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Story Archives: UPDATED: V-Vehicle loan denied


UPDATED: V-Vehicle loan denied
by Scott Rogers - posted Wednesday, March 24th, 2010 @ 4:09 pmE-mail Story E-mail Story | Print Story Print Story 
V-Vehicle Co. was denied a more than $320 million loan from the U.S. Department of Energy, which the company sought to fund efforts to establish an automobile manufacturing operation in Ouachita Parish.

The company announced the fate of its loan application with the Department of Energy on Wednesday.

V-Vehicle applied for a $321.1 million loan from the Department of Energy's Advanced Technology Vehicles Manufacturing program. It was unclear Wednesday afternoon whether V-Vehicle would proceed with its efforts to establish an automobile manufacturing operation here in light of the Department of Energy's decision.

"We were extremely surprised and disappointed by this decision," V-Vehicle founder and CEO Frank Varasano said in a prepared statement.

"Our year-long discussions with the Department of Energy had left us confident and optimistic that the loan applications would be approved," Varasano said. "We still believe that VVC is the ideal applicant for the ATVMLP loans."

Varasano reaffirmed the company's commitment to reimburse the state of Louisiana approximately $6.2 million of taxpayer funds by April 1, as required by a cooperative endeavor agreement between the state and V-Vehicle. The repayment was required because V-Vehicle did not meet a March 1 deadline to have some $350 million in capital on hand. V-Vehicle was required to have the money on hand to access millions of dollars in incentives offered by the state and Ouachita Parish entities.

"We want to thank the people of Louisiana and, in particular, the professionals at the Louisiana Economic Development agency (LED)," Varasano said. "LED was a valuable partner at every stage throughout our negotiations with the DOE."

"VVC plans to meet with its board to assess the situation, evaluate funding and strategic alternatives and develop its plan for moving forward," Varasano added.

Gov. Bobby Jindal and Stephen Moret, secretary of Louisiana Economic Development Corp., issued statements to the media expressing their disappoint with the Department of Energy's decision.

"This is certainly disappointing and surprising news," Jindal said. "The state's work alongside VVC with the Department of Energy since last summer gave no indication that the administration would deny VVC's support request to move the project forward."

"We are working closely with VVC to identify alternative options for completing the project as planned in Monroe," Jindal continued. "We will explore every possible avenue to get this project back on track and create new jobs for our people."

Moret said the Department of Energy's decision was not anticipated.

"U.S. DOE's denial of supporting this loan is very unexpected," Moret said. "In fact, for several weeks LED has been directly involved with DOE negotiations on the detailed terms of the potential loan award, and the process appeared to be tracking toward a successful conclusion."

"As we have previously shared, the taxpayer dollars provided as incentives for this project are not at risk, as the company is required and has committed to fully reimburse the state for the approximately $6.2 million it already has received before the April 1 deadline in its cooperative endeavor agreement with the state," Moret continued. "VVC will meet with their board to begin to map out their next steps and we will work right along side them to provide whatever support we can."

Ouachita Parish Police Jury President Shane Smiley was shocked to learn the news of V-Vehicle not landing a loan from the Department of Energy.

"Of course, I am like everyone else ... I'm disappointed," Smiley said. "All of our conversations up to this point had been very positive."

Smiley was unaware if V-Vehicle had a "plan B" to pursue in establishing an automobile manufacturing operation here.

Congressman Rodney Alexander was more pointed in his remarks in expressing disappointed over the Department of Energy's decision.

"We are all disappointed and frustrated," said Alexander, R-Quitman.

"There are so many people who have worked so hard on this project—from the local level to the state to up here in Washington," Alexander said. We don't know what happened. We don't know why the decision was made. I don't know why the loan wasn't made.

"It doesn't make any sense," Alexander continued. "It doesn't make any sense when you have so many investors involved who put up their money. The state put up money. Local taxpayers put up money, and all the company wanted was a loan.

"It doesn't make any sense in light of how much money has been spent all over the country through the stimulus package trying to create jobs. That's money that doesn't have to be repaid. V-Vehicle simply wanted a loan, which it would have repaid."

"We don't know why the loan wasn't made, but we will find out why it wasn't," Alexander added.

Last year, the state pledged some $130 million in incentives to convince V-Vehicle to choose Louisiana as its home to manufacture fuel-efficient automobiles. V-Vehicle picked the former Guide head light plant off Interstate 20 in eastern Ouachita Parish.

Per a cooperative endeavor agreement V-Vehicle signed with state and local governments in 2009, V-Vehicle was required to have $350 million on hand by March 1 to access the bulk of state incentives as well as access a $15 million incentives package offered by Ouachita Parish governing bodies.

The local incentives package was pledged by the cities of Monroe and West Monroe and the police jury. Also, Ouachita Economic Development Land Corp. and the I-20 Economic Development District participated.

The cities and the police jury asked parish voters to approve a 1.8-mill property tax to generate revenues to pay off bonded indebtedness the cities and the police jury would incur to pay its share, or $11.5 million, of the locals incentives package. OEDC Land Corp. and the I-20 Economic Development District were responsible for the remaining balance of the local incentives package.

In October 2009, parish voters approved the 1.8-mill property tax proposition.

In March, the police jury approved a resolution to issue $11.5 million in bonded indebtedness to meet local government's financial obligation to the V-Vehicle project.

While taxes have been collected locally on the 1.8-mill property tax approved by Ouachita Parish voters in 2009, that money remains in local hands.

The property tax measure approved by parish voters last fall stated that the money collected from the property tax could be used solely for the V-Vehicle project.

A resolution approved by the police jury last year said if the V-Vehicle project failed to pan out, tax revenues generated by the 1.8-mill property tax would be returned to parish property owners.

Jay Mitchell, attorney for the police jury, said options would be presented to the police jury on how to refund monies to taxpayers who paid the 1.8-mill property tax. The police jury's next meeting is scheduled for April 5.

"The jury protected the interest of the citizens of the parish, and none of the tax dollars collected have left the parish," Mitchell said. "We started in March going over the process of how we would refund the taxes if V-Vehicle was unsuccessful in acquiring the DOE loan."

"This won't be a small task," Mitchell said. "There's a lot of work involved."

Some 65,000 parcels of property in Ouachita Parish were taxed as part of the 1.8-mill property tax measure, Mitchell said. Of that amount, 46,000 property owners in the parish will receive reimbursement on the taxes already paid to the parish.

"It will take some time to do this," Mitchell explained. "We've been working on the logistics to make the refund in case it was needed. We're going to do it in the most cost-effective and efficient way we can. We're talking about nearly 50,000 checks, and we're trying to decide on the best way to do it so we can present it to the jury on April 5."

"This comes as quite a surprise to us locally," Mitchell continued. "The information we've gotten from the state and V-Vehicle had been very positive as recently as the end of last week."

Smiley confirmed the police jury would discuss refunding taxpayer monies to parish property owners at its April 5 meeting.

Smiley also said he was proud of the community's support of the V-Vehicle project and hopes it will show businesses considering locating in Ouachita Parish that the parish is serious about economic growth.

"The people we represent stepped up to the plate, and I am very proud of where I live and our people," Smiley said. "We want to attract business here and grow our economy. That's what we were trying to do and that's what we will continue to do. I appreciate the folks who have been supportive and wanted this company here."

V-Vehicle had plans to create 1,400 new jobs and roughly 1,800 indirect jobs for a total of 3,200 new jobs in northeastern Louisiana.
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