Residents of the Wheeling, Charleston and Huntington areas are well aware of the successes that resulted from most of a $225 million economic development initiative more than a decade ago. But West Virginians may not be as aware of the signal failure of part of the program.
State legislators approved a $225 million bond issue in 2002, with the primary purpose of helping to finance major economic development projects in three areas. Here in Ohio County, money was provided to develop The Highlands, with the beautiful, gigantic Cabela's store opening in 2004. Projects in Charleston and Huntington also have been successful.
But $25 million of the bond money was set aside for investments in venture capital companies. The state Economic Development Authority handles the project.
Of about $24 million actually invested, just $3.65 million in value remained earlier this month, it has been reported. EDA loans worth about $20.35 million have been deemed uncollectible.
Venture capital projects are, by definition, riskier than many other types of development. Venture capitalists exchange the prospect of losing investments in exchange for the possibility of high returns.
Clearly, the EDA's investment staff put too many taxpayers' eggs into flimsy baskets.
Entrepreneurs often complain they cannot get new businesses off the ground because of a lack of venture capital. Here in West Virginia, that is a more serious problem than in some other regions of the country.
Legislators' goal - providing money to get more small businesses up and running - was laudable. But the execution left much to be desired.
Nothing can be done about the more than $20 million flushed away by the project. Mountain State residents remain on the hook to repay bonds that provided the cash.
But the experience is a painful reminder of the necessity of exercising extreme caution in using taxpayers' money for economic development initiatives. That should be kept in mind if a similar scheme is suggested in the future. West Virginians simply cannot afford to take the big risks to which billionaire venture capitalists in the private sector are accustomed.