 For taxpayers, the Vendor Payment Program, or VPP, is a wash.The
VPP started in full swing last month and allows investors to take
ownership of debt the state owes vendors.
The vendors get 90 percent of what the state owes them
immediately from the investor.
In turn, the investor pays the state the remaining 10 percent,
which is put into an escrow account. Once the state pays the
investor in full, the money in the account is released. For every
month the state is late in paying off the debt to the investor, the
investor earns 1 percent interest on that debt.
"The state's innovative VPP program was designed to offer more
immediate assistance with cash flow for vendors experiencing
significantly delayed payments, at no additional cost to the state,"
said Alka Nayyar, spokeswoman for the Illinois Department of Central
Management Services, which oversees the VPP.
Most of the state's bills are about a month behind, but some date
back to the spring.
Most overdue bills bought by investors would only draw 1 percent
or 2 percent returns, though some could cost the state as much as 5
percent returns.
"This is interest that would have been paid regardless," Nayyar
said.
To date, overdue bills totaling $419,262.76 owed to businesses
ranging from food providers to eyeglass manufacturers have been
picked up by Vendor Assistance Program LLC, or VAP.
VAP was started by Dustin Mauldin, who also started the payday
loan company AmeriCash Loans, according to businesses records kept
by the Illinois secretary of state.
While Illinois Statehouse News' multiple messages for Mauldin
were not returned, an employee of VAP did respond.
"The reality is that companies that do this type of business
don't want to operate on these types of margin," said Brian Hynes,
VAP manager. "We realize the (return) margins are small, but if we
can do this at a good volume, it can be a business."
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Vermilion Valley Produce provides produce to the Danville
Correctional Center and had overdue bills dating back to the spring.
It has gotten an influx of about $30,000 from VAP.
"I will say that the program has worked to our expectations thus
far," said John Rollins, owner of Vermilion Valley Produce. "We
limit our exposure to the state because of (its) poor practices."
Rollins said that despite his positive experience so far with VPP,
he is reluctant to do business with the state.
"The state still lags behind (in paying bills), even with this
program, and that affects how often we bid and how much we bid," he
said.
So far, Hynes said, VAP has bought debt of vendors facing layoffs
or threatening to stop doing business with the state, but VAP can
handle as many overdue bills as the state can offer.
"Right now, there's a bottleneck of $4 billion flowing into the
state's (economy). If we're able to open up that bottleneck so that
more money is flowing to those vendors, the benefits to the economy
would be astronomical," Hynes said.
Illinois is the only state that operates a program like VPP;
however, Hynes said VAP has reached out to other states, nine of
which have shown interest.
[Illinois
Statehouse News; By ANDREW THOMASON]
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