Sunday, February 04, 2007

The Truth Of The MZM Martinsville Deal

Once again Waldo is off in his Virgil Goode Bizarroworld. In this, his most recent foray into the unreal, he would have his readers believe that Virgil Goode somehow manipulated the MZM/Martinsville deal that brought the defense contractor to the Clearview Business Park.

In an article replete with links to sources, most of which are earlier posts of his own, he puts forth as his own the completely ridiculous idea that Virgil is morally obligated to repay the (roughly) $145,000 that Martinsville is liable for. If this truly is Waldo's idea, then he should be aware that fellow Charlottesville liberal Al Weed plagiarized it way back in August of last year. You remember, this was also about the time Al Weed was trying to set up a contest to see who could write the nastiest letter to the editor with Virgil Goode as the subject and lunch with Barnie Day as the prize. But I digress.

Go read Waldo's latest slam on Virgil, I'll wait here until you return.

Did you find that enlightening? I really didn't think you would. As I'm sure you noticed, Waldo's last sentence once again drives his point that Virgil Goode was solely responsible for the MZM/Martinsville decision. Nothing could be further from the truth.

Let me tell you the truth of the matter. A truth that is easily discovered if one only looks for it, rather than merely wishing for future Al Weed campaign slogans, lies, and half-truths.

In late October of 2003 rumors began circulating throughout Henry County about a possible new employer, some said it would be a defense contractor. On October 30th Ginny Wray of the Martinsville Bulletin wrote a story confirming the rumors and naming MZM as the new employer, citing Virgil Goode as her source.

At this time MZM already had a presence in the 5th District so Virgil was familiar with the firm. He also was familiar with a shell building that Martinsville had to offer in the Clearview Business Park. According to Ms. Wray, Virgil urged MZM to take a look at Martinsville and their facility.

The following day a story by Mickey Powell of the Bulletin adds a few more details, with some quotes from Mitchell Wade, President and CEO of MZM at the time. Powell found it difficult to get much more information, such as the selling price of the shell building from either Wade or Tom Harned, Martinsville's Economic Development Director.

All we knew at that time was that the City had sold its $945,000 shell building to MZM for an undisclosed sum, and that Virgil Goode had introduced the two parties.

The following Tuesday, at an announcement ceremony attended by then Governor Mark Warner, it was disclosed that the City of Martinsville had received $1.027 million for the facility. $400,000 from MZM, $500,000 split equally between The Governor's Opportunity Fund and the Virginia Tobacco Indemnification and Community Revitalization Commission, and $127,000 in private funds from the Chamber's Partnership for Economic Growth, a partnership affiliated with the Martinsville-Henry County Chamber of Commerce.

According to Mickey Powell of the Martinsville Bulletin;
Information from the Center for Responsive Politics shows that MZM is Goode's top financial contributor, donating more than $37,000 to him during the current election cycle. That money was given either through a political action committee, people associated with the firm or their family members, a Web site indicates.

Goode admitted those contributions. He said, though, that he would have given information about the shell building to any firm, regardless of whether it financially backed him.

He received MZM's money "before I knew they were interested" in the building, he said.
This clearly refutes Waldo's insinuation of any "quid pro quo".

Now, let's look at what we know of the background negotiation that went on before this deal was announced.

  • Martinsville had a shell building that had been on the
    market for 3 years with no takers.

  • Martinsville owed $940,000 on this shell building and
    desperately needed both a buyer and the employment that a buyer would
    bring to the area.

  • A firm with a presence in Virgil's 5th District was
    searching for a facility in order to expand part of its business.

  • Virgil introduced the two parties and negotiation began
    for the purchase of the building. MZM offered $400,000 for the
    building, knowing that it would require another several million dollars
    in renovations to make the building suitable for its purposes.

  • Tom Harned, Martinsville's Economic Development Director
    at that time asked Virgil to request a better offer from MZM.

  • That request for a better offer was turned down by MZM.

  • Tom Harned then asked Wade to apply for state incentives
    to make up the difference.

  • Virgil Goode was not a party to these negotiations,
    though he was copied on most, if not all, of the correspondence between
    Harned and Wade.

  • At a stalemate point in the negotiations, Virgil
    suggested that Martinsville apply for two $250,000 grants from The
    Governor’s Opportunity Fund and the Tobacco Indemnification
    and Community Revitalization Commission to help retire the debt on the

  • At that point MZM refused to cooperate, insisting that it
    wanted a simple cash real estate deal, leaving Martinsville with the
    option of dropping negotiations or signing the performance agreement
    obligating it to repay the forgivable loans if the company did not meet
    its projections.

  • At the time, John Sternlicht, general counsel to the
    Virginia Economic Development Partnership, the state agency that
    drafted the performance agreement, expressed concern about the unusual
    nature of the City's request.

  • Earl Reynolds, City Manager at the time responded to
    Sternlicht, “The city understands that this is outside the
    normal procedures,” indicating the City's eagerness to
    complete the deal.

  • Sternlicht's reply, from a Dec. 11, 2005 story by
    Lawrence Hammock in the Roanoke Times, “The company is
    usually on the hook. But in this instance, based on
    [Martinsville’s] urgent request, this is what we did,"
    further indicates that the deal was pushed through to completion by
    Martinsville officials.

  • The final disposition is yet to be determined, but City
    Finance Director Wade Bartlett said in today's Martinsville Bulletin
    that any funds repaid will come from the City's fund balance, currently
    at $9.5million. The Bulletin article quotes Bartlett; "No matter how
    much of the $500,000 the city ends up paying, it will not impact our
    ability to provide services in the future to residents or bankrupt the

In summary, one can blame Earl Reynolds, Tom Harned, Gene Teague (then Mayor), Terry Roop (then Vice Mayor), and the rest of City Council for making the final decision to request the grants and taking the highly unusual step of signing the performance agreement. All Virgil Goode did was bring the two parties together.

Let's do a little accounting exercise, shall we?

Cost of shell building to Martinsville$945,000
From MZM$400,000
From Governor's Opportunity Fund$250,000
From Tobacco Commission$250,000
From C-PEG (Local Chamber Econ. Dev. group)$127,000
Total Sales Price$1,027,000
Profit (sales
price, less actual cost of building)
Balance of tax and other revenues gained from MZM/Athena$161,430
Profit Sub-total$243,430
Refund of grants due to MZM non-performance (est) ($145,000)
Martinsville Final Balance$98,430

The above balance sheet does not include revenues from utilities such as water, electric, and sewer. Also not included are local income and sales tax revenues from MZM/Athena employees. Obviously a $100,000 return on a $1 million dollar investment is not what one would hope for, especially since it ended after only a 4 year term, but it's not the catastrophic loss that Waldo would have you believe it is..

Who will actually repay those grant funds Waldo? Obviously MZM and Athena already have repaid them.

I have just been informed that the trackback I left at Waldo's earlier today had mysteriously disappeared. So I just left another. It will be interesting to see if this one is deleted as well, I took a screenshot of it this time, just in case Mr. Jaquith decides on another attempt to hide in the dark.

1 comment:

Jerry Fuhrman said...

Wonderful analysis. Waldo leaves himself open to this kind of spanking too often with his lazy attempts at scandalizing.

Great job.