Accountable USA - Virginia

Virginia generally isn’t known for spending prodigious sums on economic development deals, but that hardly means some companies haven’t benefited significantly. For example, Volvo received a $30 million package in 1994 and another of $54 million in 1999 (see below). Infineon received a package worth $60 million in 2000 (see below).

In 2010, Virginia found itself in a bidding war with Maryland and the District of Columbia to attract the runaway headquarters of military contractor Northrop Grumman. Some speculate that the company intended to locate next to the Pentagon all along and played the states against each other to get Virginia to increase its offer. The deal also highlights pay-to-play politics: Northrop made a large campaign contribution to Virginia Gov. Robert McDonnell prior to the deal. It also made contributions to members of the Virginia House and Senate economic development subcommittees.   The state ultimately shelled out $14 million in state subsidies, not including additional local subsidies required to match the state contribution.

Among the most expensive subsidy programs in the state are the Enterprise Zone Real Property Investment Grants ($9 million in 2011) and the Governor's Opportunity Fund ($11 million). Of the five programs we examined, three were discretionary “deal-closing” funds which offer large cash grants to companies that promise to create jobs by relocating or staying in the state.

One of these, the Governor’s Opportunity Fund, includes clawback provisions if the promised jobs don’t materialize. The state has clawed back most or all of such grants from John Deere, Nextel, Capital One, and others that failed to deliver.

Only two of the five programs we looked at have online recipient disclosure: the Governor’s Opportunity Fund and the Virginia Investment Partnership. And saying these programs are disclosed is generous: their recipient data are available only on an obscure legislative website in hard-to-find PDFs.

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Enterprise Zone Real Property Investment Grant

a five-year property tax credit valued at up to 20% of capital investments for corporations expanding or locating in special zones

$11.2 million (FY 2012)
5/100
10/100
40/100

Governor's Opportunity Fund (GOF)

a controversial “deal-closing” cash-grant program used to subsidize corporate relocations or retentions

$7.4 million (FY 2013)
60/100
88/100
89/100

Major Business Facility Job Tax Credit

corporate income tax credits used to subsidize relocations or expansions

$4.3 million (FY 2012)
0/100
35/100
45/100

Special Performance Grants

cash-grants used to subsidize major corporate relocations or expansions

$20.7 million (FY 2013)
15/100
not included
not included

Virginia Investment Partnership (VIP) & Major Eligible Employer Grant (MEE)

yet another “deal-closing” cash-grant program, this one aimed at retaining or attracting manufacturers

$19.4 million (FY 2013)
60/100
85/100
88/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Volvo (1994 and 1999)

In 1994 Volvo, which was then operating its U.S. truck business as a joint venture with General Motors, announced plans for a $200 million expansion of its assembly plant in the southwestern Virginia town of Dublin. The company made its decision after receiving a state and local subsidy package that was later revealed to be worth about $30 million. Five years later, after GM’s interest had been bought out, Volvo decided on another expansion, this one costing about $145 million. Although the projected project cost was smaller, the company got a bigger subsidy package, estimated at $54 million. The deal came after Volvo used the threat of a move to Mexico to pressure its workforce, represented by the United Auto Workers, to accept a contract proposal that reduced wages and benefits for new hires. With this provision in place, Volvo initially raised its headcount in Dublin to more than 3,000 but later carried out large-scale layoffs. By 2010 the workforce was down to about 1,200. (Key sources)

Infineon Technologies/Qimonda (2000)

In 2000, the German-owned semi-conductor manufacturer Infineon Technologies qualified for $55 million in performance-based subsidies from Virginia to expand an existing computer chip plant. More than half of the grant monies, $35 million, were promised on an annual schedule after the company created 1,100 new jobs; $15 million after investment of $1.1 billion in the plant, and $5 million after filling 300 new office positions. Another $5 million of state funds were given to Henrico County for site preparation and for a new graduate engineering program at a nearby technical university. Six months later, Infineon instituted a companywide hiring freeze and put plans for the facility, then an empty shell, on hold.

The state made minor changes to its terms as the expansion resumed in early 2004. Production ramped up in 2005, and 500 new workers were hired even as the semiconductor market lagged. Infineon spun off the business as a new company, Qimonda, in 2006, but shortly thereafter cut off orders to Qimonda and reduced its ownership stake. Qimonda filed for bankruptcy in early 2009 and put the plant up for sale. At the closure, the company failed to provide final paychecks and severance pay for hundreds of workers. The plant’s assessed value plummeted 78 percent, which the county said cost it more than $1 million in annual property taxes. In early 2010 a Georgia company purchased the plant out of bankruptcy for $12 million to use as a data center with 25 to 45 employees. (Key sources)

Walmart in Virginia

  • At least 4 Wal-Mart locations have received subsidies worth about $4.3 million in Virginia.
  • At least 2 Wal-Mart locations in Virginia have challenged their property tax assessment.
  • Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. Virginia among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.
  • Until Virginia changed its policy in May 2010 to deny the benefit to large companies, Wal-Mart was receiving about $4 million a year from a state policy that allows retailers to keep a portion of the sales tax they collect from customers.

For more information, see the Virginia page of Wal-Mart Subsidy Watch.