THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, March 4, 1996 TAG: 9603020156
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Editorial
SOURCE: Ted Evanoff
LENGTH: Medium: 84 lines
You can spend $38 million a lot of ways. Invest it, put it in your business, or if you're in the mood, hand chunks of cash to Fortune 500 corporations.
Corporate hand-outs may sound like the least likely way you'd spend your money, but in case you missed it, Virginia has been in the mood. So have most state governments.
It's called economic development. And it's gotten out of hand. Governors and mayors have lavished billions of taxpayer dollars on new industry.
If this was 1975 and the economy was awry in the wake of the oil embargo, or if it was 1980 and we were saddled with 20-percent interest rates, lucrative economic development incentives might make sense.
But it's 1996. Money is cheap. Corporate profits are high. Taxpayers are strapped. It's time for the states to pull back.
Gov. George F. Allen has carved a role for himself as a deal maker. Just look at his 1996-97 budget.
He requested $38 million for Opportunity Virginia. Like the bankroll available to Georgia's governor, Opportunity Virginia is a cash account used to clinch economic development deals with companies that might stray.
Set up in 1992 by Gov. L. Douglas Wilder, the Opportunity fund originally was seeded with $8.5 million, but Allen has made wide use of the account. For example, $1 million from Opportunity Virginia last year helped land Gateway 2000's computer assembly plant in Hampton.
With thousands of Virginia voters hungry for better jobs, it's no wonder Allen bristled when the House of Delegates scrapped the $38 million request and agreed to furnish only $18 million (plus $10 million for the proposed Urban Partnership revenue sharing plan).
Appearing a week ago in Norfolk before the economic development group Forward Hampton Roads, Allen railed: ``Why are they handcuffing us?''
It was a legitimate question, considering Virginia competes with other aggressive governors. But there's another legitimate question.
If the old foundry down the street must expand, chances are good it'll borrow from the bank to pay for the road to the new plant. If it's a new company moving in, especially a Fortune 500 company, chances are good the taxpayers will build the road in the name of economic development.
Why commit public money to a big company with deep pockets? Small businesses can use a boost, too, especially the dozens of small Tidewater defense firms still struggling to diversify in an era of federal downsizing.
Allen was widely praised last year after Motorola announced the computer chip plant would go in near Richmond (with $85.6 million worth of state infrastructure and training assistance including money other than from Opportunity Virginia).
When the House recently cut the $38 million budget request, it was no slap at the governor. ``He's been doing a good job with that fund,'' said Del. George H. Heilig Jr., D-Norfolk.
Yes, Allen deserves his due. Motorola, Gateway - these big projects promise big tax bases, lots of jobs: 3,000 at Motorola, 1,000 at Gateway.
But the fact remains, these are big companies. Gateway sold $10 million worth of merchandise per day last year, $3.7 billion for the year. Motorola's sales were $27 billion. Let their shareholders foot the bill.
Whether it's the federal budget deficit, as in the '92 presidential race, or harnessing entitlement spending, as in '96's race, the trend is clear.
There's a federal recession going on. Washington's cutbacks will continue.
Rather than lavish money on big companies, the governors should hoard cash, particularly if the Republican revolution returns programs such as welfare to the states.
What's going on is something like what we saw in the industrial Midwest a few years back.
Nearly 5 million factory workers were laid off in the early '80s, the worst downturn in places like Buffalo, Cleveland and Detroit since the Great Depression. Armed with federal cash, the foundry states began recruiting companies from nearby states.
More than one governor condemned the recruiting, called it raiding. It continued unabated until the electric utility Detroit Edison stepped forward in the mid '80s and organized a meeting among the Great Lakes governors.
It's time for the governors on the East Coast to step forward. This is a lucrative region. It doesn't need to give away its cash. by CNB