The State Journal
by Juliet A. Terry
May 23, 2003
West Virginia could have a hot investment for bond traders if a reorganized Economic Development Grant Committee is able to jump-start the stalled process to finance 35 projects for more than $200 million.
A new baseball stadium, a motorsports complex, a high-tech consortium and downtown development projects in Wheeling and Huntington are just a few of the ventures approved by the EDGC.
The Legislature created the committee and funding process to spur economic development in the state, using lottery revenues to finance an expected $215 million bond issue to pay for the grants. A legal challenge by the West Virginia Citizens Action Group has delayed the financing.
In a May 16 opinion, the state Supreme Court of Appeals ruled the selection process for the nine-member committee was unconstitutional, but it said the process by which it selected 35 projects for economic development funding was proper.
The decision requires Gov. Bob Wise to appoint all nine members of the grant committee without any input from the Legislature. Lawmakers will have to correct a portion of law establishing the committee codify standards the committee used when selecting projects for funding.
Wise said the Supreme Court ruling should not be seen as bad news.
"This is very good news," he said after the opinion was released May 16. "I’m pleased with the Supreme Court’s decision because they upheld the funding mechanism of the economic development grant committee."
Stock broker Pete Halloway, senior vice president at Hazlett Burt & Watson in Wheeling, said low interest rates mean delays caused by the legal challenge may not harm the bonding process.
"What the state wants to do is pay the lowest possible interest rate for the bonds. We’re at historically low interest rates, so this is a good time to do it," Halloway said.
The Federal Reserve is "way out of whack with the norm" because of the low interest rates, he said, and will need to raise rates at some point to stave off inflation.
But with the risk of deflation and extremely slow recovery of the stock market, Halloway said, the Fed realistically cannot raise rates right now.
"So the window of opportunity might be much longer than people perceive it to be," he said.
"There could be a terrific demand for West Virginia bonds because there are not many bonds being issued…so the expectation would be for them to sell well."
Holloway added that municipal bonds, which are issued by counties, cities or the state, generally are free from federal taxation because the federal government cannot tax income from other governments.
The exemption also could mean West Virginia residents who buy the bonds will not have to pay state taxes on the investments, he said.
Of course, the bond issue depends on how quickly the state can correct the grant committee in accordance with the Supreme Court decision.
Alex Macia, general counsel for Wise, said the Supreme Court did not prohibit the governor from reappointing the same committee members.
"The court said they have not been tainted by the process," Macia said. "The Legislature must come up with standards for evaluating the projects, and hopefully with those expressed standards the re-formed committee can validate and ratify the work that has been done previously."
Macia said he and Dale Steager, a lawyer with the Department of Tax and Revenue, will work with legislative counsel in preparing the corrections to the grant committee legislation included in House Bill 4005 in 2002. Fixing language that establishes the grant committee appointment process should happen fairly quickly, Macia said.
Codifying the project standards may take a little longer, but if the standards used by the committee are respected, "we’ll have a good start already," he said.
Macia believes Wise will call a special session to address both the grant committee and the workers’ compensation crisis. Lawmakers have said they expect a special session in June."
