A Big Win for Rockingham County

Pharmaceutical giant Merck & Co. has announced plans to invest $1 billion over the next three years to expand its manufacturing operations in Rockingham County. The project will add 120,00 square feet to an existing 1.1 million-square-foot plant to increase production of Gardasil, a human papillomavirus (HPV) vaccine. The project is expect to create “close to 100 new jobs,” reports the Daily New-Record.

Merck will be eligible for a custom performance grant of up to $7.5 million for storm water and infrastructure upgrades, subject to General Assembly approval. Blue Ridge Community College and James Madison University are eligible for another $2.5 million to create a custom workforce solution. The company is also eligible to receive sales and use tax exemptions on manufacturing equipment, as well as a Major Business Facility Job Tax Credit for new, full-time jobs created.

Bacon’s bottom line: As always, I have questions…
Any time Virginia snags a $1 billion investment, it’s a big win. It’s an even bigger win if that investment takes place outside of the state’s major metropolitan growth centers (although it’s worth noting that the Merck plant has been operating in Rockingham for more than 70 years). It would be useful to know exactly how big of a win the project is from a fiscal perspective after deducting for all the tax breaks and subsidies. Presumably, more information will be made available to the General Assembly than appeared in the Virginia Economic Development Partnership press release.

A second point worth making: This is yet another example of how big-dollar manufacturing investments are not necessarily big job creators. A billion dollars and only 100 jobs? Presumably, many of those jobs will be highly paid, though. As the press release states: the community college/university collaboration will create “a pipeline of biotechnology engineering and computer science talent that will allow the Shenandoah Valley to accommodate the future growth of Merck and other life science industries and manufacturers in the region.”

A final point: How much competition was there for this investment? Were other Merck plants in other states in the running? What kind of pressure was the state under to grant $10 million in infrastructural and higher-ed benefits plus an unspecified level of tax breaks? Virginia Economic Development Partnership press releases often note if other states were in the running. The press release about Merck was silent on that topic.

Update: In a comment appended to this post, VEDP chief Stephen Moret supplies some answers:

Considering just new personal income taxes and sales taxes, the project is expected to result in about $41 million in cumulative new state general fund revenue over the next decade (less $7.5 million for the performance-based company incentive and $2.5 million in higher ed investments), most of which will occur in the first few years due to large construction-related tax revenues. Local revenues and other state taxes will add to these figures.

Virginia was competing with at least two out-of-state locations for the project.

The economic and fiscal benefits of a manufacturing expansion with a certain project scope are similar to those for a greenfield project of the same scope, so there was a good case to offer a competitive incentive offer given the competitive nature of the project.

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14 responses to “A Big Win for Rockingham County

  1. Yep, $1 billion in cap ex to add 100 jobs. That says it all about modern advanced manufacturing. But I’m going to have to go look, because my recollection is that Major Facilities Job Tax Credit had a higher job threshold than that. I would guess this is one where the competition around the country if not the world was real, and is also one where the recent changes in federal tax policy towards overseas income made an impact. Before that Ireland would have been competitive (and perhaps before the hurricane, Puerto Rico.)

    On a tangent, had a recent conversation with the nurse practitioner in the family, now working in oncology. Parents, this is another vaccine your children need to get, and at the right age. It works. It will prevent what is otherwise a very serious set of nasty cancers related to HPV, and not just affecting women. It is good to see that demand for the vaccine is growing.

    • Talk about QUIBBLES, Gentlemen!

      There is a revolution going on in the Shenandoah Valley just as I predicted. It’s only just started, and it will be huge out there in the Valley, and elsewhere throughout the nation in such special places. And you guys with your arm chair experts (save for a chief engineer of the revolution Steve Moret) are missing entire story, a once in a 60 year sea change that will alter Virginia forever. Go Virginia!

      • Well, then everybody out there better suck it up and pay the bill to fix I-81. You don’t have to sell me on the Valley of Virginia, given a family history there that starts before the Revolution. But what is revolutionary about this deal is it may work out to more incentive dollars per job than Amazon. As I have predicted, that’s the pattern now. The barre has been raised.

        • In the Valley, monumental market forces of historic consequences are now flowing together under aligned stars and a full moon for game changing cumulative impacts. One of those forces is I-81. Done right amid enlightened land use policies I-81 properly engineered will become an enormous long term wealth generator that will spin off public benefits far and wide, far beyond its costs.

          This will require local and state politicians and leaders to change their incompetent ways and bad habits. If those leaders can manage to do that, then in that case, Shenandoah Valley will become a fantastically successful model for the nation, just at the renewal of the fantastically successful Ballston Rosslyn Corridor build so effectively and forcefully atop a new subway through its center, became a historic model for the nation. Mark my words.

          • Reed Fawell 3rd

            Given Steve Moret’s comment below:

            While each project for incentive purposes must stand or fall on its own merits, its also true in the long term redevelopment of a region or commercial area in a changing and dynamic market, the cumulative mix of projects, how they work holistically in synergistic ways, for cumulative affect, is of great importance too. Then 2+2+3=11. That’s just for starters, say next 5 years, then things ratchet up into 1st of many new futures and mixes.

  2. Sounds good to me as far as economic development.

  3. Snort. It may never happen. There are abundant class action suits against Guardasil. It’s unnecessary, and it’s dangerous, perhaps even fraudulent. There are lawsuits against the vaccine originating in Japan, Australia, and Columbia. There are multiple class action lawsuits against Merck and Guardasil for deaths. https://www.classaction.org/gardasil

    An excerpt from Children’s Health Defense article:
    “According to the World Health Organisation’s (WHO) VigiAccess database, as of April 09, 2018, a total of 85,329 reports of adverse reactions have been filed regarding the HPV vaccination. These reports include 37,699 reports of nervous system disorders; 2450 cardiac disorders, (including 38 cardiac arrests) 533 reports of Postural orthostatic tachycardia syndrome (POTS); over 3200 reports of seizures or epilepsy, 8453 syncope and 389 deaths.”

    A great deal of ink is being spilt on the poor (corrupt) FDA oversight and questioning how and why so many doctors have been bamboozled into injecting it. ($$$?) and the publicly funded (not pharma funded) Vaccine Injury fund has been hit hard because of it $6M extremely reluctant payouts as of 2014. Unrelated to Guardasil, but affecting Merck, is a case of Merck scientists suing Merck for fraudulent testing on MMR.

    The extraordinary problems with vaccines are big news among regular people if not among government news junkies. Haner – you have lost all of my respect. By the way, all of this information is easily available. There is more to this story than you are telling.

    If I were Rockingham County and JMU, I’d not count those chickens yet. Further, I’d question the negative affects on the environment, and the health and well-being of local citizens working in a Merck facility if Merck moves into the neighborhood.

  4. One wonders in an era of urban “agglomeration” , why places like Rockingham become more favored for companies -it just seems the worst of all worlds in terms of the number of qualified candidates for the positions. I DO KNOW that the existing MERC facility does have an approved NDPES discharge pipe into the Shenandoah RIver and using an existing approved discharge may be easier than getting a new location permit.

    In terms of the vaccine itself – as we see in the news – there is hardly ANY vaccine that does not have opponents and many of the opponents are opposed to any/all vaccines in general. I wonder about this one and I worry that in the age of the internet – we have a significant number of folks who do not believe science and who believe the government is involved in conspiracies… it’s a problem.

  5. “It would be useful to know exactly how big of a win the project is from a fiscal perspective after deducting for all the tax breaks and subsidies. … How much competition was there for this investment? Were other Merck plants in other states in the running? What kind of pressure was the state under to grant $10 million in infrastructural and higher-ed benefits plus an unspecified level of tax breaks?”

    Considering just new personal income taxes and sales taxes, the project is expected to result in about $41 million in cumulative new state general fund revenue over the next decade (less $7.5 million for the performance-based company incentive and $2.5 million in higher ed investments), most of which will occur in the first few years due to large construction-related tax revenues. Local revenues and other state taxes will add to these figures.

    Virginia was competing with at least two out-of-state locations for the project.

    The economic and fiscal benefits of a manufacturing expansion with a certain project scope are similar to those for a greenfield project of the same scope, so there was a good case to offer a competitive incentive offer given the competitive nature of the project.

  6. Jim, I understand your question about a $1 billion investment in a facility that provides just 100 new jobs. Why no similar comment on the $2 billion pumped storage project boosted by the GA that will create just 30-40 new jobs and require $8 billion in added energy costs for about two-thirds of Virginians?

    That same investment made in more cost-effective energy solutions would have much greater benefit to Virginia. Yet, I heard that a recent conference in Roanoke sponsored by the state Chamber of Commerce has touted the benefits of this project. It makes little sense from an energy system perspective, but it does provide $4 billion in profits to the utility.

    Why the silence on this one? It’s not a question of doing this or not. It is a question of whether a similar investment in more useful technology would yield far greater benefits. But no one is asking that question.

    • I hadn’t heard any news about the pumped storage project since last year. I mean nothing. I assumed that it was put on the back burner.

      • Agreed. If the Chamber event focused on that, it was wasting time and energy, blowing smoke up SW Virginia’s keister. I don’t think it is modeled in Dominion’s IRP at all, although that’s not controlling.

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