MZM Athena Closing

I haven't written much about MZM (Athena) here in Martinsville. Not that it has not been a good story, it's just that I have really not had anything much original to bring to the table on this subject. Your best source for the back story on all of this is my friend Bill Wyatt at Martinsville Daily. Bill has had an average of an article a week on the subject for over a year now.

Wednesday evening I received a tip that the Martinsville Athena (nee MZM) employees had received their pink slips. My source said that a story would be printed in the following morning's edition of the Martinsville Bulletin.

I had verified the story by midnight, but could get no more information. Yesterday as I was writing this there arose a electro-mechanical crisis at the plant that required my full attention, therefore I am late with the "news" as usual. (Hey, I don't claim to be a reporter, or even a journalist, if you come here for news you will in most cases be disappointed.)

As for my thoughts on the matter, they run in several directions at once. Primary of these, of course I am not happy to see another employer in Henry County wither.

Much has been posted regarding the decision by the City of Martinsville to sign the performance agreement for $500,000 in state incentives. Charlottesville blogger Waldo Jaquith is currently claiming that the closure of Athena will now cost the City that $500,000. Waldo knows better.

(from waldo.jaquith.org 07/27/06)
Second, Martinsville itself will take a significant, direct financial hit. Rep. Goode personally brokered the deal that got MZM into town, putting Martinsville on the hook for the success or failure of MZM by making the city responsible for repaying $500,000 in state grants if the company failed to perform. The arrangement is highly-unusual--perhaps one-of-a-kind--making Goode's insistence on it bizarre, at best. It's nice that Goode gave to charity the $90k that he took in illegal campaign contributions from MZM employees. I wonder if he's prepared to give Martinsville the hundreds of thousands of dollars that they'll lose because of his bad judgement?

If Waldo had read his own link he would see that any forfeiture would be prorated, based upon the actual performance over time, greatly reducing any liability to the City. He would also see that this sentence "The arrangement is highly-unusual--perhaps one-of-a-kind--making Goode's insistence on it bizarre, at best." is disingenuous at best. His own links show that, while it was unusual, there have been precedents. Also, while the arrangement was suggested by Goode, there is no evidence it was insisted upon by him. In fact, his links show just the opposite, there was an exuberant willingness on the part of City officials to participate in this arrangement including a quote from City Manager (at the time) Earl Reynolds,

(from the Roanoke Times, 12/11/05)
The agreement called for any payback to be proportional to the company's performance. For example, if only half of the pledged capital investments were made, the city would be responsible for paying back 50 percent of the allocation.

Usually, it's the company that makes such a commitment.

"The city understands that this is outside the normal procedures," then-City Manager Earl Reynolds wrote in a letter to the state seeking the funds.

Over ten months ago, on September 9, 2005 the City's possible liability under such a "worst case" scenario was estimated at $133,000 by City Finance Director Wade Bartlett.

(from the Martinsville Bulletin, 09/09/05)
With about 18 months left to fulfill the agreement, Bartlett said "we'll just have to wait and see," as with any other company.

However, Bartlett said he believes the company has met the capital investment requirement because the building "alone is valued at $3.2 million. That does not include any equipment" which would likely push the amount of the capital investment to $4 million.

Currently, Bartlett said he is not certain of the number of jobs created, but thinks it was 35 to 50.

Using the low end of 35 to base his calculations, Bartlett said that was 46.6 percent or nearly half the number of jobs specified in the performance agreement. Based on that, the city would be asked to repay about $133,000 of the state funds if the performance agreement ended now.

Bartlett goes on to state that the City has to date received roughly $30,000 in property tax revenue from the business, add to that income taxes and other tax revenue from employees who have moved here and purchased homes, cars, and other goods and the $133,000 loss shrinks dramatically. That assumes the Governor's Opportunity Fund and the Virginia Tobacco Indemnification and Community Revitalization Commission actually demand forfeiture, a conclusion that would frankly be hard to imagine.

I am not sure what will become of the MZM/Athena Building, but if it reverts back to City ownership, the City will then have a $4 million plus asset that can still be used to attract other firms.

It's hard for me to picture Virgil Goode as the villain in all of this as he has been portrayed elsewhere. Waldo and Weed would have you believe Virgil is either hopelessly corrupt, or terminally naive. This is one of the very few issues I've ever seen in which the liberal Democratic viewpoint is so starkly black or white. Typically they insist on seeing shades of grey in every issue, but not this one. Virgil did all that he could to bring jobs to Henry County. Jobs beget jobs. Jobs paying twice the average annual salary beget even more jobs, some of which will also pay twice the average annual salary. The ball rolls, hopefully picking up momentum as it goes.

Unfortunately, it did not work that way this time. There is and has been too much bad publicity generated by Cunningham, Wade, and Berglund surrounding the Martinsville facility for the Department of Defense to continue with the relationship. Martinsville loses an employer, the DOD loses what by all accounts was a high quality supplier of services, and Virgil loses a certain amount of credibility, but only amongst those who truly want to see the worst in him.