Development Grants Performance Data

About ten days ago during a discussion of Virginia economic development programs I posted a link to the annual report of the Virginia Economic Development Partnership, but I knew there was a something out there with even more detailed performance data.

In response to a legislative mandate pushed by a former legislator, Jimmie Massie of Henrico, VEDP has also been publishing this more detailed annual report with performance data on each of the various programs, including programs in other departments.  It’s called the HB1191 Report after Massie’s bill.  The November 2017 version is far more detailed than the three previous ones, which you can find here.

Pages 10-11, for example, summarize the Commonwealth’s Development Opportunity Fund (previously the Governor’s Opportunity Fund.)  The 139 projects over five years were approved for $87.5 million in grants but received only $60 million.  Of the promised 22,000 new jobs, only 4,000 had appeared by the end of the reporting period.  But the jobs and capital investment pledged during the first year, 2013, apparently were in place by 2017.

Projects play out over a long period of time, and a grant that is authorized might not be paid in full or paid when planned.   Having seen the process from the inside myself, that is to be expected.  Big investments and plant expansions will take time and the ramp-up may be slower than hoped.  One project I worked on didn’t happen at all, and incentive cash had to be repaid (this was in the years before this report – don’t go hunting for it).

But often the grants come only after performance.  The Enterprise Zone programs (pages 25-28) provide benefits after the capital investments are made and the jobs created, and the results there rival the better known Opportunity Fund:  hundreds of companies added more than 7,000 jobs and $1.2 billion in capital improvements, satisfied requirements to maintain existing jobs, and received in total about $65 million in direct cash benefits.

There are reports on 18 different programs and the final pages include long lists of individual company awards under each of them, from some of the state’s biggest names to new firms setting up shop inside enterprise zones.

In a letter at the very end of the 142-page document, the director of the Joint Legislative Audit and Review Commission provides both some praise and some criticism of the report.  He notes the improvement over previous iterations, but asks for additional calculations on rates of return and economic impact.  There are still too many blanks on some programs, and it’s not always clear why.

Each of the programs has its own active constituency that will charge Capitol Hill to defend them, but none should be immune from regular scrutiny.  For example, if there hasn’t been a grant under the Major Eligible Employer (MEE) program since 2006 (page 16), why is it still on the books?

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2 responses to “Development Grants Performance Data”

  1. LarrytheG Avatar

    re: ” Of the promised 22,000 new jobs, only 4,000 had appeared by the end of the reporting period. ”


    ” hundreds of companies added more than 7,000 jobs and $1.2 billion in capital improvements, satisfied requirements to maintain existing jobs, and received in total about $65 million in direct cash benefits.”

    not quite clear but perhaps a better metric for “reporting period” is how many jobs were supposed to be created – in that reporting period – realizing that perhaps that data is not collected – but at any rate – it sounds bad when it says only 4000 out of 22000 promised were provided

    As far as I am concerned – the majority of the grants and incentives should be after-the-fact rewards rather than before-the-fact money based on “promises”

    The other thing to know is that many of these ventures are crap-shoots – not money-in-the- bag guaranteed jobs. Literally – Govt …IS picking winners…or hoping to and no business – and no industry – is immune to evolving competition in the economy. One day – a patented widget is the greatest thing since sliced bread – and the next day – it’s superseded by the next big “thing”…

    All economic incentives are really supposed to be is a States efforts to get it’s SHARE of new jobs being created in the economy – and that in itself is more an art than a science… in terms of where companies want to locate in the first place. Things that the State have no control over – things internal to the companies own strategic plan may send it to one state and away from another.

  2. smoretva Avatar

    Sometime in 2017, VEDP started rating the company risk associated with every economic development project being considered for incentives, with each company receiving a low, moderate, or high risk rating (based on financing, debt ratios, etc.). For substantially every projected associated with a company rated as a moderate- or high-risk firm, incentives are provided on a post-performance basis (i.e., incentive payments are made after an equivalent amount of state tax revenue has been received). For low-risk firms, incentives typically are provided early in the project schedule (typically after construction/capex is complete) since the intent is to maximize the impact on the company site-selection decision (providing incentives later would mean that their impact on the decision is diluted, since companies often base investment decisions on an NPV with an 8-10% discount rate). With this new approach in place, Virginia may not win some projects that we previously would have won, but neither will we place taxpayer dollars at undue risk.

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