Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, September 28, 1995 TAG: 9509280032
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
DATELINE: LENGTH: Medium
An official of Gov. George Allen's administration said the recommendation matches current practice, despite the lack of a law that says how much state government can spend to attract and keep companies.
Robert Vaughn, who is a staff member for the House appropriations subcommittee on economic development, delivered his report earlier this month to committee members who can influence voting early next year on $108 million in incentive packages for two proposed semiconductor plants.
The panel was told that companies are being drawn to Virginia by its low tax rates, skilled workers, port, two major airports, five interstate highways and a right-to-work law - not by incentives. Between 1982 and 1992, job growth in Virginia was running ahead of that in all but two other Southeastern states - Florida and South Carolina, Vaughn said.
As a result, while other states routinely offer generous incentives, Virginia can be frugal about building companies free roads, cutting their taxes and offering other subsidies because many industries naturally want to be here, Vaughn reasoned.
"If you have a good business climate, the need to use incentives should be less," Vaughn said Wednesday.
In Vaughn's eyes, incentives should benefit only companies paying above-average wages. They should take the form of worker-training grants or brick-and-mortar improvements such as buildings and sewer pipe. And they should be taken back if companies skimp on hiring employees and otherwise fail to live up to their end of the bargain.
The state should not help new industry in any way that puts existing companies at a competitive disadvantage, he said.
Morgan Stewart, spokesman for the state Economic Development Department, said Vaughn's recommendations echo current state practices.
"It sounds like Mr. Vaughn is reading our script very well," Stewart said. "He seems to be pretty much on target with our philosophy and the way we act, especially with Motorola and IBM and Toshiba and just about every other company."
Vaughn agreed that current practices indeed appear in line with the thinking of national experts he recently consulted. But he suggested the Allen administration has too much freedom to negotiate with companies over the question of incentives.
Because there is no state law on incentives, negotiators under Economic Development Director Wayne Sterling may be tempted to outbid other states pursuing the same industrial plant or expansion, Vaughn said.
"What we're trying to do is put a cap on bidding," Vaughn said.
Were the state to put a law on its books, negotiators would know before meeting company officials the type and amount of incentives lawmakers are willing approve, Vaughn said. Aspects of major incentive packages have to be voted on by the General Assembly before money changes hands.
"Right now, these deals are cut and there is no legislative involvement" prior to the package coming before the General Assembly for approval, he said.
Vaughn said his recent report was an attempt to prepare lawmakers - at the urging of Del. Robert Ball, D-Richmond and chairman of the Appropriations Committee - before they must evaluate two more-recent industrial project proposals earmarked for incentives by the Allen administration.
During the legislative session that begins in January, lawmakers will be asked to approve a $60-million conditional cash grant for Motorola Inc.'s planned semiconductor factory in Chesterfield County and a similar $48-million grant to a joint project by IBM and Toshiba Corp. of Japan in Manassas.
Stewart said the Economic Development Department struck those deals and others under "one of the greatest constraints around, and that is the voters of Virginia and, of course, the General Assembly. So far, we have had good bipartisan support for what we have done." He said a poll found state residents support giving a package worth $85 million to Motorola.
Lawmakers will also take up the broader question of how Virginia pays incentives. They hope to vote a formal incentives policy into law.
As part of that effort, Attorney General Jim Gilmore is considering whether incentives are allowed by the constitution, Vaughn said.
by CNB