Follow the money: EDA-ITFederal financial roadmap tricky to navigate

FRONT ROYAL – Nearly four years ago, on June 12, 2015 former Congressman Bob Goodlatte (R-VA) announced an economic development agreement that would bring ITFederal, LLC to Front Royal.  In a press release from the Sixth District congressman’s office, Goodlatte said, “I am happy to have supported the efforts leading up to this announcement and commend Front Royal and Warren County officials for their hard work to ensure it came to fruition.”

Goodlatte’s release further stated that details of the land purchase agreement were being “worked out between the EDA and ITFederal” and indicated that details were likely to be finalized the following week.

What Goodlatte’s office never released—what no office ever released—was details of the sweetheart deal in which ITFederal owner Truc “Curt” Tran payed just one dollar for a 30.11-acre tract of land.  In fact, no one knew just how great a deal Tran had scored on the property until Royal Examiner broke the story Nov. 1, 2016. See Related Story:

Feds OK ‘Dollar Special’ on first Avtex property sale

On Oct. 26, 2015, Goodlatte showed up to join local dignitaries and shovel some dirt at the official groundbreaking for ITFederal at the former Superfund site where Tran’s company was slated to begin building shortly thereafter.  Little did the community realize no other shovels would touch the soil on the project until over two years had passed.

Three months after Tran closed the deal on the former Avtex Fibers site, the Front Royal-Warren County EDA went to extraordinary lengths to ensure that he would have plenty of cash to begin building what he pledged at the time would be a complex featuring 67,000 square feet of mixed-use office space, retail space and a cloud data center.  The project, according to Goodlatte’s press release of June 12, 2015 would “create over 600 high paying jobs for the community.”

On Sept. 14, 2015, after being told by the EDA that Truc Tran needed a $10 million bridge loan “to start construction” on the $40 million project, the Town of Front Royal agreed to loan the money for one month.  The loan was eventually extended to three months and paid back by the EDA after it obtained a loan from another entity.  Though Tran had money in hand, construction did not begin until over two years later, in Dec. 2017. Disbursement Authorization

Just two days later, on Sept. 16, 2015, the EDA used the money loaned by the Town of Front Royal to structure a loan to Tran at 3% interest, amortized over 30 years, with a possible rate adjustment every seven years.  The loan agreement required monthly payments of $42,160 and payment in full by Sept. 16, 2045.  After the initial seven-year period, a total of approximately $8,440,000 will remain on the principal balance. Attachment to Note

In December of 2015, the EDA managed to secure a $10 million loan from First Bank & Trust of Lebanon, Va. through its Winchester commercial loan office (not to be confused with First Bank of Strasburg, Va.). The loan was secured to “provide funding for economic incentive for ITFederal, LLC,” according to loan documents.

The loan has an interest rate of 4.35%, with the balance due after seven years. The required monthly payment was $40,000.  Moreover, the EDA secured the loan with a Deed of Trust on the remaining 117 acres of land at the former Avtex site.

Additionally, it was secured by a Promissory Note that was endorsed to First Bank & Trust by the EDA.  After seven years, the Principal balance due will be approximately $9,672,000. Loan Agreement

It appears that the EDA is losing money each month on the loan to Tran:

Now that Tran has admitted that ITFederal will not open, and the EDA is left paying back a substantial amount of money that opens the door for Warren County citizens to ask some tough and pointed questions of the Board of Supervisors, who are using taxpayer money to perform an outside, mostly secret audit into the finances of the EDA.

The audit began around the time that Royal Examiner broke the story last fall that the Town of Front Royal was owed nearly $300,000 related to debt servicing payments by the EDA. See Related Story:

EDA may owe Town of Front Royal nearly $300K

Interim EDA Executive Director John Anzivino said in a telephone interview Tuesday morning that moving forward, he felt the EDA would “operate in transparency.”  He said the office is short-staffed and that he is dealing with many Freedom of Information Act (FOIA)requests, as well as working with the board regarding the ongoing audit and going through the agency files, which he admitted were sometimes lacking in terms of detailed record-keeping.

Anzivino said that over the years, the EDA had been instrumental in some very positive developments for the community, citing the corridor development along Routes 340/522 and believed the agency would foster economic growth in the future.  The EDA board, he stated in the conversation, was devoted to moving forward with transparency and was hopeful regarding the future and marketing the community to prospective businesses.

Anzivino said that while he worked in nearby Fauquier County over the years, he often noted how well development was moving along in Warren County.

View all EDA loan documents related to ITFederal and Truc Tran here:

• NOTE
• Attachment to Note
• Opinion of Counsel
• Settlement Statement
• Title Insurance
• Town of Front Royal Resolution
• Certificate of Borrower
• Checks Listed
• Collateral Receipt
• Credit Line – Deed of Trust Receipt
• Deed of Trust
• Disbursement Authorization
• Document Checklist
• IDA Resolution
• Loan Agreement
• No Oral Agreements Notice