Ex-West Virginia Gov. Says 2002 Grant Program Paid Off

Tue March 09, 2010 - Northeast Edition
Mike Ruben -The State Journal



CHARLESTON, W.Va. (AP) Bob Wise described it as a model program that pumped millions of dollars into the West Virginia economy during a recession when federal stimulus money was not available.

The former governor is referring to a controversial initiative in 2002 that used $225 million in excess video lottery funds to prod development of 47 projects in 27 counties. Projects ranged from a new baseball park in Charleston to shopping hubs in suburban Wheeling and downtown Huntington, parking garages, industrial parks and a wastewater treatment plant.

The program was not without discord. Some objectors claimed it placed state government in the inappropriate position of choosing winners in the business community. Others alleged favoritism played a role in the selection process, noting projects awarded to the home counties of committee members. The program’s legality was challenged through multiple lawsuits filed by city governments, county commissions, organized labor and anti-gambling organizations.

“Yes, with lessons learned, I’d do it again,” said Wise, who now serves as the president of the Washington-based Alliance for Excellent Education. “It was one of the most positive returns on investment for the state.

“It was worth it for a couple of reasons,” he continued. “It got several projects going that would not have been possible without it; that was critical. And it took place during the recession of 2002. There was no stimulus money then. There was nobody coming forward to keep the economy moving.”

Wise appointed Cabinet Secretary Brian Kastick and Development Office Executive Director David Satterfield to a nine-member Economic Development Grant Committee to review project proposals. The House and Senate each also appointed three members. Criteria included the ability for projects to leverage other sources of funding, create or retain jobs and promote economic development in the region. After the projects were selected, the state Economic Development Authority handled the financial arrangements.

“The projects had to pass the marketplace tests with local funding and a private share,” Wise added. “They had to have some skin in the game. We had to be able to sell the bonds. We used as solid criteria as possible, and we tried to make it as rigorously tested as we could.”

Ensuing court action resulted in several delays before the EDA issued $249.8 million in lottery revenue bonds in January 2004. Construction costs escalated in the meantime.

“Litigation is important, but it stretched out the time that it took to get the projects going, and the costs went up,” said Wise. “Now the precedent is there.”

Ironically, the project that ignited the debate, a 10-block Victorian Outlet Center in downtown Wheeling, never materialized. Wheeling Mayor Andy McKenzie, who was a state senator when the concept was introduced, described it as “a great idea that didn’t happen.”

The size of the project ($164 million, 100 parcels of land) and the downturn of the economy were roadblocks, he said. Promoters of the Wheeling project originally had requested $80 million of what was projected to be $200 million in available funds.

Still, a Northern Panhandle project received the largest amount of funding. The Ohio County Commission received a $35 million grant to develop what was known as the Fort Henry Business and Industrial Center. The site of Cabella’s retail and distribution center has since evolved into The Highlands, a large retail, dining and entertainment development.

McKenzie said The Highlands is generating a solid return on investment with more than 2,000 jobs and tens of millions in annual property and sales tax revenue. He also noted that the Panhandle location is justified by the percentage of lottery proceeds that were generated by the Wheeling Island and Mountaineer racetracks.

“I have no problem using tax dollars if the taxpayers see real benefit,” he said.

McKenzie said the development is reversing a 30-year trend of Mountain State residents shopping out of state in nearby St. Clairsville, Ohio, or Washington, Pa. Cabella’s attracts overnight visitors from multiple states, he added.

“This is the third largest city in West Virginia, and we had very little retail left from 1970 until 2004,” he said. “Because of The Highlands, we now have hundreds of millions of dollars being spent here each year. It’s been a huge windfall for our community.”

Each of the grant projects is tracked by the EDA staff, according to Executive Director David A. Warner. The most recent distribution was in January — $826,000 toward a $13.9 million public theater and marina project in Morgantown.

With the exception of a $2 million balance toward a wastewater treatment plant project in Moorefield, all $225 million has been distributed. That $5 million project may be progressing to the bid phase this year.

EDA staff collected job and wage data from the various project administrators. In many instances, however, the statistics were not forwarded once the projects were completed. Seven-year highs for construction jobs (1,509), permanent full-time jobs (1,391) and permanent part-time jobs (739) were listed in 2005-06, with the 38 of the 47 projects reporting. Combined wages that year were listed at $54.1 million.

Financial reports provided by Warner reflect 10 of the grant recipients returned a combined $3.5 million in excess revenue. He said the Legislature designated $2.4 million of that last year, leaving a $1.1 million balance in the fund.