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Story Archives: Bad bet on the Ouachita?
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Bad bet on the Ouachita?
 Last summer when V-Vehicle Co. announced its plans to establish an automobile manufacturing operation in Ouachita Parish, the news was celebrated as if a car company was poised to locate in northeastern Louisiana where it would create a few thousand jobs en route to revitalizing one of the most impoverished regions in the country.
Wait, that's exactly what appeared to have occurred in June 2009 when it was confirmed a suitor had surfaced to take over the defunct Guide plant off Interstate 20 in eastern Ouachita. Flash forward eight months, and it's not out of the question to ponder whether V-Vehicle will become a reality or join a long list of wannabe car companies that harbored a fleeting thought of successfully taking on Ford and GM. It's a long-shot at best.
The brainchild of a man by the name of Frank Varasano, V-Vehicle has been billed as an automobile for the future. It's supposed to be a small, fuel-efficient car. It will sell for about $10,000. It will run on gasoline. No frills. No luxuries.
Certainly a car most Americans could afford to buy and operate. One would think the environmental movement would embrace it in light of V-Vehicle's promise to knock down about 40 miles per gallon. One would think.
Supposedly V-Vehicle has hired a company to build a prototype of its product. Supposedly that's taking place in California.
Fuel efficiency and cost aside, V-Vehicle said last year that it would hire 1,400 people to work at its plant in Ouachita if and/or when it becomes fully operational in 2011. Another 1,800 jobs would be created indirectly, said V-Vehicle.
In convincing V-Vehicle to choose the former Guide plant in which to locate its manufacturing concern, the state of Louisiana pledged some $130 million in incentives toward the project. The $130 million is a figure a state economic development official passed along to yours truly some eight months ago. That figure supposedly includes the state's payments toward expanding and rehabbing the former Guide plant as well as the state's outlay in preparing and/or training a workforce to work for V-Vehicle. Other goodies for V-Vehicle are included in the $130 million package, too.
Yet, the $130 million wasn't satisfactory, prompting a plea from the state for Ouachita Parish officials to get involved. They did with a $15 million incentives package courtesy of the cities of Monroe and West Monroe, Ouachita Parish Police Jury, Ouachita Economic Development Land Corp. and the Interstate 20 Economic Development District.
Since the cities and the Ouachita Parish Police Jury didn't have their share (about $11.5 million) of the $15 million incentives package lying around, Ouachita Parish voters were called upon to approve a property tax to pay the $11.5 million debt local governments would incur for the V-Vehicle project, assuming V-Vehicle became a reality. Some 20 percent of the registered voters in Ouachita went to the polls in October 2009 where they unimpressively approved a 1.8-mill property tax that's supposed to be levied for no longer than 15 years.
Along the way, V-Vehicle applied for a roughly $320 million loan from the U.S. Department of Energy, which obviously would underwrite V-Vehicle's foray into the automobile building business. The loan would come courtesy of the Department of Energy's Advanced Technology Vehicles Manufacturing program. The ATVM program originated on President George W. Bush's watch.
Apparently, the ATVM program is intended to make available government financing for manufacturing projects that desire to produce fuel efficient automobiles. Let's call them "green cars."
When state and local officials entered into an agreement with V-Vehicle to bring the company to Louisiana, stipulations were put in place that called for V-Vehicle to meet certain requirements, or benchmarks, to access incentives offered by state and local governments, including OEDC Land Corp. and the I-20 Economic Development District. One of those stipulations, or benchmarks, required V-Vehicle to have in place some $350 million in capital by March 1. According to V-Vehicle, it has raised slightly less than $100 million in private investments, meaning the loan from the Department of Energy is a must for V-Vehicle to meet the $350 million threshold by March 1.
Supposedly, if V-Vehicle doesn't have $350 million in capital on hand by March 1, the bulk of the incentives offered by the state and 100 percent of the $15 million in incentives made available locally would disappear. At least that's what the cooperative endeavor agreement signed by V-Vehicle and the state and local governments says.
Several weeks ago, the Ouachita Parish Police Jury discussed a letter it received from the Department of Energy concerning V-Vehicle's application for its $320 million loan. Discussion of the letter surfaced at a police jury meeting. The letter said an environmental assessment study involving V-Vehicle's loan application was under way.
A follow-up inquiry with the Department of Energy revealed that an environmental assessment study takes anywhere from six months to nine months to complete. No ifs, ands or buts, though it should be noted that V-Vehicle and the secretary of Louisiana Economic Development Corp., Stephen Moret, dismissed the Energy Department's time frame.
It is within reason to expect the Department of Energy to make an announcement about V-Vehicle's loan application prior to or shortly after Monday, March 1. It also is within reason to expect the Department of Energy to either outright deny V-Vehicle's loan request or approve it based upon V-Vehicle meeting certain requirements, or benchmarks, in the not-too-distant future.
Regardless of what the Department of Energy decides, state and local governments, namely the Ouachita Parish Police Jury, will face some pretty tough decisions.
Will the state grant an extension on its incentives package for V-Vehicle if the Department of Energy delivers a muddied message concerning V-Vehicle's loan? In other words, will the state leave its incentives package on the table if V-Vehicle doesn't have $350 million in capital raised by March 1?
Will the Ouachita Parish Police Jury and other local officials go back on their word and work toward granting V-Vehicle an extension on the $15 million in local incentives if V-Vehicle doesn't come up with the $350 million by Monday? Remember, local officials, including Ouachita Parish Police Jury President Shane Smiley, Monroe Mayor Jamie Mayo and West Monroe Mayor Dave Norris, are on record having said the March 1 deadline was firm as far as they were concerned. In other words, the property tax Ouachita Parish property owners are paying for the V-Vehicle incentives package would cease and desist and property taxes collected for the incentives package would be returned to property owners if the March 1 deadline isn't met in proper fashion.
While much has been said and published about V-Vehicle, it would appear V-Vehicle and the people involved with the company are legitimate. After all, V-Vehicle has raised in the neighborhood of $100 million for its venture, including investments from some notable investors.
Work embraced by state and local governments, including state and local officials, should be recognized as honest efforts to foster an environment in Ouachita Parish to bring much-needed jobs to the region. That much is more than apparent.
However, it's a bit discerning when taxpayers are called upon to put up some $465 million for a privately held company to take a stab at the free-market economy, especially when the company that's asking for taxpayer support has less than $100 million in the deal. I suppose I wouldn't be as nervous about it if those figures were reversed.
Maybe.
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