Four years after MZM Inc. pledged to bring high-tech jobs and new life to the struggling economy of Martinsville, the city now faces a bill for those unfulfilled promises.

The Virginia Economic Development Partnership decided Thursday to seek partial repayment of $500,000 in state economic incentive grants that went to MZM, which was a successful defense contracting company before being forced out of business by a political corruption scandal.

As part of an unusual performance agreement tied to the money, Martinsville volunteered to be held responsible if MZM did not meet its projections for jobs and capital investments in a military intelligence center the company opened in 2004.

Although it's unclear how much Martinsville will have to pay, Assistant City Attorney Wade Bartlett said his calculations put the figure at no more than $145,000. That amount gives the city credit for the jobs and investment realized by MZM's Foreign Supplier Assessment Center before it closed last summer.

State officials declined to say at this point how much they are owed.

"We want to talk with them [Martinsville officials], see what the situation is and come up with a plan," said John Sternlicht, general counsel for VEDP.

This is the first time the state has had to reclaim grant funds from a locality for the failings of a private company, Sternlicht said.

Usually, a company that receives economic incentives from the state agrees to be on the hook for the money if its venture fails. But after MZM president Mitchell Wade refused to apply for any grant money, the city persuaded the VEDP to let it stand for the performance agreement, which expired last month.

"I don't think 'plead' is too strong of a word, and they really pleaded with us to do this, even though we don't like the idea of doing it this way," Sternlicht said.

According to documents from the VEDP, the idea of Martinsville's accepting responsibility for the performance agreement was first raised by U.S. Rep. Virgil Goode, who worked closely with Wade to lure a company with high-paying jobs and the potential to reshape a local economy that has long depended on the sagging textile and furniture industries.

After the deal was struck, Goode's relationship with Wade became controversial.

Last year, Wade pleaded guilty to making illegal campaign contributions to the Rocky Mount Republican. Critics have said the money influenced him to seek federal funds for the Foreign Supplier Assessment Center and a generous benefits package from the state.

Goode, who has not been accused of any criminal wrongdoing, has said he did not know the campaign contributions were illegal and has since donated the money to charity. His only motivation in dealing with Wade, he has said, was to help his 5th Congressional District.

In the past, Goode has directed the media to submit MZM-related questions to him in writing. His spokesman could not be reached for comment Thursday.

The performance agreement between Martinsville and VEDP required MZM to hire 75 people and spend $4.4 million in capital investments. Although the plan was to hire 150 people, the performance agreement called for half that many because the jobs paid twice the area's average wage.

No more than 32 people ever worked at the site, where security-cleared employees did background checks on foreign companies that sold military equipment to the U.S. government.

As a result of Wade's troubles with the law -- he also was convicted of bribing a California congressman to win lucrative defense contracts -- MZM was sold to Athena Innovative Solutions. That company was forced to shut down the operation last summer after failing to win another Pentagon contract.

It's not unheard-of for the state to recoup grant money that went to failed projects, VEDP spokeswoman Christie Miller said. Of the 142 grants made through the Governor's Opportunity Fund since 2002, the state has sought repayment nine times. Three grants were repaid in full and the others are being negotiated, Miller said.

Although the bill Martinsville now faces will hardly break the city's financial back, Mayor Kimble Reynolds said any unanticipated expense is a bad one in a time when the area continues to bleed from company layoffs and closings.

"Some people are extremely disappointed," Reynolds said. "But I can't say that they are bitter. They're trying to look at the silver lining and see what do we have left, when all is said and done, and how do we leverage that to improve our future."

One silver lining is an upgraded building that the city can market to new economic prospects, he said.

While Reynolds stopped short of saying the city would never take another risk like the one it took for MZM, he suggested that it may be a little more wary next time.

"We're going to make sure we calculate the costs and weigh the risks," he said. "Especially as we learn from our past experiences."