Smithfield’s treasurer says the town has enough cash on hand to fund its 50% share if the Town Council votes to accept Joseph Luter III’s offer of $6 million for the beautification of the western edge of the town’s historic district, conditioned on the town matching the amount dollar for dollar and putting its farmers market in his son’s neighboring mixed-use development.

Mayor Steve Bowman flew to Palm Beach, Florida, in May for a three-day stay at Luter’s residence, during which Luter made his offer. Town Council members, which have yet to vote on whether to accept the money, learned about the trip a week after the mayor’s return – and after Bowman arranged with Town Manager Michael Stallings and Town Treasurer Laura Ross to have the first $1 million wired to the town’s bank account.

By June 7, the full $6 million had been deposited. It’s the largest cash donation Luter has offered in decades of similar grants to the town, and the largest upfront financial commitment by the town he’s requested to date.

“A lot’s been made about the taxpayer burden on what it would cost them if we were to accept,” Bowman said at the council’s Aug. 26 Finance Committee meeting.

The money, according to Bowman, would fund a brick perimeter wall in town-owned right-of-way and brick sidewalks fronting Main Street’s intersection with Route 10 where Luter’s son, Joseph Luter IV, is developing the 267-home Grange at 10Main mixed-use development.

Bowman, at the meeting, asked Ross if the town were to match the amount “over a period of time” if it would jeopardize the town’s credit rating or put the town in a precarious financial position.

“Not at all,” Ross replied.

According to a balance sheet Ross presented to the council that day, the town had $32.5 million in cash on hand as of July 31, including a $24.8 million balance across multiple TowneBank accounts and an additional $7.7 million in a “VIP Investment Pool” managed by VML VACO Finance, the banking arm of the Virginia Municipal League and the Virginia Association of Counties.

Of the $24.8 million, $14.9 million is in the town’s general fund. This includes Luter III’s $6 million. The remaining $9.8 million is in the town’s water, sewer and highway funds and is restricted to those purposes.

If the town were to spread out its use of Luter’s $6 million over a period of years, the town’s match would “eventually pay for itself,” Ross told council members.

For nearly a year the town has accrued interest on its deposits. Luter’s $6 million in the general fund has earned $50,000 in interest over the past two months, appreciating at a rate of approximately 5.57%, Ross said. 

The $7.7 million in the VIP Investment Pool includes $191,000 in year-to-date interest, according to Ross’ end-of-month report from July. It earns interest at a rate of approximately 5.42%.

The interest wouldn’t directly fund the town’s match; rather, the money would have to come from funds on hand, Ross told The Smithfield Times after the meeting.

The issue of how best to use Smithfield’s cash on hand previously came up in February when the council voted 5-2 to set a real estate tax rate of 16 cents per $100 in assessed value, up from the 14-cent rate the council had settled upon eight months prior. Councilman Randy Pack, whose term in office ends Dec. 31 and isn’t running for reelection, cast one of the two dissenting votes on the 16-cent tax rate, asserting the town didn’t need the extra revenue since an audit had found Smithfield to have ended its 2022-23 fiscal year with $12.7 million in its fund balance, or 128% of the prior year’s budgeted expenses. Town policy requires that at least 25% – or $2.8 million based on the 2024-25 fiscal year’s $11.2 million budget – be on hand at any given time.

The fund balance totals in the 2022-23 audit and the end-of-month report from July do not match because “the Audited Financial Statements report does not reflect actual cash balances, but the monthly cash balance report does,” Ross said.

The council and Isle of Wight County supervisors previously voted in October 2022 to each commit up to $1.4 million toward moving the Smithfield Farmers Market, which is currently held weekly on Saturdays in the parking lot of the Bank of Southside Virginia on Main Street, to an indoor/outdoor brick structure at the Grange. In return, Luter III pledged $1 million of his own money and land at the Grange for the market building’s construction.

The Town Council voted at its Aug. 6 meeting to award a contract for banking services to Old Point National Bank, one of three bidders to respond by April 30 to the town’s April 3 request for proposals. Ross, in a July 22 proposal to the council, recommended the town move the majority of its funds from TowneBank to Old Point, citing Old Point’s offer of an “earnings credit” or interest rate of 1% compared to the 0.5% offered by the other two bidders.

Luter’s $6 million is currently in a “sweep” account. According to TowneBank’s website, the bank is affiliated with IntraFi network to make insurance of multimillion-dollar deposits possible through insured “cash sweeps.”

“When we move to the new bank, which we will be doing within the next three months – we’re in the process of getting that done – we will have a separate money market account to hold those funds in so we can watch the revenue from that,” Ross said.