One mystery solved: Secretary of Finance Aubrey Layne was probably talking about Micron Technology in Manassas on August 17 when he warned the General Assembly about some very expensive economic development incentive package not yet announced or accounted for in the Commonwealth’s budget.
Layne repeated that warning during a discussion of tax policy yesterday with Jim Bacon and me, noting that whatever it was, the state’s incentive cost would be early in the process and the payback in state tax revenue would be years down the line. Traditionally the state’s (very conservative) approach has been to require performance first before the incentives were paid.
Governor Ralph Northam’s announcement today about the $3 billion expansion plans, which include a new company global research facility and should produce 1,100 new jobs, is tied to a $70 million commitment from the state for “site preparation and facility costs.” Additional local taxpayer incentives coming are not yet detailed, and the presence of Dominion Energy in the announcement indicates Micron will be getting special electricity rates – again, details to be announced. Existing employment is about 1,500 according to one story and 1,800 another.
The potential Micron expansion was the subject of a June Wall Street Journal story that then prompted a Bacon’s Rebellion post. Micron publicly flirting with New York and splashing the news in the Journal (does it have a Page Six, too?) to make Virginia jealous apparently worked.
The $70 million cash pledge by the state (it could include tax forgiveness), apparently blessed by legislative leaders through the Major Employment and Investment Commission, would exceed the grants tied to the Rolls Royce location in Prince George County (which has not lived up to promises) and the submarine facilities expansion underway at Newport News Shipbuilding. A previous incentive program benefitted Micron and other semiconductor manufacturers, and the industry is further subsidized by favorable sales tax treatment.
Layne’s point on August 17 and again on August 28 was that the Commonwealth has growing financial commitments at a time of slow revenue growth, although there is hope the national economic renaissance will change that. You will not see him leading any charge to return the extra state revenue being generated by conformity with the new tax laws, especially since Congress put sunsets on many provisions.
The full details of the Micron deal will be revealed in the fullness of time and face the usual gauntlet at the 2019 General Assembly. The company is not a particularly large donor to political causes and is represented at the Capitol by Hunton Andrews Kurth (formerly Hunton & Williams). Is Amazon HQ2 still out there with an even larger ask from Virginia? Only time will tell.