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HomeMy WebLinkAbout01-06-26 EDA MinutesEconomic Development Authority Meeting Minutes January 6, 2026 Chairwoman, Ms. Cox called the meeting to order at 10:01 a.m. and asked for a roll call. Marlin Reeves- Absent Collette Hash- Absent Sabrina Cox- Aye Jefferey Worrell- Absent Peter Huber- Aye Christopher Conner- Aye Lisa Webb- Aye Adoption of September 2, 2025 Minutes The motion was made by Ms. Webb and seconded by Mr. Huber to adopt the minutes as written. The motion passed unanimously. Financials Review Manager Day explained that board members had already received the financial information and invited questions. He then provided a detailed explanation of key revenue sources, particularly two major loan-based projects inherited from prior management that have proven successful for the community. The first project discussed was the Main Street project involving the Purple Cactus, which was funded through a “MUM’s grant.” This grant represented an early implementation of the Economic Development Authority (EDA) structure. The funds were lent as a low-interest loan, with consistent repayment now generating revenue. Importantly, these repayments do not need to be returned to the state or federal government, allowing the EDA to reuse the funds for future programs. A similar structure was described for another project funded through ARPA-related opportunities, also issued as low-interest loans at rates that were very favorable compared to current market conditions. Both projects are described as rapidly growing revenue sources, free from bonded debt and unencumbered by restrictions. Manager Day emphasized that these funds are unrestricted and not allocated to any specific local government task, meaning they can be used at the discretion of the EDA and the town council. The total original loan amount across projects was described as roughly one million dollars, with approximately $90,000 currently available, plus continuing interest income. These projects were highlighted as strong contributors to economic stimulation and positive return on investment for the community. Additional examples of economic development efforts were mentioned, including the brewery project supported by about one million dollars in grant funding and recent redevelopment projects utilizing historic tax credits. While acknowledging that government contracts can sometimes deter private participation, Manager Day stressed that these projects are under contract with clear reporting and performance requirements. He reiterated that the funds belong to the EDA, though all EDA actions require town council sanction. He concluded by inviting questions and encouraging the board to consider ideas for reinvesting these unrestricted funds to support entrepreneurs and small businesses. Discussions EDA History Update Manager Day explained that EDAs were created by state legislation to allow localities to make sound economic decisions insulated from political pressures. He clarified the distinction between the daily operations of local government and the role of the EDA as a specialized arm with broader discretion in certain areas. He described how local government procurement rules under Virginia law restrict the ability of elected bodies to directly select vendors or partners, even when there is widespread agreement about what might be best for the community. Competitive bidding and formal procurement processes can exclude otherwise ideal candidates based on technical criteria such as price. In contrast, the EDA, whose members are not elected, have greater flexibility to evaluate proposals based on overall community benefit and due diligence. He corrected himself during the explanation to clarify that the town council cannot exercise this discretion, but the EDA can. Several examples were offered to illustrate how EDA authority can exceed that of traditional local government in economic development contexts. The MUM’s grant was cited again as a key example, noting that the grant was awarded directly to the Town of Pulaski without a competitive process because of its perceived momentum and growth. To properly administer and protect the grant, it had to be implemented through the EDA. Manager Day noted that before this project, the EDA had been largely dormant for several years, but emphasized that dormancy is not inherently negative; it simply reflects whether the authority is needed at a given time. He compared Pulaski’s activity level to that of the county, pointing out that counties often appear more active because they manage larger funding streams and grant opportunities. He expressed a desire to keep the EDA active to preserve its powers for future opportunities and encouraged board members to suggest ideas. He candidly stated that the EDA had effectively been reactivated specifically to approve the Main Street project, but emphasized that many funding entities require EDA involvement, making its continued operation important. He also highlighted the town’s aggressive pursuit of grants, noting that millions of dollars in grant funding are secured annually, often without public awareness. Manager Day then stated his intention to provide reasons and opportunities for the EDA to take on a more active role in daily operations. He referenced successful past use of EDA authority to secure grant opportunities for businesses and reiterated his openness to questions. Grant Opportunity He introduced the topic of grant opportunities and explained that he had prepared handouts based on incentive programs used at a previous employer. He noted that he planned to share information about additional Rural Development (RD) programs, explaining that RD refers to federally subsidized assistance programs that support a wide range of operations in rural areas, which operate not only within the Commonwealth but nationwide. These programs offer a wide range of assistance, including low-interest loans for public safety equipment such as police cruisers and ambulances, as well as grants, entrepreneur programs, and small business loans. Manager Day focused on a specific RD program he had successfully used in the past that requires only a short, informal application of approximately five pages. Under this program, RD can approve up to roughly $50,000 for a locality. However, the funds are not disbursed directly as a lump sum. Instead, RD authorizes the amount, and the EDA is responsible for establishing its own lending guidelines and loaning the money out locally under those rules. Manager Day explained that in previous implementations, he structured the program with two tiers of loans, one at $5,000 and another at $15,000, though the EDA could choose different amounts depending on its risk tolerance. The funds were loaned out with interest as a revolving loan fund. At the end of each year, RD would review the activity. As long as the locality was operating within the program’s parameters, the funds did not have to be repaid to RD. If the funds were not used or loaned out, RD generally did not intervene. The primary requirement was that the locality create and adhere to its own bylaws governing how the loans would be made. An example was given involving an entrepreneur seeking to open a business on Main Street. If the entrepreneur had already secured partial financing from a bank, such as a $20,000 loan but needed an additional $10,000, the EDA could rely on the bank’s involvement as evidence of creditworthiness. Because the EDA cannot run credit checks directly, the bank’s approval served as an informal but meaningful validation of the applicant’s financial reliability. This approach avoided the awkwardness of requiring applicants to submit personal credit reports while still providing a reasonable basis for evaluating risk. The same logic applied whether the entrepreneur sought a $5,000 or a $15,000 loan. Manager Day emphasized that lending always involves risks, particularly the risk that a business may fail and be unable to repay the loan. While RD provides the funds and allows them to be loaned out, it expects the locality to conduct thorough due diligence and act responsibly. If a borrower failed, local officials would not face legal consequences, but RD would closely scrutinize the situation. RD would examine the locality’s decision-making and its ability to repay the funds if necessary. While RD might not take legal action, it would remember the failure and consider it in future dealings, potentially affecting future opportunities. The program has been successfully used by several localities, including Marion and Tazewell, though some cases required legal action to recoup funds when borrowers defaulted. Mr. Huber asked whether the EDA’s current $90,000 balance could be used to repay RD if a loan failed. Manager Day confirmed that it could serve as a stopgap or backup. In that scenario, RD funds would be used for the actual loans, while local funds could cover repayment if necessary. He cautioned, however, against making loans casually just because backup funds exist. The discussion also touched on other protective measures, such as placing liens on property when appropriate. Past county experiences were cited where foreclosed properties were later remarketed successfully, preserving long-term economic impact even after a business failure. It was acknowledged that banks would typically hold a first lien position, limiting the locality’s options. RD, Manager Day noted, expects localities to take appropriate legal steps, similar to a bank, to recover funds when necessary. He stressed that the RD program is not a “by-right” entitlement. The EDA has full discretion to choose which applicants receive loans, based on business plans and perceived viability. He noted that while challenges and disputes can arise, the locality does have the authority to enforce repayment, even if borrowers initially believe otherwise. Manager Day distributed a sample application used in a previous locality. This application supported a locally created tax incentive program involving real estate tax, personal property tax, and BPOL (Business, Professional, and Occupational License) tax relief. The program functions similarly to an Enterprise Zone but without the higher level of state oversight that Enterprise Zones require. He clarified that he would not review the application in detail during the meeting but provided context for how the program works. This incentive program was originally developed by a locality and became the first of its kind sanctioned by the Virginia Department of Housing and Community Development (DHCD). It allows entrepreneurs who purchase, improve, or rent property to receive temporary tax relief on the increased value resulting from improvements. For example, if a property’s base real estate tax was $500 and improvements raised its value to generate $700 in taxes, the $200 increase would be exempt for four years. The locality does not lose existing revenue; it simply delays collecting new revenue. In cases where new construction occurs on vacant land, taxes on the new structure are deferred, though taxes on the land itself continue to be paid. The incentive also applies to BPOL and personal property taxes and is structured as a four-year program. While the program is attractive, safeguards are built in to prevent abuse. After the four-year incentive period, the business must remain in operation for an additional five years. If it fails to do so, the tax benefits must be repaid under aggressive terms. This structure reinforces the idea of providing a “hand up” rather than a “handout.” The program was administered through the EDA and could be modified to fit local priorities, including adjusting incentive duration or job creation requirements. Manager Day described how job thresholds were reduced over time, from five employees to three, and eventually to one, after considering cases where a single individual successfully operated a viable business. He noted that while the four-year incentive period is fixed, program elements can be adjusted to reflect community goals and economic realities, concluding the segment by clarifying that the program ends after four years, followed by the required retention period. The discussion resumed by clarifying that the requirement for a business to remain open an additional five years after the incentive period was not fixed. Although it had been presented earlier as a standard element, Manager Day emphasized that every component of the program is negotiable. The incentive framework was locally created and is not a state or federally sanctioned program through DHCD, meaning it can be fully customized. Board members were encouraged to review and adjust the program so that it fits Pulaski’s specific needs, as the example provided was acknowledged to be the wrong size and shape for the town in its current form. It was noted that only the governing body, the town council, would ultimately need to approve any such program. Manager Day reiterated that growth is essential for a locality’s long-term survival, emphasizing that communities that fail to grow will eventually cease to exist. Manager Day explained that rising costs, fuel, police cruisers, fire trucks, and employee salaries continue to increase while revenues remain static if growth does not occur. In such circumstances, the only options become reallocating funds from other priorities, such as reducing pavement or infrastructure budgets, or raising taxes and fees. In southwest Virginia, inflation continues to rise while economic growth lags, and the two trends do not intersect. Tax incentive programs were framed as having limited downside because they defer revenue that does not yet exist rather than reducing existing revenue. This perspective reinforced the value of incentives as a tool to encourage development without immediate fiscal harm. Mr. Huber suggested reducing the financial shock to businesses when incentive periods end. Rather than eliminating benefits abruptly after four years, the board discussed the idea of a longer program, such as seven years, with full incentives for the first four years, followed by a gradual reduction. This approach would allow businesses to adjust incrementally instead of facing a sudden increase in tax liability. Manager Day responded positively to this idea and praised the collaborative thinking. Manager Day reminded the board that, by charter, the EDA meets once a month, though additional meetings may be scheduled if desired. Any meeting must be properly advertised, with at least three business days’ notice, excluding holidays and weekends. Advertising is done through the town website and social media, newspaper ads, and the town clerk handles compliance. He also explained open meetings requirements, noting that two board members may meet informally without public notice, but three members discussing town business constitute an official meeting requiring advertisement. While it is not illegal for three members to be together socially, discussing EDA business in that setting could lead to public criticism and legal concerns, and members were advised to avoid that situation. Board members were encouraged to thoroughly review and refine the incentive concepts, with the understanding that the process is lengthy. Even with monthly meetings, it could take a year to develop a proposal, coordinate with the administration, assess financial impacts, and present it to the town council. Manager Day noted candidly that even after extensive work, the council could still reject the proposal, characterizing this as a normal aspect of local government. He offered to act as a liaison to introduce the concept to the council, noting that council members had not yet been briefed. However, he emphasized that the council controls tax policy and revenue decisions, and any significant reductions or rebates would raise concerns about maintaining a balanced budget. Manager Day cautioned against proposals that would reduce general fund revenue or involve bond losses, which are not acceptable under current financial conditions. However, he noted that using EDA funds, such as the existing $90,000 balance, to support incentives or grants could be a viable alternative. This distinction highlighted the difference between general fund constraints and EDA flexibility. He also warned that any action taken by the board would be subject to public scrutiny, particularly on social media, where decisions are often criticized regardless of context. He shared anecdotes illustrating how public commentary can be disconnected from the realities of local government operations. Board members were advised to expect criticism and divided votes, even for well-intentioned programs. Mr. Huber asked whether it would be appropriate for the EDA to ask Manager Day to approach the town council about potential interest in such a program before the board invested significant effort. Manager Day agreed, suggesting that he could introduce the concept to the council and determine whether there was interest. If the council was receptive, the board could then proceed with tailoring a proposal specifically for Pulaski. Concerns were raised about the quality of housing in the community, particularly along Main Street and Route 11, where house-flipping activity has been observed. A question was posed about whether residential properties could be included in an incentive program, such as temporarily deferring tax increases for rehabilitated homes until they are sold. Manager Day confirmed that there was no technical barrier to considering residential incentives, aside from the need for board discussion and consensus. Manager Day noted that the town’s primary residential incentive at present is the 177-acre development, which will include approximately 300 workforce housing units. He clarified that this development is not classified as low-income or affordable housing under state definitions. He also mentioned ongoing efforts related to revitalization and demolition of dilapidated homes, stressing that such efforts are far more complex and costly than they may appear. He explained that tearing down homes involves significant legal, financial, and logistical challenges, which is why previous administrations may not have pursued it aggressively. A program is now in place, aided by recent legislation introduced by Delegate Doug Pillion, with examples from Wise County and Dickenson County. He explained that while recent funding and programs have provided a major boost for tearing down unsafe homes and structures, those benefits come at a high cost. Beyond the direct financial cost of writing checks, there is an extensive burden in staff time, documentation, and attorney fees. These administrative and legal requirements are described as “unbelievable” and are cited as the primary reason such programs are not used more frequently. Despite those challenges, the town currently has several successful housing initiatives underway. A structure was demolished a few weeks prior, and the town is planning to build three homes on that property. Additionally, the town currently has a home for sale, demonstrating tangible progress from these efforts. Ms. Webb asked whether the proposed incentive or funding program can be applied to existing businesses or if it must be limited to new ones. Manager Day responded by first cautioning that offering incentives exclusively to new businesses can generate significant backlash from existing business owners, who may feel unfairly excluded and become vocal in their opposition. The discussion emphasized that incentives cannot be structured in a way that unfairly advantages one competitor over another. To remain equitable, any benefit offered to a new business must also be available to existing businesses, provided it is tied to measurable growth such as increased employment or new investment. The key principle is that incentives must be based on increases over current levels, not on existing operations. This approach avoids intentionally reducing the current tax base while still encouraging expansion. Manager Day explained that, in practice, the financial savings from such programs are relatively modest, particularly for entrepreneurial or small businesses. If a business does not own its building and is merely renting, the benefit is even more limited, as property tax savings would accrue primarily to the property owner rather than the business itself. It is emphasized that businesses should not rely on these incentives as a deciding factor for survival or success. The program is intended as a signal of support rather than a lifeline. While it does provide some savings, those savings are described as more psychological than substantial, even for higher-value properties. The goal is to show that the town wants to help, while acknowledging that it does not have the resources to ensure every business’s success. Several participants noted that existing businesses often represent better investment opportunities than startups, as they have proven track records and operational experience. These businesses may be well-positioned for expansion if given the right encouragement. The discussion centers on the idea that whether a business is new or existing, there must be demonstrable growth, such as expansion, added value, or increased employment, for incentives to be justified. It was also observed that few businesses on Main Street or elsewhere in town actually own their buildings, further limiting the direct financial impact of tax-based incentives. Even so, the board acknowledges that deferring tax increases after improvements can help prevent discouragement among investors who may otherwise feel penalized for reinvesting in their properties. The conversation shifted to residential development and its fiscal implications. Manager Day noted that even modest increases in assessed value, such as $200 to $250 per home, can add up to significant revenue over time, especially if multiple homes are built each year and those increases compound across several years. New residential construction is described as a powerful and reliable revenue stream for the locality. However, he stressed that any policy changes involving residential incentives would require careful consideration and collective discussion, with Manager Day weighing the broader implications alongside the board. Mr. Conner disclosed personal involvement in real estate flipping and raised concerns about potential ethical conflicts or conflicts of interest related to discussions of housing or incentive programs. He emphasized the importance of transparency and avoiding situations where decisions could personally benefit themselves or their employer. Manager Day and other board members affirm that disclosure is the first and most critical step. He explained that while Mr. Conner’s expertise can be valuable during discussions, recusal would be required for any vote directly affecting their interests. It is strongly cautioned that even with disclosure, participating in or benefiting from a program created by a board on which one serves can create serious ethical concerns and public perception issues. The consensus is that while there may be legal ways to navigate such situations, the safest and most ethical course is to avoid taking advantage of any program the member helped shape. Maintaining public trust and protecting the board from future scrutiny is emphasized as paramount. Statement of Economic Interest Forms Ms. Hale, Clerk of Council, reported that the Statement of Economic Interest filings, which are required by the state each January are due by January 30. Hard copies and fillable electronic versions have been provided. Failure to file results in a $250 fine imposed by the state, and staff are required to report noncompliance. Board members were reminded to complete all sections accurately, mark “N.A.” where applicable per auditor guidance, and include their name on every page. She emphasizes their commitment to ensuring full compliance and avoiding penalties. Board Member Comments Mr. Conner raised a financial observation regarding the proposed loan or incentive program. The fund currently stands at approximately $90,000, and if no program is implemented for six months, it could grow by an additional $25,000 by year’s end. He suggested that knowing the fund will continue to grow may influence future guidelines, thresholds, or strategic decisions about how and when the money should be deployed, signaling a need to revisit financial planning assumptions as balances increase. Manager Day emphasized that there are effectively no hard restrictions on what could be proposed under a future program, reiterating that “the sky’s the limit.” If any ideas raise conflict-of-interes t concerns, the board and staff commit to protecting one another by working collaboratively and transparently to design something defensible. Ultimately, any proposal must be acceptable to legal counsel and the town council. It was noted that the council members are understandably sensitive to financial exposure, and staff shares that same concern. While it is good to think proactively and creatively, the town must avoid overleveraging itself. The discussion acknowledges that there is a balance to be struck between innovation and fiscal caution, and that balance will need to be carefully evaluated as ideas move forward. The group recognized that whatever program is developed, it will inherently involve risk. If a project were fully bankable, a private lender would already be financing it. The town’s role, therefore, is not to compete with banks but to address gaps where traditional financing is unavailable. These are, by nature, less secure opportunities. Because of this, Manager Day cautioned that there will likely be fewer applicants than some might expect. The program is not expected to be flooded with demand, given its risk profile and limited financial upside for applicants. Manager Day explained that the topic will be brought to the council at a future meeting, as it could not be added to the agenda for the meeting occurring that evening. Manager Day is committed to reporting back after speaking with the council, noting that while he cannot speak on the council’s behalf, council members are generally professionally open-minded to reasonable ideas. It was emphasized that even if the council agrees to explore a proposal, that does not guarantee final approval. The council may approve moving forward conceptually but later request changes or reject certain elements. The board is encouraged not to take that personally, as refinement and adjustment are a normal part of the process. Mr. Huber commented on holding a joint meeting or informal session with the council to discuss expectations and preferences before investing too much time in developing a detailed program. This could help ensure alignment early on and reduce friction later. Manager Day agreed that a brainstorming-style discussion could be beneficial. Options discussed include placing the board chair on a future council agenda, providing an update, or having the board attend a council meeting as a group for a brief discussion. He explained that executive sessions are not possible without a qualifying reason, and that special-called meetings are difficult to arrange due to scheduling constraints. Nevertheless, Manager Day reassured the board that collaboration will continue until a workable path forward is identified. Ms. Hale provided corrected information regarding the ARS home previously discussed. The property is located at 520 Jackson Ave and is listed at just under $230,000. The conversation returns to housing programs and redevelopment strategy. Manager Day described the ARS model as particularly interesting, noting that while it involves a substantial upfront incentive, approximately $50,000, it must still be paid back. Demolition and site preparation are acknowledged as costly, but those expenses can be offset by long-term gains. One proposed approach is for the town to demolish deteriorated homes, then transfer the cleared property to a developer at no cost, with the sole requirement that the developer construct a modest home, such as a 1,400-square-foot, two-bedroom residence. This approach is described as yielding an exceptional return on investment. He emphasized that the benefits extend well beyond property taxes, including years of real estate tax revenue, personal property taxes, meals taxes, and broader economic activity. While balancing the upfront cost remains a challenge, the long-term fiscal impact is characterized as “amazing.” Reminder of Next Meeting Date Tuesday, February 3, 2026 at 10:00 a.m. With no further business, Chairwoman Cox adjourned the meeting at 11:06 a.m.