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State grants have helped economy

BY CHELYEN DAVIS

RICHMOND—A new study says the $700 million Virginia has spent in the past decade on economic incentive grants to businesses has helped the economy.

But those economic development programs need better tracking and reporting on how effective they are, the report concluded.

The Joint Legislative Audit and Review Commission studied how the state uses economic development incentive grants after a request by state Sen. Janet Howell, D–Fairfax.

The report, released Tuesday, says that the state’s more than 3,300 grants awarded in the past 10 years “appear to have a positive impact” on the state’s economy, although such grants are only one of many factors that businesses weigh when choosing whether to expand or relocate in the state.

Virginia has 18 different economic incentive grant programs, the report said. Half of them fall under the Virginia Economic Development Partnership.

Economic development incentive programs are intended to encourage businesses to expand or relocate to Virginia. Many states have similar programs.

The JLARC study said projects funded by the grants created more than 70,000 jobs and resulted in $8 billion in capital invested over the past 10 years. Most of the jobs came from companies receiving grants through the Governor’s  Development Opportunity Fund or the Virginia Jobs Investment Program.

Five of the programs have awarded most of the grants, with the majority coming through the Virginia Jobs Investment Program—it has given out 1,506 grants in the past decade. But the highest money awards have come from the Governor’s Development Opportunity Fund, which has given out almost $100 million in grants over the past decade.

And 40 percent of the total grant money in the past 10 years has gone to seven businesses—including Rolls–Royce, Qimonda (which has closed its Richmond plant) and Philip Morris, which has received $44 million in grants.

Overall, most projects that received grants did meet goals, according to the report. But performance measurements vary across the different grant programs.

The Governor’s Development Opportunity Fund, for example, reported projects that met goals for job creation, capital investment and having higher-than-average wages.

But there were no performance data for transportation grant programs, the report said, nor for the Coalfield Regional Opportunity Fund.

Custom grant projects also have a varied record. Micron, for example, got $36 million in grants and, according to the report, has met goals for job creation and capital investment.

But Rolls–Royce, with $66 million in grants, hasn’t yet met either of those goals. And Qimonda got $55 million in grants but was defunct by 2009; a JLARC staff member said the grants were performance-based, so Qimonda did not receive all of the money it was granted.

The report suggested that grant programs focus more tightly on projects that are expected to create jobs—not just through the project but in the community; pay higher wages than the industry’s average; and are based on exporting to other states, which brings new money into the state.

Some programs already do that, the report said—about half give the majority of their awards to projects meeting at least two of the three criteria—and those that do have showed the greatest impact on the state’s economy.

While the state secretary of commerce and trade’s office reports annually on incentive grants, the JLARC study found those reports don’t assess effectiveness, and suggested that they should.

Overall, the report said, state grants make little impact on businesses when they’re deciding whether to expand or where to relocate. But apart from an estimate that only 10 percent of such decisions are swayed by economic incentives, JLARC could find no hard data on the topic.

Lawmakers on the JLARC panel asked staffers to come back with more information, particularly on how other states handle economic incentives.

“You’re always competing with somebody  so you can’t look at this in a vacuum without knowing where other states are with this and what they’re doing,” said Del. John O’Bannon, R–Richmond.

 Chelyen Davis:  540/368-5028

cdavis@freelancestar.com

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