Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, May 8, 1994 TAG: 9405100028
SECTION: EDITORIAL PAGE: D2 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
Other states were courting Volvo-GM; had the plant gone to one of them, it could have meant the loss of 2,500 jobs in the New River Valley and risked 23,000 jobs statewide. Additionally, according to a Virginia Tech economist's analysis, it would have meant the loss of $1 million a year in county revenue, plus $18 million in state sales-tax revenue and $320 million in other state revenues over the next five years.
Instead, 200 new jobs are to arrive next year in Pulaski County, more than 580 spinoff jobs in the region and as many as 6,100 new jobs statewide. County officials expect the plant to generate more than $6 million in additional property taxes for the county in a decade; add to that nearly $4 million a year in state sales-tax revenue; figure on a boost in Virginia individual incomes of about $60 million over five years - and you're talking real money.
The Allen administration and county officials worked in concert on an incentive package that did the job; the governor in particular is to be commended for his aggressive, hands-on approach - as promised last year in his gubernatorial campaigning.
That said, something else needs to be. In fashioning an incentive deal that Volvo-GM couldn't refuse - not long after putting together an even bigger one for the proposed Disney's America theme park in Northern Virginia - Allen also has highlighted a continuing concern. The state still has no comprehensive state economic-development policy, including incentives for new or expanding businesses.
Such a policy was promised by former Gov. Douglas Wilder, but was never delivered. Virginia's approach continues to be, for the most part, free-lance expediency.
The only direct outlay of state money will be $5 million over the next five years from the Governor's Opportunity Fund, set up so governors could quickly sweeten the pot to close a deal when a Virginia locality is competing with areas outside the state for new businesses. But the indirect cost to taxpayers could total as much as $30 million over several years.
Additionally, Volvo-GM may get tax breaks, of undetermined amounts, linked to enterprise-zone programs for encouraging business development in economically depressed areas. It may also be eligible for tax credits under a new program that Allen won from the 1994 legislature to encourage jobs creation.
In themselves, the incentives are not unreasonable (and are considerably less than the $131 million in state incentives promised to Disney). The problem is that such deals are being put together on an ad hoc basis. There are no guidelines for when the state will put money on the table, no limits spelled out for incentive outlays per new job, no standards for determining when public benefits outweigh public costs.
Among other things, this hinders efforts to market Virginia to prospective employers, who can't be told with reliability what help they might expect under which circumstances.
Moreover, Virginia has never articulated a fairness doctrine. At what point do incentives for new businesses or expansions become unfair to existing businesses that contribute by maintaining employment? The state has never precisely distinguished between reasonable incentives and giveaways. It has no good measure for the cost effectiveness of, say, enterprise-zone tax breaks.
As Allen frequently pointed out during his campaign, Virginia has been losing ground to states with comprehensive economic-development plans, including well-reasoned incentive programs. In office only four months, Allen can't really be faulted for not doing what took his predecessor four years not to do.
But he needs to get on with it. The more success the Allen administration enjoys in wooing business to Virginia, the more pressing the need for clear and consistent guidelines to prevent the relationship from going sour.
by CNB