Questions about the Volkswagen USA Deal

The relocation of the Volkswagen of America corporate headquarters from a Detroit suburb to Fairfax County is an undeniable economic development coup for Virginia — Northern Virginia in particular. The deal will bring 400 high-paying jobs to the state. Average annual salary: $125,000, high even by Northern Virginia standards. Another major headquarters adds to the region’s prestige as a world-class business center. And you can’t buy the kind of press you get when CEO Stefan Jacoby says (to quote the Detroit Free Press), “We are a company of innovators and bold-thinking people who want to challenge the status quo and we know we will fit very well here.” By “here,” he meant Northern Virginia.

But the deal does raise questions. The Commonwealth of Virginia is providing $6 million in incentives to land the $100 million investment. That’s chump change compared to what the state spends to bring industry to other parts of the state, and NoVa economic developers can justifiably argue that it’s time they get their share of state largesse.

But here’s the rub: Does it make sense for Virginia to subsidize Volkswagen’s relocation when the creation of 400 jobs to the region’s super-heated economy can be met only by the infux of new residents to the state? According to the Virginia Employment Commission, the region’s unemployment rate stood at 2.3 percent in July. That’s not unemployment, that’s a labor shortage. (Every economy has a irreducible minimum of workers in transition — students leaving schools, moms rejoining the workforce, laid off workers transitioning to new jobs, etc.) Those 400 jobs means 400 people moving into Virginia — even more, if you include the multiplier effect created by their spending in the local economy.

Fairfax County will enjoy a nice $100 million boost to its tax base, yielding roughly $900,000 a year in tax revenues. But where will the newcomers live? Will they live in Fairfax County? If so, what will the county incur in additional public-service obligations? Conversely, what if some VW employees choose not to live in Fairfax? How far will they have to drive to work, and how much stress will they place on an already overloaded transportation system? What will the state’s financial liability be accommodate another 400 drivers on state roads?

Another question: Dominion Virginia Power is projecting that Northern Virginia will begin experiencing brownouts within four years. Does the state need to be subsidizing the influx of 400 more residents to put even more strain on the electric power grid?

Look, it’s a free country. If Volkswagen USA wants to move to Virginia, that’s great. But under the current circumstances, I wonder about the wisdom of the state inducing the company to move with $6 million in subsidies. Maybe the high salaries paid to VW executives will represent a net gain to the taxpayers of Virginia. Maybe. But we don’t know. If the state has made any cost-benefit calculations, it hasn’t made them public.

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22 responses to “Questions about the Volkswagen USA Deal”

  1. Anonymous Avatar

    I just love you Libertarian, conservative, land use fanatics. NOVA lands Volkswagen USA — a major coup by anyone’s estimation, and you start wringing your hands. Is the state paying too much? Will the power company have enough power? Will there be enough toilet paper?
    Get out of your frigging basements and get real. Breathe some fresh air. Stop chattering amongst your little cabal of like-minded fruitcakes. AnY region would love to have the German carmaker. Be grateful for once.

  2. Jim Bacon Avatar

    Anonymous 8:50, I will refrain from calling you names, as you did me. I’ll just suggest that you read the first paragraph of my post. Of course landing VW is a coup. It’s just not an unalloyed blessing — and the fact is, other than the state’s $6 million subsidy, we don’t know what the costs will be. Northern Virginia’s human settlement patterns are so dysfunctional right now that any good news may be bad news in disguise.

    I’ll address the issue in greater depth in the next segment of my “Economy 4.0” series.

  3. E M Risse Avatar

    As we point out in yesterdays post on this topic, no public money should be spent to induce jobs that do not contribute to the evolution of Balanced Communities.

    Uses such as this are drawn to large, New Urban Regions and there are places for them in the National Capital Subregion but no one knows the cost of putting VW in that location as Jim Bacon points out.

    This may add tax base but who says some existing company would not expand in that location?

    Jim Bacon asks the right questions.

    I just wish there was a way to insure those concerned with the trajectory of civilization (aka, land use fanatic and fruitcakes who live in basements) would get the air that is left to breath when the cumulative result of these sorts of self-destructive actions come home to roost.

    I suspect, however, the Business-
    As-Usual (aka, oligarch, squandering, Mass OverConsumptionist) will want a fair share of what air and other resouces are left when citizen realize the Shape of the Future.

    Anon 8:50 is a perfect example of the 2o% / 20% / 60% Rule. See GLOSSAY. He/She is still willing to spout flat-earthism, al be it as “Anon.”

    Oh by the way, WaPo has a double truck ad announcing both VM and Audi are coming to the Northern Part of VA.

    Anyone care to wager that WaPo will raise the important questions that Jim Bacon did?

    “Rise and Fall of the Fourth Estate as Positive Influnce on Civilization” coming soon.


  4. Anonymous Avatar

    Please explain to me that how adding 400 well-paying Volkswagen USA jobs to Northern Virginia is somehow going to upset patterns of human settlement.
    I just don’t get it. How do you know where they are going to choose to live. They might not live in an area that you deem appropriate, but then again, they might. Soooo? If you take your argument to its logical conclusion then we should shut down all of NOVA to any newcomer.

  5. As a resident of Fairfax County, I am glad that the county is an attractive place for companies like VW to locate. However, as a resident of Virginia, I agree that those 400 jobs would have done the state more good elsewhere in Virginia. I’ll assume that even Gov. Kaine sees this. Therefore, I further assume that he offered the money to VW to locate in Fairfax County because he couldn’t persuade them to locate in a more needy region of Virginia. It was Fairfax County or somewhere other than Virginia. If these assumptions are right the question is less about VW liking Fairfax County and more about why they wouldn’t like other areas of Virginia just as much. Is it the schools? The airports? Hard to imagine that VW feels a big need to be close to the federal government.

    The $6M price tag is very interesting. Does it offer good cost / benefit? Maybe.

    Let’s just look at the salaries.

    $6M / 400 = $15,000 per job.

    I assume that local and state government takes 10% of salary in various taxes (state income, real estate, sales, gas, etc.).

    The average salary is $125,000 per year.

    Therefore, the average “tax take” is $12,500 per year.

    Unfortunately, we have no idea as to what each of these jobs cost in state and local services. We have no idea because the politicians hide that information from the electorate.

    But, for the sake of argument, let’s assume that the government operates along rational economic lines.

    Let’s view the $6M as a loan by Gov. Kaine to VW NA. In return for the loan, VW NA will locate 400 good jobs in Virginia. In addition, VW will pay back the loan through the surplus revenue generated above and beyond any marginal costs the state and local government incurs in support the people associated with those jobs.

    Let’s further say that the loan must be repaid in 8 years and the interest rate is 7%.

    How big does the surplus have to be?

    I get around $2,500 per job per year.

    I am doing these calculations “quick and dirty” so I’d be happy to hear from anybody who has a better calculation.

    So, Kaine’s $6M for 400 jobs at $12,500 “tax take” per year works if the marginal cost of those jobs is $10,000 per year.

    And you know what?

    Kaine knows that people making $125,000 per year in Fairfax County pay more in taxes than they get in services.

    So, his $6M “loan” may make sense after all.

  6. Anonymous Avatar

    Re: Why NOVA instead of other Virginia spots for VW:

    Look at it from their perspective. This is the USA HQ. The people are mostly likely top management — highly educated — multi-lingual — sophisticated. They want to be near an international airport, like Dulles, so they can easily get to Germany. Or, NYC for a day hop.
    Not being NASCAR types, they probably want good schools, decent restaurants, a cosmopolitan environment, a place where you can see tier one opera and hear world class orchestras and national-level sports. They also probably want a place where they have have interesting and sophisticated dinner-party conversations.
    Obviously NOVA meets all of those requirements. Radford doesn’t. Bristol doesn’t. Danville doesn’t And (dare i say it?) Richmond doesn’t.

  7. Toomanytaxes Avatar

    Where did the statement “Fairfax County will enjoy a nice $100 million boost to its tax base, yielding roughly $900,000 a year in tax revenues” come from? Is that sales tax revenue? Real estate taxes? Could some one help me understand? Thanks.

  8. Toomanytaxes:

    I wondered about that too. I guess it’s a real estate tax calculation. The percentage is about right for Fairfax county.

  9. Anon 2:17 –

    I definitely buy the airport argument. Maybe Virginia needs to look at the airports across the state and ask whether they can be expanded in order to draw more companies like VW.

    I might understand the cosmopolitan argument – especially if these executives are European.

    Decent restaurants? Less likely. You should try the White Spot in Charlottesville before denigrating the restaurants outside of NOVA. Very classy. Perfect for snooty Europeans.

    Interesting and sophisticated dinner conversations? You must be eating dinner with different people in NOVA than I am. Man, the people around here are boring. Their job, their kids, their job, their kids…. I don’t know anything about NASCAR but I’d rather talk about that than hear about Buffy getting into Georgetown or Hubby becoming Assistant Deputy Under Secretary of Labor for the 10th time!

    But you really lost me on the national-level sports. Is that the Nationals? Or the Redskins? I love both teams but if people are moving here to watch professional sports they better go check the won – lost records again.

    I hear Jacksonville is having a hard time with attendance with the Jaguars. Maybe move them to Richmond? The Richmond Rats? At least I’d have something to watch after the Redskins drop out of playoff contention by the 10th game!

  10. Jim Bacon Avatar

    TMM, I was referring to property taxes. The current rate in Fairfax County is $.89 per $100.

  11. E M Risse Avatar

    Anon 11:10 I know that you do not understand.

    As an educator and writer, that bothers me a lot.

    I assume your inquiry is an honest one and if so, it indicates there is much work to be done.

    Unfortunately, we do not have time to tailor a response for every question such as yours.

    Perhaps you can get yourself on the road to understanding by becoming conversant with the causes of the Mobility and Access Crisis and the Affordable and Accessible Housing Crisis as well as the barriers to a fair allocation of location variable costs.


  12. Larry Gross Avatar
    Larry Gross

    being the resident contrarian and after reading the Wall Street article about VW leaving Detroit once must ask … if Detroit should consider itself better off because VW is leaving (only 1/2 by the way)….

    so … is Detroit better off with their infrastructure and housing challenges with Detroit exiting stat
    stage right?

  13. Larry Gross Avatar
    Larry Gross


    is Detroit better off with VW exiting stage right?

    (damn laptop!)

  14. Anonymous Avatar

    Reverse outsourcing at its finest. No one seesm to have a problem when it benefits us but when companies determine to leave US and outsource overseas folks get annoyed. You either support outsourcing in principle or you don’t. Fact is VW just outsourced its HQ.

  15. Anonymous Avatar

    Having a decent, seviceable airport in SW VA would do a world of good in terms of enticing businesses to SW VA. Unless you drive here, getting to SW VA is ridiculous.

  16. Anonymous Avatar

    “Maybe Virginia needs to look at the airports across the state and ask whether they can be expanded in order to draw more companies like VW.”

    Funny, I had that conversation with Virginia, and the response was pretty much, come back and see us after you start your airline.

    Viginia has several nice airports, but none of them have usable air service. (I don’t know about SW VA, it wasn’t in our plans.)

    Expanding the airport without the air service is putting the cart before the horse, but you need the travelers to support the service, and that means you need the businesses to provide the travelers.

    This is the kind of thing that government can do and private enterprise cannot. All four of those things need to be in place together, and they have to be maintained for a considerable period of time before they become self supporting.

    No business can afford to support all four sides of this box long enough to make it happen. As a result, businesses that need the stuff go where the stuff already exists, and where it is already crowded and expensive.


    I think VW only outsourced its American HQ. Outsourced from Detroit, anyway.


  17. Anonymous Avatar

    Anon 8:50

    Anons are not well tolerated here, unless they are respectful or pseudonyms from the right side of the tracks. It helps if they quote chapter and verse.

    Name calling isn’t accepted either, unless it is in the third person.

    ALL CAPS SEEM TO BE OK. Even though elsewhere it is considered shouting and rude.

    Thewbest way to have fun here is to state an INCONVENIENT TRUTH. Then watch some people rotate ninety degrees from reality as they attempt to put the right spin on it.


  18. Anonymous Avatar

    I asked you to support you position On Volks USA and you give me this response: that I should study “the causes of the Mobility and Access Crisis and the Affordable and Accessible Housing Crisis as well as the barriers to a fair allocation of location variable costs.”
    With all do respect,can you please translate? You may be short of time, but I, too, am a working professional and do not have time to wade through this obscure gobbleygook. I certainlky don’t have time to take a graduate course in land use. If you can not state and defend your opinions clearly, you really should not be making them. This isn’t a college seminar.
    Cheers, Anon.

  19. Anonymous Avatar

    You are so right with your observations on blogger interplay. Bacon’s Rebellion does seem to have a subtle, two-tiered rule system. Right wingers have the advantage and can say or insult whomever and whatever they want and it is perfectly OK. Anyone who rebutts is a name caller.
    There are several levels of dogma on this blog:
    (1) The anti-growth crowd, which requires you to laud the “Patterns of Human Settlement” or whatever to show that you are a True Believer in the Rissean philosophy.
    (2) The knee-jerk anti-tax crowd. Any attempt to raise public money for badly needed items like roads, schools, universities, bridges and highways is evil.
    (3) Big government is out to get us. Anything public is evil. Some of Virginia’s best treasures, such as UVA or W&M, must privatized.
    (4) The MSM is an incompetent, unenlightened, venal body intersted only in cheap profits. Some truth here, but the bigger and better MSMs do take the time to research issues before they blog, unlike some of the bloggers on Bacons Rebellion.
    (4) The social issues wingnuts. These whackjobs are homophobic, xenophobic and Yankee-phobic. They love to lecture on cultural “subsets” and of course, they get to decide who belongs in what “subset.” Their leadership seems to reside in Poquoson.
    Your advice to simply state an inconvenient truth and watch how they react is wonderful.Thank you.

  20. Anonymous Avatar

    face the reality of a global economy – Communities need to grow or perish. Before 1850, economic hubs grew primarily around ports – Norfolk, Baltimore, Cape Charles, Reedville..and countless others, most of which are now in decline; from 1850 to the early 1900’s, railroad hubs created a 2nd nexus for growth, then in the mid to late 20th century, highway tranportation added to the mix and created new centers of economic growth while those not on interstates perished (witness Rt 460, 360, Rt 1, Route 250, Rt 29. With the rise of the global economy, centers with airtransport, intellectual capital appear set to dominate for the next X years (I beleive this will be for at least a century). Because of the economics (a major airport needs a certain minimum volume to induce airlines to offer routes), Virginia, indeed the Mid-Atlantic region will only support one major world center – and we are fortunate that the DC Metro area is it. Instead of begrudging Northern Va its good fortune, southern Virginia needs to appreciate and encourage it – The General Assembly (and far right republicans spend more time on hot botton social issues that they beleive will motivate their voters to re-elect them than they do on pragmatic problems such as transportation and community development). Va should embrace opportunities such as this – but impose the taxes/fees needed to sustain it and fund associated infrastructure improvements. If I-95 was not always jammed, the commute to Dulles would be 90 minutes – sufficient to enable Richmond to participate in this growth. Dense Communities that are well planned and that have adequate transportation can flourish without the negative aspects mentioned – witness Arlington and the impact that Metro, combined with well planned high density around mass transit – that has been a tremendous success. The bottom line is – don’t try to “Petersburg” or “Danville” (two communities without growth)Northern Virginia – instead, embrace the opportunity, but expend the resources necessary to keep it a world class success.

  21. Anonymous Avatar


    Where did you get the stat,”Average annual salary: $125,000″? I am in the process of interviewing for a position at their new Herndon office and want to be sure that the offer (if I do receive one) is competitive. I would like to have this stat in my back pocket if necessary.


  22. Jim Bacon Avatar
    Jim Bacon

    Anonymous 2:19, I made a quick check but could not find the original citation for that figure. It’s not in the official Virginia press release (which you can find on It might have been on the Detroit Free Press article (the link appears not to be working anymore) or other early press coverage… You might check the Fairfax County Economic Development Authority press releases. Good luck.

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