ROANOKE TIMES
Copyright (c) 1995, Roanoke Times
DATE: Wednesday, December 20, 1995 TAG: 9512200059
SECTION: BUSINESS PAGE: C-8 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
Virginia Secretary of Commerce and Trade Robert Skunda and a committee of lawmakers have a plan that would tighten, yet sweeten the state's incentives to lure businesses.
Their long-awaited initiative, while only in draft form, already has prompted Gov. George Allen to propose boosting to $20 million the amount of money a Virginia governor can give communities each year to support new and expanding companies. That's 20 percent more than likely will be spent this fiscal year, which ends June 30.
The strategy also envisions rigorously holding companies that benefit from the incentives to their promises to hire new workers and build or expand facilities.
The incentives debate may be far less publicized than education as an issue in the General Assembly session that begins Jan. 10, but the topic has implications for economic growth.
Incentives have been called an important stimulus for growth and a wasteful misuse of tax dollars. Virginia politicians and others began more than a year ago to question the state's use of business incentives including tax credits, grants to localities and desired industries, worker training grants and financing packages.
Among the questions raised:
nDoes Virginia use incentives only when absolutely necessary to attract business investment?
nDo local governments pay their fair share of development costs?
nAre incentives being spent on the right types of companies to create high-paying jobs?
nAre incentives equally available to companies already in Virginia?
Skunda and Democratic and Republican lawmakers, who finished a review Dec. 13, applauded the state for achieving good results but said incentives need to be expanded while the rules are tightened. The committee cautioned that its 19-page report is subject to revision before being presented to the legislature.
The report refers indirectly to heavy incentives promised this year to IBM, Toshiba and Motorola, which are building two multibillion-dollar semiconductor plants in the state and plan to hire thousands of workers at above-average salaries.
It said it makes sense for the state to promise hefty incentives in such cases, but in the future, payment should be delayed until a company reaches hiring and investment benchmarks. That way, the state can tax the new industry for several years before paying anything, Skunda said.
Another need, the report suggested, is putting more money in the Governor's Opportunity Fund. While $10 million originally was set aside for this fiscal year, Allen has shifted to the fund nearly $5 million of money at his disposal and on Tuesday asked the General Assembly to appropriate $2 million more, bringing the spendable total to $17 million.
But while endorsing an increase in the fund, the incentives committee suggested limiting grants to $1 million per community per year so the money goes further.
The committee also said more money is needed to train workers of new or expanding companies.
Sen. Charles Hawkins, R-Chatham, the chairman, said that as smoothly as committee hearings went, he expects a favorable reaction from fellow lawmakers and business interest groups. "It's a good starting point," he said. "There is very little about it I object to."
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