Mayor Jeff Worrell participation would not affect the town’s financial rating.
Councilman Dave Clark said he would feel more comfortable backing one-seventh of the obligation than $325,000.
White pointed out that the refinancing would allow the Center to remain open “without any cash contributions” from the localities.
Council needs to act on the request by May 25, White said.
Burchett expressed concern that none of the businesses that have graduated from the center have located within the Town of Pulaski.
However, White said that doesn’t mean the Center hasn’t been a benefit to the town. He recounted some of the “success stories” that came out of the Center.
Worrell pointed out that the Center has an 80 percent success rate, which he noted is pretty good for small businesses.
Burchett said he has seen “moral obligations” too often turn into “financial obligations.” He suggested maybe the center’s usefulness has “come and gone.”
Bopp said he thinks the Center has provided “great benefits to the area as a whole,” but a possible failure needs to be considered in making a decision.
Worrell said each jurisdiction is partly to blame for the Center’s financial situation in that when a new business is opening “we all want it on our Main Street when it probably needs to be there to start with.”
In a letter to the town from Pulaski County Administrator Peter Huber, Huber indicates that the Development Corporation is in a “difficult situation” because graduating businesses and the current economy has left the Competitiveness Center with a 57 percent occupancy rate.
“As a result of (the reduced occupancy) and the interest on our current debt, the Corporation will not be able to remain solvent past June 30, 2009 when a $20,000 interest payment becomes due,” Huber states. He points out that the Corporation currently has a cash balance of $254.39 and owes $41,248.45 to a reserve account being used “to pay utility bills and other critical expenses.”
Huber said the Corporation’s Board of Directors “believes that the continued operation of the Center is critical to rebuilding the economy of the New River Valley and has been working on resolving the financial difficulties of the Center for some time.”
Huber points out in the letter that the Center has been “operating without local government support or financial involvement for the past 10 years.” He says the Center’s services are “likely to become more critical as residents affected by recent layoffs begin to consider use of their talents in making a living by starting a small business.”
The shared moral obligation would allow the Competitiveness Center to reduce debt service costs by $30,000 per year, according to Huber’s letter. In addition to the moral obligation, the Corporation is asking the localities to also provide “in-kind operational support” such as mowing, accounting, management services and light maintenance for the Center.
Any jurisdiction participating in the moral obligation also will have a “proportionate say in the management and operation of the facility, an equity position in the Center and potential prospects for revenue generated by the Center as occupancy increases,” Huber’s letter states.