CIT says projected $800,000 budget shortfall unrelated to incentive payouts

2/26/16

By MICHAEL MARTZ Richmond Times-Dispatch

The new leader of the Center for Innovative Technology says the payout of $883,000 in performance incentives to employees last summer is not related to a projected $800,000 revenue shortfall the state has been asked to fill in this year’s budget.

Ed Albrigo, who became president and chief executive officer of the Herndon-based center on Nov. 2, said the CIT board of directors voted in July and August to award the incentives, effective in September, under the performance pay plan for employees.

“It has nothing to do with our revenue shortfall and operating position for fiscal year 2016,” he said Thursday. “The two issues are disconnected.”

Albrigo, the former chief operating officer of The Hilltop Companies, said he became concerned about the potential loss of revenue from private contracts that might not come to fruition in the fiscal year that ends on June 30.

When the board awarded the performance incentives, “there was not any appearance of a shortfall,” he said.

The board includes three members of Gov. Terry McAuliffe’s Cabinet — the secretaries of technology, education, and commerce and trade — as well as the presidents of the University of Virginia, Virginia Tech, and Virginia Commonwealth University. The governor’s proposed budget includes $800,000 to fill the funding gap this year.

“I think the governor wants to give the new director the opportunity he deserves to set the organization on a better path,” said Brian Coy, communications director for McAuliffe.

The proposed budgets that the Senate and House of Delegates adopted Thursday also include state general funds to fill the hole, but some legislative leaders are not happy about the surprise shortfall for the center or the revelation of the incentive payments.

“How can they not be related?” asked Sen. Ryan T. McDougle, R-Hanover, a member of the Senate Finance subcommittee that addressed the shortfall and other budget issues related to the CIT.

“I think that’s a legitimate question,” McDougle said. “The numbers seem to be very close in size.”

House Appropriations Chairman S. Chris Jones, R-Suffolk, has been vocal in his displeasure over the shortfall. “There will need to be a full accounting of how we got to this point,” he said Friday.

The CIT, created more than 30 years ago by Gov. Charles S. Robb, is expected to play a big role in proposed state budget initiatives for spurring research and development of technologies in emerging industries that can jump-start what McAuliffe calls “the new Virginia economy.”

The Senate budget even envisions selling the landmark CIT building, straddling the Fairfax-Loudoun county line next to the Dulles Access Road. The sale proceeds would endow the Virginia Research Alliance Fund proposed in the Senate budget to encourage collaboration between the state’s academic research institutions and private industry.

“The property on which the building sits is extremely valuable because of its geographic location,” said McDougle, chairman of the Senate Republican Caucus and a member of the Finance general government subcommittee. “Maybe the goals of that entity can be achieved on a less valuable piece of property.”

Other budget initiatives would give the CIT control of the Commonwealth Research Commercialization Fund that it already administers to help companies across the state bring new technologies to market, and additional money for the Growth Accelerator Fund that the center uses to leverage financing for high-tech companies expected to create thousands of jobs.

The CIT, run by the Innovation and Entrepreneurship Investment Authority, also is expected to play an expanding role in nurturing the technology-based cybersecurity industry through the center’s MACH 37 Cyber Accelerator program.

Although the center is based in Northern Virginia, Albrigo said its programs have produced economic benefits beyond the region and across the state, supporting 188 companies and 105 university research faculty.

The CIT complex covers more than 150,000 square feet in an office tower, research building, auditorium, conference center, and cafeteria, and leases space to almost two dozen companies or institutions, including George Mason University. Albrigo said CIT officials have been talking to legislators about the potential sale but declined to elaborate.

“We’re going to be watching this thing play out,” he said of the Senate proposal.

Albrigo replaced Peter Jopse, who resigned last year to return to the private sector after leading the center since 2003. McAuliffe picked Albrigo after a national executive search conducted by Korn Ferry.

The new leader said he quickly began analyzing the center’s finances, which rely on private contracts and grants as well as state support. Through that analysis, Albrigo said he assessed whether all of the expected revenues would materialize by the end of the fiscal year.

“As the new CEO, I chose a very conservative approach in the outlook,” he said.

At the time the center’s board awarded payments under its performance incentive plan last summer, Albrigo said the financial picture “looked good. It looked reasonable.”

Even now, he said, “the contracts may actually come in.”

McDougle said he expects the General Assembly and its money committees to discuss the center’s outlook and role in the remaining two weeks of the scheduled legislative session, and beyond.

“I have a feeling we’ll continue to delve into this,” he said.