An Explanation, Please, for $2 Million Subsidy to Relocate Jobs from Roanoke to Norfolk

Shuttered: Norfolk Southern's regional office in Roanoke

Shuttered: Norfolk Southern’s regional office in Roanoke

About that $2 million subsidy from the Governors Opportunity Fund (GOF) to support the relocation of Norfolk Southern jobs from Roanoke to Norfolk… The Roanoke Times is asking whether it violates state law.

On the one hand, the newspaper reports, a 2006 law bars the use of GOF grants intended to underwrite the move of jobs from one Virginia community to another, as Norfolk Southern is doing in in the transfer of roughly 165 jobs from the shuttered regional headquarters office in Roanoke to the headquarters facility in Norfolk. On the other, the law provides an exception in rare instances justified by letter from the state Secretary of Commerce and Trade.

Arguably, there is an extenuating circumstance in the Norfolk Southern deal. The railroad company did consider relocating employees to Atlanta. State and local subsidies tipped the deal in favor of Norfolk. But, as of Friday, neither Senate Finance nor House Appropriations committees had received such an explanation from Commerce Secretary Maurice Jones.

Sen. Emmett W. Hanger Jr., R-Augusta, co-chairman of the Finance Committee, said, “I need an explanation of what went on, since I don’t have clarity. … The intent of the law is, of course, you shouldn’t [subsidize the relocation of jobs from one Virginia locality to another] except in rare circumstances. Then, in that rare circumstance, you need to justify it through appropriate channels to let people know what you did. It does seem like on the surface there, that they haven’t complied with that in a timely manner, and it may not be appropriate.”

Bacon’s bottom line: Here’s the key question for which the public has no answer: How seriously did Norfolk Southern contemplate moving the jobs to Atlanta? We can start by asking which business functions were being moved. Could those business functions have integrated into Norfolk Southern operations as efficiently in Atlanta as in Norfolk? How expensive was Atlanta office space compared to Norfolk office space? How did the workforce characteristics compare for purposes of recruiting? What other factors might have come into play? Virginia taxpayers need to know that the railroad company wasn’t, well, railroading the state into coughing up money unnecessarily.

I expect the McAuliffe administration to demonstrate that it has command of all the relevant facts and to be able to make a strong business case that the subsidies were necessary to keep the jobs. We have seen in the case of Lindenburg Industry LLC that the dispensation of GOF dollars has been loosey-goosey at times. The fact that the administration has provided no explanation for the Norfolk Southern deal does not inspire confidence.

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7 responses to “An Explanation, Please, for $2 Million Subsidy to Relocate Jobs from Roanoke to Norfolk

  1. Right. These guys can’t even get a straight answer on health care and the Va. Dept. of Health Professions. Why would they think they get this right, morally and ethically and legally?

  2. It works out to about $12K+ per job. If the average cost per employee including benefits was $65K/year (my guesstimate) NS saved about 1/5 of each FTE for the year.

    If it prevented those positions from going south it looks to be a good deal all around: NS, VA, and Norfolk.

    As a stockholder, seems a minor issue to me.

  3. I think it would have been unconscionable for McAuliffe to gamble and lose and am fine with him going too far to keep the jobs than not enough , especially if there were multiple areas of uncertainty in play.

    I just don’t understand this Monday morning nitpicking when it seems to have some partisan tint to it – i.e do not recall this level of scrutiny when McDonnell was doing his thing.

    And even then I do not see how most ordinary folks without access to the particulars, much less expertise in those areas would be doing anything worthwhile anyhow – just nosing around and stirring a pot…

    Don’t get me wrong -I do believe we do need transparency – but I support it across the board – and more importantly – across partisan lines… a single standard for all – not ones that shift according to one’s politics – which to my way of thinking – we have way too much of these days…

    Perhaps if we had that same heightened level of interest, we might have saved McDonnell from Anatabloc, eh?

    And when we talk about the GOF – how about we also talk about the TROF – “… From July 2007 until October 2014, 22 localities defaulted on Tobacco Region Opportunity Fund (TROF) grants or owe the Virginia Indemnification and Community Revitalization Commission money”

    let’s get the politics out of this –

  4. It is usually hard to evaluate these things without more of the details. For example, how long did NS promise to keep the jobs in place there, and is there a claw back provision should some or all of the jobs go away after all? The longer the promise, the better the deal. What impact does keeping those jobs in Virginia have on the corporate income tax paid by the company to the state, if any? Don’t forget that payroll is major factor in calculating apportionment of taxes between states and 165 management jobs could have an impact on that. Many moving parts here are not visible. We may never see them. Hanger should, though..

  5. From the 2015 annual report:
    “In 2015, we closed our Roanoke office building and consolidated or
    relocated approximately 500 positions.”

    I couldn’t find how many of the remaining 335 odd were either consolidated or moved to Atlanta or other places.

  6. well, the plot thickens…. “….. In a letter sent to the chairmen of the General Assembly’s money committees on Aug. 28, 2015, Jones called the state grant “a justifiable exception” to Virginia’s policy against issuing state grants to help a private company that has cut jobs in one community while simultaneously expanding in another within the state.
    Last week, a Senate Finance Committee co-chairman and a House Appropriations Committee staffer said they could not locate any copies of the justification letter, ”

    ” Members of Roanoke Valley’s legislative delegation were scratching their heads over the weekend over whether Jones had notified the General Assembly of the deal and, if he had, why they hadn’t heard about it.
    “I would have liked to have known about it,” said Sen. John Edwards, D-Roanoke, who said he heard about the deal in the newspaper.”

    http://www.roanoke.com/business/news/secretary-of-commerce-notice-of-ns-grant-was-sent-last/article_8a4e8130-1642-59f7-aba3-f74c26ec34a3.html

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