According to a recent audit, a local grant program to stimulate corporate expansion in Virginia Beach is plagued with gaps.
For years, the Virginia Beach Development Authority has given businesses hundreds of millions of dollars to entice them to come to Virginia Beach – or to keep them here. The incentives effectively assist businesses in reimbursing them for capital investment and employment development in the city.
However, City Auditor Lyndon Remias warned authority members at a meeting Tuesday that the processes used to determine that a company has met the criteria are not up to grade.
“As a city, that raises the risk,” Remias added. “It’s possible that we’ll make the grant award but not receive the financial gain.”
Remias also claimed that records from recent years are incomplete, claiming that certain programs had been fully funded while others had monies available.
“We don’t know the true number of pledges,” Remias remarked at the meeting. “We may have a rough concept, but we’re not sure what the perfect balance is.”
Taylor Adams, the city’s director of economic development, told the authority members that some of the issues arise from staff turnover. His team is in charge of coordinating the grant program. Since February, the department has been without an accountant, although one is expected to be hired next month.
Nonetheless, Adams claimed he was unaware that unallocated monies for awards dating back to 2014 remained on the books.
“It took me by surprise,” Adams remarked.
The mechanism for verifying the grant recipient’s performance was also found to be poor during the audit.
This isn’t the first time the Economic Development Incentive Program has been called into question. Bcause, a bitcoin mining facility on Greenwich Road, received the majority of a $500,000 grant from the Development Authority in 2018 for its growth efforts. Bcause filed for bankruptcy a year later, and a judge ordered that its assets be liquidated.
According to Remias, the city is attempting to recoup the funds.
He believes that requiring more documentation from firms, such as payroll records and paid bills, will provide greater proof that they are satisfying the award conditions. Companies now provide spreadsheets outlining employee positions and wages, and Remias believes that “some of those could be problematic.”
The Virginia Beach Development Authority awarded Apex Systems in Town Center a $350,000 grant last year with the expectation that the company would create 147 full-time equivalent jobs in Virginia Beach. However, Remias said it’s unclear whether the staffing firm’s positions were actually produced in Virginia Beach.
Seven companies received grant money for job positions that were filled for less than one year, which did not match the grant standards, according to the audit.
The Development Authority’s head, Lisa Murphy, believes the rules should be tightened.
She stated, “I believe it is a good time to rethink the policy.”