Whatever happened to sustainable industries?

For better or worse, here’s a story I did for Richmond’s alternative newsweekly, Style Weekly. The topic involves how lots of bets go bad when it comes to economic development.

A few examples:

Republican Governor George Allen went heads over heels with Motorola showed interest in two silicon chip making plants in the Richmond area back int he 1990s. One was finally built with about $80 million in public goodie money. Well, Qimonda, a German firm, is going through its death throes and just about everyone at the Henrico County facility faces job extinction.

Democratic Governor Mark Warner went heads of heels when Wachovia Securities wanted to move after merging with Prudential Securities about a decade later. The goodie basket was opened again. Well after staying in downtown Richmond for maybe four years, the firm merged with brokerage A.G. Edwards and split for St. Louis. You know the rest of the story — Wachovia is now owned by San Francisco-based Wells Fargo after it got screwed by buying up a lot of toxic, subprime mortgages.

There’s plenty more. Here’s the URL:


Let me know what you think.

Peter Galuszka

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19 responses to “Whatever happened to sustainable industries?”

  1. Anonymous Avatar

    I have said it before and I will say it again:


    Though I will note there is a difference between government incentives like green/historic tax rebates and government hand-outs.

  2. Any guesses to who made the previous comment?

  3. The arts center will be a real dud too as it opens to empty consumer wallets & programming yawns in the fall. Watch out for the stadium boondoggle and who knows, maybe a monorail will save the region?

  4. It seems to me, more and more, government employees are being outfoxed by the corproate types. Companies take the economic development money then move out-of-state? Shouldn’t that money have come with some strings attached? Like – if you leave you have to give us back our money? As for companies that go bankrupt – that’s an unfortunate consequence of free market economics (well, kind of free markets as RH would point out).

    The problem I have with government economic development spending is that government doesn’t get enough of the upside. The economic development funding ought to let the state “buy in” to the company. Something like stock warrants. If things work out and the company prospers, the governemnt converts the warrants, sells the stock and cashes out. I think this is what the feds did with Chrysler in the late 70s and the feds ended up making money. I believe this is what the CIA does with In-Q-Tel. I believe that the Center for Innovative Technology in VA runs a small venture fund that has made money.

    If the state is going to invest my tax money in economic development they can at least do it wisely.

    Maybe this is already part of these deals. Maybe Virginia has warrants in VW and/or warrants in Flour and Transurban.

  5. Anonymous Avatar

    I’ve been pondering whether a state that abandoned economic bidding in favor of running itself and its institutions efficiently and kept taxes low, but broadly based might do better in the long-run attracting and keeping businesses.

    I went to a meeting last evening on Fairfax County’s budget problems. An elected official, who shall remain nameless said, now that we are in a huge hole, we can probably get the County and the Schools to look at sharing various support services. Amazing! The economic hole would be smaller today had those steps occurred years ago.

    In some ways, the economic hard times are good. Fairfax County is even proposing to raise fess substantially for land development and zoning services to recover more of their costs. Again, had those fees been raised similar to fees for recreation facilities were raised, the economic hole would be a bit smaller today.

    I got a chuckle from the Virginia Home Builders who decried the fee increase and urged the County to cut staff, whereas the Fairfax County Chamber of Commerce and the Tysons landowners have urged the County to hire more staff to process their development requests. Maybe Mike Toalson and Bill Lecos will arm-wrestle to settle their dispute!


  6. Anonymous Avatar

    I have never been ablke to figure out what the Center for Innovative Technology does. Do you know?
    Peter G.

  7. Regardless of past, present, and future governors, it is expected that they will advocate to solicit any/all business that will provide jobs and sustain Virginia’s economy.

    Notice how the mindset is changing from “why should we offer these companies incentives” to ” Virginia, especially Richmond, is getting hammered as companies – as they say “seek other opportunities”.

    So.. we want the incentives back if they leave?

    I think some companies – see government – State government especially as a ‘leech’ and that the incentives are a little like inviting in a new host for the leech to suck on.

    so.. it’s a mutual relationship in terms of what the other gets out of the deal.

    Companies have no loyalties other than to preserve themselves and provide equity to the owners.

    That’s what companies do.

    In this country, we call them incentives, in other countries, they call them bribes.

    The net effect is the same fro the company’s point of view.

    “How much will it cost me to operate in this county, state, country?”

    “Can I make a profit producing my goods and services after paying expenses – some of which are ..essentially payments to the county, state, country?”

    I don’t think this is good, bad or indifferent.

    It is the nature of the beast and it is up to the citizens of the County and State to do what is in their best interests.

    and if it is in their best interests to pay a “bribe” for a company to come and/or stay there – then the relationship has mutual benefits – for as long as it continues to serve both needs.

    I don’t think Companies “owe” the locality anything in return for an incentive in terms of how long they stay but if that is an issue then why not structure the incentives over time?

    That’s in essence what a TIF is.

    In Fredericksburg, they offered Kalhari “incentives” which boil down to – annual tax rebates.

    Think about this.

    Why do we tax companies to start with – and then turn around and offer “incentives” which.. if you think about it is nothing more than a promise to not tax them as much as was intended.


    Why not – not tax them to start with and be done with it?

  8. James Atticus Bowden Avatar
    James Atticus Bowden

    Sustainable industries or competitive industries?

  9. Anonymous Avatar

    J.A. Bowden
    I think both. To be sustainable, you need to be competitive.

  10. Anonymous Avatar

    And profitable.

    this is the same message I keep trying to send to the enviros and the greens: they need a model that is profitable, competitive, and equitable.


    Fairfax proerty taxes are higher than in Stafford. Does this give Fairfax more money to use to lure businesses?


  11. Anonymous Avatar

    The closeness of Congress and the federal agencies, most especially the Pentagon and the CIA, are what brings most businesses to Fairfax County.

    I suspect that while it generally positive to bring Hilton Hotel’s HQ to Fairfax (for as long as it is a separate entity), the real impact on Fairfax County revenues would be quite small.

    What might have a greater impact would be substantial economic growth in RoVA, which, in turn, would bring down the amount of Fairfax County tax dollars dispersed outside the county. If Fairfax County received 50 cents on the dollar from Richmond, we’ve be on Easy Street.



  12. TMT is correct IMHO.

    Virginia might well have an economy like North Carolina or West Virginia were it not for it’s proximity to the Feds and to the Navy Ports.

    So Virginia and RoVa believe that the State is entitled as much to the largess as NoVa jurisdictions who in some folks eyes are no better (or worse) than RoVa Economic Development efforts.

    NoVa’s proximity is a windfall and a curse – at the same time – depending on what part of that Geographic elephant you are chewing on….

    Do we have – an objective accounting – dollars and cents of how much Fairfax gets “fleeced” and how is this fleecing accomplished?

    Is it that Fairfax gets shortchanged on the return of Income Tax or Sales Tax dollars and in what proportion as compared to RoVa counties?

    I thought Groveton was going to spin up a website that got into all this stuff.

  13. “So Virginia and RoVa believe that the State is entitled as much to the largess as NoVa jurisdictions who in some folks eyes are no better (or worse) than RoVa Economic Development efforts.”.

    Larry, Larry, Larry…

    Somehow you just can’t force yourself to differentiate between jobs and handouts. If you want poor parts of RoVA to be like NoVa then you should break up the state government in Richmond and disburse the jobs to needy parts of RoVA. I’d be all for that. Once done, it would be unfair of me to say that the areas receiving the state jobs were getting handouts. Instead, I’d say that they were earning their wages by working for the state.

    “Do we have – an objective accounting – dollars and cents of how much Fairfax gets “fleeced” and how is this fleecing accomplished?”. No. We have anecdotal evidence and data from the SoQs. However, every comment I’ve ever read from every semi-informed source indicates that NoVA in general and Fairfax in particular pay at least 2:1 in taxes vs. benefits received. Many estimates are far higher than that. I have written letters to NoVA politicians asking that they provide this accounting, I have asked NoVA politicians in person to provide this accounting, I have posted the request on their blog sites. None has ever addressed the question. They routinely either fail to answer at all or duck the question with an obtuse answer about “from each according to his ability, to each according to his need”. The simple fact is that accounting will not be provided until some area in NoVA is in financial crisis and challenger politicians figure out that they can win elections against incumbents by providing the facts and asking what the incumbents have been doing. This is a perfect tact for the Republicans in NoVA but, frankly, they are too stupid to do it. They’d rather bore 85% of the electorate with rants about gun rights and illegal immigration while losing each and every election. Somewhere in the roasting fires of hell Harry F. Byrd must be laughing.

  14. “Groveton,
    I have never been ablke to figure out what the Center for Innovative Technology does. Do you know?
    Peter G.”

    Not really. I heard the head of CIT talk at a political breakfast in NoVA in January. He talked about the state venture fund that CIT ran and how it was not only helping to stimulate companies which add jobs in Virginia but making money to boot. Yet there is this big building on the Dulles Toll Rd that houses the CIT. It’s way too big for a VC fund. The pros on Sand Hill Rd in Silicon Valley operate in vastly smaller office sites. So, they must be doing something more than running a relatively small venture fund. Someone once told me that they provided office space to promising companies out of teh CIT building but that was a while ago.

    One thing for sure – technology based economic development works best when it is associated with a university. For example, SRI International is the right idea.


    I have lived in Northern Virginia essentially all of my life. I have been to SRI International many times and purchased intellectual property from SRI. I could walk to CIT. I have never been in the building.

  15. “I thought Groveton was going to spin up a website that got into all this stuff.”.

    My plans to retire in April have been put on hold. Our CEO asked me to stay on and continue to run the division I have been running for the last 4 1/2 years. Given what I owe both my CEO and my company – I had to say “yes”. I know it sounds odd to write about keeping a job out of duty in a recession when many don’t have jobs at all. I have been good with the money I earned over the years and could walk away if I wanted to. But my job is still interesting (maybe too interesting in these economic times) and the boss wants me to stay. So, my plans to become the next Jim Bacon (or, at least a faint shadow thereof) are deferred. In addition, a few more years of work might finally land me that house on Kiawha Island or on the Chesapeake Bay that I have always yearned for. If I do get that house on the bay I promise to awaken early each morning, go down to the shoreline and dance the dysfunctional development dance while chanting, “EMR is satan.”. Then, I’ll use a magic marker to write “LarryG” on an aluminum beer car and throw it in the water.

    Actually, I wouldn’t do either of those things. I’d be too busy trying to catch “in the slot” rockfish for breakfast.

  16. Well I appreciate your thoughts and sharing your current circumstances.

    With respect to the “accounting”, I think it would be helpful to have more than what we currently have especially if we are going to form strong opinions.

    But let me ask – who does the Income Tax and 4 cents of the sales tax “belong” to.

    Are not both of these designated as “State” taxes?

    If we agree on this then the next issue to confront would be whether or not, the “State” must allocate it’s tax revenues back to the localities in the same exact proportion that they were collected?

    In other words, is the policy that for every dollar in taxes that the State collects in Fairfax – supposed to be allocated back to Fairfax as a dollar?

    This is a serious question.

    In other words – does the State have the right to tax and does it have the right to spend it – to support State priorities that are not necessarily local priorities?

    If I can convince you that it does have this right – then wouldn’t the argument then really be about the money that it does allocate back to the localities to use?

    For instance, what use is a Game Warden or Va Forestry Specialist in Covington, Va to NoVa?

    Who is responsible for making sure that there is a State Trooper presence in Bath County,Va?

    Should folks in Fairfax County have some of their sales tax spent on people who work on the Va Port Authority?

    So.. enough blather..

    does the State Sales tax that the State collects from every Virginia – HAVE to be allocated back in exact proportion the the localities that paid the tax – in exact proportion?

  17. Anonymous Avatar

    does the State Sales tax that the State collects from every Virginia – HAVE to be allocated back in exact proportion the the localities that paid the tax – in exact proportion?

    A good start would be to have the benefits feed back in proportion to the money spent. So there is a benefit to NOVA for game wardens in SW, although it might be small. There is a benefit to NOVA for state workers at the port.

    Payments should be inckind for the benefits recieved.


  18. Anonymous Avatar

    If you want a good laugh, checkout the Richmond Times-Dispatch Sunday. It spends two thirds of its front page and two inside pages trying to debunk the Style Weekly article.The RTD tries to reassure Richmond that it is smart, it works hard and there are better times ahead. It never once mentions Qimonda, Wachovia Securities or Circuit City. Once again the rag proves it serves no journalistic purpose but is simply a mouthpiece for a small coterie of local establishment and pooh-baas.The article reads as if it were writen by a committee of chamber of commerce rtypes and press agents, sort of like a Babbit version of the Naked Lunch.

  19. Anonymous Avatar

    “The economic development funding ought to let the state “buy in”… “

    Unfortunately, that is prohibited.


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