Danville and Pittsylvania County must pay back rail funds

Danville and Pittsylvania County must pay back $900,000 — or $450,000 each — in state grant funding because a railroad extension to Swedwood Danville hasn’t been used.

In 2006, as part of helping the Ikea furniture-maker set up shop in Cane Creek Centre, the city and county applied for money from a Virginia Department of Rail & Public Transportation economic development fund to construct 4,800 feet of track into the Swedwood facility.

The city and county matched the grant with $300,000 total, or $150,000 each. The Commonwealth Transportation Board appropriated the $900,000 to reimburse expenses for the $1.9 million project.

As part of the funding agreement, 520 rail cars had to use the track annually within a five-year performance window. But County Administrator Dan Sleeper told the Board of Supervisors at its Feb. 6 meeting that no rail cars used the track since Swedwood opened its facility.

So, the city and county must pay back the grant money for not meeting the usage requirement.

The city and county did not have a side agreement with Swedwood Danville, and Swedwood is not obligated to pay back any of the grant money, said Danville City Manager Joe King.

In a December letter, Sleeper asked the state department for an extension to pay back the money. In a Jan. 10 letter, the department granted a conditional extension of two years providing for monthly payments, and added it would “re-evaluate the grant relationship” if the track is used as intended within that time frame.

The money must be paid by March 10, 2014, said Kim Kovac, department communications specialist, in an email. The first monthly payment would be due on April 10.

The grant money is a state appropriation through what is now called the Economic Development, Airport and Rail Access Fund.

The board of supervisors still need to accept the extension agreement, Sleeper said. That will be on the Feb. 21 agenda. The county also received $700,000 in community development block grant funding, which is separate, for the rail project.

Danville City Council will discuss the issue in a work session in early March and will address it at a council meeting thereafter, King said. Council members would decide whether to pay off the amount in a lump sum or monthly.

Swedwood did not respond to questions by Wednesday night.