JLARC Report - Economic Development Incentives 2019 Spending and Performance (December 16, 2019)
Summary
A report to the Governor and the General Assembly of Virginia from the Joint Legislative Audit and Review Commission (JLARC), titled Economic Development Incentives 2019 Spending and Performance, dated December 16, 2019. The summary page states that Virginia spent $2.4 billion on 79 economic development incentives from FY10 to FY18, and that spending in FY18 was $285 million. Its contents cover grants, tax incentives and financing programs, with appendixes on the study mandate, research methods, incentive program descriptions and agency responses. A letter from Stephen Moret, President & CEO, to Mr. Greer comments on the report's figures.
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Commonwealth of Virginia
December 16, 2019
Report to the Governor and the General Assembly of Virginia
Economic Development Incentives 2019
Spending and Performance
JOINT LEGISLATIVE AUDIT
AND REVIEW COMMISSION
Joint Legislative Audit and Review Commission
Senator Thomas K. Norment, Jr., Chair
Delegate Terry Austin
Delegate Betsy Carr
Delegate M. Kirkland Cox
Senator Emmett W. Hanger, Jr.
Delegate Charniele L. Herring
Senator Janet D. Howell
Delegate S. Chris Jones
Senator Ryan T. McDougle
Delegate Robert D. Orrock, Sr.
Delegate Kenneth R. Plum
Senator Frank M. Ruff, Jr.
Delegate Christopher P. Stolle
Martha S. Mavredes, Auditor of Public Accounts
JLARC staff
Hal E. Greer, Director
Kimberly Sarte, Associate Director for Ongoing Oversight and Fiscal Analysis
Ellen Miller, Chief Economic Development and Quantitative Analyst
Information graphics: Nathan Skreslet
Managing Editor: Jessica Sabbath
Economic analysis
Terance J. Rephann, Regional Economist
Weldon Cooper Center for Public Service
JLARC Report 529
©2019 Joint Legislative Audit and Review Commission
jlarc.virginia.gov
Contents
Summary i
Economic Development Incentives 2019 1
State spent $2.4 billion on incentives FY10–FY18 1
Incentives have increased in number and spending 3
More than 4,400 projects were awarded $903 million in grants FY10–FY18 5
Through tax incentives, businesses saved $1.6 billion FY10–FY18 18
Through financing programs, businesses obtained $43 million 21
in loans and gap funding FY10–FY18
Appendixes
A: Study mandate 25
B: Research methods and activities 27
C: Incentive program descriptions 34
D: Spending or tax expenditure by incentive 47
E: Regional distribution of grant awards 52
F: Average employment size of grant recipients by program 54
G: Project-specific goals used by grant programs 55
H. Agency responses 56
Economic Development Incentives 2019 – Summary
WHAT WE FOUND
Virginia spent $2.4 billion on 79 economic development incentives from FY10
to FY18. This amounts to 1.4 percent of total general fund spending during
this time. Total spending on incentives in FY18 ($285 million) was slightly less
than spending in the previous fiscal year,
during which a custom incentive grant was WHY WE DID THIS STUDY
awarded. Through language in the Appropriation Act, the General As-
sembly directed the Joint Legislative Audit and Review Com-
Sixty-six percent of the spending on incen- mission (JLARC) to review and evaluate economic develop-
tives was for tax incentives such as sales and ment initiatives. Topics include spending on incentives and
use tax exemptions ($1 billion), tax credits activity generated by businesses receiving incentives; the
($438 million), and single sales apportion- economic benefits of incentives; and the effectiveness of in-
centives.
ment for manufacturers ($91 million).
JLARC releases two reports each year: a high-level summary
The remaining 34 percent was spent on report on overall spending and business activity and an in-
grants ($776 million) and other incentives depth report on the effectiveness of selected individual
incentives. (See Appendix A: Study mandate.) JLARC
such as loans and gap financing programs contracted with the Weldon Cooper Center for Public Service
($28 million). to perform the analysis for both reports.
This report is the third in the series of overall spending and
Overall, the amount spent on incentives in-
business activity and focuses on incentives that were pro-
creased by 105 percent between FY10 and vided between FY10 and FY18.
FY18. This increase is more than twice the
increase in the state general fund and total
operating budgets during that time.
Collectively, Virginia economic development incentive grant programs
awarded $903 million to 4,461 projects between FY10 and FY18. Actual
spending on grant projects was $127 million less than the total amount
awarded because of award cancelations, reductions, or recaptures.
Completed projects receiving grant funds created more than 70,000 jobs and
nearly $15 billion in capital investment or other spending. The majority of
these projects met their capital investment goals, and only one-quarter met
their job creation goals.
i
Economic Development Incentives 2019 – Summary
ii
Economic Development Incentives 2019
Virginia provides economic development incentives to encourage businesses to locate
or expand their operations in the state as part of its economic development strategy.
To better understand the effectiveness of these incentives in stimulating business ac-
tivity, the General Assembly directed the Joint Legislative Audit and Review Commis-
sion (JLARC) to review spending on and performance of economic development in-
centives such as grants, tax preferences, and other assistance. (See Appendix A.)
JLARC contracted with the University of Virginia’s Weldon Cooper Center for Public
Service to perform the evaluation. For purposes of this re-
port, incentives spend-
This report is the third in a series of annual reports about Virginia’s economic devel- ing refers to (1) actual
opment incentives, trends in state spending on incentives, and performance of incen- expenditures by the
state in the form of
tive programs. Every other year the reports in this series will include information about
grant awards or other fi-
the economic benefits of total spending on economic development incentives. The nancing and (2) esti-
2018 report was the first in which information on economic benefits was included, mated tax expenditures,
and this information will be included again in the 2020 report. in the form of forgone
revenue, through tax
This report provides summary information on 79 economic development incentive credits or sales and use
programs, including grants, tax preferences, business loans, and gap financing. The tax exemptions. Actual
expenditures may occur
incentive programs covered in this report are funded by the state, are actively providing
for refundable tax cred-
incentives, and have a primary purpose of promoting economic activity through loca- its, such as the film tax
tion or expansion of businesses. Businesses may also benefit from a variety of other credit. See Appendix B
grants, tax credits, and exemptions offered by the state for purposes other than eco- for more information on
methods used to esti-
nomic development; these programs are not included in this report.
mate spending for each
program.
State spent $2.4 billion on incentives FY10–FY18
Virginia spent $2.4 billion on 79 economic development incentives over the past nine
fiscal years (Figure 1), for an average of $263 million per year. Nearly all incentives are
funded by the state general fund (with the exception of incentives provided by the
Tobacco Region Revitalization Commission), and spending on incentives represented
The time period FY10 to
approximately 1.4 percent of total general fund spending between FY10 and FY18. In FY18 was chosen for this
addition, the majority of spending on incentives was forgone revenue from tax incen- report because agencies
tives. Sales and use tax exemptions make up 44 percent of forgone revenue, and tax have maintained data as
credits and single sales apportionment for manufacturers together make up 22 percent far back as FY10. Starting
in 2020, the report will
of forgone revenue. Almost all the remaining spending was for grants. cover a 10-year period.
Ten incentives accounted for approximately two-thirds of the spending on incentives
between FY10 and FY18 (Table 1). Two of the top three—the Data Center Exemption
and Railroad Common Carriers Exemption—provided $673 million in exemptions to
businesses in capital-intensive sectors that make large purchases of equipment. Because
of the incentives, these purchases are exempt from the retail sales and use tax. The sec-
ond-largest incentive was the Coalfield Employment Enhancement Tax Credit, which
provided $226 million for metallurgical coal mining and coal bed methane production
1
Economic Development Incentives 2019
(and before January 1, 2017 for other underground coal production). Other top incen-
tives include the Commonwealth’s Opportunity Fund, the state’s primary “deal closing”
program, which awarded $118 million for 228 projects; the Tobacco Region Oppor-
tunity Fund Grant, which awarded $99 million to 277 projects; and the Tobacco Region
Megasite Grant, which awarded 36 grants totaling $97 million for nine industrial parks
in the Southside and Southwest regions.
FIGURE 1
Two-thirds of spending on incentives was for tax incentives (FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentive programs.
NOTE: Estimates may not sum because of rounding. Adjusted for canceled projects, recaptures, and award reductions.
Exemptions exclude the 1 percent sales tax for localities and the additional amounts collected in Northern Virginia
and Hampton Roads. Includes the Coalfield Employment and Enhancement Tax Credit, which had expired January 1,
2017 but was reinstated in 2018. Includes single sales apportionment for manufacturers for which an estimate was
previously not available.
2
Economic Development Incentives 2019
TABLE 1
Ten incentives are responsible for two-thirds of spending (FY10–FY18)
Incentive Spending % of spending
Data Center Exemption $487M 21%
Coalfield Employment Enhancement Tax Credit 226 10
Railroad Common Carriers Exemption 186 8
Commonwealth’s Opportunity Fund 118 5
Tobacco Region Opportunity Fund 99 4
Tobacco Region Megasite Grants 97 4
Real Property Investment Grant 94 4
Manufacturing single sales factor apportionment 91 4
Virginia Coal Production and Employment Incentive Tax Credit 89 4
Airline Common Carriers Exemption 87 4
Subtotal $1,573M 67%
All others $791M 33%
TOTAL $2,364M 100%
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Excludes several tax preferences for which data was not available. Includes Coalfield Employment Enhance-
ment Tax Credit, which had expired but was reinstated in 2018. Includes single sales apportionment for manufacturers
for which an estimate was previously not available. Adjusted for canceled projects, recaptures, and award reductions.
Exemptions exclude the 1 percent sales tax for localities and, in most cases, the additional amounts collected in
Northern Virginia and Hampton Roads. (See Appendix C for a description and Appendix D for spending for all incen-
tives.)
Incentives have increased in number and spending
The number of economic development incentives offered by the state has grown over
time (Figure 2). The oldest is the Economic Development Access Program—a grant
program designed to improve transportation access for industrial sites—which was
adopted in 1956. Among the newest, and the largest, is the Advanced Shipbuilding
Production Facility Grant Program, a customized performance grant adopted in 2016
for Newport News Shipbuilding, for a new facility to manufacture a new class of nu-
clear ships. Half of the current incentives were adopted in 2005 or after.
Overall, the amount spent on economic development incentives increased by 105 per-
cent between FY10 and FY18, though the spending amount varies from year to year
(Figure 3). This increase is more than twice the increase in the state general fund and
total operating budgets during the time period (38 percent and 42 percent, respec-
tively). Much of the overall increase in incentive spending occurred between FY10 and
FY15 because of newly adopted programs, which have grown over time. The Data
Center Exemption was first claimed in FY10 at an estimated $3 million in exemptions
but is now estimated to total more than $86 million in exemptions annually. Manufac-
turers could begin using single sales apportionment in FY14, and it was estimated to
reduce income tax revenue by $2 million that year. This incentive is estimated to reduce
revenue by $23 million in FY18. Spending for the Commonwealth’s Opportunity
3
Economic Development Incentives 2019
Fund, Major Research and Development Tax Credit, and Motion Picture Production
Tax Credit have each increased by $5 million or more overall between FY10 and FY18,
either because of increasing incentive activity or because they were new incentives
during the time period.
FIGURE 2
More than one-third of current incentives were adopted in 2010 or after
SOURCE: Weldon Cooper Center analysis of economic development incentive programs.
NOTE: Excludes expired incentives. See Appendix C for the year when each incentive was adopted.
Incentive spending often fluctuates from year to year because of program changes or
large or atypical awards. Newport News Shipbuilding received a $32.8 million award
from the Advanced Shipbuilding Training Facility Grant in FY11, which contributed
to a spike in incentive spending for that year. Two programs contributed to the spike
in incentive spending in FY13. Two-thirds ($59.5 million) of the total Virginia Coal
Production and Employment Tax Credit awards between FY10 and FY18 were
awarded in FY13. The estimated amount of the Data Center Exemption increased by
$53 million between FY12 and FY13 after colocation data centers, which are operated
by a landlord and may have multiple data centers as tenants, were allowed to use the
exemption.
4
Economic Development Incentives 2019
FIGURE 3
Spending on incentives fluctuates from year to year but has increased by 105
percent since FY10
SOURCE: Weldon Cooper Center analysis of economic development incentive programs.
NOTE: Adjusted for canceled projects, recaptures, and award reductions. Amounts differ from earlier Economic De-
velopment Incentives reports because of project cancelations, recaptures for nonperforming projects, and adjusted
Economic development
reporting on completed projects. Includes Coalfield Employment Enhancement Tax Credit, which had expired but
grants are financial in-
was reinstated in 2018. Includes single sales apportionment for manufacturers for which an estimate was previously
not available. Not adjusted for inflation. The trend is similar if adjusted for inflation. centives provided to
businesses in return for
locating in the state or
Several programs have experienced sizable declines in spending since FY15, which has expanding business ac-
resulted in spending on incentives being relatively stable since FY16. The Tobacco tivity. Some grants are
Region Megasite grant program awarded $18 million annually for the development of discretionary, which
means that the state can
industrial parks between FY11 and FY15. Since then, however, only $4.9 million in negotiate the terms of
FY18 has been awarded. Estimated tax savings because of the Coalfield Employment the grant with the busi-
Enhancement Tax Credit also declined, from $28.4 million in FY15 to $15.2 million ness. Other grants are
in FY18. automatically awarded if
the business meets the
minimum requirements.
More than 4,400 projects were awarded $903 Grants are not repaid as
long as businesses meet
million in grants FY10–FY18 program requirements.
Even though sales and use tax incentives—particularly exemptions—have a larger im- Several programs that
are not commonly iden-
pact on the state budget, Virginia’s grant programs are the most widely recognized
tified as grant programs
economic development incentive. The grant programs—which are typically funded are included in this cate-
with general funds, with some exceptions—incentivize economic growth by encour- gory because they pro-
aging businesses to expand or locate in the state. Collectively, Virginia’s economic de- vide financial assistance
to businesses (or to a
velopment incentive grant programs awarded $903 million to 4,461 projects between
third party for their ben-
FY10 and FY18 (Table 2). Ten of the 22 grant programs each provided more than $30 efit).
million in awards during the time period.
5
Economic Development Incentives 2019
TABLE 2
Grant programs made more than 4,400 awards totaling $903 million (FY10–FY18)
Total FY10–FY18 Annual average
Award # of Award # of
Program amount awards amount awards
Tobacco Region Opportunity Fund $152.6M 277 $17.0M 31
Commonwealth’s Opportunity Fund 129.8 228 14.4 25
Tobacco Commission Megasite Grant 109.0 36 13.6 5
Virginia Jobs Investment Program 100.1 1,012 11.1 112
Real Property Investment Grant (Enterprise Zone) 93.7 1,435 10.4 159
Virginia Investment Partnership Grant 47.0 56 5.2 6
Advanced Shipbuilding Production Facility Grant 46.0 1 n.a. n.a.
Virginia Economic Development Incentive Grant 39.3 8 4.4 1
Transportation Partnership Opportunity Fund 35.2 11 3.9 1
Advanced Shipbuilding Training Facility Grant 32.8 1 n.a. n.a.
Governor's Motion Picture Opportunity Fund 25.8 46 2.9 5
Economic Development Access Program 23.9 42 2.7 5
Job Creation Grant (Enterprise Zone) 22.5 505 2.5 56
Rail Industrial Access Program 10.7 31 1.2 3
Commonwealth Research Commercialization Fund 10.3 174 1.5 25
Small Business Jobs Grant Fund Program 7.4 137 0.8 15
Agriculture and Forestry Industries Devel. Grant 5.5 63 1.1 13
VALET Program 3.9 216 0.4 24
Port of Virginia Economic and Infrastructure Grant 3.5 11 0.7 2
Small Business Investment Grant Fund 1.9 38 0.4 8
Virginia Business Ready Site Program 1.2 8 1.2 8
Trade Show Assistance Program 1.1 124 0.5 62
GO Virginia 0.2 1 0.2 1
All programs $903.3M 4,461 $123.2M 569
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Includes all awards and amounts prior to recaptures, cancelations, or reductions. For this reason, amounts for the Tobacco Region Oppor-
tunity Fund, Commonwealth’s Opportunity Fund, and Virginia Jobs Investment Program are higher than amounts shown in Table 1. Newport News
Shipbuilding received the custom Advanced Shipbuilding Training Facility Grant in FY11 and the Advanced Shipbuilding Production Facility Grant
in FY17. These grants provide custom one-time awards that were or will be paid out over several years based on performance.
Grant funding is targeted to manufacturing sector and Southside and
Southwest Virginia
Half of grant funding was directed to businesses in the manufacturing sector (Figure
4). This sector is commonly represented because grant programs generally target
“basic” industry firms, which are companies that export at least half their goods or
services outside the state. Targeting these businesses is desirable because they bring
6
Economic Development Incentives 2019
new revenue into the state. Another 23 percent of grant funding was directed to busi-
nesses in the professional, scientific, and technical service sectors (11 percent); infor-
mation services sector (7 percent); and utilities sector (5 percent).
FIGURE 4
Half of grant funding was directed to manufacturers (FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Excludes $212 million in awards for which industry information was unavailable. The “all other” category in-
cludes businesses in the management of companies and real estate sectors. Estimates may not sum because of
rounding.
Geographically, the largest amount of grant awards went to highly populated localities,
such as Newport News ($116 million) and Fairfax County ($53 million). Several less
populated counties—such as Henry and Greensville—also received large amounts
($41 million and $39 million respectively). Ten localities received approximately 48
percent of the total amount awarded for the period (Table 3).
7
Economic Development Incentives 2019
TABLE 3
Ten localities accounted for almost half of grant award amounts (FY10–FY18)
% of total # % of total
Locality Amount awarded amount awards awards
Newport News City $116M 8.2% 248 5.5
Fairfax County 53 6.2 301 6.7
Henry County 41 4.7 105 2.4
Richmond City 39 4.6 344 7.7
Greensville County 39 4.6 28 0.6
Arlington County 37 4.3 65 1.5
Brunswick County 30 3.5 7 0.2
Accomack County 30 3.5 33 0.7
Henrico County 24 2.8 170 3.8
Mecklenburg County 23 2.7 28 0.6
Subtotal $434M 48.0% 1,329 29.8%
All others $470 52.0% 3,132 70.2%
TOTAL $903M 100.0% 4,461 100.0%
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Localities were not assigned to 14 Governor’s Motion Picture Opportunity Fund projects because filming oc-
curred in multiple locations. One Tobacco Commission Megasite Grant is also unassigned. Estimates may not sum
because of rounding.
Rural localities in the southern part of the state received a large proportion of grant
funding, relative to population size (Figure 5). Tobacco Region localities received ap-
proximately 38 percent of all economic development grant awards, largely due to the
contributions of the Tobacco Commission’s Tobacco Region Opportunity Fund and
Megasite Grant programs. The highest per capita award amounts were in Greensville
County ($3,360), which benefited from large awards for the Mid-Atlantic Advanced
Manufacturing Center; Brunswick County ($1,855), which was the location of a Do-
minion Power gas power plant that received $30 million in financial assistance; and
Sussex County ($1,190), which is the location of a Tobacco Commission-funded
megasite. (See Appendix E for maps of the regional distribution of grant awards, over-
all and per capita.)
8
Economic Development Incentives 2019
FIGURE 5
Awards per capita are concentrated in Southside and Southwest Virginia (FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
The per capita amount awarded per locality has a slight positive association with the
2018 local unemployment rate, indicating that more funds are generally provided to
localities that are economically distressed. The number of awards per capita is even
more positively correlated with the local unemployment rate.
Majority of grant projects were for business locations that had fewer
than 100 employees at the time of the award
Sixty-two percent of the grant awards between FY10 and FY18 were for business
Many businesses have
locations that had fewer than 100 employees at the time the awards were made (Figure
operations in multiple
6). Of this group, 53 percent were for business locations with fewer than 25 employees. locations. Grants and
These businesses received grant awards from programs, such as the Small Business other incentives are of-
Investment Grant or Commonwealth Research and Commercialization Fund, that ten provided to projects
that occur at a specific
tend to make awards to start-up businesses with 10 or fewer employees, on average. In
business location.
contrast, 20 percent of grant awards were for large businesses with 250 or more em-
ployees. Custom grants and four other grant programs—Transportation Partnership
Opportunity Fund, Virginia Investment Partnership Grant, Virginia Economic Devel-
opment Incentive Grant, and the Port of Virginia Economic and Infrastructure
Grant—tend to make awards to business locations with 250 employees or more. (See
Appendix F for the average employment size of grant recipients by program.)
9
Economic Development Incentives 2019
FIGURE 6
Majority of grant recipients were for business locations with fewer than 100
employees (FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic incentive grant awards.
NOTE: Employment records were matched with 2,705 of the 4,461 awards (61 percent) and $358 million of $903
million in total awards. The numbers and percentages shown in the figure reflect a weighted distribution of awards
and amounts using information from the matched records.
Grant awards have generally declined since FY11
While grant awards increased dramatically between FY10 and FY11, they have since
declined (Figure 7). Grant awards in FY10 were low because of the lingering effects
of the 2008–09 recession on business activity. Grant awards more than tripled in FY11
when two large incentive programs were introduced: the Tobacco Commission
Megasite Grant, which awards $14 million in incentives per year on average, and the
custom Advanced Shipbuilding Training Facility Grant, which made a one-time award
of $32.8 million to Newport News Shipbuilding. Grant awards have experienced a
declining trend since FY11, with the exception of FY17, when Newport News Ship-
building received another custom grant award of $46 million from the Advanced Ship-
building Production Facility Grant. Much of the overall decrease in awards since FY11
is a result of declining Tobacco Region Megasite and Tobacco Region Opportunity
Fund grant awards over time. (See Appendix D for grant awards by program.)
10
Economic Development Incentives 2019
FIGURE 7
Grant spending has generally declined since FY11
SOURCE: Weldon Cooper Center analysis of economic incentive grant awards.
NOTE: Adjusted for canceled projects, recaptures, and award reductions. Amounts differ from earlier Economic De-
velopment Incentives reports because of project cancelations, recaptures for nonperforming projects, and adjusted
reporting on completed projects. Not adjusted for inflation. (The trend is the same if adjusted for inflation.)
Programs vary in amount awarded per job created and level of
business investment
The size of grant awards ranged widely by program (Table 4). Awards ranged from an
average high of $4.9 million to a low of $8,300 per project (excluding the two custom
grant awards to Newport News Shipbuilding of $32.8 million and $46 million).
The size of the award in relation to project goals also varied widely by program, based
on program goals, guidelines, and the types of projects targeted (Table 4). Grant pro-
grams require that projects meet certain minimum requirements to be eligible for grant
funding. These minimum requirements vary based on the goals of the program, but
the most common are job creation and some form of business investment or spending
in Virginia. The average grant award per expected job for Virginia projects was $4,205
between FY10 and FY18, but it ranged from a high of $46,000 per job (Advanced
Shipbuilding Production Facility Grant) to a low of less than $1,000 (Virginia Jobs
Investment Program and Small Business Jobs Grant Fund). The average award per
$1,000 of expected capital investment or additional spending was $25 and ranged from
a high of $200 (Economic Development Access Program) to a low of $5 (Agriculture
and Forestry Industries Development Grant).
11
Economic Development Incentives 2019
TABLE 4
Average grant awards by program varied widely (FY10–FY18)
Average award amount per
$1,000 in spending Job created
or investment in in Virginia
Program Project Virginia (expected) (expected)
Advanced Shipbuilding Production Facility Grant $46,000,000 $61 $46,000
Transportation Partnership Opportunity Fund 3,197,218 103 37,177
Advanced Shipbuilding Training Facility Grant 32,777,745 109 32,778
Rail Industrial Access Program 345,157 40 9,745
Virginia Economic Development Incentive Grant 4,912,500 75 6,928
Virginia Investment Partnership Grant 838,393 14 6,510
Tobacco Region Opportunity Fund 550,927 22 6,390
Small Business Investment Grant Fund 50,092 147 3,893
Commonwealth’s Opportunity Fund 569,217 14 3,416
Agriculture and Forestry Industries Develop. Grant 87,844 5 2,560
Port of Virginia Economic and Infrastructure Grant 317,318 n.a. 2,148
GO Virginia 200,000 2 2,000
Job Creation Grant (Enterprise Zone) 44,599 n.a. 1,659
Virginia Jobs Investment Program 98,921 10 916
Small Business Jobs Grant Fund Program 54,072 25 850
Tobacco Commission Megasite Grant 3,026,924 ** n.a.
Economic Development Access Program 569,155 200 n.a.
Governor's Motion Picture Opportunity Fund 560,912 ** n.a.
Virginia Business Ready Site Program 148,452 n.a. n.a.
Real Property Investment Grant (Enterprise Zone) 65,565 39 n.a.
Commonwealth Research Commercialization Fund 61,365 243 n.a.
VALET Program 16,383 n.a. n.a.
Trade Show Assistance Program 8,302 n.a. n.a.
Average, all projects $202,490 $25 $4,205
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Expected jobs and spending or investment were used for programs that awarded grants prior to when project performance began.
Actual jobs and spending or investment were used for programs for which performance already occurred prior to projects receiving a grant
award. The goal of the VALET program is to increase a company’s international sales rather than to encourage job creation or capital
investment; therefore, the average award amount per $1,000 in spending or investment or jobs created is not relevant for this program. As
of FY18, most GO Virginia awards ($11.4 million) have not been for specific business projects. Average award amounts are calculated using
total spending across programs divided by the total number of projects, amount of expected capital investment, and expected jobs across
programs.
n.a. indicates that job creation or investment is not among the criteria considered for obtaining the grant.
** indicates that data was not provided for the program.
12
Economic Development Incentives 2019
From FY10 to FY18, only 7 percent of awards were for more than $500,000 each.
However, these larger awards accounted for the majority of the grant funding (Fig-
ure 8).
FIGURE 8
Seven percent of grant awards accounted for 65 percent of total grant funding
(FY10–FY18)
Completed projects rep-
resent 3,701 projects
and $422.6 million in
awards. Not all projects
that received a grant
award between FY10
and FY18 had completed
their performance at the
end of FY18.
It is likely that the major-
ity of the jobs and busi-
ness investment or
spending by completed
projects would have oc-
SOURCE: Weldon Cooper Center analysis of economic development incentive grants. curred without incen-
NOTE: Number of grants awarded is 4,461. Total amount awarded is $903.3 million (not adjusted for cancelations,
tives. In 2012, JLARC re-
recaptures, and refunds).
ported that approxi-
mately 10 percent of lo-
Completed projects created more than 70,000 jobs and nearly $15 cation and expansion
decisions, on average,
billion in business investment and spending are swayed by typical
Projects that received grant awards between FY10 and FY18 and completed their lo- economic development
incentives. However, the
cation or expansion project collectively created an estimated 70,000 jobs and $14.9
success in swaying busi-
billion in capital investment or other spending (Table 5). Completed projects that re- ness decisions likely var-
ceived Virginia Jobs Investment Program grants accounted for the largest share of ies by program (JLARC,
jobs (45,340) and capital investment and other spending ($7.2 billion). Projects funded Review of State Economic
Development Incentive
through the Commonwealth’s Opportunity Fund ranked second in job creation
Grants, 2012).
(15,320 jobs) and business spending ($5.0 billion).
13
Economic Development Incentives 2019
TABLE 5
Completed projects created over 70,000 jobs and nearly $15 billion in business spending or
investment (FY10–FY18)
# of Spending or Jobs
Program projects investment ($M) created
Virginia Jobs Investment Program 826 $7,241 45,340
Commonwealth’s Opportunity Fund 100 5,009 15,320
Job Creation Grant (Enterprise Zone) 505 n.a. 13,577
Tobacco Region Opportunity Fund 159 2,194 6,406
Small Business Jobs Grant Fund Program 122 ** 3,023
Port of Virginia Economic and Infrastructure Grant 11 n.a. 1,625
Advanced Shipbuilding Training Facility Grant 1 358 1,520
Agriculture and Forestry Industries Devel. Grant 12 343 876
Tobacco Commission Megasite Grant 19 n.a. 450
Commonwealth Research Commercialization Fund 131 34 n.a.
Economic Development Access Program 23 36 n.a.
Governor's Motion Picture Opportunity Fund 42 278 n.a.
Rail Industrial Access Program 27 203 n.a.
Real Property Investment Grant (Enterprise Zone) 1,435 2,393 n.a.
Transportation Partnership Opportunity Fund 8 n.a. n.a.
Total (duplicated): $18,087M 88,137
Total (unduplicated): $14,899M 70,475
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Completed projects represented about $423 million in total awards across programs. Some grant programs, such as the Major
Eligible Employer and Virginia Investment Partnership Grants, had no completed projects during this time period. Jobs are not counted
for the Governor’s Motion Picture Opportunity Fund program because they are part time or seasonal and not comparable to other pro-
grams’ reporting of full-time jobs. Transportation Partnership Opportunity Fund did not have investment and performance goals for pro-
jects prior to 2015. Many projects receive grants from more than one program. No unique identifiers exist to easily identify projects that
received grants from multiple programs. The unduplicated number of jobs and investment or spending is an estimate based on a review
of projects with similar business names, locations, time periods, and other factors. VALET program (166 completed projects) is not included
in the table because its goal is to increase a company’s international sales, and job creation and capital investment are not reported by
program participants.
n.a. indicates that job creation or investment is not one of the criteria for receiving the grant.
** indicates that data was not provided for program.
Majority of completed projects met capital investment goals, and
only one-quarter met their job creation goals
Ten grant programs establish an “up front” award agreement with project-specific
goals. The most common project-specific goals are job creation, capital investment,
and average wages paid. Several programs use alternative goals that are more relevant
to their program. For example, transportation-related programs, such as the Rail In-
dustrial Access Program and Port of Virginia Economic and Infrastructure Grant,
establish project-specific goals for rail car volume and Virginia port usage, respectively.
(See Appendix G for goals across programs.)
14
Economic Development Incentives 2019
Seventy percent of completed projects met or exceeded their project-specific goals for
capital investment or other spending (Figure 9). Forty-five percent met their average
wage goals, and about 24 percent met their job creation goals.
FIGURE 9
Majority of completed projects met their capital investment goals (FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: N=1,403 duplicated projects. Only includes projects from programs that establish project-specific goals. Some
programs allow projects to attain 90 percent of specific goal(s) before award reduction or recapture is made. For
simplicity of making calculations across programs, projects that exceeded 90 percent (or other established percent-
age) for a specific goal but did not achieve 100 percent are not included in the figure.
Attainment rates for project-specific goals varied widely by program (Table 6). The
custom Advanced Shipbuilding Training Facility Grant and Port of Virginia Economic
and Infrastructure Program were the only programs for which the project-specific
goals for all projects were attained. Goal achievement was especially low for some
programs. Only 14 percent of the 159 completed Tobacco Region Opportunity Fund
projects met all project-specific goals.
15
Economic Development Incentives 2019
TABLE 6
Attainment of project-specific goals varied by program (FY10–FY18)
% of projects that achieved goal
Program # of Job Capital Average All
projects creation investment wage goals
Advanced Shipbuilding Training Facility Grant 1 100% 100% n.a. 100%
Port of Virginia Economic and Infrastructure Grant 11 100 n.a. n.a. 100
Commonwealth Research Commercialization Fund 131 n.a. n.a. n.a. 82
Rail Industrial Access Program 27 n.a. 67 n.a. 63
Agriculture and Forestry Industries Devel. Grant 12 50 50 ** 42
Commonwealth’s Opportunity Fund 100 51 58 63 37
Virginia Jobs Investment Program-Retraining 190 n.a. 95 56 35
Economic Development Access Program 23 n.a. 35 n.a. 35
Tobacco Region Opportunity Fund 159 29 37 41 14
Virginia Jobs Investment Program – Job Creation 636 20 74 40 10
Small Business Jobs Grant Fund Program 122 12 ** 50 8
Total 1,412 24% 70% 45% 22%
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Some programs have other goals, which are reflected in the “All goals” column. The goal of the VALET program is to increase
international sales, and 72 percent of the participants met or exceeded their goal for increased international sales. Some programs, such
as the Commonwealth’s Opportunity Fund, allow projects to attain 90 percent of specific goals before award reduction or recapture is
made. Projects that exceeded 90 percent (or other established percentage) for a specific goal but did not achieve 100 percent are not
shown in the percentage of projects that achieved goal. For the Commonwealth’s Opportunity Fund, 60 percent of projects met at least
90 percent of their job creation goal, and 66 percent met at least 90 percent of their capital investment goal. The Virginia Jobs Investment
Program and Small Business Jobs Grant Program do not establish project-specific goals, but they are included here because grant awards
are committed based on an expected number of jobs and amount of capital, although reimbursement is established as a set amount per
job actually created and paid post-performance. This may lead to over-commitment of funding to many projects that do not create the
number of jobs expected. Some projects do not collect information on average wage levels upon completion of the project.
n.a. indicates that job creation or investment is not one of the criteria for receiving the grant.
** indicates that data was not provided for program.
Some grant programs were successful overall in achieving goals for job creation and
capital investment, even though some of the projects funded by the programs did not
achieve their project-specific goals. For example, only 51 percent of completed pro-
jects that received a Commonwealth’s Opportunity Fund grant fully achieved their job
creation goals (Table 6). However, some projects far exceeded their job creation goal,
such that collectively, all projects created 104 percent of the total jobs that were ex-
pected (Table 7). This program also had overall success in achieving its capital invest-
ment and average wage goal. The Tobacco Region Opportunity Fund, however, was
not successful overall in achieving its goals, with the exception of the average wage
goal.
16
Economic Development Incentives 2019
TABLE 7
Projects for most grant programs collectively met their average wage goals (FY10–FY18)
Job Spending or Average
Program
creation investment wage
Advanced Shipbuilding Training Facility Grant 152% 119% n.a.
Commonwealth’s Opportunity Fund 104 132 113
Port of Virginia Economic and Infrastructure Grant 100 n.a. n.a.
Agriculture and Forestry Industries Devel. Grant 87 67 **
Virginia Jobs Investment Program 54 85 105
Small Business Jobs Grant Fund Program 38 ** 103
Tobacco Region Opportunity Fund 38 60 138
Commonwealth Research Commercialization Fund n.a. 100 n.a.
Economic Development Access Program n.a. 56 n.a.
Rail Industrial Access Program n.a. 90 n.a.
SOURCE: Weldon Cooper Center analysis of economic incentive grants.
NOTE: The Virginia Jobs Investment Program and Small Business Jobs Grant Program do not establish project-specific goals like other
programs. However, they are included here because grant awards are committed based on an expected number of jobs and amount of
capital, although reimbursement is established as a set amount per job actually created and paid post-performance. This leads to over
commitment of funding to many projects that do not create the number of jobs expected. Not all projects collect average wage levels
upon completion of the project to calculate the percentage of projects that attained wage goals. The VALET program is excluded from the
table because its goal is to increase international sales. Collectively, program participants increased international sales by 126 percent of
the goal.
n.a. indicates that job creation or investment is not one of the criteria for receiving the grant.
** indicates that data was not provided for program.
Grant awards totaling $127 million were canceled, reduced, or
recaptured because projects did not achieve goals
When projects do not go forward or do not meet their goals, the grant awards may be
canceled, reduced, or recaptured. Grant awards totaling $127 million (or 15 percent of
the total paid or committed between FY10 and FY18) were canceled, reduced, or re-
captured because the projects did not go forward or meet their goals (Figure 10). Half
of the $127 million was never paid because projects did not go forward and were can-
celed. Another 26 percent was not paid to projects that did not meet their goals, and
the award amount was reduced.
17
Economic Development Incentives 2019
FIGURE 10
Agencies administering
grants reported recap- Grant awards totaling $127 million were canceled, reduced, or recaptured
turing $22 million in (FY10–FY18)
grant awards. In some
cases, this may be less
than the full amount that
should have been recap-
tured according to grant
guidelines. The upcom-
ing in-depth reports on
these incentives will pro-
vide more information
about agency efforts to
recapture funding when
projects do not achieve
their goals.
Exemptions to Virginia’s
retail sales and use tax
can be claimed by busi-
nesses for qualifying SOURCE: Weldon Cooper Center analysis of economic development incentive grant awards or award commitments
purchases. and program information of recaptures, reductions, and cancelations. Numbers may not sum because of rounding.
Virginia’s retail sales and
use tax is currently 7 Approximately $22 million was recaptured between FY10 and FY18 from 100 projects
percent of eligible pur-
that failed to meet their performance goals. Recaptures are a feature of grant programs
chases in the Historic
Triangle (the city of Wil- that make up-front award payments. Each of these programs recaptured small per-
liamsburg and the coun- centages of the funds they awarded:
ties of James City and Agriculture and Forestry Industries Development grant: 13 percent;
York), 6 percent of eligi-
ble purchases in North- Commonwealth’s Opportunity Fund: 10 percent;
ern Virginia and Hamp- Tobacco Region Opportunity Fund: 9 percent;
ton Roads, and 5.3 per-
Rail Industrial Access Program: 8 percent;
cent of eligible pur-
chases in the rest of the Small Business Investment Grant: 1 percent
state. One percent is re- Economic Development Access Program: 1 percent; and
tained by the locality
where the purchase is
Commonwealth Research Commercialization Fund: 1 percent.
made.
The sales tax applies to Through tax incentives, businesses saved $1.6 billion
the sale of certain goods
and services purchased FY10–FY18
in the state and is gener- Virginia’s economic development tax incentives, such as exemptions, credits, and single
ally collected by the
merchant at the point of
sales apportionment, resulted in $1.56 billion in tax savings to businesses between
sale. FY10 and FY18. Most (82 percent) of this amount was from sales and use tax exemp-
The use tax is levied on tions that provide savings to businesses on their purchases of equipment and supplies
out-of-state purchases that qualify for the exemption. Nine of the 19 sales and use tax exemptions each pro-
that are used in Virginia vided more than $20 million in incentives to businesses between FY10 and FY18 (Ta-
and is self-assessed and
ble 8). Some of these exemptions are provided to capital-intensive industries, such as
remitted to the state by
the consumer.
18
Economic Development Incentives 2019
data centers and airlines, that make substantial equipment purchases to start or upgrade
their operations.
TABLE 8
Sales and use tax exemptions provided an estimated $1 billion in tax savings to
businesses (FY10–FY18)
Total Average savings
Exemption savings ($M) per year ($M)
Data Center Exemption $486.7M $54.1M
Railroad Common Carriers Exemption 185.9 20.7
Airline Common Carriers Exemption 87.0 9.7
Ships and Vessels Exemption 65.7 7.3
Research and Development Exemption 38.5 4.3
Media Provider Equipment Exemption 38.4 4.3
Certain Printed Materials for Out-of-State Distribution Exemption 34.5 3.8
Railroad Rolling Stock Exemption 30.0 3.3
Pollution Control Equipment & Facilities Exemption 29.8 3.3
Semiconductor Manufacturers Exemption 8.4 0.9
Film, Television, and Audio Production Inputs Exemption 8.2 0.9
Uniform Rental and Laundry Businesses Exemption 7.1 0.8
Out-of-State Nuclear Facility Repair Exemption 4.4 0.5
Taxi Parts and Radios Exemption 2.8 0.3
Semiconductor Wafers Exemption 1.2 0.1
Virginia Spaceport Users Exemption 0.9 0.1
Contractor Temporary Storage Exemption 0.9 0.1
Electrostatic Duplicators Exemption 0.1 <0.1
Total $1,030.4M $114.5M
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Exempted amounts are estimates and exclude the 1 percent sales tax for localities and, in most cases, the
additional amounts collected in the Historic Triangle, Northern Virginia, and Hampton Roads. (See Appendix B for
methodology used to estimate the sales and use tax exemptions.)
Economic development tax credits provided less ($438 million) in savings to busi-
Tax credits allow busi-
nesses relative to exemptions between FY10 and FY18 (Table 9). The largest credit— nesses or their owners to
the Coalfield Employment Enhancement Tax Credit—is available to coal mining com- reduce their income tax
panies to help slow the decline of coal mining activity in Virginia. It was repealed liability, dollar for dollar,
according to the amount
effective January 1, 2017 and was not included in prior reports. The credit was rein-
allowed under the credit.
stated in 2018 with modifications that will reduce the amount of credit coal companies
can claim. Four other credits awarded more than $20 million in credits during this
period. While many of the older tax credits are designed to encourage businesses such
as manufacturers to locate or expand in Virginia, the credits adopted more recently are
designed to incentivize businesses in other industries (film, wineries, and transporta-
tion or distribution companies).
19
Economic Development Incentives 2019
TABLE 9
Tax credits provided nearly $438 million in tax savings to businesses (FY10–FY18)
Tax credit Total savings ($M)
Information on job crea- Coalfield Employment Enhancement Tax Credit $225.5M
tion, spending, and Virginia Coal Production and Employment Incentive Tax Credit 89.1
other business require-
ments in return for re- Motion Picture Production Tax Credit 28.3
ceiving tax incentives is Major Business Facility Job Tax Credit 24.2
not readily available as it Research and Development Expenses Tax Credit 22.2
is for grants.
Qualified Equity and Subordinated Debt Investment Tax Credit 19.3
Performance of tax in-
Recyclable Materials Processing Equipment Tax Credit 12.2
centives will be included
in upcoming reports de- Virginia Port Volume Increase Tax Credit 6.1
tailing the findings of in- Major Research and Development Tax Credit 6.1
depth evaluations of in-
Worker Retraining Tax Credit 1.6
dividual incentives. As
part of this effort, JLARC International Trade Facility Tax Credit 1.3
staff will collect perfor- Farm Wineries and Vineyards Tax Credit 0.9
mance data—which is Barge and Rail Usage Tax Credit 0.6
either not currently col-
Telework Expenses Tax Credit 0.3
lected or not readily
available—on tax incen- Green Job Creation Tax Credit 0.1
tives. Biodiesel and Green Diesel Fuels Producers Tax Credit <0.1
Total, all tax credits $437.8M
SOURCE: Weldon Cooper Center analysis of tax credit information from the Department of Taxation.
NOTE: The average tax credit award per year is not reported for tax credits because several new programs were
adopted during this time period and several other programs provided too few awards for disclosure purposes. The
Coalfield Employment Enhancement Tax Credit was not included in prior reports because it expired January 1, 2017.
Apportionment formu-
It was reinstated in 2018.
las are used to ensure
that states do not tax
more than their fair Since 2014, Virginia has allowed manufacturers to use single sales apportionment—a
share of income from method that could reduce their income tax liability—to help stem the decline of the
multistate companies.
industry in the state. Tax savings for manufacturers using single sales apportionment
Virginia’s standard for-
mula uses three factors is estimated to be $91 million between FY14 and FY18, or about $20 million per year.
(property, payroll, and
sales) and double- Savings to businesses through tax incentives more than doubled
weights the sales factor.
FY10–FY18
Manufacturers use sin-
gle sales apportionment Annual tax savings realized by businesses because of economic development tax ex-
to calculate their taxable emptions and credits more than doubled between FY10 and FY18 (Figure 11). This
income in Virginia based occurred for several reasons. The Data Center Exemption became effective after
solely on their propor-
FY10; by FY18 its annual tax savings to businesses are estimated to be more than $86
tion of total sales that
are in Virginia. million. Manufacturers single sales apportionment became effective in FY14; by FY18
its annual tax savings to businesses are estimated to be $23 million. Gradual improve-
ments in the economy since FY10 also led to a recovery in business spending and
investment. The increase in investment magnified the fiscal impact of sales and use
tax exemptions that target capital intensive industries, such as rail, air, and water trans-
portation companies. Savings from tax credits were highest in FY13 because the Vir-
ginia Coal Production and Employment Incentive Tax Credit experienced a large
20
Economic Development Incentives 2019
amount of credit redemptions ($59.5 million). According to the Department of Tax-
ation, a large number of carryover credits were claimed in FY13.
FIGURE 11
Savings to businesses through tax incentives increased (FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Includes Coalfield Employment Enhancement Tax Credit, which had expired but was reinstated in 2018. Includes single sales apportion-
ment for manufacturers for which an estimate was previously not available. Exempted amounts are estimates and exclude the 1 percent sales
tax for localities and the additional amounts collected in Northern Virginia and Hampton Roads. Not adjusted for inflation. The trend is nearly
identical if adjusted for inflation.
Through financing programs, businesses obtained
$43 million in loans and gap funding FY10–FY18
Virginia offers six incentive programs that are designed to assist firms in securing ad-
ditional debt and equity financing. The Virginia Small Business Financing Authority
(VSBFA) administers four programs that provide loan assistance to eligible businesses:
Economic Development Loan Fund provides loan financing for eligible
small businesses that create permanent full-time jobs;
Loan Guaranty Program assists small businesses to obtain loans by reducing
bank credit risk;
State Cash Collateral Program assists small businesses that lack the necessary
collateral to obtain a loan, and
SWaM Loan Fund provides small loans to small businesses to use for work-
ing capital, financing accounts receivable and inventory, and other short-term
financing needs.
21
Economic Development Incentives 2019
Virginia also offers several gap financing programs. The Center for Innovative Tech-
Venture capital is fi- nology offers gap funding through its Growth Acceleration Program, which enables
nancing that investors
provide to startup com-
technology firms with high growth potential to obtain additional venture capital in-
panies and small busi- vestment. The Virginia Tourism Corporation administers the Tourism Development
nesses that are believed Financing Program to large-scale tourism projects. This program was created in 2011
to have long-term and allows eligible projects to keep a portion of state sales and use taxes that are gen-
growth potential.
erated by the project. Six projects have begun receiving state funding.
These financing programs incentivize different types of business activity than the
grant programs discussed previously. Over three-quarters of VSBFA assistance was
provided to small businesses in services and trade industries. Over three-quarters of
Growth Acceleration Program recipients were in professional, scientific, and technical
services and information industries, which include businesses in high-tech fields such
as biotechnology and software development. In contrast, nearly half of grant funding
was for manufacturers.
These financing programs also concentrate awards in different regions than grant pro-
grams. Thirteen percent of VSBFA assistance went to projects in non-metropolitan
areas, whereas 36 percent of all grant funds went to projects in non-metropolitan areas.
Over three-fourths of Growth Acceleration Program assistance went to firms in
Northern Virginia, with over 55 percent to Fairfax County companies alone. A large
portion of the remaining award amounts were made to firms in localities that are home
to the state’s major research universities.
VSBFA programs helped businesses obtain more than $27 million in
loans and loan enhancements
Small businesses aided by the four VSBFA programs obtained $27.4 million in loan
Loan enhancements in- and loan enhancement financing between FY10 and FY18 (Table 10). In most cases,
clude collateral or guar-
anty assistance provided
state appropriations were not directly used to finance the loans or provide the obliga-
to a commercial bank to tion to secure the loans. While programs may have received appropriations in the past,
help the business secure they are revolving loan funds, which means they utilize interest and principal payments
a loan. on old loans to issue new ones, or receive funding from other self-financing programs
offered by VSBFA.
The average loan or loan enhancement to secure the loan was $101,616, but the aver-
age varied among the four programs. The Economic Development Loan Fund pro-
vided the greatest amount of loan assistance at $654,673 per project. The SWaM Loan
Fund provided the least, at $20,489 per project.
22
Economic Development Incentives 2019
TABLE 10
VSBFA programs helped businesses secure more than $27 million in loans or equity financing
Loan/loan
Amount # of Average # of enhancement per
Program awarded projects award jobs job
Economic Development Loan Fund $2,618,692 4 $654,673 284 $9,221
Loan Guaranty Program 19,302,144 83 232,556 617 31,284
State Cash Collateral Program 1,930,000 8 241,250 132 14,677
SWaM Loan Fund 3,585,598 175 20,489 450 7,968
Total $27,436,434 270 $101,616 1,483 $18,507
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: VSBFA programs use only a small portion of state funding to secure loan financing. Jobs reported are expected jobs.
The four programs collectively were expected to add 1,483 jobs. The average loan or
loan enhancement assistance per job was $18,507, on average. This figure is not di-
rectly comparable to the average grant award per job ($4,010) because the cost of the
programs to the state represents only a small portion of the total loan and loan en-
hancement amount. For example, the VSBFA Loan Guaranty Program provides the
financial guarantee to secure a loan provided by a private bank on behalf of an eligible
business. The program would only be required to obligate funds if an eligible business
were to default on its loan. The SWaM loan is a direct loan provided by VSBFA, but
funding for the loan is derived from fees from other bond financing provided by
VSBFA and not state appropriations.
Growth Acceleration Program provided businesses a total of
$15.8 million in financing
Recipients of the Growth Acceleration Program financing received $15.8 million be-
tween FY10 and FY18 to attract venture capital investment. This program made
awards to 234 projects, for an average award of $67,325. Program expenditures
reached a peak of $3.5 million in total awards in FY14 but have not exceeded $2.2
million since then. All 68 of the completed projects in the Growth Acceleration Pro-
gram met their financing objectives for the period, according to the Center for Inno-
vative Technology.
23
Economic Development Incentives 2019
24
Appendixes
Appendix A: Study mandate
2018-2020 Appropriation Act
Passed as Chapter 854 of the Acts Assembly, May 2, 2019
§ 1-11 Item 31 F
F.1. The General Assembly hereby designates the Joint Legislative Audit and Review Commission
(JLARC) to conduct, on a continuing basis, a review and evaluation of economic development
initiatives and policies and to make such special studies and reports as may be requested by the General
Assembly, the House Appropriations Committee, or the Senate Finance Committee.
2. The areas of review and evaluation to be conducted by the Commission shall include, but are not
limited to, the following: (i) spending on and performance of individual economic development
incentives, including grants, tax preferences, and other assistance; (ii) economic benefits to Virginia of
total spending on economic development initiatives at least biennially; (iii) effectiveness, value to
taxpayers, and economic benefits to Virginia of individual economic development initiatives on a cycle
approved by the Commission; and (iv) design, oversight, and accountability of economic development
entities, initiatives, and policies as needed.
3. For the purpose of carrying out its duties under this authority and notwithstanding any contrary
provision of law, JLARC shall have the legal authority to access the facilities, employees, information,
and records, including confidential information, and the public and executive session meetings and
records of the board of VEDP, involved in economic development initiatives and policies for the
purpose of carrying out such duties in accordance with the established standards, processes, and
practices exercised by JLARC pursuant to its statutory authority. Access shall include the right to
attend such meetings for the purpose of carrying out such duties. Any non-disclosure agreement that
VEDP enters into on or after July 1, 2016, for the provision of confidential and proprietary
information to VEDP by a third party shall require that JLARC also be allowed access to such
information for the purposes of carrying out its duties.
4. Notwithstanding the provisions of subsection A or B of § 58.1-3 or any other provision of law,
unless prohibited by federal law, an agreement with a federal entity, or a court decree, the Tax
Commissioner is authorized to provide to JLARC such tax information as may be necessary to
conduct oversight of economic development initiatives and policies.
5. The following records shall be excluded from the provisions of the Virginia Freedom of
Information Act (§ 2.2-3700 et seq.), and shall not be disclosed by JLARC:
(a) records provided by a public body as defined in § 2.2-3701, Code of Virginia, to JLARC in
connection with its oversight of economic development initiatives and policies, where the records
would not be subject to disclosure by the public body providing the records. The public body
providing the records to JLARC shall identify the specific portion of the records to be protected and
the applicable provision of the Freedom of Information Act or other provision of law that excludes
the record or portions thereof from mandatory disclosure.
25
Appendixes
(b) confidential proprietary records provided by private entities pursuant to a promise of
confidentiality from JLARC, used by JLARC in connection with its oversight of economic
development initiatives and policies where, if such records are made public, the financial interest of
the private entity would be adversely affected.
6. By August 15 of each year, the Secretary of Commerce and Trade shall provide to JLARC all
information collected pursuant to § 2.2-206.2, Code of Virginia, in a format and manner specified by
JLARC to ensure that the final report to be submitted by the Secretary fulfills the intent of the General
Assembly and provides the data and evaluation in a meaningful manner for decision-makers.
7. JLARC shall assist the agencies submitting information to the Secretary of Commerce and Trade
pursuant to the provisions of § 2.2-206.2, Code of Virginia, to ensure that the agencies work together
to effectively develop standard definitions and measures for the data required to be reported and
facilitate the development of appropriate unique project identifiers to be used by the impacted
agencies.
8. The Chairman of JLARC may appoint a permanent subcommittee to provide guidance and
direction for ongoing review and evaluation activities, subject to the full Commission's supervision
and such guidelines as the Commission itself may provide.
9. JLARC may employ on a consulting basis such professional or technical experts as may be
reasonably necessary for the Commission to fulfill its responsibilities under this authority.
10. All agencies of the Commonwealth shall cooperate as requested by JLARC in the performance of
its duties under this authority.
26
Appendixes
Appendix B: Research activities and methods
JLARC contracted with the University of Virginia’s Weldon Cooper Center for Public Service (Weldon
Cooper Center) for this review. Key research activities performed by Weldon Cooper Center for this
study included
data collection and analysis,
estimation of sales and use tax exemptions,
agency staff interviews, and
review of documents and research.
Data collection and analysis
Weldon Cooper Center collected project data from 13 state agencies that administer Virginia economic
development incentive programs. Data was provided for grant, tax credit, and loan or gap financing
programs that have made awards. Among the data elements collected for the incentive programs were
business identifiers, location, industry type, amount of grant approved and paid, and program
performance metrics, such as number of jobs created, average wage levels, and capital investment
(Table B-1). Some programs, namely the small business loan and tax incentive programs, do not collect
performance data or maintain it electronically.
TABLE B-1
Data and information were collected from 13 state agencies on incentive awards
Agencies Types of information
Center for Innovative Technology Business identifiers (name, federal tax ID number)
Dept. of Housing and Community Development Industry
Department of Rail and Public Transportation Location (locality) of project
Tobacco Region Revitalization Commission Amount of incentive approved and paid
Virginia Department of Agriculture and Consumer Number of jobs promised and created and timing
Services Capital investment promised and delivered and timing
Virginia Department of Taxation Average wages promised and delivered and timing
Virginia Department of Transportation Other performance metrics as specified
Virginia Department of Small Business and
Supplier Diversity
Virginia Economic Development Partnership
Virginia Film Office
Virginia Port Authority
Virginia Small Business Financing Authority
Virginia Tourism Corporation
SOURCE: Weldon Cooper Center.
27
Appendixes
Analysis of grant programs
Grant programs were grouped for analysis purposes based on the date/year when awards were
approved rather than paid. The approval date represents when a contract between the agency and the
business is signed in either a memorandum of understanding or performance agreement. The time
period between approval and payment varies widely by program. Some programs make award
payments upon approval or soon after. For other programs, payment depends on the business meeting
performance goals or other program requirements specified in the agreement and availability of
program funding. The most common performance period for Virginia economic incentive programs
is three to five years between approval and completion. Customized economic incentive grants, larger
business incentives, and infrastructure-related grants typically have longer performance periods
because of the significantly larger size and complexity of the projects.
Program expenditures by fiscal year were computed as the funds paid for completed projects and
grant funds still committed toward active but unfinished projects. Some programs report program
milestones to be included in the report issued by the Secretary of Commerce and Trade pursuant to
§ 2.2-206.2 of the Code of Virginia. However, milestone information was sometimes found to be
incomplete, and the quality of reporting varied by agency and program. Thus, it was not used in
computing program expenditures.
Grant program awards and amounts were categorized by location and industry using North American
Industrial Classification System (NAICS) codes provided by the agency administering the grant or
from information available from the Virginia Employment Commission (VEC). Several agencies did
not provide NAICS codes. For these programs, project awards were matched with VEC unit-level
ES202 records obtained under a confidentiality agreement with VEC. These grant records were
matched with VEC records using firm name, address, and when available, taxpayer identification
numbers. In many instances, matches could not be found (1,071 projects and $212 million in total
award amount). This problem was most pronounced for the Enterprise Zone Real Property
Investment Grant program, affecting 906 projects or 63 percent of the total projects and $59 million
in total awards for the program. In terms of financial impact, the Tobacco Commission Megasite
Grant awards were most significant with $97 million in unassigned awards. None of the Megasite
projects could be classified into a specific industry since they are made at the industrial-park level
rather than at the business level.
Thirteen Governor’s Motion Picture Opportunity Fund awards for a total award amount of $6.2
million were also not assigned to localities. The filming activities for these projects occurred in multiple
locations throughout the state but principally in Central Virginia.
Grant project records do not systematically include the employment of businesses receiving awards
across programs. Employment of the business that received the grant was estimated by matching grant
records with VEC ES202 payroll employment records that corresponded to the year of the award.
Many companies have more than one location in Virginia, and only the employment levels for the
specific location of the business that qualified for the grant were included in the analysis. Project
records for FY10 through FY18 were matched by fiscal year of award with the corresponding VEC
employment data by calendar year between 2009 and 2017 (i.e., FY18 project records were matched
to calendar year 2017 VEC employment records). Using this process, 61 percent of the total number
28
Appendixes
of awards and 42 percent of the award amounts were accounted for. Since larger establishments were
less likely to be represented in the matching process, project awards were weighted to account for the
underrepresentation of large awards (and correspondingly large establishments) relative to their
occurrence in the grant files to improve the representation of large establishments in the tabulations.
Analysis of loan programs
For the four loan programs—the Economic Development Loan Fund, Loan Guaranty Program, State
Cash Collateral Program, and SWaM Loan Fund—there were no state appropriations for the programs
for the FY10–FY18 period. These programs are primarily revolving loan funds or secure funding
outside the legislative appropriation process, but some have received state appropriations in the past.
Since some programs have relied or continue to rely on federal funding, only those projects that could
be attributed to previous state funding were included in this analysis. The costs of the programs were
estimated to be the actual or projected defaults.
Analysis of tax credits
For quantifying the revenue impact of state economic development-related tax credits, Weldon Cooper
Center used corporate and individual tax credit files obtained from the Virginia Department of Taxation.
These files list tax credit redemptions by fiscal year of utilization based on when the return was
processed. (See Virginia Department of Taxation annual report, Table 3.1: Fiscal Year Tax Credits.)
Incentives excluded from the analysis and report
Several programs did not make awards during the period of analysis (FY10–FY18) and are not included
in this report. Two tax incentive programs are relatively new and were not available to businesses during
the review period:
Aircraft Parts, Engines, and Supplies Exemption and the
Venture Capital Account Subtraction.
One custom grant program is not included in this report because a formal memorandum of
understanding has not been filed:
Pulp, Paper, and Fertilizer Advanced Manufacturing Grant Program.
Three grant programs have been active for over a decade but have not yet funded private business
projects:
Tobacco Commission Agribusiness Grant Program,
Southside Economic Development Grant Program, and
Tobacco Commission Southwest Economic Development Grant Program.
Four grant programs made awards that occurred earlier than FY10:
Aerospace Engine Manufacturing Performance Grant Program (Rolls-Royce),
Semiconductor Grant Program (Micron),
Semiconductor Grant Program (Qimonda), and
SRI custom grant.
29
Appendixes
Several tax incentives were also not included in this analysis. Information from the Department of
Taxation based on individual and corporate tax forms could not be obtained and processed within the
time frame for this report. These incentives include
Data Center Single Sales Factor Apportionment,
Qualified Business Long-Term Capital Gain Subtraction, and
Zero G Zero Tax Act Subtractions (Parts I and II).
This report includes program expenditures for three economic development incentive programs that
were not included in the 2018 report: GO Virginia, the Virginia Business Ready Site Program, and the
Single Sales Factor Apportionment for Manufacturing. The first two programs are new. GO Virginia
awarded one industrial site development grant (Wood Haven Water and Sewer) in FY18, while the
Virginia Business Ready Site Program provided 11 grants to localities for industrial sites around the
state in FY17. Although the Manufacturing Single Sales Apportionment Factor has been in use since
2014, tax expenditure estimates were not available until an intensive review of this incentive was
conducted in 2019. (See Data Center and Manufacturing Incentives, JLARC, 2019.) Corporate income tax
records for the period 2013–2016 were used to estimate the tax impact of the program.
Estimation of business savings from sales and use tax exemptions
Sales and use exemptions provide relief from sales and use taxes on selected taxable goods and
services for businesses in targeted industries. For most exemptions, eligible businesses obtain a sales
and use exemption certificate from the Department of Taxation (available online) and present it to
merchants at the point of sale to claim the exemption. Neither the merchant nor the purchaser is
required to report the tax savings to the Department of Taxation outside of an audit process.
Therefore, the size of these tax savings to businesses must be estimated by other means. For other
exemptions, such as the data center and pollution control equipment exemptions, the department
issues the exemption certificate after approving an application. The business may not have the
certificate at the time of eligible purchases and can apply for a refund once the exemption certificate
is obtained.
For quantifying forgone revenue because of sales and use tax exemptions, Weldon Cooper Center
relied on Department of Taxation fiscal impact estimates and staff-generated estimates based on
IMPLAN and other data sources (Table B-2). Department of Taxation estimates are based on a variety
of approaches, including industry surveys, industry association tallies, and imputations made from
secondary data sources such as federal statistical data. Some estimates rely on sales and use tax
exemption estimates published as part of detailed tax expenditure studies conducted by the
Department of Taxation in the early- and mid-1990s. More recent estimates are sometimes available
when the Department of Taxation issues fiscal impact estimates to inform new General Assembly
legislation. Weldon Cooper Center estimates were substituted for Department of Taxation estimates
in three different situations:
if the Department of Taxation estimates were based on much older estimates and credible
estimates could be generated using more recent data and alternative methods;
if Department of Taxation estimates were not available for a specific sales and use tax
exemption; and
30
Appendixes
if an alternative methodology had practical or conceptual advantages over the Department
of Taxation estimates.
Weldon Cooper Center estimates for tax revenue rely primarily on IMPLAN data for Virginia.
IMPLAN is a commercial economic impact model produced by MIG, Inc. It is based on input-output
analysis, which requires estimates of the value of intermediate input purchase for each industry. The
intermediate input purchase estimates for Virginia formed the basis of the relevant sales tax base for
sales and use tax revenue impact calculations. Spending on durable and leased good inputs is estimated
by multiplying industry output by gross absorption coefficients for IMPLAN commodity sectors
3111-3395 and 3442-3446, using the most recent data for 536 industries and commodities. These
coefficients represent the input purchases for various commodities per dollar of output. For example,
the construction machinery manufacturing industry spent $0.00170 per dollar of output on
commodity 362 (railroad rolling stock). This absorption coefficient was multiplied by the output of
the construction machinery equipment industry for 2015 ($122,220,940) to obtain the estimated
expenditure on this input ($208,000).
Because the exemptions are sometimes more narrowly targeted than the individual IMPLAN sectors
available, supplemental data from EMSI, Virginia Employment Commission, Bureau of Labor
Statistics, and Bureau of Transportation Statistics was used to apportion the sector purchases to
narrower industry subsets. For example, the airline common carrier exemption is available for air
common carriers that provide scheduled service to Virginia airports at least once per week. Eligible
purchases were imputed by apportioning IMPLAN input purchase estimates by the percentage of the
air transportation industry (NAICS 481) providing scheduled service (NAICS 4811---Scheduled Air
Transportation) and apportioning again based on the percentage of scheduled departures performed
by airlines that provide service at least once per week based on Bureau of Transportation Statistics T-
100 Air Carrier Traffic Segment data.
31
Appendixes
TABLE B-2
Estimates of business savings from sales and use tax exemptions were based on different
methods and sources
Exemption Sources used to derive estimate
Airline Common Carriers Exemption IMPLAN, Bureau of Transportation Statistics (BTS), EMSI
Aircraft Parts, Engines, and Supplies Exemption No estimate generated (becomes effective in FY19)
Certain Printed Materials for Out-of-State Distribution Exemption TAX (Sales and use tax study 1991)
Contractor Temporary Storage Exemption TAX (Sales and use tax study 1995)
Data Centers Exemption Weldon Cooper Center based on VEDP MOU data
Electrostatic Duplicators Exemption IMPLAN, EMSI
Film, Television, & Audio Production Inputs Exemption IMPLAN, EMSI
Media Provider Equipment Exemption TAX estimate (updated) for legislative proposal
Out-of-State Nuclear Facility Repair Exemption IMPLAN, VEC, EMSI
Pollution Control Equipment & Facilities Exemption Weldon Cooper Center survey of TAX ST-11A users
Railroad Common Carriers Exemption IMPLAN
Railroad Rolling Stock Exemption IMPLAN
Research & Development Exemption TAX estimate, updated by Weldon Cooper Center
Semiconductor Manufacturers Exemption IMPLAN, industry use estimate
Semiconductor Wafers Exemption IMPLAN, industry use estimate
Ships and Vessels Exemption IMPLAN
Taxi Parts & Radios Exemption TAX fiscal impact, HB1488 (2004)
Uniform Rental & Laundry Businesses Exemption IMPLAN, EMSI
Virginia Spaceport Users Exemption TAX fiscal impact, HB1488 (2004)
SOURCE: Weldon Cooper Center.
The sectors targeted vary by sales and use tax exemption, as do the categories of purchases that are
eligible for exemption. Generally speaking, tangible personal property purchases and leases are
covered though the specific items sometimes differ. For instance, the railroad rolling stock exemption
gives Virginia manufacturing firms an exemption on purchases of rolling stock. The tax base is
determined by aggregating purchases of rolling stock across all Virginia manufacturing industries.
Other adjustments are needed to convert calendar years to fiscal years. IMPLAN purchases are
expressed in terms of calendar years; thus fiscal year estimates were calculated by averaging two
calendar years (e.g., FY12 is the average of CY11 and CY12). The last calendar year of data available
from IMPLAN is 2017. Therefore, FY18 revenue estimates were calculated by inflating the FY17
estimates by the consumer price index (CPI).
32
Appendixes
Agency interviews
In 2017, Weldon Cooper Center and JLARC staff conducted structured interviews with state agency
staff that administered and/or provided research support for economic development incentive
programs. The interviewees included representatives of each of the 13 agencies that administer grants,
loans, and gap financing and several staff from the Department of Taxation. Topics included the
purpose of each program, criteria used in selecting award recipients and amounts, and data availability
and quality for tracking program performance. Additional interviews are only performed as needed,
such as when new incentive programs are adopted, programs are substantially changed, or programs
are selected as part of an intensive review for that year.
Review of documents and research
Weldon Cooper Center reviewed several sources of information, including documents, reports, and
published or unpublished research. The purpose of this literature review was to understand the
purpose and goals of Virginia economic development incentive programs, determine the best
approach to quantify the revenue impacts of sales and use tax exemptions, and develop an approach
for performance evaluation that draws on best practices from other states. Sources consulted included
Virginia agency documents that describe economic development incentive program
purpose, application requirements, award criteria, and other features;
Virginia Legislative Information System documents describing grant and sales and use
exemption statutes and Department of Taxation fiscal impact estimates;
State economic development performance evaluations published by state agencies or their
consultants in Virginia and other states.
33
Appendixes
Appendix C: Incentive program descriptions
Seventy-nine economic development incentive programs are subject to this review. These include 32
grant programs, 16 tax credits, 19 tax exemptions, and 12 other programs.
Grant programs
Ten state agencies administer 32 economic development incentive grant programs. These programs
reflect a variety of economic development goals and often target different activities, including
development in disadvantaged regions (Tobacco Region Opportunity Fund and Enterprise Zone
grants), transportation enhancements for business expansion and recruitment (Economic
Development Access Program, Rail Industrial Access Program, and Transportation Partnership
Opportunity Fund grants), and small business development (Small Business Investment Grant Fund
and Small Business Jobs Grant Fund Program).
Programs also target particular industries such as agriculture and forestry (Agriculture and Forestry
Industries Development Grant), corporate headquarters (Virginia Economic Development Incentive
Grant), motion picture production (Governor’s Motion Picture Opportunity Fund), and port-related
industries (Port of Virginia Economic and Infrastructure Grant).
The state has also created customized grants for individual large industrial attraction and expansion
projects, such as Newport News Shipbuilding (Advanced Shipbuilding Training Facility Grant
Program and Advanced Shipbuilding Production Facility Grant Program) and Rolls-Royce
Corporation (Aerospace Engine Manufacturing Performance Grant Program). The Major Eligible
Employer Grant program likewise targets large expansions; so far both Booz Allen Hamilton and
Philip Morris have received awards for expanding their state footprints.
Sixty-nine percent of total spending on economic incentive grants over the FY10 to FY18 period was
administered by two state agencies, the Virginia Economic Development Partnership and Tobacco
Region Revitalization Commission. The Department of Housing and Community Development and
Department of Transportation also awarded large portions of total grant funding at 16 percent and 7
percent of the total, respectively.
TABLE C-1
Thirty-two incentive grant programs are administered by 10 state agencies
State agency/program
(year enacted) Purpose Description
Center for Innovative Technology
Commonwealth Research Promote high technology Grants are made on the basis of scientific merit and
Commercialization Fund economic development through economic development potential for technology at the
commercialization of promising proof-of-concept stage or earlier in targeted high-
(2011)
research and development. technology industries. Funds must be matched by
recipient.
34
Appendixes
State agency/program
(year enacted) Purpose Description
Department of Agriculture and Consumer Services
Agriculture and Forestry Attract new and expanding Eligible projects must produce value-added
Industries Development agriculture and forestry processing agricultural or forestry products that derive at least
Grant value-added facilities that use 30% of agricultural or forestry product inputs from
Virginia-grown products. Virginia. Incentive grant requests are made by the host
(2012)
political jurisdiction and must be locally matched.
Department of Small Business and Supplier Diversity – Virginia Small Business Financing Authority
Small Business Investment Assist small businesses obtain Grant for equity or subordinated debt investment in
Grant Fund investment capital. eligible small business. Grant amount equals 10% of
qualified investments made in small businesses not to
(2012)
exceed $250,000 per investor.
Small Business Jobs Grant Support small business job Grants are made to small businesses in targeted
Fund Program creation and investment. sectors that create at least five full-time positions
paying at least 1.35 times the federal minimum wage
(2010)
and making a capital investment of at least $100,000
within two years. Funding ($500–$2,000) per job is
based on job characteristics.
Department of Housing and Community Development
Job Creation Grant Encourage job creation in Grants are awarded to qualified businesses that create
(Enterprise Zone) distressed communities at least four permanent full-time jobs in an enterprise
designated as enterprise zones. zone. Qualifying jobs must pay at least 1.75 times the
(2005)
federal minimum wage (lowered to 1.5 times for high
unemployment areas) and offer health benefits.
Real Property Investment Encourage private investment in Grants are awarded to investors making qualified
Grant (Enterprise Zone) distressed communities investments in industrial, commercial, or mixed-use
designated as enterprise zones. real property in an enterprise zone. The grant is
(2005)
computed as 20% of the investment amount minus a
base investment with a project cap of $200,000.
GO Virginia (Virginia Promote private-sector business The new grant includes FY18 funds allocated to
Growth and Opportunity and employment growth through regions on the basis of population and competitive
Fund Grants) regional cooperation. grant funds. Performance parameters of grants are still
being developed.
(2017)
Department of Rail and Public Transportation
Rail Industrial Access Encourage construction, The grant is available to businesses that seek access to
Program reconstruction, or improvement of a common carrier railroad. Funding is limited to 15%
railroad tracks serving new or of the business capital investment with a cap of
(1987)
expanding industrial sites and $450,000. The program evaluates applicants using a
divert truck traffic to the freight project scoring system.
rail network.
35
Appendixes
State agency/program
(year enacted) Purpose Description
Department of Transportation
Economic Development Encourage construction, The grant is made in support of road enhanced access
Access Program improvement, or maintenance of for basic employers that export at least half of output
roads serving new or expanding outside state. Award amount is based on value of
(1956)
industrial sites. capital investment by qualifying companies who locate
at the economic development site.
Transportation Partnership Improve transportation access for Grants of up to $5 million are available to companies
Opportunity Fund business development projects. that develop transportation facilities, such as on- and
off-site road, rail, mass transit or other transportation
(2006)
access improvements. Projects must meet
Commonwealth’s Opportunity Fund or Virginia
Investment Partnership Grant program criteria.
Tobacco Region Revitalization Commission
Agribusiness Grant Promote agricultural and Awards are made to projects likely to generate new
agribusiness growth, development income and investment and align with targeted
(2002)
and diversification in the tobacco categories such as applied research and education,
region to help the agricultural product processing, livestock and crop demonstration,
industry pursue market local foods, multi-purpose agriculture centers, and
opportunities and reduce wholesale/retail cooperatives.
dependence on tobacco and
tobacco-related business.
Megasite Grant Develop large, business-ready and Megasite funding is only available for the eight sites
publicly owned industrial sites that have been developed to date with Tobacco
(2010)
across the tobacco region to Commission support. Megasite projects are defined as
attract major employer and those that create at least 400 jobs and $250 million in
investment projects. private investment.
Southside Economic Promote economic development Funds are allocated by locality. Awards fall into
Development Grant in the Southside localities of the strategic funding categories identified as important for
Tobacco Region. economic development including infrastructure
(1999)
improvements, workforce training, regional tourism,
building industry clusters, and entrepreneurial
development.
Southwest Economic Promote economic development Awards fall into strategic funding categories identified
Development Grant in the Southwest localities of the as important for economic development, including
Tobacco Region. infrastructure improvements, workforce training,
(1999)
regional tourism, building industry clusters, and
entrepreneurial development.
Tobacco Region Attract new jobs and investments Grant requests are initiated by the host community.
Opportunity Fund for the Tobacco Region through Grant criteria include a minimum private capital
business attraction and expansion. investment of $1 million and 10 jobs created within 36
(1999)
months. Applications are evaluated using a ROI model
with award amounts based on that analysis.
36
Appendixes
State agency/program
(year enacted) Purpose Description
Virginia Economic Development Partnership
Advanced Shipbuilding Promote the expansion of Incentive payments are based on attainment of
Training Facility Grant advanced shipbuilding in Virginia. performance milestones specified in a performance
Program (Newport News) This customized performance- agreement between the state and the company.
based grant is used to support the Performance measures include employment, capital
(2011)
growth of Newport News investment, and training expenditures.
Shipbuilding in Newport News
City.
Advanced Shipbuilding Promote the expansion of Incentive payments are based on attainment of
Production Facility Grant advanced shipbuilding in Virginia. performance milestones specified in a performance
Program (Newport News) This customized performance- agreement between the state and the company.
based grant is used to support the Performance measures include employment and
(2016)
expansion of Newport News capital investment.
Shipbuilding in Newport News
City.
Aerospace Engine Attract an aerospace engine Incentive payments are based on attainment of
Manufacturing manufacturer to locate in Virginia. performance milestones specified in a performance
Performance Grant This customized performance- agreement between the state and the company.
Program (Rolls-Royce) based grant is used to support the Performance measures include employment, capital
growth of the Rolls-Royce turbine investment, and number of trainees.
(2007)
plant in Prince George county and
industry cluster firms.
Business Ready Sites Encourage the development of Incentive grants consist of two types. Site
Program sites and associated infrastructure characterization grants fund site needs assessment.
for industrial and commercial uses Site development grants fund site development
(2016)
as tools for business attraction, costs. Eligible sites must have at least 100 contiguous,
retention, and expansion. developable acres and meet additional criteria.
Commonwealth’s Attract new businesses and Grant program is discretionary deal closing fund for
Opportunity Fund support existing business firms exporting at least half of output outside Virginia.
expansion. Funds must be matched by host locality and are used
(1996)
for site acquisition and improvement, infrastructure,
building construction, and employee training.
Major Eligible Employer Attract new or expanding large The grant is targeted to major employers that make a
Grant employers to the state. capital investment of at least $100 million and create
at least 1,000 jobs. This job threshold is reduced if
(1999)
high-paying jobs are created. The grant amount per
job ranges from $500 to $800.
Pulp, Paper, and Fertilizer Promote the expansion of pulp, Incentive payments based on attainment of
Advanced Manufacturing paper, and fertilizer advanced performance milestones specified in a performance
Performance Grant manufacturing in Virginia. This agreement between the state and the company.
Program customized performance-based Performance measures include employment and
grant was used to support the capital investment. Shandong Tranlin ultimately
(2016)
location and expansion of canceled its plans to build its Virginia plant.
Shandong Tranlin, Inc. in
Chesterfield County.
37
Appendixes
State agency/program
(year enacted) Purpose Description
Semiconductor Custom Promote and expand Incentive payments were based on attainment of
Grant (Micron)-- semiconductor product performance milestones specified in a performance
Semiconductor Memory or manufacturing. This customized agreement between the state and the company.
Logic Wafer Manufacturing performance-based grant was Performance measures included employment and
Performance Grant used to support the expansion of capital investment.
Micron in Manassas.
(2004)
Semiconductor Custom Promote and expand semicon- Incentive payments were based on attainment of
Grant (Qimonda)-- ductor product manufacturing. performance milestones specified in a performance
Semiconductor Memory or This customized performance- agreement between the state and the company.
Logic Wafer Manufacturing based grant was used to support Performance measures included employment and
Performance Grant the attraction of the now defunct capital investment.
Qimonda semiconductor plant in
(2004)
Henrico County.
SRI custom grant Promote public-private R&D and Incentive payments are based on attainment of
commercialization activities to performance milestones specified in a performance
(2006)
facilitate economic growth. This agreement between the state and the company.
customized grant is used to Performance measures include employment and
support SRI Shenandoah Valley in capital investment.
the establishment of the Center
for Advanced Drug Research in
Rockingham County.
Virginia Economic Encourage the location of signifi- Grants are awarded to eligible companies based on
Development Incentive cant headquarters, administrative, ROI analysis, subject to the governor's approval.
Grant research and development, and Companies must agree to create a minimum number
basic service companies. of jobs (200–400) that pay 1.5 times the local
(2005)
prevailing average wage and make a capital
investment of $6,500 per job or more.
Virginia Investment Encourage Virginia manufacturer Grant is targeted to manufacturers that have operated
Partnership Grant retention and expansion though in the state for at least 3 years, will make a capital
new capital investment and R&D. investment of at least $25 million, and face high risk of
(1999)
relocating elsewhere. New job creation is not required,
but current employment levels must be maintained.
Virginia Jobs Investment Support private business job Grants are awarded for creating new jobs or upgrading
Program creation and worker training and skills for existing workers. Job creation awardees must
retraining. create at least 25 new jobs and make a capital
(1965)
investment of at least $1 million (or 5 new jobs and
$100,000 capital investment if a small business.)
Retraining awardees must retrain 10 full-time workers
and make a capital investment of $500,000 (or 5 full-
time workers and $100,000 capital investment if a
small business.)
Virginia Leaders in Export Help companies expand their The VALET program provides technical assistance,
Trade (VALET) Program markets and encourage the export training, and reimbursement for approved expenses to
of products and services to help eligible businesses develop international export
(2002)
international markets. markets. Reimbursements of up to $15,000 per
company for approved export-related expenses.
Awardees must complete a two-year program.
38
Appendixes
State agency/program
(year enacted) Purpose Description
Virginia Trade Show Help companies expand their The grant reimburses company trade show attendees
Assistance Program markets and encourage the export for up to $10,000 of the cost of trade exhibits.
of products and services to
(2016)
international markets.
Virginia Film Office
Governor's Motion Picture Support growth of the film and Grants are awarded to production companies that film
Opportunity Fund television industries in Virginia. in Virginia. Awards are made on a discretionary basis
considering project expenditures in Virginia,
(1999)
employment, presence of any local commitment,
geographic diversity, and industry or company growth
potential in Virginia.
Virginia Port Authority
Port of Virginia Economic Encourage maritime companies to Grants are awarded to companies in maritime
and Infrastructure locate or expand to promote the industries that create at least 25 permanent full-time
Development Grant growth of the Port of Virginia. jobs and are involved in maritime commerce or an
import/export industry. The award per job is scaled to
(2014)
the number of jobs created.
39
Appendixes
Tax credits
Sixteen economic development tax credits are available to eligible applicants when filing income tax
forms. The state offers three types of credits: transferable, refundable, and non-refundable and non-
transferable. Most economic development tax credits in this report are the latter two types. In most
cases, non-refundable and non-transferable tax credits can be credited against a company’s tax liability
over a designated “carryover” period. For these programs, carryover periods vary from a low of three
years to a high of 15 years. Three of the economic development tax credit programs offer refundable
credits: Coalfield Employment Enhancement Tax Credit, Motion Picture Production Tax Credit, and
Research and Development Expenses Tax Credit. A refundable tax credit allows taxpayers to be
reimbursed by the difference between the credit amount and tax liability.
TABLE C-2
Sixteen economic development tax credits are available through the state corporate and
individual income tax
Program (year enacted) Purpose Description
Barge and Rail Usage Tax Encourage use of rail and Tax credit for facilities engaged in port-related activities
Credit waterway transportation and utilizing barge and rail rather than motor
(2011) decrease Virginia road congestion. transportation. Credit is awarded on basis of amount of
increased cargo shipped by barge and rail over
previous tax year.
Biodiesel and Green Diesel Promote biodiesel and green Tax credit for biodiesel and green diesel fuel producers
Fuels Producers Tax Credit diesel production. making up to 2 million gallons of fuel per year. The
(2008) credit amount is $0.01 per gallon but cannot exceed
$5,000 per year.
Coalfield Employment Encourage production of Virginia Tax credit for metallurgical coal and coalbed methane
Enhancement Tax Credit metallurgical coal and coalbed producers that is based on mining method and seam
(1996) methane. thickness.
Farm Wineries and Promote the growth of the Virginia Tax credit for eligible vineyards and winery qualified
Vineyards Tax Credit wine industry. expenditures such as equipment and supplies used in
(2011) winemaking. Credit is 25% of all qualified expenditures.
Green Job Creation Tax Promote creation of jobs in Tax credit for creating green jobs during the taxable
Credit renewable and alternative energy year. The credit amount is $500 per green full-time job
(2010) industries. created that pays at least $50,000 per year in wages.
International Trade Facility Encourage port-related economic Tax credit for international trade facilities that show at
Tax Credit activity by increasing capital least 5% increase in Virginia port shipments. Employee
(2011) investment or new hiring credit is equal to $3,500 per job. Capital investment
connected to international trade credit is equal to 2 percent of capital investment.
facilities.
Major Business Facility Job Promote growth of company Tax credit of $1,000 per job for creation of new, full-
Tax Credit headquarters; manufacturing, time jobs in excess of threshold of 50 jobs or 25 jobs
(1995) agricultural, and transportation for enterprise zone/economically distressed areas.
businesses; and export-oriented
service industries such as legal and
financial services. Retail industries
are excluded.
40
Appendixes
Program (year enacted) Purpose Description
Major Research and Promote research and Tax credit for qualified R&D expenses greater than $5
Development Expenses Tax development activities. million. Credit is based on difference between R&D
Credit expenses during taxable year and 50% of the average
(2016) expenses incurred during previous 3 years.
Motion Picture Production Encourage motion picture Tax credit for qualifying expenses of eligible
Tax Credit production and use of Virginia productions that complete a motion picture. Tax credit
(2011) resident labor and merchants in is equal to 15% of qualifying expenses, with bonus rates
production for Virginia resident payroll and production in
economically distressed areas.
Qualified Equity and Encourage investment in high-tech Tax credit for equity or subordinated debt investment
Subordinated Debt small business ventures. in qualified small businesses engaged in technology-
Investments Tax Credit related fields. Credit amount is equal to 50% of
(1999) qualified investments during the taxable year but may
not exceed tax liability or $50,000.
Recyclable Materials Encourage recycling of waste and Tax credit for qualifying purchases of equipment to
Processing Equipment Tax pollution control. produce items from recyclable materials. Credit is equal
Credit to 20% of the purchase price of the recycling
(1991) equipment. The allowable credit cannot exceed 40% of
tax liability.
Research and Development Promote research and Tax credit for qualified R&D expenses. Credit is equal to
Expenses Tax Credit development activities. 15% of first $300,000 of expenses or 20% if conducted
(2011) with Virginia higher education. Alternatively, credit may
be computed as 10% of difference of expenses and
50% of previous 3-year average.
Telework Expenses Tax Encourage telework to ease road Tax credit for eligible expenses incurred for permitting
Credit congestion. employees to telework. Credit was equal to up to
(2012) $1,200 per teleworking employee or $20,000 for
conducting a telework assessment. Maximum credit is
$50,000 per employer per year. This credit expired
January 1, 2019.
Virginia Coal Production Encourage use of Virginia coal by Tax credit for Virginia coal that is both purchased and
and Employment Incentive Virginia power generators to consumed by Virginia electricity generator. Credit is
Tax Credit increase Virginia coal production equal to $3-per-ton.
(2001) and employment.
Virginia Port Volume Promote use of state port facilities. Tax credit for qualified agricultural, manufacturing, or
Increase Tax Credit mining entities that use Virginia port facilities and
(2011) increase cargo volume by at least 5%. Credit is $50 per
20-foot equivalent unit.
Worker Retraining Tax Encourage worker retraining to Tax credit for training costs of providing eligible worker
Credit improve productivity and retraining for qualified employees. The retraining must
(1999) employment retention. occur with a pre-designated program such as a
noncredit course or apprenticeship. Tax credit is up to
30% of qualified training costs. Modified in 2018 to
allow manufacturers that conduct qualifying
orientation, instruction, or other programs to claim a
credit equal to 35% of the direct cost of the program
not to exceed $2,000 for any year.
41
Appendixes
Sales and use tax exemptions
Nineteen sales and use tax exemptions reduce taxes for eligible firms that purchase or lease selected
tangible personal property. Sales and use tax exemptions are generally realized at the point of sale
when eligible items are purchased. Eligible firms must complete Department of Taxation forms
(Commonwealth of Virginia Sales and Use Tax Certificate of Exemption) and present them to
merchants at time of sale. Two exemptions require additional authorization before use. The data center
exemption statutorily requires qualifying firms to meet minimum employment, capital investment, and
wage requirements and enter into a memorandum of understanding with VEDP. The MOU requires
data centers to provide annual reports to VEDP to demonstrate that the minimum requirements were
met. Companies using the pollution control equipment and facilities exemption must first obtain
certification from a state monitoring agency (i.e., Department of Environmental Quality, Department
of Mines, Minerals, and Energy) before applying for the exemption. For these exemptions, the
certificate may not have been issued at the time of eligible purchases, but the business can request a
refund once the certificate is obtained.
TABLE C-3
Nineteen sales and use tax exemptions reduce taxes at point of sale
Exemption (year enacted) Purpose Description
Airline Common Carriers Encourage commercial airline Tax exemption for tangible personal property sold or
Exemption service to and from Virginia leased to an airline operating in intrastate, interstate, or
airports. foreign commerce as a common carrier. The airline must
(1966)
provide scheduled air service on a continuing basis to one
or more Virginia airports at least one day per week.
Aircraft Parts, Engines, & Encourage growth of aviation Tax exemption for parts, engines, and supplies used for
Supplies Exemption sector, including unscheduled maintaining, repairing, or reconditioning aircraft.
common carriers, private planes,
(2018)
and unmanned aviation systems.
Certain Printed Materials Encourage out-of-state business Tax exemption for catalogs, letters, brochures, reports,
for Out-of-State purchases of printing materials and similar printed materials, and paper furnished to a
Distribution Exemption from state firms. printer for fabrication into such printed materials, when
stored for 12 months or less in Virginia and distributed
(1976)
outside the state.
Contractor Temporary Promote competitiveness of state Tax exemption for personal property purchased by a
Storage Exemption construction material supply firms. contractor for use solely in another state or in a foreign
country and temporarily stored in Virginia pending
(1989)
shipment, if such property could be similarly purchased
free from sales tax in such other state or foreign country.
Data Center Exemption Promote the establishment of Tax exemption for Virginia data centers and tenants
large-scale data centers. meeting certain minimal investment, employment, and
(2010)
wage-level criteria. Exemption is for processing, storage,
retrieval, and communication equipment.
42
Appendixes
Exemption (year enacted) Purpose Description
Electrostatic Duplicators Promote small-scale printing Tax exemption for high-speed electrostatic duplicators
Exemption businesses by providing or any other duplicators having a printing capacity of
exemption comparable to 4,000 impressions or more per hour purchased or leased
(1986)
industrial printers. by persons engaged primarily in the printing or
photocopying of products for sale or resale.
Film, Television, & Audio Promote motion picture Tax exemption for audiovisual works acquired for
Production Inputs production and sound recording licensing, distributing, broadcasting, commercially
Exemption industries. exhibiting, or reproducing, or production services or
fabrication connected with such production. The
(1995)
exemption applies to purchases and leasing of tangible
personal property.
Media Provider Equipment Promote radio and television Tax exemption for broadcasting equipment, parts and
Exemption broadcasting, cable television, and accessories used by radio, television, cable, and
broadband media industries. broadband media companies. The exemption also
(1966)
applies to amplification, transmission, and distribution
equipment used by cable television systems or other
video systems.
Out-of-State Nuclear Promote nuclear maintenance and Tax exemption for tangible personal property purchased
Facility Repair Exemption repair industry by exempting for use or consumption in the performance of
purchases of supplies used for the maintenance and repair services at Nuclear Regulatory
(2000)
purpose of providing services to Commission-licensed nuclear power plants located
out-of-state buyers. outside the state.
Pollution Control Encourage business adoption of Tax exemption for pollution control equipment and
Equipment & Facilities pollution control equipment and facilities used for air and water pollution abatement
Exemption technologies by reducing capital certified by a state certifying authority.
costs.
(1972)
Railroad Common Carriers Promote maintenance and Tax exemption for tangible personal property sold or
Exemption expansion of state railroads. leased to a public service corporation that is a common
carrier of property or passengers by railway.
(1978)
Railroad Rolling Stock Encourage capital investment in Tax exemption for railroad rolling stock when sold or
Exemption railroad rolling stock. leased by the manufacturer.
(2007)
Research & Development Encourage research and develop- Tax exemption for tangible personal property purchased
Exemption ment of new and improved for use or consumption directly and exclusively in basic
products and processes. research or research and development in the
(1966)
experimental or laboratory sense.
Semiconductor Promote semiconductor Tax exemption for semiconductor cleanrooms or
Manufacturers Exemption manufacturing industry. equipment, fuel, and supplies used in the process of
designing, developing, manufacturing, or testing
(2006)
semiconductor products or equipment.
Semiconductor Wafers Promote semiconductor Tax exemption for semiconductor wafers for use or
Exemption manufacturing industry. consumption by a semiconductor manufacturer.
(2006)
43
Appendixes
Exemption (year enacted) Purpose Description
Ships & Vessels Exemption Promote maritime shipping Tax exemption for ships or vessels used or to be used
industries, including commercial exclusively or principally in interstate or foreign
(1966)
ship building, repairing, supplying, commerce. The tax exemption also applies to fuel and
and dredging. supplies for use or consumption aboard ships or vessels
plying the high seas, either in intercoastal trade or in
foreign commerce.
Taxi Parts & Radios Encourage commercial taxi Tax exemption for parts, tires, meters, and dispatch
Exemption operations and prevent their radios sold or leased to taxicab operators for use in their
further decline. services.
(1984)
Uniform Rental & Laundry Promote the commercial uniform Tax exemption for machinery and tools, supplies and
Businesses Exemption rental industry by providing a tax materials used directly in maintaining and preparing
exemption similar to other textile products for renting or leasing by an industrial
(1980)
industrial manufacturers and processor engaged in commercial leasing or renting of
processors. laundered textile products.
Virginia Spaceport Users Promote spaceport operations at Tax exemption for space facilities and hardware,
Exemption facilities owned, leased, or including inputs, components and supplies such as
operated by the state and the special fuels, machinery and equipment, and other
(1997)
commercial space industry. goods and services for activities undertaken at a Virginia
Commercial Space Flight Authority facility.
44
Appendixes
Other incentive programs
Twelve other incentive programs included in this report fall into a “miscellaneous” category. These
incentives include tax preferences such as corporate income tax apportionment methods and income
tax subtractions as well as gap and loan financing programs that are difficult to classify elsewhere. The
latter programs are administered by the Virginia Small Business Financing Authority and the Center
for Innovative Technology and are designed to provide alternative funding sources for business
startups and established small businesses that face financing constraints. Based on current estimates,
the Manufacturing Single Sales Apportionment Factor is the largest of these miscellaneous incentives.
The single sales formula allows manufacturers to calculate their taxable income in Virginia based solely
on the proportion of total sales that are in Virginia rather than a weighted average of sales, property,
and payroll. This creates tax savings for multistate firms that have sizeable operations within the state
but ship substantial amounts of products outside the state.
TABLE C-4
Twelve other tax incentives, loan, and gap financing programs target economic development
Program (year enacted) Purpose Description
Income tax apportionment methods and subtractions
Data Center Single Sales Promote the establishment and This tax rule allows eligible multistate corporations that
Factor Apportionment growth of data centers. make a capital investment of at least $150 million in a
(2017) data center to use the single sales factor method of
apportionment to reduce tax liability. Companies that
choose to use this apportionment method must enter
into an MOU with VEDP.
Manufacturing Single Sales Incentivize the state’s This tax rule allows manufacturing companies to choose
Factor Apportionment manufacturing industry and slow single sales factor apportionment to reduce tax liability.
(2009) the decline of manufacturing Companies must certify that full-time employee average
jobs. wages are above the state industry average and that
employment is at least 90 percent of base-year
employment for three years.
Qualified Business Long- Promote high technology Tax subtraction for income attributable to an
Term Capital Gain business investment. investment in certain high technology businesses that is
Subtraction taxed as long-term capital gain. Qualified businesses
(2010) must have gross revenues of less than $3 million and
received less than $3 million in equity or debt
investments.
Venture Capital Investment Promote investment in early- Tax subtraction on certain income attributable to an
Subtraction stage companies in Virginia. investment in a Virginia venture capital account, which
(2018) is an investment fund certified by TAX. The account
must intend to invest at least 50% of its capital in
qualified portfolio companies and employ at least 1
investor with at least 4 years of professional experience
in venture capital investment or substantially equivalent
experience. A qualified portfolio company has its
principal place of business in Virginia; has a primary
purpose of production, sale, research, or development
of a product or service; and provide equity in the
company to the account in exchange for capital
investment.
45
Appendixes
Program (year enacted) Purpose Description
Zero G Zero Tax Act (Part I) Encourage the location and Tax deduction for gains realized from the sale of launch
Subtraction expansion of companies at a services to space flight participants or launch services
(2009) Virginia airport or spaceport intended to provide individuals the training or
involved in flying or training experience of a launch, without performing an actual
humans in suborbital flight. launch.
Zero G Zero Tax Act (Part II) Encourage the location and Tax deduction for gains realized from resupply services
Subtraction expansion of companies at a contracts for delivering payload entered into with the
(2009) Virginia spaceport involved in Commercial Orbital Transportation Services division of
resupplying the space station. the National Aeronautics and Space Administration or
other space flight entity.
Loan and gap financing programs
CIT Gap Funds Promote expansion of early stage Seed-stage equity investments in Virginia-based tech-
(2005) high-science and technology nology, green technology, and life science companies
companies in targeted fields with with a high-growth potential. The Center for Innovative
rapid growth potential. Technology holds an ownership position in the company
while the company grows operations and value.
Economic Development Promote small business job Loans are targeted to small businesses in technology,
Loan Fund creation and retention by tourism, manufacturing, and services that generate a
(2007) providing gap financing. majority of sales outside the state. Project must create
permanent full-time jobs that pay a minimum of $10
per hour. Maximum loan available is 40% or $1 million,
whichever is less.
Loan Guaranty Program Promote small business capital This program helps small businesses obtain loans by
(1985) investment. reducing bank credit risk. The maximum guarantee is
the lessor of $750,000 or 75% of the loan amount. The
program does not have job creation requirements but
considers job creation in financing decisions.
State Cash Collateral Promote small business capital This program assists small businesses obtain loans by
Program investment. reducing bank credit risk. The maximum guarantee is
(2013) the lessor of $500,000 or 40% of the loan amount. The
program does not have job creation requirements but
considers job creation in financing decisions.
SWaM Business Microloan Promote small, women-owned, This fund provides a maximum of $10,000 to eligible
Fund and minority-owned business businesses, or $25,000 if business received counseling
(2012) capital investment and expansion. from a Small Business Development center. Loans are
allocated on a credit score basis. Loans may be used for
working capital, financing accounts receivable and
inventory, and other purposes.
Tourism Development Promote tourism and economic The program provides gap financing for tourism
Financing Program development in Virginia. development projects otherwise unable to access
(2012) capital. The locality must make application, demonstrate
a tourism deficiency, and provide tax incentives or
regulatory flexibility for a designated tourism zone
where the project occurs.
46
Appendix D: Spending or tax expenditure by incentive
TABLE D-1
State spending on incentive grant payments ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Total
Advanced Shipbuilding Training Facility Grant Program -- $32.8 -- -- -- -- -- -- $32.8M
(Newport News)
Advanced Shipbuilding Production Facility Grant -- -- -- -- -- -- -- 46.00 0.00 46.0
Program (Newport News)
Aerospace Engine Manufacturing Performance Grant 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Program (Rolls Royce)
Tobacco Commission Agribusiness Grant 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Agriculture and Forestry Industries Development Grant -- -- -- -- 0.9 0.4 1.0 1.6 0.9 4.9
Virginia Business Ready Sites Program -- -- -- -- -- -- -- 1.2 0.0 1.2
47 Commonwealth’s Opportunity Fund 3.2 8.7 11.5 7.7 8.7 24.3 25.0 17.7 11.2 118.1
Appendixes
Commonwealth Research Commercialization Fund -- -- 1.9 2.5 0.9 1.0 1.5 1.3 0.9 10.1
Economic Development Access Program 0.6 2.0 3.4 1.1 2.1 1.3 1.0 4.3 2.5 18.2
GO Virginia -- -- -- -- -- -- -- 0.00 0.2 0.2
Governor's Motion Picture Opportunity Fund 0.3 2.1 2.4 0.6 1.7 2.9 12.1 0.8 1.7 24.6
Job Creation Grant (Enterprise Zone) 1.3 2.7 3.0 2.9 2.9 3.1 2.7 1.8 2.2 22.5
Major Eligible Employer Grant 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Tobacco Commission Megasite Grant -- 25.0 27.2 21.0 12.8 6.3 0.0 0.0 4.9 97.1
Port of Virginia Economic and Infrastructure -- -- -- -- 0.5 0.0 0.3 2.2 0.5 3.5
Development Grant
Pulp, Paper, and Fertilizer Advanced Manufacturing -- -- -- -- -- -- -- -- -- 0.0
Performance Grant Program
Rail Industrial Access Program 0.9 1.5 1.2 0.5 2.1 0.3 0.9 0.0 1.3 8.9
Real Property Investment Grant (Enterprise Zone) 10.6 9.5 11.2 11.2 11.3 9.1 9.3 10.9 10.7 93.7
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Total
Semiconductor Custom Grant (Micron) -- -- -- -- -- -- -- -- -- 0.0
Semiconductor Custom Grant (Qimonda) -- -- -- -- -- -- -- -- -- 0.0
Small Business Investment Grant Fund -- -- -- -- 0.0 0.1 0.2 1.0 0.5 1.9
Small Business Jobs Grant Fund Program 0.0 0.2 0.4 0.8 1.2 0.3 0.0 0.7 0.2 3.8
Southside Economic Development Grants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Southwest Economic Development Grants 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
SRI custom grant -- -- -- -- -- -- -- -- -- 0.0
Tobacco Region Opportunity Fund 8.8 12.2 8.8 16.0 27.4 6.2 9.8 4.2 5.2 98.7
Transportation Partnership Opportunity Fund 0.0 3.3 10.0 10.2 0.7 6.0 3.0 0.0 2.0 35.2
Virginia Economic Development Incentive Grant 0.0 10.0 5.0 0.0 5.0 6.0 0.0 9.3 4.0 39.3
Virginia Investment Partnership Grant 1.1 2.8 2.0 13.4 2.2 10.3 6.7 1.6 4.4 44.3
Virginia Jobs Investment Program 6.7 8.1 5.3 5.6 7.4 4.4 8.9 11.4 9.3 67.1
48 VALET Program 0.1 0.3 0.3 0.3 0.3 0.3 0.3 0.7 0.8 3.5
Appendixes
Virginia Trade Show Assistance Program -- -- -- -- -- -- -- 0.6 0.5 1.1
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Adjusted for canceled projects, recaptures, and award reductions. Not adjusted for inflation. Numbers may not add because of rounding.
-- indicates no awards were made by the program in that year, either because they had not been adopted yet or because it was a custom grant that made only a one-time award.
TABLE D-2
Tax savings to businesses because of tax credits ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Total
Barge and Rail Usage Tax Credit 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 $0.6M
Biodiesel and Green Diesel Fuels Producers Tax Credit -- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Coalfield Employment Enhancement Tax Credit 44.1 27.3 25.0 21.8 21.5 28.4 23.4 18.9 15.2 225.5
Farm Wineries and Vineyards Tax Credit 0.0 0.0 0.0 0.1 0.2 0.2 0.2 0.1 0.1 0.9
Green Job Creation Tax Credit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1
International Trade Facility Tax Credit 0.0 0.0 0.0 0.2 0.2 0.1 0.3 0.3 0.3 1.3
Major Business Facility Job Tax Credit 3.2 -0.9 4.3 2.8 1.3 4.1 0.8 6.8 1.8 24.2
Major Research and Development Tax Credit -- -- -- -- -- -- -- -- 6.1 6.1
Motion Picture Production Tax Credit 0.0 0.0 0.0 0.0 3.0 7.2 5.5 6.6 6.1 28.3
Qualified Equity and Subordinated Debt Investment Tax 1.9 1.6 2.1 1.9 2.4 2.1 2.4 2.2 2.8 19.3
Credit
49
Recyclable Materials Processing Equipment Tax Credit 1.2 0.6 0.7 2.7 1.2 0.6 2.1 1.7 1.4 12.2
Appendixes
Research and Development Expenses Tax Credit 0.0 0.0 0.0 1.5 3.4 4.2 4.7 4.2 4.2 22.2
Telework Expenses Tax Credit -- 0.0 0.0 0.0 0.1 0.1 0.1 0.0 0.1 0.3
Virginia Coal Production and Employment Incentive Tax 0.4 0.0 0.0 59.4 6.7 8.9 3.1 3.7 6.8 89.1
Credit
Virginia Port Volume Increase Tax Credit 0.0 0.0 0.0 0.1 0.4 0.7 0.9 2.2 1.8 6.1
Worker Retraining Tax Credit 0.0 0.2 0.2 0.1 0.2 0.2 0.2 0.2 0.3 1.6
SOURCE: Weldon Cooper Center analysis of the Department of Taxation’s Annual Reports for Fiscal Years 2010–2018.
NOTE: Credits were claimed for the Biodiesel and Green Diesel Fuels Producers Tax Credit, but amounts were very minimal. Not adjusted for inflation. Numbers may not add because of
rounding.
-- indicates no credits were claimed in that year because they had not been adopted yet.
TABLE D-3
Estimated tax savings to businesses on sales and use tax exemptions ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Total
Airline Common Carriers Exemption $12.0 $7.1 $6.7 $7.8 $8.6 $10.7 $11.6 $11.2 $11.4 $87.0M
Aircraft Parts, Engines, and Supplies Exemption -- -- -- -- -- -- -- -- -- 0.0
Certain Printed Materials for Out-of-State Distribution 3.4 3.5 3.6 3.7 4.0 4.0 4.0 4.1 4.2 34.5
Exemption
Contractor Temporary Storage Exemption 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.9
Data Center Exemption 3.0 23.1 23.1 76.2 75.0 92.2 53.9 53.6 86.5 486.7
Electrostatic Duplicators Exemption 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1
Film, Television, & Audio Production Inputs Exemption 0.9 1.1 1.1 0.8 0.7 0.8 0.9 0.9 0.9 8.2
Media Provider Equipment Exemption 3.7 3.9 4.0 4.1 4.4 4.5 4.5 4.6 4.7 38.4
Out-of-state Nuclear Facility Repair Exemption 0.4 0.4 0.3 0.4 0.5 0.6 0.6 0.6 0.6 4.4
Pollution Control Equipment & Facilities Exemption 4.0 3.1 2.6 3.1 2.3 4.2 4.1 3.2 3.2 29.8
50
Railroad Common Carriers Exemption 15.9 17.4 21.0 21.3 24.6 25.7 24.2 17.7 18.1 185.9
Appendixes
Railroad Rolling Stock Exemption 1.3 1.8 2.0 1.9 3.0 5.3 6.1 4.3 4.4 30.0
Research & Development Exemption 3.8 3.9 4.0 4.1 4.5 4.5 4.5 4.6 4.7 38.5
Semiconductor Manufacturers Exemption 0.8 1.1 1.3 1.3 1.2 0.8 0.6 0.6 0.6 8.4
Semiconductor Wafers Exemption 0.1 0.1 0.2 0.2 0.2 0.1 0.1 0.1 0.1 1.2
Ships and Vessels Exemption 4.4 3.6 3.6 8.8 12.1 10.1 8.3 7.3 7.5 65.7
Taxi Parts & Radios Exemption 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 2.8
Uniform Rental & Laundry Businesses Exemption 0.5 0.5 0.5 0.7 0.8 0.9 1.0 1.0 1.0 7.1
Virginia Spaceport Users Exemption 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.9
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Exempted amounts exclude the 1 percent sales tax for localities and, in most cases, the additional amounts collected in Northern Virginia and Hampton Roads. Not adjusted for inflation.
Numbers may not add because of rounding.
-- indicates exemption had not been adopted yet.
TABLE D-4
State spending on other incentives ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Total
Income tax apportionment methods and subtractions
Data Center single sales factor apportionment -- -- -- -- -- -- -- -- -- $0.0M
Manufacturing single sales factor apportionment -- -- -- -- 1.9 20.9 22.3 22.7 23.3 91.0
Qualified Business Long-Term Capital Gain Subtraction No data collected; estimates will be calculated during in-depth review.
Venture Capital Account Subtraction No data collected; estimates will be calculated during in-depth review.
Zero G Zero Tax Act (Part I) Subtraction No data collected; estimates will be calculated during in-depth review.
Zero G Zero Tax Act (Part II) Subtraction No data collected; estimates will be calculated during in-depth review.
Loan and gap financing programs
CIT Gap Fund 0.3 0.4 2.1 2.1 3.5 1.6 1.6 2.0 2.1 15.8
Economic Development Loan Fund -- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Loan Guaranty Program 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.1 0.0 0.4
51
State Cash Collateral Program -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Appendixes
SWaM Loan Fund -- -- 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.2
Tourism Development Financing Program 0.0 0.0 0.3 1.3 0.0 8.4 0.0 0.9 0.6 11.5
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Not adjusted for inflation. Virginia Small Business Financing Authority loan program amounts listed are legislative appropriations since these revolving loan program costs are not equal
to the loan award amount.
-- indicates incentive had not been adopted yet.
Appendixes
Appendix E: Regional distribution of grant awards
The largest amount of grant awards went to highly populated localities such as Newport News, Fairfax
County, and Richmond City and to rural localities in the Tobacco Region and on the Eastern Shore
(Figure E-1). Adjusted for population size, awards are concentrated in southern and rural localities
(Figure E-2).
FIGURE E-1
Awards are concentrated in several highly populated areas and the southern region (FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Localities were not assigned to 13 Governor’s Motion Picture Opportunity Fund projects because filming occurred in multiple localities.
52
Appendixes
FIGURE E-2
Awards are concentrated in southern and southwestern localities, adjusted for population size
(FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Localities were not assigned to 13 Governor’s Motion Picture Opportunity Fund projects because filming occurred in multiple localities.
53
Appendixes
Appendix F: Average employment size of grant recipients by
program
The average establishment size of a grant recipient was 160 employees across all programs. However,
the average size varied widely by program (Figure F-1). The largest average sizes were for the
Transportation Partnership Opportunity Fund (1,118 employees), the Virginia Investment Partnership
Grant (521), and the Virginia Economic Development Incentive Grant (498). The smallest average
employee sizes were for finance programs for startups—the Commonwealth Research
Commercialization Fund (four employees) and the Small Business Investment Grant Fund (11).
Figure F-1
Average employment size of business location at time of award varies widely by program
(FY10–FY18)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants and VEC data.
NOTE: Employment records were matched with 2,705 of the 4,461 awards (61%) and $358M of $903M in total awards.
54
Appendixes
Appendix G: Project-specific goals used by grant programs
Some programs award grants or make award commitments before projects begin. These programs
require projects to achieve specific goals to obtain or keep the full award promised. Job creation,
capital investment, and average wages paid are the most common goals, but several programs establish
other goals that are more aligned with the purpose of the program.
TABLE G-1
Job creation, average wages, and capital investment are most common performance measures
Job Capital
Grant program creation Wages expenditures Other
Advanced Shipbuilding Production Facility Grant
X X
Program (Newport News)
Advanced Shipbuilding Training Facility Grant Number of apprentices,
X X X
Program (Newport News) training expenses
Aerospace Engine Manufacturing Performance
X X X
Grant Program (Rolls-Royce)
Agriculture and Forestry Industries Development Value of Virginia
X X X
Grant agricultural products
Commonwealth Research Commercialization Capital attracted from other
Fund sources
Commonwealth’s Opportunity Fund X X X
Economic Development Access Program X
Total Virginia spending,
Governor's Motion Picture Opportunity Fund X
value of advertising
GO Virginia X X
Capital attracted from other
Growth Acceleration Program
sources
Major Eligible Employer Grant X X X
Port of Virginia Economic & Infrastructure
X Port user
Development Grant
Pulp, Paper, and Fertilizer Advanced
X X
Manufacturing Performance Grant Program
Rail Industrial Access Program X Carloads
Semiconductor Custom Grant (Micron) X X
Semiconductor Custom Grant (Qimonda) X X X
Small Business Investment Grant Fund X Private equity investment
Small Business Jobs Grant Fund Program X X X
SRI custom grant X X
Tobacco Commission Megasite Grant
Tobacco Region Opportunity Fund X X X
Transportation Partnership Opportunity Fund X X
VALET Program International sales
Virginia Business Ready Sites Program
Virginia Economic Development Incentive Grant X X X
Virginia Investment Partnership Grant X X X
Virginia Jobs Investment Program X X X Job retraining
Virginia Trade Show Assistance Program International sales
SOURCE: Weldon Cooper Center analysis of agency documents.
55
Appendixes
Appendix H: Agency responses
As part of an extensive validation process, the state agencies and other entities that are subject to a
JLARC assessment are given the opportunity to comment on an exposure draft of the report. JLARC
staff sent an exposure draft of this report to the Virginia Economic Development Partnership,
Virginia Department of Taxation, Secretary of Commerce and Trade, and Secretary of Finance.
Appropriate corrections resulting from technical and substantive comments are incorporated in this
version of the report. This appendix includes response letters from the Virginia Economic
Development Partnership and the Virginia Department of Taxation.
56
December 9, 2019
Mr. Hal E. Greer, Director
Joint Legislative Audit & Review Commission
919 East Main Street, Suite 2101
Richmond, VA 23219
Re: VEDP response to the draft JLARC report, Economic Development Incentives 2019: Spending
and Performance
Dear Mr. Greer:
Thank you for providing an opportunity for us to comment on the Joint Legislative Audit & Review
Commission’s (JLARC’s) draft report, Economic Development Incentives 2019: Spending and Performance.
The report provides a helpful overview of economic development incentive spending and performance in the
Commonwealth. Among other things, we appreciate your analysis showing that projects that received grant
awards between FY10 and FY18 and completed their location or expansion project collectively created an
estimated 70,000 jobs and $14.9 billion in capital investment or other spending in Virginia.
Your report demonstrates the impact of some of VEDP’s most important economic development incentive
programs. Notably, completed projects that received Virginia Jobs Investment Program (VJIP) grants
accounted for the largest share of jobs (45,340) and capital investment and other spending ($7.2 billion)
associated with Virginia’s economic development grant programs during this time period. Similarly, projects
funded through the Commonwealth’s Opportunity Fund (COF) ranked second in job creation (15,320 jobs)
and business spending ($5.0 billion).
Furthermore, Table 7 on page 17 shows that several economic development grant programs collectively
outperformed their aggregate performance goals for job creation, spending/investment, and/or the average
wage. In particular, the COF program outperformed on all three measures, exceeding its collective total goals
on job creation (104% of goal), spending/investment (132%), and average wage (113%). The footnote of that
same table indicates that the Virginia Leaders in Export Trade (VALET) program helped participating Virginia
companies increase their international sales by 126 percent of their collective goal.
The side bar on page 13 characterizes the effectiveness (or lack thereof) of economic development incentive
programs in sweeping terms. In practice, the effectiveness of economic development grant programs in
influencing a company location decision varies by program design and amount of incentives offered relative to
job creation and investment, among other factors. Some programs are more effective than others. In this
context, the reference to the 2012 JLARC report’s estimate (“approximately 10 percent of location and
expansion decisions, on average, are swayed by typical economic development incentives”) suggests
considerably more analytical precision than actually exists.
We understand that finding common definitions among different types of incentives for comparison purposes
is challenging. However, we think that the definition of VJIP funds spent in Appendix D, Table D-1 (p. 47)
would be better represented by the actual funds paid/disbursed during each fiscal year, versus a blend of
901 E. Cary Street, Suite 900
Richmond, Virginia 23219
VEDP.org
Mr. Greer
Page 2 of 2
funds paid and projected award amounts reported in the years the funds were awarded. In reality, VJIP has
disbursed a total of about $59 million over FY10 through FY18, averaging about $6.5 million per year.
As usual, we appreciated the professionalism of JLARC staff during the project, as well as compliment your
team on its insightful analysis and reporting.
Sincerely,
Stephen Moret
President & CEO
JLARC.VIRGINIA.GOV
919 East Main Street Suite 2101 Richmond, VA 23219
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- 2020-RD147.pdf
- Original
- No public link identified.