Economic Development Incentives 2020: Spending and Performance, Joint Legislative Audit and Review Commission
Summary
The Joint Legislative Audit and Review Commission report Economic Development Incentives 2020 Spending and Performance, dated December 14, 2020, to the Governor and the General Assembly of Virginia. Its summary states that Virginia spent $2.7 billion on 83 economic development incentive programs from FY10 to FY19, which amounts to 1.5 percent of total general fund spending, and that total spending on incentives was $314 million in FY19. It states that grant programs have substantially higher economic benefits than tax incentives, although historically Virginia has spent more on tax incentives than on grants. The appendixes include study mandate, research methods, and agency responses.
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Commonwealth of Virginia
December 14, 2020
Report to the Governor and the General Assembly of Virginia
Economic Development Incentives 2020
Spending and Performance
JOINT LEGISLATIVE AUDIT
AND REVIEW COMMISSION
Joint Legislative Audit and Review Commission
Delegate Kenneth R. Plum, Chair
Senator Janet D. Howell, Vice Chair
Delegate Terry L. Austin
Delegate Betsy B. Carr
Delegate M. Kirkland Cox
Delegate Eileen Filler-Corn
Delegate Charniele L. Herring
Senator Mamie E. Locke
Senator Jeremy S. McPike
Senator Thomas K. Norment, Jr.
Delegate Robert D. Orrock, Sr.
Delegate Mark D. Sickles
Senator Lionell Spruill, Sr.
Delegate Luke E. Torian
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 546
©2020 Joint Legislative Audit and Review Commission
jlarc.virginia.gov
Contents
Summary i
Economic Development Incentives 2020 1
State spent $2.7 billion on incentives FY10–FY19 1
Incentives have increased in number and spending 3
More than 5,000 projects were awarded $1.8 billion in grants FY10–FY19 5
Through tax incentives, businesses saved $1.7 billion FY10–FY19 19
Businesses obtained $61 million in loans and gap funding through 22
financing programs FY10–FY19
Grants have higher economic benefit than tax incentives 24
Appendixes
A: Study mandate 29
B: Research methods and activities 31
C: Incentive program descriptions 38
D: Spending or tax expenditure by incentive 51
E: Regional distribution of grant awards 56
F: Average employment size of grant recipients by program 58
G: Project-specific goals used by grant programs 59
H: Economic and revenue impact analysis 61
I: Agency responses 75
Economic Development Incentives 2020 – Summary
WHAT WE FOUND
Virginia spent $2.7 billion on 83 economic development incentive programs
from FY10 to FY19. This amounts to 1.5 percent of total general fund spend-
ing during this time period. Total spending on incentives was $314 million in
FY19. Incentive spending has increased
since FY17 because of increased spending WHY WE DID THIS STUDY
for the data center exemption and several Through language in the Appropriation Act, the General As-
other incentives. sembly directed the Joint Legislative Audit and Review Com-
mission (JLARC) to review and evaluate economic develop-
Sixty-seven percent of incentive spending ment initiatives. Topics include spending on incentives and
was for tax incentives such as sales and use activity generated by businesses receiving incentives; the
tax exemptions ($1.2 billion), tax credits economic benefits of incentives; and the effectiveness of in-
centives.
($472 million), and single sales apportion-
JLARC releases two reports each year: a high-level summary
ment for manufacturers and data centers
report on overall spending and business activity and an in-
($115 million). The remaining 33 percent depth report on the effectiveness of selected individual
was spent on grants ($855 million) and incentives. (See Appendix A: Study mandate.) JLARC
other incentives such as loans and gap fi- contracted with the Weldon Cooper Center for Public Service
to perform the analysis for both reports.
nancing programs ($33 million).
This report is the fourth in the series of overall spending and
Economic benefits, such as increases in em- business activity and focuses on incentives that were pro-
ployment, gross domestic product, and per- vided between FY10 and FY19.
sonal income, vary widely by type of eco-
nomic development incentive program.
Although grant programs have substantially higher economic benefits—in-
creases in employment, gross domestic product, and personal income—than
tax incentives, historically Virginia has spent more on tax incentives than on
grants.
Grant programs have a higher economic benefit because they typically target
projects in export-base industries that have high employment multipliers and
that pay high wages.
Loan and gap financing programs have a higher economic benefit because they
have minimal costs to the state.
Collectively, Virginia economic development incentive grant programs
awarded $1.8 billion to 5,000 projects between FY10 and FY19. Grant awards
increased substantially in FY19 primarily because of the $750 million custom
grant award for Amazon HQ2.
i
Economic Development Incentives 2020 – Summary
Less than half of the $1.8 billion in grant awards was paid out or ‘spent’ be-
tween FY10 and FY19 because nearly $900 million in custom awards for Am-
azon HQ2 and three other companies are not scheduled to be paid out until
after FY19. Spending on grants, and thus total incentives, will increase sub-
stantially as these custom grant awards are paid.
Completed projects receiving grant funds created more than 78,000 jobs and
nearly $18 billion in capital investment or other spending. The majority of
these projects met their capital investment goals, but only one-quarter met
their job creation goals.
ii
Economic Development Incentives 2020
Virginia provides economic development incentives to encourage businesses to locate
For purposes of this re-
or expand their operations in the state as part of its economic development strategy. port, incentives spend-
To better understand the effectiveness of these incentives in stimulating business ac- ing refers to (1) actual
tivity, the General Assembly directed the Joint Legislative Audit and Review Commis- expenditures by the
sion (JLARC) to review spending on and performance of economic development in- state in the form of
grant awards or other fi-
centives such as grants, tax preferences, and other assistance. (See Appendix A.) nancing and (2) esti-
JLARC contracted with the University of Virginia’s Weldon Cooper Center for Public mated tax expenditures,
Service to perform the evaluation. in the form of forgone
revenue, through tax
This report is the fourth in a series of annual reports about Virginia’s economic de- credits or sales and use
velopment incentives, trends in state spending on incentives, and performance of in- tax exemptions.
centive programs. Every other year the reports in this series will include information For most grants, spend-
about the economic benefits of total spending on economic development incentives. ing is allocated to the
fiscal year in which
This report is the second in which information on economic benefits is included.
awards were approved.
This report provides summary information on 83 economic development incentive For custom grants,
programs, including grants, tax preferences, business loans, and gap financing. The spending is allocated to
the fiscal year in which
incentive programs covered in this report are funded by the state, are actively providing grant payments are
incentives, and have a primary purpose of promoting economic activity through loca- made to the company.
tion or expansion of businesses. Businesses may also benefit from a variety of other For refundable tax cred-
grants, tax credits, and exemptions offered by the state for purposes other than eco- its, such as the film
nomic development; these programs are not included in this report. credit, spending may re-
flect actual expenditures
rather than forgone rev-
State spent $2.7 billion on incentives FY10–FY19 enue.
See Appendix B for more
Virginia spent $2.7 billion on 83 economic development incentive programs over the
information on methods
past 10 fiscal years (Figure 1), for an average of $267 million per year. Nearly all in- used to estimate spend-
centives are funded by the state general fund, with the exception of incentives pro- ing for each program.
vided by the Tobacco Region Revitalization Commission and several transportation
infrastructure incentives. Spending on incentives represented approximately 1.5 per-
cent of total general fund spending between FY10 and FY19. In addition, the majority
of spending on incentives was forgone revenue from tax incentives. Sales and use tax
exemptions make up 45 percent of forgone revenue, and tax credits and single sales
apportionment for manufacturers together make up 22 percent of forgone revenue. This report is the first in
Almost all the remaining spending was for grants. this series to use a 10-
year time period (FY10
Ten incentives accounted for over two-thirds of the spending on incentives between to FY19). Prior reports
FY10 and FY19 (Table 1). Two of the top three—the Data Center Exemption and Rail- included fewer years be-
cause some agencies did
road Common Carriers Exemption—provided $796 million in exemptions to businesses not maintain data prior
in capital-intensive sectors that make large purchases of equipment. Because of the in- to FY10.
centives, purchases by these businesses are exempt from the retail sales and use tax. The
second-largest incentive was the Coalfield Employment Enhancement Tax Credit, which
provided $242 million for coal mining and coal bed methane production. Other top
1
Economic Development Incentives 2020
incentives include the Commonwealth’s Opportunity Fund, the state’s primary “deal
closing” program, which awarded $142 million for 267 projects; the Tobacco Region
Opportunity Fund, which awarded $113 million to 301 projects; and the Tobacco Re-
gion Megasite Grant, which awarded 36 grants totaling $97 million for nine industrial
parks in the Southern and Southwest regions.
FIGURE 1
Two-thirds of spending on incentives was for tax incentives (FY10–FY19)
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 the Historic Triangle,
Northern Virginia, and Hampton Roads. Prior reports included the full custom grant amount in the year in which the
grant was approved, but, beginning with this report, actual custom payments are included and allocated to the fiscal
year when they were paid. Estimate for single sales apportionment includes both manufacturer and data center esti-
mates.
2
Economic Development Incentives 2020
TABLE 1
Ten incentives are responsible for two-thirds of spending (FY10–FY19)
Incentive Spending % of spending
Data Center Exemption $593M 22%
Coalfield Employment Enhancement Tax Credit 242 9
Railroad Common Carriers Exemption 203 8
Commonwealth’s Opportunity Fund 142 5
Manufacturers single sales apportionment 115 4
Tobacco Region Opportunity Fund 113 4
Real Property Investment Grant 105 4
Airline Common Carriers Exemption 99 4
Tobacco Region Megasite Grants 97 4
Virginia Coal Employment and Production Incentive Tax Credit 90 3
Subtotal $1,797M 67%
All others 875M 33%
TOTAL $2,672M 100%
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Excludes several tax preferences for which data was not available. Prior reports included the full custom grant
amount in the year in which the grant was approved, but, beginning with this report, actual custom payments are
included and allocated to the fiscal year when they were paid. Adjusted for canceled projects, recaptures, and award
reductions. Exemptions exclude the 1 percent sales tax for localities and, in most cases, the additional amounts col-
lected in the Historic Triangle, Northern Virginia, and Hampton Roads. (See Appendix C for a description and Appen-
dix D for spending for all incentives.)
Incentives have increased in number and spending
The number of economic development incentive programs offered by the state has
grown over time (Figure 2). The oldest is the Economic Development Access Pro-
gram—a grant program designed to improve transportation access for industrial
sites—which was adopted in 1956. The newest, and the largest, is the Major Head-
quarters Workforce Grant, a customized performance grant adopted in 2019 for Am-
azon to establish a second corporate headquarters (HQ2) in Arlington County. Half
of the current incentives were adopted in 2006 or after.
Overall, the amount spent on economic development incentives increased by 99 per-
cent between FY10 and FY19, though spending varies from year to year (Figure 3).
This increase is more than twice the increase in the state general fund budget during
that time period (45 percent) and nearly twice the increase in the total operating budget
(57 percent).
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 nearly $98 million in exemptions annually. Manufacturers could
begin using single sales apportionment in FY15, and it reduced income tax revenue by
3
Economic Development Incentives 2020
an estimated $2 million that year and grew to an estimated $24 million in FY19. Spend-
ing for four incentives—the Data Center Exemption, manufacturers single sales ap-
portionment, the Commonwealth’s Opportunity Fund, and Transportation Partner-
ship Opportunity Fund—have each increased by $10 million or more overall between
FY10 and FY19, because they were new incentives during the time period or because
of increasing incentive activity.
FIGURE 2
More than one-third of current incentive programs were adopted in 2010 or
after
SOURCE: Weldon Cooper Center analysis of economic development incentive programs.
NOTE: Excludes incentive programs that expired prior to 2017 when this evaluation series began. 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. For example, two programs contributed to the spike in incen-
tives in FY13. Two-thirds ($59.5 million) of the total Virginia Coal Employment and
Production Incentive Tax Credit awards between FY10 and FY19 were awarded in
FY13 when a substantial amount of carryover credits were claimed on tax returns. The
total amount of spending on the Data Center Exemption increased by $53 million
between FY12 and FY13 after co-location data centers, which are operated by a land-
lord and may have multiple data centers as tenants, were allowed to use the exemption.
4
Economic Development Incentives 2020
FIGURE 3
Spending on incentives fluctuates from year to year but has increased nearly
Custom grants are peri-
100 percent since FY10 odically offered to at-
tract specific large com-
panies to the state. The
state’s typical package of
incentives (grants, tax
credits, exemptions, etc.)
are relatively modest
compared with a custom
grant. For example,
grant awards for non-
custom projects were an
average of $181,000 per
project between FY10
and FY19 compared with
custom grants, which
were an average of
$182M per project.
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
reporting on completed projects. Prior reports included the full custom grant amount in the year in which the grant
was approved, but, beginning with this report, actual custom payments are included and allocated to the fiscal year
when they were paid. Not adjusted for inflation. The trend is similar if adjusted for inflation. Economic development
grants are financial in-
centives provided to
Several programs have experienced sizable declines in spending since FY15, which
businesses in return for
resulted in a decline in spending in FY16 and FY17. The Tobacco Region Megasite locating in the state or
grant program awarded $18 million annually for the development of industrial parks expanding business ac-
between FY11 and FY15. Since then, however, only $4.9 million in FY18 has been tivity. Some grants are
discretionary, which
awarded. Estimated tax savings from the Coalfield Employment Enhancement Tax
means that the state can
Credit also declined, from $28.4 million in FY15 to $16.1 million in FY19. These de- negotiate the terms of
clines, however, were offset beginning in FY18 because of increased spending for the the grant with the busi-
Data Center Exemption, the Transportation Partnership Opportunity Fund, and the ness. Other grants are
automatically awarded if
new Major Research and Development Investment Tax Credit.
the business meets the
minimum requirements.
More than 5,000 projects were awarded $1.8 billion Grants are not repaid as
long as businesses meet
in grants FY10–FY19 program requirements.
Even though sales and use tax incentives—particularly exemptions—have historically Several programs that
are not commonly iden-
had a larger overall impact on the state budget, Virginia’s grant programs are the most tified as grant programs
widely recognized economic development incentive. Custom grants in particular are are included in this cate-
provided to business location or expansion projects promising to make substantial job gory because they pro-
creation and capital investment and therefore receive considerable media attention. vide financial assistance
to businesses (or to a
For example, Virginia’s award of a $750 million custom grant for Amazon to locate its third party for their ben-
East Coast headquarters in Virginia received national attention in fall 2018 and early efit).
5
Economic Development Incentives 2020
2019. Grant payments are scheduled to begin in FY24 and end in FY43. To receive
the full award, Amazon must create at least 37,850 jobs and make a capital investment
of at least $2 billion.
Collectively, Virginia’s economic development incentive grant programs—which are
typically funded with general funds with some exceptions—awarded $1.8 billion to
5,023 projects between FY10 and FY19 (Table 2). Thirteen of the 26 grant programs
each provided more than $30 million in awards during the time period. For most grant
programs, awards were paid out between FY10 and FY19. However, less than half of
the $1.8 billion in grant awards was paid out or ‘spent’ between FY10 and FY19 be-
cause nearly $900 million in custom awards for Amazon HQ2, Micron, Newport News
Shipbuilding, and Amazon Web Services are not scheduled to be paid out until after
FY19. Spending on grants, and thus total incentives, will increase substantially as these
custom grant awards are paid.
Grant awards were targeted to corporate headquarters and
manufacturing sectors and to urban localities
Nearly three-quarters of grant award amounts were directed to corporate headquarters
or manufacturers between FY10 and FY19 (Figure 4). Forty-three percent of grant
awards were directed to businesses in the corporate headquarters sector, reflecting the
sizable custom grant award for Amazon HQ2. Another third was directed to busi-
nesses in the manufacturing sector. The manufacturing sector is commonly repre-
sented because grant programs generally target “basic,” or export-based industry com-
panies, which export at least half their goods or services outside the state. Targeting
these businesses is desirable because they bring new revenue into the state. Corporate
headquarters is also an export-base industry sector, but until FY19, the state generally
provided fewer and smaller grants for headquarters locations or expansions.
Geographically, the largest amount of grant awards went to highly populated urban
localities, such as Arlington County ($790 million), Newport News ($114 million), and
Fairfax County ($65 million). Several less populated counties—such as Henry and
Greensville—also received large amounts ($44 million and $41 million respectively).
Ten localities received approximately 70 percent of the total amount awarded for the
period (Table 3).
6
Economic Development Incentives 2020
TABLE 2
Grant programs made more than 5,000 awards totaling $1.8 billion (FY10–FY19)
Total FY10–FY19 Annual average
Award # of Award # of
Program amount awards amount awards
Major Headquarters Workforce Grant (Amazon HQ2) a $750.0M 1 n.a. n.a.
Tobacco Region Opportunity Fund 160.5 301 $16.0M 30
Commonwealth’s Opportunity Fund 156.2 267 15.6 27
Tobacco Commission Megasite Grant 108.9 36 12.1 4
Virginia Jobs Investment Program 105.7 1,102 10.6 110
Real Property Investment Grant (Enterprise Zone) 104.5 1,603 10.5 160
Semiconductor Manufacturing Grant (Micron) a 70.0 1 n.a. n.a.
Transportation Partnership Opportunity Fund 48.4 14 4.8 1
Advanced Shipbuilding Production Facility Grant
46.0 1 n.a. n.a.
(Newport News Shipbuilding) a
Virginia Investment Partnership Grant 45.9 62 4.6 6
Virginia Economic Development Incentive Grant 40.8 9 4.1 1
Advanced Shipbuilding Training Facility Grant (Newport
32.8 1 n.a. n.a.
News Shipbuilding) a
Governor's Motion Picture Opportunity Fund 32.5 52 3.2 5
Economic Development Access Program 26.2 46 2.6 5
Job Creation Grant (Enterprise Zone) 25.2 560 2.5 56
Rail Industrial Access Program 11.8 34 1.2 3
Commonwealth Research Commercialization Fund 11.6 202 1.4 25
Special Workforce Grant (Amazon Web Services) a 10.5 1 n.a. n.a.
Small Business Jobs Grant Fund Program 7.4 138 0.7 14
Agriculture and Forestry Industries Development Grant 6.5 81 1.1 14
VALET Program 4.6 237 0.5 24
Port of Virginia Economic and Infrastructure Grant 3.6 13 0.6 2
GO Virginia 3.0 3 1.5 2
Small Business Investment Grant Fund 2.8 55 0.5 9
Trade Show Assistance Program 1.7 191 0.6 64
Virginia Business Ready Sites Program 1.5 12 0.7 6
All programs $1,818.5M 5,023 $95.5M 568
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. Total award
amounts for custom grants are shown. The Small Business Jobs Grant Fund Program was eliminated by the 2020 General Assembly.
a
These grants provide custom one-time awards that are or will be paid out over several years based on performance. The $32.5 million Advanced
Shipbuilding Training Facility Grant has been fully paid.
7
Economic Development Incentives 2020
FIGURE 4
Three-quarters of grant awards were directed to corporate headquarters and
manufacturers (FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: The “other industries” category includes businesses in a variety of sectors such as agriculture and forestry,
construction, utilities, finance and insurance, wholesale or retail trade, transportation and warehousing, and other
service sectors. Estimates may not sum because of rounding.
TABLE 3
Businesses in 10 localities received 70 percent of grant awards (FY10–FY19)
% of total # % of total
Locality Amount awarded amount awards awards
Arlington County $790M 43.5% 79 1.6
Newport News City 114 6.3 277 5.5
Manassas City 73 4.0 17 0.3
Fairfax County 65 3.6 317 6.3
Richmond City 57 3.1 434 8.6
Henry County 44 2.4 123 2.4
Greensville County 41 2.3 29 0.6
Accomack County 35 1.9 38 0.8
Brunswick County 34 1.9 11 0.2
Henrico County 26 1.4 196 3.9
Subtotal $1,279M 70.3% 1,521 30.3%
All others 540 29.7 3,502 69.7
TOTAL $1,818M 100.0% 5,023 100.0%
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.
Businesses in urban localities in Northern Virginia and rural localities in the southern
part of the state received a large proportion of grant funding, relative to population
size (Figure 5). Businesses in the Northern Virginia Regional Commission service area
8
Economic Development Incentives 2020
(the counties of Arlington, Fairfax, Loudoun, and Prince William and the cities of
Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park) received approxi-
mately 52 percent of all economic development incentive grant awards. Businesses in
Tobacco Region localities received approximately 19 percent of all economic develop-
ment grant awards, largely due to the contributions of the Tobacco Commission’s To-
bacco Region Opportunity Fund and Megasite Grant programs. The highest per capita
award amounts were in
Greensville County ($3,632) for development of the Mid-Atlantic Advanced
Manufacturing Center;
Arlington County ($3,336) for the location of Amazon HQ2;
Brunswick County ($2,090) for the location of a Dominion Power gas power
plant that received $30 million in financial assistance;
Manassas City ($1,773) for the Micron expansion; and
Sussex County ($1,217) for development of a Tobacco Commission-funded
megasite.
(See Appendix E for maps of the regional distribution of grant awards, overall and
per capita.)
FIGURE 5
Awards per capita are concentrated in Arlington, Manassas City, and rural localities in
Southern Virginia (FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
The awards amount per capita slightly align with the local unemployment rate, indicat-
ing that more funds are generally provided to businesses in localities that are econom-
ically distressed. The number of awards per capita is even more highly correlated with
the local unemployment rate.
9
Economic Development Incentives 2020
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 FY19 went to business lo-
Many businesses have
cations that had fewer than 100 employees at the time the awards were made (Figure
operations in multiple
locations. Grants and 6). Of this group, 54 percent were for business locations with fewer than 25 employees.
other incentives are of- These businesses received grant awards from programs, such as the Small Business
ten provided to projects Investment Grant or Commonwealth Research and Commercialization Fund, which
that occur at a specific
typically make awards to start-up businesses with 10 or fewer employees, on average.
business location.
In contrast, 20 percent of grant awards were for large businesses with 250 or more
employees. Custom grants and four other grant programs—the Transportation Part-
nership Opportunity Fund, Virginia Investment Partnership Grant, Virginia Eco-
nomic Development Incentive Grant, and Port of Virginia Economic and Infrastruc-
ture 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.)
FIGURE 6
Majority of grant recipients were for business locations with fewer than 100
employees (FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic incentive grant awards.
NOTE: Employment records were matched with 3,066 of the 5,023 awards (61 percent) and $479 million of $1.8 billion
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 increased substantially in FY19 because of large custom
grant awards
Grant awards increased substantially in FY19 because of large custom grant awards
for Amazon HQ2, Amazon Web Services, and Micron that totaled $830.5 million,
which was 91 percent of total grant awards that year (Figure 7). Before FY19, annual
grant awards fluctuated within a much narrower range and were generally on a declin-
ing trend. Awards in FY10 were at a low point because of the lingering effects of the
10
Economic Development Incentives 2020
2008–09 recession on business activity, but more than tripled in FY11 when two large
incentive programs were introduced: the Tobacco Commission Megasite Grant, which
awarded $14 million in incentives per year on average, and the custom Advanced Ship-
building Training Facility Grant, which made a one-time award of $32.8 million to
Newport News Shipbuilding. After FY11, grant awards generally declined, with the
exception of FY17 when Newport News Shipbuilding received another custom grant
award of $46 million from the Advanced Shipbuilding Production Facility Grant.
Much of the overall decrease in awards between FY11 and FY18 was a result of de-
clining Tobacco Region Megasite and Tobacco Region Opportunity Fund grant awards
over time. (See Appendix D for grant awards by program.)
FIGURE 7
Grant awards increased substantially in FY19 because of three large custom
grant awards
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. Sizable custom grants were awarded to Amazon HQ2 ($750 million), Micron ($70
million), and Amazon Web Services ($10.5 million) in FY19. 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 $4.5 million to a low of $8,830 per project excluding the custom grant
awards. Custom grant awards—which tend to be much larger—ranged from $10.5
million to $750 million.
The size of grant awards also varied when compared with the number of jobs created
or investment made (Table 4). Grant programs require projects to meet certain mini-
mum requirements to be eligible for funding. These minimum requirements vary based
on program goals, but the most common are job creation and some form of business
11
Economic Development Incentives 2020
investment or spending in Virginia. The average grant award per expected job for Vir-
ginia projects was $6,393 between FY10 and FY19, but it ranged from a high of
$63,291 per job (custom grant for Micron) to a low of less than $1,000 (Virginia Jobs
Investment Program and Small Business Jobs Grant Fund). The average grant award
for capital investment or additional spending was $40 per $1,000 spent and ranged
from a high of $375 (custom grant for Amazon HQ2) to a low of $6 (Agriculture and
Forestry Industries Development Grant). These amounts (the average grant award per
expected job and per $1,000 of expected capital investment) are higher than amounts
in prior reports in this series because of the custom grant awards in FY19.
TABLE 4
Average grant awards by program varied widely (FY10–FY19)
Average award amount per
$1,000 in spending
or investment in Job created
Program Project Virginia (expected) in Virginia (expected)
Custom grants
Semiconductor Manufacturing Grant (Micron II) $70,000,000 $23 $63,291
Advanced Shipbuilding Production Facility Grant 46,000,000 61 46,000
Advanced Shipbuilding Training Facility Grant 32,777,745 109 32,778
Major Headquarters Workforce Grant (Amazon HQ2) 750,000,000 375 19,815
Special Workforce Grant (Amazon Web Services) 10,500,000 125 7,000
Average, all custom projects $181,855,549 $149 $21,417
All other grants
Transportation Partnership Opportunity Fund $3,456,937 $106 $20,369
Rail Industrial Access Program 347,961 37 9,769
Virginia Investment Partnership Grant 740,323 13 8,251
Virginia Economic Development Incentive Grant 4,533,333 76 6,947
Tobacco Region Opportunity Fund 533,062 22 5,962
Small Business Investment Grant Fund 50,952 180 4,758
Commonwealth’s Opportunity Fund 585,206 14 3,511
Agriculture and Forestry Industries Develop. Grant 80,091 6 2,723
Port of Virginia Economic and Infrastructure Grant 274,269 n.a. 2,097
Job Creation Grant (Enterprise Zone) 45,035 n.a. 1,608
GO Virginia 1,006,117 30 1,029
12
Economic Development Incentives 2020
Average award amount per
$1,000 in spending Job created
or investment in in Virginia
Program Project Virginia (expected) (expected)
Virginia Jobs Investment Program 95,886 9 875
Small Business Jobs Grant Fund Program 53,815 25 850
Tobacco Commission Megasite Grant 3,023,838 ** n.a.
Governor's Motion Picture Opportunity Fund 624,594 ** n.a.
Economic Development Access Program 569,815 204 n.a.
Virginia Business Ready Sites Program 122,736 n.a. n.a.
Real Property Investment Grant (Enterprise Zone) 65,207 40 n.a.
Commonwealth Research Commercialization Fund 57,334 247 n.a.
VALET Program 19,198 n.a. n.a.
Trade Show Assistance Program 8,830 n.a. n.a.
Average, all other projects $181,184 $23 $3,757
Average, all projects (including custom) $362,027 $40 $6,393
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 and Virginia Trade Show Assistance 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 FY19, most GO Virginia awards 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. The Small Business Jobs Grant Fund Program was eliminated by the 2020 General As-
sembly.
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.
From FY10 to FY19, only 7 percent of awards were more than $500,000. However,
these larger awards accounted for 81 percent of the grant funding (Figure 8). In fact,
the five custom grant awards alone accounted for 50 percent of the grant funding.
13
Economic Development Incentives 2020
FIGURE 8
Seven percent of grant awards accounted for over 80 percent of total grant
funding (FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Number of grants awarded is 5,023. Total amount awarded is $1,818.4 million (not adjusted for cancelations,
recaptures, and refunds).
The 78,000 jobs and
$17.9 billion in capital
investment or other Completed projects created more than 78,000 jobs and nearly $18
spending are undupli-
cated amounts because
billion in business investment and spending
many projects receive Projects that received grant awards between FY10 and FY19 and completed their lo-
more than one grant. For
cation or expansion project collectively created an estimated 78,000 jobs and $17.9
example, Navy Federal
Credit Union received a billion in capital investment or other spending (Table 5). Completed projects that re-
Commonwealth’s Op- ceived Virginia Jobs Investment Program grants accounted for the largest share of
portunity Fund grant jobs (48,097) and capital investment and other spending ($7.9 billion). Projects funded
and Virginia Jobs Invest- through the Commonwealth’s Opportunity Fund ranked second in job creation
ment Program grant to
create 1,400 jobs and
(20,526 jobs) and business spending ($7.3 billion).
make a $100 million
capital investment in
Frederick County.
14
Economic Development Incentives 2020
TABLE 5
Completed projects created over 78,000 jobs and nearly $18 billion in business
spending or investment (FY10–FY19)
# of Spending or Jobs
Program projects investment ($M) created
Virginia Jobs Investment Program 898 $7,875M 48,097
Commonwealth’s Opportunity Fund 142 7,280 20,526
Job Creation Grant (Enterprise Zone) 560 n.a. 15,686
Tobacco Region Opportunity Fund 175 2,566 6,758
Small Business Jobs Grant Fund Program 128 ** 3,050
Port of Virginia Economic and Infrastructure Grant 13 n.a. 1,700
Advanced Shipbuilding Training Facility Grant 1 358 1,520
Agriculture and Forestry Industries Devel. Grant 11 257 461
Tobacco Commission Megasite Grant 19 n.a. 450
Virginia Investment Partnership 15 281 284
Commonwealth Research Commercialization Fund 150 40 n.a.
Economic Development Access Program 24 35 n.a.
Governor's Motion Picture Opportunity Fund 47 296 n.a.
Rail Industrial Access Program 30 242 n.a.
Real Property Investment Grant (Enterprise Zone) 1,603 2,625 n.a.
Transportation Partnership Opportunity Fund 9 n.a. n.a.
Total (duplicated): $21,855M 98,532
Total (unduplicated): $17,861M 78,493
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
NOTE: Completed projects represented about $469 million in total awards across programs. Some grant programs, such as the Major
Eligible Employer and some custom 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 programs’ reporting
of full-time jobs. Many projects receive grants from more than one program. No unique identifiers exist to easily identify projects that
received grants from multiple programs so 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. The VALET program (218 completed projects)
and Trade Show Assistance Programs (191 completed projects) are not included in the table because their goals are to increase a
company’s international sales, and job creation and capital investment are not reported by program participants. The Small Business
Jobs Grant Fund Program was eliminated by the 2020 General Assembly.
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 “upfront” 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.)
15
Economic Development Incentives 2020
Completed projects in-
Sixty-seven percent of completed projects met or exceeded their project-specific goals
clude those whose grant for capital investment or other spending (Figure 9). Forty-five percent met their aver-
performance period age wage goals, and 26 percent met their job creation goals.
ended during the time
period analyzed, includ-
ing projects that did not FIGURE 9
perform. Not all projects Majority of completed projects met their capital investment goals (FY10–FY19)
that received a grant
award between FY10
and FY19 had completed
their performance at the
end of FY19. Completed
projects represent 3,825
projects and $469 mil-
lion in awards.
It is likely that the ma-
jority of the jobs and
business investment or
spending by completed
projects would have oc-
curred without incen-
tives. Trying to deter-
mine the effect of incen-
tives with precision is
difficult because site se-
lection decisions are
SOURCE: Weldon Cooper Center analysis of economic development incentive grants.
based on a variety of
NOTE: N=1,587 duplicated projects. Only includes projects from programs that establish project-specific goals. Some
factors. The success in programs allow projects to attain 90 percent of specific goal(s) before award reduction or recapture is made. For
swaying business deci- simplicity of making calculations across programs, projects that exceeded 90 percent (or other established percent-
sions varies by program. age) for a specific goal but did not achieve 100 percent are not included in the figure.
Research on incentives
nationally suggests that
between 75 percent and
Attainment rates for project-specific goals varied widely by program (Table 6). The
98 percent of projects Port of Virginia Economic and Infrastructure Development Grant Program is the
would have occurred an- only program with multiple projects where all projects attained project-specific goals.
yway without incentives Goal achievement was especially low for some programs. Only 16 percent of the 175
(Bartik 2018).
completed Tobacco Region Opportunity Fund projects met all project-specific goals.
16
Economic Development Incentives 2020
TABLE 6
Attainment of project-specific goals varied by program (FY10–FY19)
% 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 Devel. 13 100 n.a. n.a. 100
Grant
Commonwealth Research Commercialization Fund 150 n.a. n.a. n.a. 81
Rail Industrial Access Program 30 n.a. 67 n.a. 60
Commonwealth’s Opportunity Fund 142 53 74 75 47
Virginia Jobs Investment Program-Retraining 205 n.a. 97 54 34
Agriculture and Forestry Industries Devel. Grant 11 45 45 ** 27
Virginia Investment Partnership Grant 15 27 27 27 27
Economic Development Access Program 24 n.a. 25 n.a. 25
Tobacco Region Opportunity Fund 175 29 37 41 16
Virginia Jobs Investment Program – Job Creation 693 20 68 37 9
Small Business Jobs Grant Fund Program 128 12 ** 50 8
Total 1,587 26% 67% 45% 25%
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 Virginia Investment Part-
nership Grant does not require job creation (it requires that existing jobs be maintained), but some projects have job
creation goals. 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 Oppor-
tunity 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, 63 percent
of projects met at least 90 percent of their job creation goal, and 79 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 num-
ber of jobs expected. Some projects do not collect information on average wage levels upon completion of the
project. The Small Business Jobs Grant Fund Program was eliminated by the 2020 General Assembly.
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 did not achieve their project-spe-
cific goals. For example, only 53 percent of completed projects that received a Com-
monwealth’s Opportunity Fund grant fully achieved their job creation goals (Table 6).
However, because some projects far exceeded their job creation goals, collectively all
projects created 105 percent of the total jobs that were expected (Table 7). The Com-
monwealth’s Opportunity Fund also achieved its capital investment and average wage
goals collectively. Most grant programs had overall success in achieving average wage
goals even if they did not have overall success in achieving other goals.
17
Economic Development Incentives 2020
TABLE 7
Projects for most grant programs collectively met their average wage goals (FY10–FY19)
% of collective goals met
Program Job Spending or Average
creation goals investment goals wage goals
Advanced Shipbuilding Training Facility Grant 152% 119% n.a.
Commonwealth’s Opportunity Fund 105 148 117
Port of Virginia Economic and Infrastructure Grant 100 n.a. n.a.
Virginia Jobs Investment Program 53 87 103
Agriculture and Forestry Industries Devel. Grant 49 57 **
Small Business Jobs Grant Fund Program 37 ** 104
Tobacco Region Opportunity Fund 38 60 156
Virginia Investment Partnership Grant 22 45 111
Commonwealth Research Commercialization Fund n.a. 107 n.a.
Economic Development Access Program n.a. 53 n.a.
Rail Industrial Access Program n.a. 93 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 Virginia Investment Partnership Grant
does not require job creation (it requires that existing jobs be maintained), but some projects do have job creation goals. The VALET
program is excluded from the table because its goal is to increase international sales. Collectively, program participants increased interna-
tional sales by 126 percent over sales on program entry. The Small Business Jobs Grant Fund Program was eliminated by the 2020 General
Assembly.
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 $133 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 $133 million (or 16 percent of
the total paid or committed between FY10 and FY19) were canceled, reduced, or re-
captured because the projects did not go forward or meet their goals (Figure 10).
Nearly 60 percent of the $133 million was never paid because projects did not go
forward and were canceled. Another 21 percent was not paid to projects that did not
meet their goals, and the award amount was reduced.
18
Economic Development Incentives 2020
FIGURE 10
Agencies administering
Grant awards totaling $133 million were canceled, reduced, or recaptured grants reported recap-
(FY10–FY19) turing $28 million in
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 $28 million was recaptured between FY10 and FY19 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
that make up-front award payments. Each of these programs recaptured small per- Triangle (the city of Wil-
centages of the funds they awarded: liamsburg and the coun-
ties of James City and
Agriculture and Forestry Industries Development grant: 13 percent; York), 6 percent of eligi-
Commonwealth’s Opportunity Fund: 12 percent; ble purchases in North-
ern Virginia and Hamp-
Tobacco Region Opportunity Fund: 12 percent;
ton Roads, and 5.3 per-
Rail Industrial Access Program: 6 percent; cent of eligible pur-
Small Business Investment Grant: 1 percent chases in the rest of the
state. One percent is re-
Economic Development Access Program: 1 percent; and tained by the locality
Commonwealth Research Commercialization Fund: 1 percent. where the purchase is
made.
Through tax incentives, businesses saved $1.7 billion The sales tax applies to
the sale of certain goods
FY10–FY19 and services purchased
in the state and is gener-
Virginia’s economic development tax incentives, such as exemptions, credits, and single ally collected by the
sales apportionment, resulted in $1.7 billion in tax savings to businesses between FY10 merchant at the point of
and FY19. Most ($1.2 billion or 72 percent) of this amount was from sales and use tax sale.
exemptions that provide savings to businesses on their purchases of equipment and The use tax is levied on
out-of-state purchases
supplies that qualify for the exemption. Nine of the 19 sales and use tax exemptions
that are used in Virginia
each provided more than $20 million in incentives to businesses between FY10 and and is self-assessed and
FY19 (Table 8). Some of these exemptions are provided to capital-intensive industries, remitted to the state by
the consumer.
19
Economic Development Incentives 2020
such as data centers and airlines, which make substantial equipment purchases to start
or upgrade their operations.
TABLE 8
Sales and use tax exemptions provided an estimated $1 billion in tax savings to
businesses (FY10–FY19)
Total Average savings
Exemption savings ($M) per year ($M)
Data Center Exemption $593.1M $59.3M
Railroad Common Carriers Exemption 203.1 20.3
Airline Common Carriers Exemption 99.0 9.9
Ships and Vessels Exemption 72.1 7.2
Research and Development Exemption 43.3 4.3
Media Provider Equipment Exemption 43.1 4.3
Certain Printed Materials for Out-of-State Distribution Exemption 38.8 3.9
Pollution Control Equipment & Facilities Exemption 33.1 3.3
Railroad Rolling Stock Exemption 30.2 3.0
Film, Television, and Audio Production Inputs Exemption 11.4 1.1
Semiconductor Manufacturers Exemption 8.9 0.9
Uniform Rental and Laundry Businesses Exemption 8.0 0.8
Out-of-State Nuclear Facility Repair Exemption 5.2 0.5
Taxi Parts and Radios Exemption 3.1 0.3
Semiconductor Wafers Exemption 1.3 0.1
Virginia Spaceport Users Exemption 1.0 0.1
Contractor Temporary Storage Exemption 1.0 0.1
Aircraft Parts, Engines, and Supplies Exemption 0.9 0.9
Electrostatic Duplicators Exemption 0.1 <0.1
Total $1,196.7M $125.6M
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 $472 million in savings to businesses be-
Tax credits allow busi- tween FY10 and FY19 (Table 9), accounting for about 40 percent of spending on tax
nesses or their owners to incentives. Two coal tax credits account for 70 percent of total economic development
reduce their income tax
tax credits. The largest credit—the Coalfield Employment Enhancement Tax Credit—
liability, dollar for dollar,
according to the amount is available to coal mining companies to help slow the decline of coal mining activity
allowed under the credit. in Virginia. It was repealed effective January 1, 2017 and was reinstated in 2018 with
modifications to restrict eligibility to metallurgical coal mining and coalbed methane
production. These modifications 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
20
Economic Development Incentives 2020
designed to incentivize businesses in other industries (film, wineries, and transporta-
tion or distribution companies).
TABLE 9
Tax credits provided nearly $472 million in tax savings to businesses (FY10–FY19)
Tax credit Total savings ($M)
Coalfield Employment Enhancement Tax Credit $241.7M Information on job crea-
Virginia Coal Employment and Production Incentive Tax Credit 89.6 tion, spending, and
other business require-
Motion Picture Production Tax Credit 28.3 ments in return for re-
Research and Development Expenses Tax Credit 26.4 ceiving tax incentives is
Major Business Facility Job Tax Credit 25.4 not readily available as it
is for grants.
Qualified Equity and Subordinated Debt Investment Tax Credit 22.5
Performance of tax in-
Recyclable Materials Processing Equipment Tax Credit 13.7
centives will be included
Major Research and Development Tax Credit 10.9 in upcoming reports de-
Virginia Port Volume Increase Tax Credit 8.0 tailing the findings of in-
depth evaluations of in-
International Trade Facility Tax Credit 2.3
dividual incentives. As
Worker Retraining Tax Credit 1.6 part of this effort, JLARC
Farm Wineries and Vineyards Tax Credit 1.1 staff will collect perfor-
Barge and Rail Usage Tax Credit 0.6 mance data—which is
either not currently col-
Telework Expenses Tax Credit 0.3
lected or not readily
Green Job Creation Tax Credit 0.1 available—on tax incen-
Biodiesel and Green Diesel Fuels Producers Tax Credit <0.1 tives.
Total, all tax credits $472.4M
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
Telework Expenses Tax Credit expired January 1, 2019.
Apportionment formu-
las are used to ensure
Since 2014, Virginia has allowed manufacturers to use single sales apportionment—a that states do not tax
method that could reduce their income tax liability—to help stem the decline of the more than their fair
share of income from
industry in the state. Tax savings for manufacturers using single sales apportionment multistate companies.
is estimated to be $115 million between FY14 and FY19, or about $20 million per year. Virginia’s standard for-
Since 2017, Virginia has allowed data centers meeting certain eligibility requirements mula uses three factors
to also use single sales apportionment. Tax savings for data centers using single sales (property, payroll, and
sales) and double-
apportionment is estimated to be $0.1 million in FY19.
weights the sales factor.
Manufacturers and data
Business savings from tax incentives more than doubled centers can use single
FY10–FY19 sales apportionment to
calculate their taxable in-
Annual tax savings realized by businesses because of economic development tax ex- come in Virginia based
emptions and credits nearly doubled between FY10 and FY19 (Figure 11). This oc- solely on their propor-
curred for several reasons. The Data Center Exemption became effective after FY10; tion of total sales that
by FY19 its annual tax savings to businesses are estimated to be more than $98 million. are in Virginia.
21
Economic Development Incentives 2020
Manufacturers single sales apportionment became effective in FY15; by FY19 its an-
nual tax savings to businesses are estimated to be $24 million. Gradual improvements
in the economy since FY10 also led to a recovery in business spending and investment.
Increased investment magnified the fiscal impact of sales and use tax exemptions that
target capital intensive industries, such as rail, air, and water transportation companies.
Tax credit savings were highest in FY13 because the Virginia Coal Employment and
Production Incentive Tax Credit experienced a large amount of credit redemptions
($59.5 million). According to the Department of Taxation, a large number of carryo-
ver credits were claimed in FY13.
FIGURE 11
Business savings from tax incentives increased (FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Exempted amounts are estimates and exclude the 1 percent sales tax for localities and the additional amounts
collected in the Historic Triangle, Northern Virginia and, Hampton Roads. Not adjusted for inflation. The trend is
nearly identical if adjusted for inflation.
Businesses obtained $61 million in loans and gap
funding through financing programs FY10–FY19
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 helps small businesses obtain loans by reducing
bank credit risk;
State Cash Collateral Program assists small businesses that lack the necessary
collateral to obtain a loan, and
22
Economic Development Incentives 2020
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.
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
technology firms with high growth potential to obtain additional venture capital in- provide to startup com-
vestment. The Virginia Tourism Corporation administers the Tourism Development panies and small busi-
Financing Program to large-scale tourism projects. This program was created in 2011 nesses that are believed
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. Eight projects have begun receiving state funding totaling $13.4
million.
These financing programs incentivize different types of business activity than the
state’s grant programs. Over 70 percent of VSBFA assistance was provided to small
businesses in services and trade industries between FY10 and FY19. Eighty-seven per-
cent 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, 76 percent of
grant funding was for corporate headquarters and manufacturers.
Financing programs have also tended to concentrate more awards in metropolitan ar-
eas of the state than grant programs until recently. Eighty-six percent of VSBFA
awards went to projects in metropolitan areas between FY10 and FY19. Over three-
fourths of Growth Acceleration Program assistance went to firms in Northern Vir-
ginia, with over 54 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. In contrast, the percentage of grant funding that went to
projects in metropolitan areas has historically been lower (63 to 65 percent in the prior
three reports in this series) but it has increased (82 percent in this report) because three
companies that received custom grants in FY19 are all located in Northern Virginia.
VSBFA programs helped businesses obtain more than $29 million in
loans and loan enhancements
Small businesses aided by the four VSBFA programs obtained $29 million in loan and
loan enhancement financing between FY10 and FY19 (Table 10). In most cases, state Loan enhancements in-
clude collateral or guar-
appropriations were not directly used to finance the loans or provide the obligation to anty assistance provided
secure the loans. While programs may have received appropriations in the past, they to a commercial bank to
are revolving loan funds, which means they utilize interest and principal payments on help the business secure
old loans to issue new ones, or receive funding from other self-financing programs a loan.
offered by VSBFA.
The average loan or loan enhancement to secure the loan was $99,683, but the average
varied among the four programs. The Economic Development Loan Fund provided
the greatest amount of average loan assistance at $561,115 per project. The SWaM
Loan Fund provided the least, at $20,278 per project.
23
Economic Development Incentives 2020
TABLE 10
VSBFA programs helped businesses secure nearly $29 million in loans or equity financing
Loan/loan
Amount # of Average # of enhancement per
Program awarded projects award jobs job
Economic Development Loan Fund $3,366,692 6 $561,115 299 $11,260
Loan Guaranty Program 19,699,400 87 226,430 592 33,276
State Cash Collateral Program 1,930,000 8 241,250 56 34,464
SWaM Loan Fund 3,812,213 188 20,278 532 7,166
Total $28,808,305 289 $99,683 1,479 $19,478
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 1,479 jobs. The average loan or
loan enhancement assistance per job was $19,478, on average. This figure is not di-
rectly comparable to the average grant award per job ($6,393) because state funding
for these programs represents only a small portion of the total loan and loan enhance-
ment amount. For example, the VSBFA Loan Guaranty Program provides the finan-
cial 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
defaulted 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
$19 million in financing
Recipients of the Growth Acceleration Program financing received $18.7 million be-
tween FY10 and FY19 to attract venture capital investment. This program made
awards to 270 projects, for an average award of $69,107. Program expenditures
reached a peak of $3.5 million in total awards in FY14 but have not exceeded $2.2
million since then. Seventy-four of the 86 completed projects in the Growth Acceler-
ation Program met their financing objectives for the period, according to the Center
for Innovative Technology.
Economic impact
analysis of incentive Grants have higher economic benefit than tax
spending between FY10
and FY19 was conducted incentives
using economic model-
Virginia’s economic development incentives are estimated to generate additional eco-
ing software developed
by REMI, Inc. nomic activity for the state. Economic impact analysis estimates that private sector
(See Appendix H for the
employment increased by about 15,600 jobs per year, Virginia GDP increased by $2.9
economic impact analy- billion per year, and statewide personal income increased by $1.4 billion per year, on
sis used in this study.) average, because of all incentives (Table 11). For every $1 million in spending on all
24
Economic Development Incentives 2020
incentives between FY10 and FY19, it is estimated that an additional 78 jobs, $14 mil-
lion in Virginia GDP, and $7 million in personal income per year, on average, are added Net impact is the
to the Virginia economy. These estimates assume that only a portion of the economic increase in economic
activity can be attributed to incentives. Research on incentives nationally suggests that activity induced by the
incentives after adjusting
between 75 percent and 98 percent of projects would have occurred anyway without
for the opportunity cost
incentives (Bartik 2018). (See Appendix H for more information about the assump- of increasing taxes to
tions used by type of incentive.) pay for the incentives.
(See Appendix H for in-
formation on the total
TABLE 11
economic impact and
Virginia’s economic development incentives are estimated to generate the opportunity cost of
additional economic activity for the state (FY10–FY19) increasing taxes.)
Annual average
FY10–FY19
Net impact to Virginia economy
Private employment 15,571 jobs
Virginia GDP $2,859.6M
Personal income $1,478.3M
Impact to Virginia economy per $1 million of spending
Private employment 78 jobs
Virginia GDP $13.8M
Personal income $7.4M
Impact to state revenue
Total revenue $99.0M
Cost of incentive $223.7M
Net revenue −$102.7M
Return in revenue per $1 spent 44¢
SOURCE: Weldon Cooper Center economic impact analysis of business activity induced by Virginia’s economic de-
velopment incentive programs between FY10 and FY19.
NOTE: Includes direct, indirect, and induced impacts of completed projects only. Assumes that only a portion of
employment creation, capital investment, sales, or other activity is attributable to the programs. The gross impact on
Virginia’s economy is used to calculate the impact per $1 million per incentive awards and the impact to state reve-
nue. This is consistent with how the economic development research literature typically calculates these impacts.
Estimates of the grants’ economic benefits are adjusted to account for projects that receive grants from more than
one program as indicated in Table 5. Some additional duplication may still exist for projects that receive a grant and
a tax credit, for example, but it is expected to be slight. (See Appendix H for more information about the economic The additional economic
impact estimates and the detailed results on total impact of the incentives, impact of raising income taxes by the activity generated by
amount of the incentives [opportunity cost], and revenue generated by source.) sales and use tax ex-
emptions is substantially
higher than amounts re-
The additional economic activity generated varies by incentive type. Sales and use tax
ported in the 2018 edi-
exemptions are estimated to account for more than half of the net additional jobs, tion of this report. This is
Virginia GDP, and personal income because of incentives (Table 12). The majority of because the analysis was
this additional activity is because of the Data Center Exemption, which is by far Vir- able to more precisely
account for the impact
ginia’s largest incentive. Tax credits, however, are estimated to generate a small portion
of the data center ex-
of additional jobs and personal income and are estimated to generate a net loss in emption from analysis
Virginia GDP. This loss occurs because the reduction in Virginia GDP that results performed for Data Cen-
from increasing taxes to pay for the credits, particularly the Coalfield Employment ter and Manufacturing
Enhancement Tax Credit, is greater than the total additional GDP generated. Incentives, JLARC, 2019.
25
Economic Development Incentives 2020
Grants have higher economic benefits than tax incentives when benefits are assessed
per $1 million spent (Table 12). For every $1 million spent on grants between FY10
and FY19, it is estimated that an additional 132 jobs, $23 million in Virginia GDP, and
$13 million in personal income are added to the Virginia economy. Manufacturers sin-
gle sales apportionment is the tax incentive with the highest economic benefit per $1
million spent, but benefits (98 jobs, $18 million in Virginia GDP, and $7 million in
personal income) are much less than the benefits generated by grants. Tax credits gen-
erate the lowest amounts of economic benefits, generating less than $1 million in Vir-
ginia GDP and approximately $1 million in personal income per every $1 million in
spending.
TABLE 12
Grant programs have larger economic benefit than tax incentives (FY10–FY19)
Annual average (FY10–FY19)
Tax Mfg. single sales Loan/gap
Grants Tax credits exemptions apportionment financing/other
Net impact to Virginia economy
Private employment 5,503 jobs 122 jobs 8,700 jobs 1,736 jobs 205 jobs
Virginia GDP $962.3M -$18.3M $1,689.4M $316.7M $36.2M
Personal income $542.3M $7.6M $837.4M $118.1M $20.1M
Impact to Virginia economy per $1 million of spending
Private employment 132 jobs 11 jobs 81 jobs 98 jobs 391 jobs
Virginia GDP $22.7M $0.7M $15.2M $17.6M $368.9M
Personal income $13.0M $1.0M $7.8M $6.9M $38.5M
Impact to state revenue
Total revenue $37.4M $2.3M $51.8M $10.3M $1.4M
Cost of incentive $44.8M $47.2M $119.7M $19.1M $0.5M
Revenue net of awards −$7.4M −$23.0M −$67.9M −$8.8M −$0.8
Return in revenue
84¢ 5¢ 43¢ 54¢ $2.53
for every $1 spent
SOURCE: Weldon Cooper Center economic impact analysis of business activity induced by Virginia’s economic development incentive pro-
grams between FY10 and FY19.
NOTE: Includes direct, indirect, and induced impacts of completed projects only. Assumes that only a portion of employment creation, capital
investment, sales, or other activity is attributable to the programs. The gross impact on Virginia’s economy is used to calculate the impact
per $1 million per incentive awards and the impact to state revenue. This is consistent with how the economic development research literature
typically calculates these impacts. Estimates of the grants’ economic benefits are adjusted to account for projects that receive grants from
more than one program as indicated in Table 5. Some additional duplication may still exist for projects that receive a grant and a tax credit,
for example, but it is expected to be slight. Manufacturers single sales apportionment was not in effect until FY14, so estimates are for FY14
to FY19. (See Appendix H for more information about the economic impact estimates and the detailed results on total impact of the incen-
tives, impact of raising income taxes by the amount of the incentives [opportunity cost], and revenue generated by source.)
The return in revenue to the state for every $1 spent on incentives also varies widely
by type of incentive (Table 11), with grants generating higher returns in revenue than
tax incentives. For every $1 spent on grants between FY10 and FY19, it is estimated
26
Economic Development Incentives 2020
that the state receives 84¢ in revenue in return. Manufacturers single sales factor ap-
portionment has the highest revenue return for tax incentives, with tax credits again
having the lowest return.
The “loan, gap financing, and other” incentives category has the highest economic
benefits per $1 million spent and the highest return in state revenue per $1 spent. This
is primarily because the loan assistance programs—which represent over half of the
projects in this category—are revolving programs that require no spending by the
state. State costs are only incurred when a participating business defaults on its loan.
Grant programs have higher economic benefits and returns in state revenue than tax
incentives for several reasons. Economic benefits per $1 million spent and returns in
revenue are higher when awards are made to projects in export-based industries that
have high economic multipliers and pay above average employee compensation. One-
third of grant funding was directed to businesses in manufacturing industries, which
are export-based, generally have high economic multipliers, and pay higher wages.
Manufacturers single sales apportionment, which has the highest economic benefits
and returns in state revenue of the tax incentives, is exclusively used by manufacturers.
In contrast, only 12 percent of sales and use tax expenditures, 15 percent of loan and
gap financing, and 17 percent of tax credit expenditures are directed to manufacturing
businesses.
Businesses that receive grants must also agree to create jobs and make capital invest-
ments, usually above minimum levels. Economic benefits and returns in revenue are
higher for programs targeted to businesses that commit to creating jobs and making
capital investments. In contrast to grants, other incentives often do not have similar
job creation and capital investment requirements for business recipients. The Data
Center Exemption is one exception.
Estimates of grant programs’ economic benefits and returns in revenue are also more
precise and less likely to be underestimated than other programs. More precise esti-
mates of the economic benefit can be generated for grant programs because employ-
ment and capital expenditure performance data is readily available. Employment and
capital expenditure impacts of businesses that received tax credits and most sales and
use tax exemptions (with exception of the Data Center Exemption) must be inferred
from model simulations and may be slightly underestimated. These simulations pro-
duce relatively conservative estimates of program employment and output impacts
and could result in slightly more conservative estimates of the economic benefit of
these programs.
27
Economic Development Incentives 2020
28
Appendixes
Appendix A: Study mandate
2020–2022 Appropriation Act
Passed as Chapter 1289 of the Acts Assembly, May 21, 2020
§ 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.
29
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.
30
Appendixes
Appendix B: Research methods and activities
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.
31
Appendixes
Analysis of grant programs
For discretionary and by-right grant programs, program spending by fiscal year was computed as the
funds paid for completed projects and grant funds still committed toward active but unfinished
projects. For most grant programs, spending was assigned to the same date/year when awards were
approved. The approval date represents when a contract between the agency and the business is signed
in either a memorandum of understanding or performance agreement. Many programs make award
payments upon approval or soon after. Because custom grants are often large awards with long
performance periods, spending is assigned to the fiscal year in which payments are made. Program
expenditures by fiscal year were computed as the funds paid for completed projects and grant funds
still committed toward active but unfinished projects.
For the grant award analysis, awards for all grant awards and amounts were assigned to the year in
which the award was approved. Grant program awards and amounts were also 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) or other sources. Several agencies did not provide NAICS codes for each project.
For many grant projects, 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 some instances,
matches could not be found. In these cases, additional online research using Manta.com, other
business directories, and company websites was conducted to characterize the primary industry of the
establishment and/or firm primary. When information was not available, certain assumptions about
the nature of the firm or prospective firm were made. For Enterprise Zone Real Property Investment
Grant projects that could not be otherwise identified (generally Limited Liability Corporation
beneficiaries set up for commercial real estate development purposes), a NAICS code of “531120”
(“Real Estate and Rental and Leasing”) was assigned. Governor’s Motion Picture Opportunity Fund
projects were characterized as NAICS 512110 (“Motion Picture and Video Production”). Speculative
infrastructure projects funded by the Tobacco Commission Megasite Program, Virginia Business
Ready Sites Program, and Economic Development Access Program were assumed to be NAICS
333000 (“Machinery Manufacturing”).
Fourteen Governor’s Motion Picture Opportunity Fund awards for a total award amount of $6.4
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. Estimation of the employment size of the business that received the grant was
conducted by matching grant records with VEC Quarterly Census of Employment and Wages
(QCEW) 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
FY19 were matched by fiscal year of award with the corresponding VEC employment data by calendar
year between 2009 and 2018 (i.e., FY19 project records were matched to calendar year 2018 VEC
employment records). Using this process, 61 percent of the total number of awards and 26 percent
32
Appendixes
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 administered by the Virginia Small Business Financing Authority—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–FY19 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. The average default rate (2.1 percent) for these loans was also applied
to awarded loans to estimate the “cost” of the loan portion of Tobacco Region Opportunity Fund
(TROF) awards. In the last three years, the Tobacco Region Revitalization Commission has begun to
issue a larger portion of its TROF awards in the form of revolving loans.
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–FY19) and are not included
in this report. 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,
Tobacco Commission Southside Economic Development Grant Program, and
Tobacco Commission Southwest Economic Development Grant Program.
Four grant programs made awards that occurred earlier than FY10. These grants include:
Aerospace Engine Manufacturing Performance Grant Program (Rolls-Royce),
Semiconductor Grant Program (Micron),
Semiconductor Grant Program (Qimonda), and
SRI custom grant.
33
Appendixes
The award analysis does not include these four custom grants, but the spending analysis includes
payments made to Rolls-Royce, Micron, and SRI.
Several tax incentives were also not included in this analysis. The Worker Training Tax Incentive
became effective January 1, 2019 and was not claimed in FY19. For some tax incentives, 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
Venture Capital Account Subtraction,
Qualified Business Long-Term Capital Gain Subtraction, and
Zero G Zero Tax Act Subtractions (Parts I and II).
This report includes program expenditures for two economic development incentive programs that
were not included in the 2019 report: the Aircraft Parts, Engines, and Supplies Exemption and Data
Center Single Sales Apportionment. Both programs are new.
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
if an alternative methodology had practical or conceptual advantages over the Department
of Taxation estimates.
34
Appendixes
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 relevant IMPLAN commodity
sectors, using the most recent data for 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 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.
35
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 IMPLAN, Bureau of Transportation Statistics (BTS), EMSI
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 2018. Therefore, FY19 revenue estimates were calculated by inflating the FY18
estimates by the consumer price index (CPI).
36
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.
37
Appendixes
Appendix C: Incentive program descriptions
Eighty-three economic development incentive programs are subject to this review. These include 35
grant programs, 17 tax credits, 19 tax exemptions, and 12 other programs.
Grant programs
Ten state agencies administer 35 economic development incentive grant programs that are subject to
this review. 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 Development Grant).
The state has also created customized grants for individual large industrial attraction and expansion
projects, such as
Amazon HQ II (Major Headquarters Workforce Grant),
Micron (Semiconductor Manufacturing Grant),
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.
Seventy-three percent of total spending on economic incentive grants over the FY10 to FY19 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 8
percent of the total, respectively.
38
Appendixes
TABLE C-1
Thirty-five 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.
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
(eliminated 2020) 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 funds allocated to regions on
Growth and Opportunity and employment growth through the basis of population and competitive grant funds.
Fund Grants) regional cooperation. Performance parameters of grants are still being
developed.
(2017)
39
Appendixes
State agency/program
(year enacted) Purpose Description
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.
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 nine 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.
40
Appendixes
State agency/program
(year enacted) Purpose Description
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.
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.
Major Headquarters Attract a major corporate Incentive payments are based on attainment of
Workforce Grant Fund headquarters to locate in the state. performance milestones specified in a performance
(Amazon HQ II) This customized performance- agreement between the state and the company.
based grant is used to support the Performance measures include employment, capital
(2019)
establishment of the Amazon HQII investment, and average annual wages.
headquarters in Arlington County.
41
Appendixes
State agency/program
(year enacted) Purpose Description
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.
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.
Semiconductor Promote and expand Incentive payments were based on attainment of
Manufacturing Grant semiconductor product performance milestones specified in a performance
(Micron II) manufacturing and research. This agreement between the state and the company.
customized performance-based Performance measures included employment and
(2019)
grant was used to support the capital investment.
expansion of Micron in Manassas
City.
Special Workforce Grant Attract an e-services company to Incentive payments were based on attainment of
(Amazon Web Services) locate operations in the state. This performance milestones specified in a performance
customized performance-based agreement between the state and the company.
(2019)
grant is used to establish Amazon Performance measures included employment and
Web Services in Fairfax County. capital investment.
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.
42
Appendixes
State agency/program
(year enacted) Purpose Description
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 $30,000 per
company for approved export-related expenses.
Awardees must complete a two-year program.
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.
43
Appendixes
Tax credits
Seventeen economic development tax credits, which are available to eligible applicants when filing
income tax forms, were subject to this review. 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. The Virginia Port Volume Increase Tax Credit was changed from a non-refundable
and non-transferable tax credit to a transferable one beginning in tax year 2019.
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.
44
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. Beginning January 1, 2020, the credit may
also be claimed for machinery and equipment used in
advanced recycling.
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
(expired January 1, 2019) 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
(expired January 1, 2019) 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.
45
Appendixes
Program (year enacted) Purpose Description
Worker Training Tax Credit Encourage worker training to Tax credit in an amount equal to 35 percent of the
(2019) improve productivity and expenses incurred for eligible worker training up to
employment retention. $500 per qualified employee or $1,000 for training
related to each non-highly compensated worker.
Manufacturing businesses that currently qualify for the
Worker Retraining Tax Credit for conducting
orientation, instruction, and training in Virginia related
to its manufacturing activities are also eligible. The
annual aggregate credit cap is $1 million.
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.
46
Appendixes
Exemption (year enacted) Purpose Description
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.
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)
47
Appendixes
Exemption (year enacted) Purpose Description
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)
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.
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.
48
Appendixes
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.
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.
49
Appendixes
Program (year enacted) Purpose Description
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 $25,000 if business received counseling
(2012) capital investment and expansion. from a Small Business Development center. Loans are
allocated on a credit score basis. Loans may be used for
working capital, financing accounts receivable and
inventory, and other purposes.
Tourism Development Promote tourism and economic The program provides gap financing for tourism
Financing Program development in Virginia. development projects otherwise unable to access
(2012) capital. The locality must make application, demonstrate
a tourism deficiency, and provide tax incentives or
regulatory flexibility for a designated tourism zone
where the project occurs.
50
Appendix D: Spending or tax expenditure by incentive
TABLE D-1
State spending on incentive grant payments ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Total
Advanced Shipbuilding Training Facility Grant -- $0.0 $0.0 $5.0 $5.0 $8.0 $7.6 $7.2 -- -- $32.8M
Program (Newport News)
Advanced Shipbuilding Production Facility Grant -- -- -- -- -- -- -- 0.0 0.0 6.0 6.0
Program (Newport News)
Aerospace Engine Manufacturing Performance 0.8 0.2 0.4 0.4 0.3 3.1 0.0 0.0 0.8 0.0 6.0
Grant 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 0.0
Agriculture and Forestry Industries Development -- -- -- -- 0.9 0.4 1.0 1.6 0.9 0.9 5.8
Grant
Appendixes
Virginia Business Ready Sites Program -- -- -- -- -- -- -- 1.2 0.0 0.3 1.5
51
Commonwealth’s Opportunity Fund 6.3 7.0 11.9 5.8 7.1 24.8 23.1 24.0 10.9 20.9 141.8
Commonwealth Research Commercialization Fund -- -- 1.9 2.5 0.9 1.0 1.5 1.3 0.8 1.3 11.3
Economic Development Access Program 0.6 2.0 3.4 1.1 2.1 0.7 1.0 4.3 2.5 2.3 19.8
GO Virginia -- -- -- -- -- -- -- 0.0 0.2 2.8 3.0
Governor's Motion Picture Opportunity Fund 0.3 2.1 2.4 0.6 1.7 2.9 12.1 0.8 5.8 2.5 31.2
Job Creation Grant (Enterprise Zone) 1.3 2.7 3.0 2.9 2.9 3.1 2.7 1.8 2.2 2.7 25.2
Major Eligible Employer Grant 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Major Headquarters Workforce Grant (Amazon -- -- -- -- -- -- -- -- -- 0.0 0.0
HQII)
Tobacco Commission Megasite Grant -- 25.0 27.2 21.0 12.8 6.2 0.0 0.0 4.9 0.0 97.0
Port of Virginia Economic and Infrastructure -- -- -- -- 0.5 0.0 0.3 2.2 0.5 0.1 3.6
Development Grant
Pulp, Paper, and Fertilizer Advanced Manufacturing -- -- -- -- -- -- -- -- -- -- 0.0
Performance Grant Program
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Total
Rail Industrial Access Program 0.9 1.5 1.2 0.5 2.1 0.3 0.9 0.0 1.3 0.7 9.5
Real Property Investment Grant (Enterprise Zone) 10.6 9.5 11.2 11.2 11.3 9.1 9.3 10.9 10.7 10.8 104.5
Semiconductor Custom Grant (Micron) 1.6 5.4 5.4 5.4 5.4 3.8 -- -- -- -- 27.0
Semiconductor Custom Grant (Qimonda) -- -- -- -- -- -- -- -- -- -- 0.0
Semiconductor Manufacturing Grant (Micron II) -- -- -- -- -- -- -- -- -- 0.0 0.0
Small Business Investment Grant Fund -- -- -- -- 0.0 0.1 0.2 1.0 0.6 0.8 2.7
Small Business Jobs Grant Fund Program 0.0 0.2 0.4 0.8 1.2 0.3 0.0 0.4 0.0 0.0 3.4
Southside Economic Development Grants 0.0 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 0.0
Special Workforce Grant (Amazon Web Services) -- -- -- -- -- -- -- -- -- 0.0 0.0
SRI custom grant 4.0 1.0 1.0 1.0 -- -- -- -- -- -- 7.0
Appendixes
Tobacco Region Opportunity Fund 8.8 12.2 7.9 14.9 27.3 6.0 9.7 4.0 11.2 10.5 112.6
52 Transportation Partnership Opportunity Fund 0.0 3.3 10.0 10.2 0.7 6.0 0.0 0.0 2.0 11.3 43.5
Virginia Economic Development Incentive Grant 10.0 0.0 5.0 0.0 5.0 6.0 0.0 9.3 4.0 1.5 40.8
Virginia Investment Partnership Grant 0.0 2.4 0.9 3.9 6.2 9.6 6.9 1.6 3.6 5.1 40.1
Virginia Jobs Investment Program 6.4 8.0 5.1 5.7 7.4 4.5 7.3 10.8 9.0 9.2 73.3
VALET Program 0.1 0.3 0.3 0.3 0.3 0.3 0.3 0.6 0.8 0.6 4.0
Virginia Trade Show Assistance Program -- -- -- -- -- -- -- 0.6 0.5 0.6 1.7
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 program had not been adopted or was no longer in effect.
TABLE D-2
Tax savings to businesses because of tax credits ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 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 $0.0 $0.6M
Biodiesel and Green Diesel Fuels Producers Tax -- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Credit
Coalfield Employment Enhancement Tax Credit 44.1 27.3 25.0 21.8 21.5 28.4 23.4 18.9 15.2 16.1 241.7
Farm Wineries and Vineyards Tax Credit 0.0 0.0 0.0 0.1 0.2 0.2 0.2 0.1 0.1 0.2 1.1
Green Job Creation Tax Credit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.1
International Trade Facility Tax Credit 0.0 0.0 0.0 0.2 0.2 0.1 0.3 0.3 0.3 0.9 2.3
Major Business Facility Job Tax Credit 3.2 -0.9 4.3 2.8 1.3 4.1 0.8 6.8 1.8 1.3 25.4
Major Research and Development Tax Credit -- -- -- -- -- -- -- -- 6.1 4.8 10.9
Motion Picture Production Tax Credit 0.0 0.0 0.0 0.0 3.0 7.2 5.5 6.6 6.1 0.0 28.3
Appendixes
Qualified Equity and Subordinated Debt Investment 1.9 1.6 2.1 1.9 2.4 2.1 2.4 2.2 2.8 3.2 22.5
53
Tax Credit
Recyclable Materials Processing Equipment Tax 1.2 0.6 0.7 2.7 1.2 0.6 2.1 1.7 1.4 1.5 13.7
Credit
Research and Development Expenses Tax Credit 0.0 0.0 0.0 1.5 3.4 4.2 4.7 4.2 4.2 4.1 26.4
Telework Expenses Tax Credit -- 0.0 0.0 0.0 0.1 0.1 0.1 0.0 0.1 0.0 0.3
Virginia Coal Production and Employment Incentive 0.4 0.0 0.0 59.4 6.7 8.9 3.1 3.7 6.8 0.5 89.6
Tax Credit
Virginia Port Volume Increase Tax Credit 0.0 0.0 0.0 0.1 0.4 0.7 0.9 2.2 1.8 1.8 8.0
Worker Retraining Tax Credit 0.0 0.2 0.2 0.1 0.2 0.2 0.2 0.2 0.3 0.0 1.6
SOURCE: Weldon Cooper Center analysis of the Department of Taxation’s Annual Reports for Fiscal Years 2010–2019.
NOTE: Credits were claimed for the Biodiesel and Green Diesel Fuels Producers Tax Credit, but amounts were very minimal. Not adjusted for inflation. Numbers may not add because of
rounding.
-- indicates no credits were claimed in that year because they had not been adopted yet.
TABLE D-3
Estimated tax savings to businesses on sales and use tax exemptions ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Total
Airline Common Carriers Exemption $12.0 $7.1 $6.7 $7.8 $8.6 $10.7 $11.6 $11.2 $11.6 $11.8 $99.0M
Aircraft Parts, Engines, and Supplies Exemption -- -- -- -- -- -- -- -- -- 0.9 0.9
Certain Printed Materials for Out-of-State 3.4 3.5 3.6 3.7 4.0 4.0 4.0 4.1 4.2 4.3 38.8
Distribution Exemption
Contractor Temporary Storage Exemption 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.0
Data Center Exemption 3.0 23.1 26.9 80.8 77.8 89.2 50.5 53.2 90.7 97.9 593.1
Electrostatic Duplicators Exemption 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1
Film, Television, & Audio Production Inputs 0.9 1.1 1.1 0.8 0.7 0.8 0.9 0.9 2.1 2.1 11.4
Exemption
Media Provider Equipment Exemption 3.7 3.9 4.0 4.1 4.4 4.5 4.5 4.6 4.7 4.8 43.1
Appendixes
Out-of-state Nuclear Facility Repair Exemption 0.4 0.4 0.3 0.4 0.5 0.6 0.6 0.6 0.7 0.7 5.2
54
Pollution Control Equipment & Facilities Exemption 4.0 3.1 2.6 3.1 2.3 4.2 4.1 3.2 3.2 3.3 33.1
Railroad Common Carriers Exemption 15.9 17.4 21.0 21.3 24.6 25.7 24.2 17.7 17.5 17.8 203.1
Railroad Rolling Stock Exemption 1.3 1.8 2.0 1.9 3.0 5.3 6.1 4.3 2.2 2.3 30.2
Research & Development Exemption 3.8 3.9 4.0 4.1 4.5 4.5 4.5 4.6 4.7 4.8 43.3
Semiconductor Manufacturers Exemption 0.8 1.1 1.3 1.3 1.2 0.8 0.6 0.6 0.5 0.6 8.9
Semiconductor Wafers Exemption 0.1 0.1 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 1.3
Ships and Vessels Exemption 4.4 3.6 3.6 8.8 12.1 10.1 8.3 7.3 6.9 7.0 72.1
Taxi Parts & Radios Exemption 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 3.1
Uniform Rental & Laundry Businesses Exemption 0.5 0.5 0.5 0.7 0.8 0.9 1.0 1.0 1.0 1.0 8.0
Virginia Spaceport Users Exemption 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.0
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Exempted amounts exclude the 1 percent sales tax for localities and, in most cases, the additional amounts collected in Northern Virginia and Hampton Roads. Not adjusted for inflation.
Numbers may not add because of rounding.
-- indicates exemption had not been adopted yet.
TABLE D-4
State spending on other incentives ($ millions)
Incentive FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Total
Income tax apportionment methods and subtractions
Data Center single sales factor apportionment -- -- -- -- -- -- -- -- -- 0.1 $0.1M
Manufacturing single sales factor apportionment -- -- -- -- 1.9 20.9 22.3 22.7 23.3 23.7 114.8
Qualified Business Long-Term Capital Gain
No data collected; estimates will be calculated during in-depth review.
Subtraction
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 2.3 3.5 1.6 1.6 2.0 2.1 2.7 18.7
Appendixes
Economic Development Loan Fund -- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
55 Loan Guaranty Program 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.1
State Cash Collateral Program -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
SWaM Loan Fund -- -- 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.2
Tobacco Region Opportunity Fund (loan portion) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.2
Tourism Development Financing Program 0.0 0.0 0.3 1.3 0.0 8.4 0.0 0.9 0.6 1.8 13.4
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 businesses in highly populated localities such as Arlington
County, Newport News City, 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 urbanized localities in Northern Virginia and in southern, rural localities (Figure E-2).
FIGURE E-1
Awards are concentrated in several highly populated areas and the southern region (FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Localities were not assigned to 14 Governor’s Motion Picture Opportunity Fund projects because filming occurred in multiple localities.
56
Appendixes
FIGURE E-2
Awards are concentrated in urban areas in Northern Virginia and in rural southern localities,
adjusted for population size (FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic development incentives.
NOTE: Localities were not assigned to 14 Governor’s Motion Picture Opportunity Fund projects because filming occurred in multiple localities.
57
Appendixes
Appendix F: Average employment size of grant recipients by
program
The average establishment size of a grant recipient was 152 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 (1,172 employees), the Virginia Investment Partnership
Grant (475), and the Virginia Economic Development Incentive Grant (440). 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 (10).
Figure F-1
Average employment size of business location at time of award varies widely by program
(FY10–FY19)
SOURCE: Weldon Cooper Center analysis of economic development incentive grants and VEC data.
NOTE: Employment records were matched with 3,066 of the 5,023 awards (61%) and $479M of $1.8B in total awards.
58
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
Major Headquarters Workforce Grant (Amazon
X X X
HQII)
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
Establishment of R&D
Semiconductor Manufacturing Grant (Micron II) X X X
facility
Small Business Investment Grant Fund X Private equity investment
Small Business Jobs Grant Fund Program X X X
Special Workforce Grant Fund (Amazon Web
X X X
Services)
SRI custom grant X X
Tobacco Commission Megasite Grant
Tobacco Region Opportunity Fund X X X
59
Appendixes
Job Capital
Grant program creation Wages expenditures Other
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.
60
Appendixes
Appendix H: Economic and revenue impact analysis
The economic impact analysis for incentives involved modeling (1) the additional economic activity
that occurred because of the incentive and (2) the simultaneous increase in taxes that was used to
“pay” for the incentive. Increasing taxes has the general effect of decreasing employment and other
economic activity. Thus, increasing taxes to pay for the incentive reduced the total effect of the
incentive on the economy.
Economic impact modeling
Weldon Cooper Center staff conducted economic impact analyses of Virginia economic incentives
using REMI PI+ (Policy Insight Plus) software. REMI PI+ is a dynamic, multi-sector regional
economic simulation model used for economic forecasting and measuring the impact of public policy
changes on local economies. The model combines different contemporary regional economic
modeling methods such as input-output analysis, econometric forecasting, and computable general
equilibrium to characterize the mechanics and path of a regional economy. The model has been
extensively peer-reviewed and is widely used by state agencies elsewhere in the nation to model
economic and tax revenue impacts of economic development incentive programs, including economic
development incentives. The model used for this analysis was customized for the state of Virginia and
includes 70 industry sectors. Outcome variables examined include total employment, state GDP, and
personal income. In addition, a state tax revenue impact analysis was conducted based on a
methodology described further below.
The modeling of each program was conducted differently depending on the type of economic
stimulus provided by the program and available information on program outcomes (Table H-1). The
most comprehensive information on establishment-level performance outcomes was available for
grant programs, which typically track employment, capital investment, and other performance metrics
related to the specific economic aims of the programs. Information on employment benchmarks was
also available for four Small Business Financing Authority loan programs, which a previous JLARC
study corroborated are in aggregate indicative of ultimate employment creation. (See Workforce and
Small Business Incentives, JLARC 2018.) Similar information was available for the Data Center
Exemption because users are required to enter into a Memorandum of Understanding with VEDP
and report employment and capital investment goal attainment. However, it was not available for other
sales and use tax exemptions and tax credits. Thus, those programs were generally modeled as
decreasing either firm capital or production costs. Programs were modeled as decreasing firms’ costs
of capital if the incentive reduced the costs of purchasing tangible personal property. They were
modeled as decreasing firm production costs if the costs of labor as well as equipment and supplies
were reduced by the incentive.
61
Appendixes
Table H-1
REMI policy variables
Name of incentive REMI policy variables Modeling description
Agriculture and Forestry Industries Labor and Capital Demand>- Model economic impact estimate
Development Grant Employment>-Firm >-Industry based on 10% "but for" assumption
Advanced Shipbuilding Production for programs except Governor’s
Facility Grant Program (Newport Motion Picture Opportunity Fund
News) (95%) and loan programs (31%)
Commonwealth’s Opportunity Fund based on documented or projected
Governor's Motion Picture employment increase.
Opportunity Fund* Assign REMI industry based on grant
Job Creation Grant or loan project industry identifiers.
Major Eligible Employer Grant
Port of Virginia Economic and
Infrastructure Grant
Small Business Investment Grant
Fund
Small Business Jobs Grant Fund
Program
Tobacco Region Opportunity Fund
Virginia Economic Development
Incentive Grant
Virginia Investment Partnership Grant
Virginia Jobs Investment Program--
Job Creation
Economic Development Loan Fund
Loan Guaranty Program
State Cash Collateral Program
SWaM Loan Fund
Economic Development Access Output and Demand>-Investment Model economic impact estimate
Program Spending>-Nonresidential based on 10% "but for" factor based
Rail Industrial Access Program on documented investment. Assign
Real Property Investment Grant REMI industry based on grant project
Megasite Grants (Tobacco industry identifiers.
Commission)
Transportation Partnership
Opportunity Fund
Farm Wineries and Vineyards Tax Compensation and Prices- Model economic impact based on
Credit >Production Costs->Capital Costs reduced capital cost equal to tax
Recyclable Materials Processing credit or estimated exemption tax
Equipment Tax Credit revenue effect.
Airline Common Carriers Exemption Assign REMI industry based on
Aircraft Parts, Engines, and Supplies industry(ies) affected based on
Exemption program descriptions
Certain Printed Materials for Out-of-
State Distribution Exemption
Data Centers Single Sales Factor
Apportionment
Electrostatic Duplicators Exemption
Film, Television, & Audio Production
Inputs Exemption
62
Appendixes
Name of incentive REMI policy variables Modeling description
Media Provider Equipment
Exemption
Pollution Control Equipment &
Facilities Exemption
Railroad Common Carriers
Exemption
Railroad Rolling Stock Exemption
Research & Development Exemption
Semiconductor Manufacturers
Exemption
Semiconductor Wafers Exemption
Ships and Vessels Exemption
Taxi Parts & Radios Exemption
Uniform Rental & Laundry Businesses
Exemption
Virginia Spaceport Users Exemption
Barge and Rail Usage Tax Credit Compensation and Prices- Model economic impact estimate
Biodiesel and Green Diesel Fuels >Production Costs->Production based on reduced production cost.
Producers Tax Credit Costs Assign REMI industry based on
Green Job Creation Tax Credit industry(ies) affected based on
International Trade Facility Tax Credit program descriptions and corporate
Major Business Facility Job Tax Credit tax credit records matched with VEC
Major Research and Development employment records.
Tax Credit
Motion Picture Production Tax Credit
Research and Development Expenses
Tax Credit
Telework Expenses Tax Credit
Virginia Coal Production and
Employment Incentive Tax Credit
Virginia Port Volume Increase Tax
Credit
Worker Retraining Tax Credit
Data Center Exemption (1) Labor and Capital Demand>- Model economic impact estimate
Employment>-Firm >-Industry based on 90% “but for" assumption.”
(Exogenous Production, Nullify Employment assigned to industry.
Investment); (2) Output and Tangible personal property capital
Demand>-Industry Sales (Exogenous investment assigned to wholesale
Production)>-Power and trade using margin of 28.7%.
Communication Structures; (3)
Output and Demand>-Industry Sales
(Exogenous Production)>-Wholesale
Trade
Virginia Jobs Investment Program (1) Output and Demand>-Investment Model economic impact estimate
(VJIP)--Training Spending>-Equipment, (2) Output based on 1.5% wage and salary
and Demand>-Real Disposable increase with associated output
Income>-Compensation (Adjust increase. Also, capital investment
compensation by amount of training based on 10% "but for" factor.
related wage increase). (3) Output Assign to industries based on grant
and Demand>-Output (Adjust by project records.
ratio of value-added to training
related wage increase)
63
Appendixes
Name of incentive REMI policy variables Modeling description
Manufacturers Single Sales Factor (1) Labor and Capital Demand>- Model economic impact estimate
Apportionment Employment>-Firm >-Industry based on 15% “but for” assumption.
(Competes locally)
Virginia Trade Show Assistance Output and Demand>-Industry Sales Model economic impact as increased
Program (Exogenous Production)> sales of (a) advertising, public
Contractor Temporary Storage relations and related services, (b)
Exemption warehousing and storage, and (c)
Out-of-state Nuclear Facility Repair construction.
Exemption
Virginia Leaders in Export Trade Output and Demand>-Industry Sales Model economic impact as increased
Program (International Exports)> sales for industry based on grant
project records.
Source: Weldon Cooper Center.
When employment, capital investment, and other documented performance metrics were modeled
(grant and loan programs), only a small portion of the program documented outcomes were attributed
to the effect of the incentive. In no instance are estimated program employment levels equal to
program reported metric attainment. Even though the success of incentives in swaying business
decisions varies by program (and by project), general assumptions are made by program type. For
grants, the assumption was made that 10 percent of grant employment creation is attributable to the
programs, with one exception (the Governor’s Motion Picture Opportunity Fund). The 10 percent
effect for grant programs is derived from the 10 to 15 percent consensus value range commonly
recommended for use in economic incentive evaluations (Bartik 2018; Peters and Fisher 2004) and is
the same estimate used in a previous analysis of state economic incentive economic impacts. (See
Review of Economic Development Incentive Grants, JLARC 2012.) For the Governor’s Motion Picture
Opportunity Fund, 95 percent of film activity (job creation and Virginia spending) is attributed to the
grant program based on a previous film industry evaluation study. (See Evaluation: Film Incentives,
JLARC 2017). Film project employment was also converted to motion picture and sound recording
industries full-time-equivalents because of the preponderance of part-time and seasonal employees in
grant-supported film and television productions. For loan programs, 31 percent of loan program
employment benchmarks were established as the program effects of the loan programs based on a
previous analysis of loan program effects. (See Workforce and Small Business Incentives, JLARC 2018).
Some REMI policy variables require industry level data aggregated into 70 REMI industry categories.
Since NAICS codes were obtained or assigned and then cross-walked to REMI industry categories.
NAICS-level industry information was obtained for grant projects as described in Appendix B. Tax
credit projects were assigned NAICS codes based on available corporate tax filer industry
characteristics when corporate users made up a large portion of filers or other information was not
available. Thus industries of corporate filers are assumed to be similar to other pass-through entities
that file through the individual income tax system. Most sales and use tax exemptions are fairly
narrowly targeted to individual industries, and industry assignment was relatively straightforward. In
some instances, secondary data was used. For the Pollution Control Equipment exemption, utilization
was assigned to industries using industry information from the U.S. Census Bureau’s Pollution
Abatement Costs and Expenditures: 2005 survey (issued in 2008) on pollution abatement capital
64
Appendixes
expenditures for the state of Virginia (Table 8 of the survey report). For the Research and
Development Exemption, industry information was drawn from the National Science Foundation
Business Research and Innovation: 2013 on corporate R&D expenditures by industry (Table 30 of
that report).
Table H-2
REMI industry assignments for modeling impacts of tax credits and sales and use tax
exemptions
Programs Industries
Tax credit programs
Barge and Rail Usage Tax Credit Warehousing and storage
Biodiesel and Green Diesel Fuels Producers Tax Oil and gas extraction
Credit
Coal Employment Enhancement Tax Credit Mining
Farm Wineries and Vineyards Tax Credit Beverage and tobacco product manufacturing
Green Job Creation Tax Credit Construction
International Trade Facility Tax Credit Warehousing and storage
Major Business Facility Job Tax Credit Varies, based on corporate tax credit utilization files from
Department of Taxation
Motion Picture Production Tax Credit Motion picture and sound recording industries
Qualified Equity and Subordinated Debt Investment No industry assignment used
Tax Credit
Recyclable Materials Processing Equipment Tax Varies, based on corporate tax credit utilization files from
Credit Department of Taxation
Research and Development Expenses Tax Credit Varies, based on corporate tax credit utilization files from
Department of Taxation
Telework Expenses Tax Credit Professional, scientific, and technical services
Virginia Coal Production and Employment Incentive Utilities and paper manufacturing based on tax credit use
Tax Credit
Virginia Port Volume Increase Tax Credit Warehousing and storage
Worker Retraining Tax Credit Varies, based on corporate tax credit utilization files from
Department of Taxation
Sales and use tax exemptions
Airline Common Carriers Exemption Air transportation
Aircraft Parts, Engines, and Supplies Exemption Air transportation
Certain Printed Materials for Out-of-State Printing and related support activities
Distribution Exemption
Contractor Temporary Storage Exemption Warehousing and storage
Data Centers Exemption Data processing, hosting, and related services (50%); Other
information services and Telecommunications (50%)
Electrostatic Duplicators Exemption Administrative and support services
Film, Television, & Audio Production Inputs Motion picture and sound recording industries
Exemption
Media Provider Equipment Exemption Broadcasting except internet
Out-of-state Nuclear Facility Repair Exemption Construction
Pollution Control Equipment & Facilities Exemption U.S. Census Bureau PACE Survey
65
Appendixes
Programs Industries
Railroad Common Carriers Exemption Rail transportation
Railroad Rolling Stock Exemption Machinery manufacturing (99.3%) and other transportation
equipment manufacturing (0.7%)
Research & Development Exemption National Science Foundation Business Research and Innovation
Semiconductor Manufacturers Exemption Computer and electronic product manufacturing
Semiconductor Wafers Exemption Computer and electronic product manufacturing
Ships and Vessels Exemption Water transportation
Taxi Parts & Radios Exemption Transit and ground transportation
Uniform Rental & Laundry Businesses Exemption Personal and laundry services
Virginia Spaceport Users Exemption Air transportation
Other incentives
Data Center Single Sales Factor Apportionment Data processing, hosting, and related services
Manufacturers Single Sales Factor Apportionment REMI industries for 2013 cohort: nonmetallic mineral product
manufacturing, fabricated metal product manufacturing,
machinery manufacturing, miscellaneous manufacturing, food
manufacturing, and plastics and rubber product manufacturing
SOURCE: Weldon Cooper Center.
For the purposes of the economic impact analysis, only completed grant and other incentive projects
(i.e., loans, gap funding) were counted. Outcomes and expenditures were grouped for analysis
purposes based on the date/year when awards were completed.
When modeling firm employment increases, the REMI firm employment option is used. This option
assumes that firm sales associated with incentivized job creation may displace to various degrees the
sales of other Virginia-based firms in the same industry based on industry market-area characteristics.
To generate input data to capture the effect of firm retraining for the Virginia Jobs Investment
Program, data for wages and salaries and value-added by industry were obtained from the Virginia
REMI PI+ model. Ratios of value-added per wages were formed for each REMI industry. These
ratios were then multiplied by estimated wage increases (1.5 percent) that resulted from firm retraining
for the firms that were assumed to have been incentivized by the VJIP retraining grant. The results by
year were assigned to the REMI policy variables “Industry Sales/Exogenous Production” by REMI
industry. Estimated wage increases were assigned to the compensation policy variable. This method is
the same as used in an intensive review of the VJIP program. (See Workforce and Small Business Incentives,
JLARC 2018.)
Two sales and use tax exemptions affect the Virginia economy through reducing the costs of goods
sold to out-of-state buyers rather than Virginia-based firms. Thus, the sales tax exemption was
modeled as an increase in sales for the Virginia warehousing and storage industry (Contractor
Temporary Storage Exemption) and construction industry (Out-of-state Nuclear Facility Repair
Exemption) caused by the de-facto price reduction. Industry demand for the production inputs was
assumed to be relatively inelastic (.5).
The Data Center Exemption was modeled using employment and capital investment information from
VEDP MOUs. Based on analysis included in an in-depth review (Data Centers and Manufacturing
Incentives, JLARC 2019), approximately 90 percent of data center economic activity was attributed to
66
Appendixes
the existence of the sales and use exemption. Data center employment was modeled as equally split
between the telecommunications sector and internet publishing and broadcasting; ISPs search portals
and data processing; and other information services. In addition to the employment and capital
investment figures estimated using information from VEDP MOU data, it was assumed that 22.3
percent of capital investment costs were building and equipment and 77.7 percent sales and use tax
exemption eligible equipment based on the expenditure pattern of a standard data center. These
expenditures are represented as sales to the construction and wholesale trade sectors (wholesale
margins only for the latter). Full-build out of data center employment and investment occurs over a
three-year period. Allowance is made for an equipment refresh cycle of every five years, which is
modeled as generating sales for the wholesale trade sector (again, only wholesale margin spending
occurs in the state).
The economic and tax revenue impact estimates for single sales apportionment (manufacturers and
data centers) were based on analysis from in-depth reviews (Data Center and Manufacturing Incentives,
JLARC 2019). The estimate for manufacturers single sales apportionment is an extrapolation of the
cohort of manufacturers that elected to use single sales apportionment in 2013 scaled to tax revenue
impact estimates (2014–2016) and projections (2017–2019). The data center single sales
apportionment methodology depends on several data sources and assumptions. (See Appendix B of
the Data Center and Manufacturing Incentives report for more detail on the methodology.)
For each economic impact analysis, the opportunity cost of state funds was accounted for by raising
personal income taxes. Personal income taxes are the largest source of tax revenue for the general
fund, and thus seemed appropriate as a source for offsetting the cost of the incentive programs.
REMI PI+ discontinued tax revenue estimation as part of its base package beginning with the 2.0
version and moved improved revenue modeling capabilities into its new REMI Tax PI model. To
conduct tax revenue analysis, this study scaled revenues to economic outputs using the procedure
described in Regional Economic Models, Inc. (2012). State tax revenues were derived from the Census
of Government’s State and Local Government Finance and Annual Survey of State Tax Collections.
Revenue estimates are calculated by multiplying state revenue rates by the corresponding base quantity,
which included state-level demand for selected industries (general sales tax, selective sales tax, license
taxes), state-level personal income less transfer payments (individual income tax), corporate income
tax (gross domestic product), and personal income (other taxes). The tax revenue impact analysis does
not include the effect of economic development incentives on other revenues, including non-general
revenues. Nor does it estimate the effect on local tax revenues. Lastly, it does not estimate the effect
of economic development incentives on government expenditures at the state or local level.
Economic impact estimates
Tables H-3 through H-14 provide estimates of the total economic activity induced by each group of
incentives (i.e., grants, sales and use tax exemptions, tax credits, and other incentives), and the net
impact (total activity adjusted for the reduction). Economic activity reported in the tables is defined
as follows:
Total employment – private and public employment,
Private employment – private non-farm employment,
67
Appendixes
Virginia GDP – Gross domestic product for Virginia (the market value of goods and
services produced by labor and property in Virginia), and
Personal income – received by persons from all sources.
68
TABLE H-3
Impact of economic development grant programs to the Virginia economy
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Economic activity induced by grant program
Total employment 1,224 2,032 2,973 3,598 5,146 5,882 7,334 9,906 11,465 13,883
Private employment 1,173 1,919 2,787 3,339 4,778 5,426 6,758 9,142 10,528 12,752
Virginia GDP $126,457,630 $240,510,465 $379,323,745 $501,143,529 $734,451,554 $875,058,486 $1,148,814,607 $1,626,217,278 $1,986,851,218 $2,476,916,934
Personal income $75,635,126 $139,375,412 $216,949,068 $282,477,918 $421,674,245 $509,719,083 $659,371,149 $925,397,668 $1,125,494,158 $1,427,223,547
Reduction in economic activity because of the tax increase to fund grant program costs
Total employment -143.0 -191.5 -320.4 -372.1 -626.4 -438.9 -408.3 -750.4 -378.5 -335.6
Private employment -135.5 -178.0 -297.0 -340.7 -577.1 -390.4 -360.5 -684.5 -323.0 -286.2
Virginia GDP -$13,100,680 -$19,568,791 -$33,251,166 -$41,154,578 -$69,615,355 -$55,064,270 -$51,071,939 -$90,559,427 -$53,922,148 -$45,016,012
Personal income -$8,746,035 -$12,701,909 -$22,571,438 -$28,658,201 -$49,830,995 -$40,261,351 -$40,647,849 -$70,152,866 -$44,392,025 -$42,317,464
Net economic impact of grant program
Total employment 1,081 1,840 2,653 3,226 4,520 5,443 6,926 9,155 11,087 13,547
Private employment 1,037 1,742 2,490 2,998 4,201 5,036 6,398 8,458 10,205 12,466
Virginia GDP $113,356,950 $220,941,674 $346,072,579 $459,988,951 $664,836,199 $819,994,216 $1,097,742,667 $1,535,657,851 $1,932,929,069 $2,431,900,922
Appendixes
Personal income $66,889,092 $126,673,503 $194,377,631 $253,819,718 $371,843,250 $469,457,732 $618,723,301 $855,244,802 $1,081,102,133 $1,384,906,084
TABLE H-4
Revenue collections from economic development grant programs and their return in revenue
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Revenue tax collections induced by economic development grant programs
General sales tax $1,784,124 $2,360,518 $4,194,507 $5,028,602 $6,397,108 $8,276,261 $10,882,023 $15,520,724 $17,870,412 $21,966,503
Selective sales tax $1,172,448 $1,630,051 $2,854,479 $3,368,698 $4,446,556 $5,895,104 $8,159,846 $11,516,867 $13,197,138 $15,469,444
License taxes $156,591 $245,359 $426,252 $519,424 $666,649 $838,498 $1,037,064 $1,516,560 $1,766,202 $2,070,421
Individual income tax $2,087,066 $3,951,491 $6,211,189 $8,652,976 $12,266,912 $15,384,707 $20,093,302 $28,909,191 $36,156,688 $46,374,114
Corporate income tax $227,195 $425,307 $687,758 $816,062 $1,130,387 $1,449,540 $1,725,112 $2,577,179 $3,138,173 $4,259,103
Other taxes $90,327 $164,191 $242,428 $361,761 $474,142 $567,578 $759,048 $1,090,195 $1,283,319 $1,544,513
Total revenue $5,517,750 $8,776,917 $14,616,613 $18,747,523 $25,381,755 $32,411,689 $42,656,396 $61,130,716 $73,411,933 $91,684,098
Program cost $14,807,132 $18,331,482 $31,924,974 $37,122,925 $68,792,196 $43,866,053 $45,019,949 $97,972,280 $42,920,482 $44,601,012
Net revenue -$9,289,382 -$9,554,565 -$17,308,361 -$18,375,402 -$43,410,441 -$11,454,364 -$2,363,554 -$36,841,564 $30,491,451 $47,083,086
Return on investment
Return per $1 spent $0.37 $0.48 $0.46 $0.51 $0.37 $0.74 $0.95 $0.62 $1.71 $2.06
TABLE H-5
Impact of economic development tax credits to the Virginia economy
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Economic activity induced by the tax credit program
Total employment 433 308 344 1167 666 761 566 547 506 307
Private employment 410 281 313 1095 598 689 500 485 447 258
Virginia GDP $7,304,282 $17,714,934 $19,403,266 -$971,308 $57,955,522 $52,155,859 $49,089,649 $43,044,527 $36,702,432 $29,595,137
Personal income $23,016,867 $18,777,792 $23,380,696 $78,386,997 $53,494,821 $64,447,434 $54,008,579 $55,402,809 $54,604,838 $39,232,773
Reduction in economic activity because of the tax increase to fund tax credit
Total employment -491 -341 -359 -840 -450 -520 -386 -361 -334 -231
Private employment -465 -311 -326 -778 -395 -463 -333 -312 -288 -192
Virginia GDP -$44,940,522 -$37,462,261 -$39,133,125 -$88,483,892 -$57,005,948 -$61,696,055 -$48,905,787 -$45,188,445 -$42,333,299 -$30,215,911
Personal income -$30,003,076 -$23,657,219 -$27,328,635 -$63,092,161 -$41,205,971 -$49,032,978 -$41,387,918 -$40,841,113 -$39,926,650 -$32,208,800
Net economic impact of tax credit program
Total employment -58 -33 -16 327 216 241 181 186 172 75
Private employment -55 -30 -13 317 203 226 167 173 160 67
Virginia GDP -$37,636,240 -$19,747,327 -$19,729,859 -$89,455,200 $949,574 -$9,540,196 $183,861 -$2,143,918 -$5,630,867 -$620,774
Personal income -$6,986,209 -$4,879,427 -$3,947,939 $15,294,836 $12,288,850 $15,414,455 $12,620,661 $14,561,696 $14,678,188 $7,023,972
Appendixes
TABLE H-6
Revenue collections from economic development tax credits and their return in revenue
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Revenue tax collections induced by tax credit program
General sales tax $223,324 $270,228 $262,754 $589,855 $637,209 $688,142 $612,131 $527,352 $481,247 $351,295
Selective sales tax $146,759 $186,606 $178,812 $395,148 $442,917 $490,157 $459,005 $391,312 $355,397 $247,392
License taxes $19,601 $28,088 $26,702 $60,928 $66,404 $69,718 $58,337 $51,529 $47,564 $33,111
Individual income tax $635,853 $523,110 $654,326 $2,407,207 $1,500,930 $1,887,474 $1,555,402 $1,622,967 $1,632,807 $1,119,012
Corporate income tax $13,123 $31,326 $35,180 -$1,582 $89,199 $86,397 $73,715 $68,216 $57,970 $50,889
Other taxes $27,488 $22,121 $26,127 $100,388 $60,151 $71,763 $62,173 $65,269 $62,262 $42,457
Total revenue $1,066,148 $1,061,480 $1,183,901 $3,551,944 $2,796,810 $3,293,650 $2,820,762 $2,726,644 $2,637,247 $1,844,157
Program cost $50,793,782 $28,789,455 $32,170,868 $90,694,127 $40,295,088 $56,868,839 $44,145,809 $46,958,186 $47,130,868 $34,545,451
Net revenue -$6,559,617 -$1,493,846 -$7,064,056 -$67,565,352 -$18,087,128 -$27,488,778 -$19,905,678 -$27,122,974 -$27,122,974 -$27,122,974
Return on investment
Return per $1 spent $0.01 $0.03 $0.02 $0.02 $0.04 $0.04 $0.04 $0.03 $0.03 $0.03
TABLE H-7
Impact of economic development sales and use tax exemptions to the Virginia economy
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Economic activity induced by the exemptions
Total employment 1,065 4,499 5,771 13,624 13,974 15,789 10,966 11,197 13,776 15,358
Private employment 1,016 4,267 5,386 12,790 12,883 14,460 9,705 9,932 12,358 13,771
Virginia GDP $75,977,186 $530,463,601 $765,742,278 $1,882,123,424 $2,140,138,623 $2,550,003,616 $2,036,085,951 $2,161,390,800 $2,765,203,487 $3,234,569,660
Personal income $65,227,131 $290,525,560 $403,126,820 $994,531,510 $1,113,501,844 $1,336,085,681 $1,044,620,716 $1,111,944,513 $1,384,682,413 $1,590,702,808
Reduction in economic activity because of the tax increase to fund the exemptions
Total employment -530 -737 -834 -1344 -1401 -1488 -1120 -944 -1100 -1122
Private employment -502 -686 -765 -1237 -1272 -1342 -982 -817 -970 -988
Virginia GDP -$48,552,768 -$75,095,262 -$89,509,872 -$144,831,474 -$162,006,735 -$177,501,554 -$143,062,046 -$121,464,340 -$139,195,018 -$146,679,004
Personal income -$32,414,762 -$48,802,276 -$60,552,103 -$102,163,263 -$116,343,163 -$132,302,148 -$113,337,207 -$104,652,359 -$121,459,211 -$128,676,608
Net economic impact of the exemptions
Total employment 535 3,762 4,937 12,280 12,573 14,301 9,846 10,254 12,676 14,236
Private employment 514 3,581 4,620 11,552 11,611 13,118 8,723 9,115 11,388 12,783
Virginia GDP $27,424,417 $455,368,339 $676,232,406 $1,737,291,949 $1,978,131,888 $2,372,502,063 $1,893,023,905 $2,039,926,461 $2,626,008,469 $3,087,890,656
$SSHQGL[HV
Personal income $32,812,369 $241,723,284 $342,574,716 $892,368,247 $997,158,681 $1,203,783,533 $931,283,509 $1,007,292,154 $1,263,223,202 $1,462,026,200
TABLE H-8
Revenue collections from the economic development sales and use tax exemptions and their return in revenue
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Revenue tax collections induced by exemptions
General sales tax $562,373 $3,148,019 $4,593,905 $11,048,013 $12,109,085 $14,912,278 $13,086,969 $13,342,937 $15,745,440 $18,696,185
Selective sales tax $369,567 $2,173,858 $3,126,280 $7,401,145 $8,416,886 $10,621,878 $9,813,217 $9,900,880 $11,627,866 $13,166,392
License taxes $49,359 $327,215 $466,840 $1,141,193 $1,261,899 $1,510,817 $1,247,197 $1,303,764 $1,556,183 $1,762,182
Individual income tax $1,798,886 $8,261,406 $11,517,809 $30,684,089 $32,293,264 $40,178,936 $30,946,678 $33,530,379 $43,367,843 $50,387,054
Corporate income tax $136,501 $938,046 $1,388,379 $3,064,850 $3,293,867 $4,224,097 $3,057,480 $3,425,305 $4,367,558 $5,561,900
Other taxes $77,897 $342,254 $450,472 $1,273,665 $1,252,053 $1,487,746 $1,202,536 $1,309,962 $1,578,853 $1,721,427
Total revenue $2,994,583 $15,190,798 $21,543,685 $54,612,955 $58,627,054 $72,935,751 $59,354,077 $62,813,228 $78,243,743 $91,295,140
Program cost $54,876,437 $70,892,285 $78,468,218 $139,296,041 $145,389,903 $161,921,534 $121,476,131 $113,891,934 $150,519,317 $159,968,438
Net revenue -$51,881,853 -$55,701,488 -$56,924,533 -$84,683,087 -$86,762,849 -$88,985,782 -$62,122,055 -$51,078,706 -$72,275,574 -$68,673,298
Return on investment
Return per $1 spent $0.05 $0.21 $0.27 $0.39 $0.40 $0.45 $0.49 $0.55 $0.52 $0.57
TABLE H-9
Impact of manufacturers single sales factor apportionment to the Virginia economy
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Economic activity induced by manufacturers single sales factor apportionment
Total employment -- -- -- -- 199 2,247 2,391 2,442 2,497 2,548
Private employment -- -- -- -- 183 2,058 2,191 2,237 2,287 2,335
Virginia GDP -- -- -- -- $32,688,143 $368,333,002 $392,064,083 $400,297,429 $409,309,709 $417,802,190
Personal income -- -- -- -- $12,873,903 $145,064,328 $154,410,581 $157,653,203 $161,202,601 $164,547,281
Reduction in economic activity because of the tax increase to fund costs of manufacturers single sales factor apportionment
Total employment -- -- -- -- -15 -167 -193 -199 -196 -189
Private employment -- -- -- -- -14 -157 -178 -181 -177 -169
Virginia GDP -- -- -- -- -$1,576,475 -$17,970,412 -$23,440,589 -$25,454,773 -$26,078,851 -$25,848,226
Personal income -- -- -- -- -$1,104,251 -$12,560,761 -$16,021,716 -$18,097,202 -$19,401,714 -$20,110,033
Net economic impact of manufacturers single sales factor apportionment
Total employment -- -- -- -- 184 2,080 2,199 2,243 2,300 2,360
Private employment -- -- -- -- 168 1,901 2,013 2,056 2,111 2,166
Virginia GDP -- -- -- -- $31,111,668 $350,362,590 $368,623,494 $374,842,656 $383,230,858 $391,953,964
Appendixes
Personal income -- -- -- -- $11,769,652 $132,503,567 $138,388,865 $139,556,001 $141,800,887 $144,437,248
TABLE H-10
Revenue collections from manufacturers single sales apportionment and its return in revenue
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Revenue tax collections induced by grant program
General sales tax -- -- -- -- $340,240 $3,833,857 $4,080,866 $4,166,564 $4,260,370 $4,348,765
Selective sales tax -- -- -- -- $230,033 $2,592,036 $2,759,036 $2,816,976 $2,880,397 $2,940,160
License taxes -- -- -- -- $35,236 $397,037 $422,617 $431,492 $441,207 $450,361
Individual income tax -- -- -- -- $322,306 $3,631,777 $3,865,766 $3,946,947 $4,035,809 $4,119,545
Corporate income tax -- -- -- -- $57,845 $651,805 $693,799 $708,369 $724,317 $739,346
Other taxes -- -- -- -- $15,416 $173,704 $184,895 $188,778 $193,028 $197,033
Total revenue -- -- -- -- $1,001,076 $11,280,214 $12,006,980 $12,259,126 $12,535,128 $12,795,210
Program cost -- -- -- -- $1,857,000 $20,924,847 $22,273,000 $22,740,733 $23,252,717 $23,735,171
Net revenue -- -- -- -- -$855,924 -$9,644,633 -$10,266,020 -$10,481,607 -$10,717,589 -$10,939,961
Return on investment
Return per $1 spent -- -- -- -- $0.54 $0.54 $0.54 $0.54 $0.54 $0.54
TABLE H-11
Impact of loan/gap financing/other incentive programs to the Virginia economy
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Economic activity induced by the incentive programs
Total Employment 0 0 183 230 252 262 277 322 361 394
Private Employment 0 0 174 214 233 239 252 293 327 356
Virginia GDP -$5,964 $20,320 $22,509,407 $32,214,785 $36,876,043 $39,798,207 $43,783,642 $54,377,166 $63,452,968 $74,705,257
Personal Income $19,991 $9,906 $12,229,712 $16,980,210 $20,262,845 $22,652,448 $25,464,156 $30,758,353 $36,052,036 $41,014,938
Reduction in economic activity because of the tax increase to fund incentive program costs
Total employment 0 0 0 0 -3 -4 -7 -11 -10 -9
Private employment 0 0 0 0 -3 -4 -6 -10 -9 -8
Virginia GDP -$34,890 -$9,636 -$3,483 -$43,338 -$303,824 -$495,866 -$816,677 -$1,295,581 -$1,363,521 -$1,207,168
Personal income -$23,292 -$5,310 -$3,536 -$31,492 -$212,876 -$341,510 -$576,505 -$924,291 -$990,908 -$927,514
Net economic impact of the incentive programs
Total employment 0 0 183 229 249 258 270 312 351 385
Private employment 0 0 174 214 230 235 246 283 318 348
Virginia GDP -$40,854 $10,684 $22,505,923 $32,171,447 $36,572,218 $39,302,341 $42,966,965 $53,081,585 $62,089,448 $73,498,089
Personal income -$3,301 $4,596 $12,226,176 $16,948,718 $20,049,969 $22,310,938 $24,887,651 $29,834,062 $35,061,129 $40,087,424
Appendixes
TABLE H-12
Revenue collections from the loan/gap financing/other incentive programs and their return in revenue
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Revenue tax collections induced by the incentive programs
General sales tax -$635 $136 $237,106 $324,312 $349,872 $392,178 $452,777 $507,893 $561,824 $681,595
Selective sales tax -$417 $94 $161,357 $217,259 $243,192 $279,345 $339,513 $376,872 $414,902 $479,999
License taxes -$56 $14 $24,095 $33,500 $36,460 $39,733 $43,150 $49,627 $55,527 $64,243
Individual income tax $551 $267 $354,134 $524,323 $589,398 $681,651 $769,881 $950,285 $1,146,431 $1,315,529
Corporate income tax -$11 $36 $40,812 $52,459 $56,756 $65,926 $65,748 $86,175 $100,222 $128,457
Other taxes $24 $12 $13,666 $21,746 $22,784 $25,224 $29,314 $36,236 $41,108 $44,386
Total revenue -$544 $558 $831,170 $1,173,599 $1,298,461 $1,484,057 $1,700,383 $2,007,088 $2,320,014 $2,714,208
Program cost $39,435 $0 $0 $50,000 $345,537 $492,538 $813,811 $1,304,794 $1,244,043 $1,049,262
Net revenue -$39,979 $558 $831,170 $1,123,599 $952,924 $991,519 $886,572 $702,294 $1,075,971 $1,664,946
Return on investment
Return per $1 spent -$0.01 $0 $0 $23.47 $3.76 $3.01 $2.09 $1.54 $1.86 $2.59
TABLE H-13
Impact of all economic development incentives to the Virginia economy
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Economic activity induced by all incentives
Total employment 2,723 6,839 9,271 18,618 20,238 24,941 21,535 24,414 28,606 32,490
Private employment 2,599 6,467 8,659 17,438 18,674 22,873 19,407 22,089 25,948 29,472
Virginia GDP $209,733,134 $788,709,320 $1,186,978,696 $2,414,510,429 $3,002,109,884 $3,885,349,170 $3,669,837,931 $4,285,327,200 $5,261,519,814 $6,233,589,179
Personal income $163,899,116 $448,688,670 $655,686,296 $1,372,376,636 $1,621,807,658 $2,077,968,973 $1,937,875,181 $2,281,156,546 $2,762,036,046 $3,262,721,348
Reduction in economic activity because of the tax increase to fund the costs of all incentives
Total employment -1,164 -1,269 -1,514 -2,556 -2,496 -2,618 -2,113 -2,265 -2,020 -1,887
Private employment -1,103 -1,174 -1,388 -2,356 -2,261 -2,356 -1,860 -2,004 -1,767 -1,642
Virginia GDP -$106,628,860 -$132,135,950 -$161,897,646 -$274,513,282 -$290,508,337 -$312,728,157 -$267,297,039 -$283,962,565 -$262,892,837 -$248,966,321
Personal income -$71,187,165 -$85,166,715 -$110,455,712 -$193,945,117 -$208,697,256 -$234,498,748 -$211,971,194 -$234,667,831 -$226,170,507 -$224,240,420
Net economic impact of all incentives
Total employment 1,559 5,569 7,757 16,062 17,742 22,323 19,422 22,149 26,586 30,603
Private employment 1,496 5,293 7,271 15,081 16,412 20,516 17,547 20,084 24,181 27,830
Virginia GDP $103,104,274 $656,573,370 $1,025,081,050 $2,139,997,147 $2,711,601,547 $3,572,621,013 $3,402,540,892 $4,001,364,635 $4,998,626,977 $5,984,622,858
Personal income $92,711,951 $363,521,955 $545,230,583 $1,178,431,519 $1,413,110,403 $1,843,470,225 $1,725,903,987 $2,046,488,715 $2,535,865,539 $3,038,480,928
Appendixes
TABLE H-14
Revenue collections from all economic development incentives and their return in revenue
Impact FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Revenue tax collections induced by all incentives
General sales tax $2,569,187 $5,778,900 $9,288,272 $16,990,782 $19,833,514 $28,102,716 $29,114,766 $34,065,470 $38,919,293 $46,044,344
Selective sales tax $1,688,357 $3,990,608 $6,320,928 $11,382,250 $13,779,584 $19,878,520 $21,530,617 $25,002,908 $28,475,700 $32,303,387
License taxes $225,495 $600,676 $943,889 $1,755,045 $2,066,648 $2,855,803 $2,808,365 $3,352,971 $3,866,683 $4,380,318
Individual income tax $4,522,355 $12,736,274 $18,737,457 $42,268,596 $46,972,809 $61,764,545 $57,231,030 $68,959,770 $86,339,578 $103,315,254
Corporate income tax $376,808 $1,394,716 $2,152,129 $3,931,789 $4,628,054 $6,477,764 $5,615,854 $6,865,244 $8,388,241 $10,739,695
Other taxes $195,735 $528,578 $732,693 $1,757,560 $1,824,546 $2,326,013 $2,237,965 $2,690,440 $3,158,569 $3,549,816
Total revenue $9,577,937 $25,029,753 $38,175,368 $78,086,021 $89,105,156 $121,405,362 $118,538,597 $140,936,803 $169,148,065 $200,332,813
Program cost $120,516,785 $118,013,222 $142,564,060 $267,163,093 $256,679,724 $284,073,810 $233,728,700 $282,867,926 $265,067,427 $263,899,334
Net revenue -$67,770,831 -$66,749,341 -$80,465,781 -$169,500,242 -$148,163,418 -$136,582,038 -$93,770,734 -$124,822,555 -$78,548,716 -$57,988,201
Return on investment
Return per $1 spent $0.08 $0.21 $0.27 $0.29 $0.35 $0.43 $0.51 $0.50 $0.64 $0.76
Appendixes
Appendix I: 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,
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 Department of Taxation.
75
December 4, 2020
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 2020: 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 2020: 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 FY19 and completed their location or expansion project collectively created an
estimated 78,000 jobs and $17.8 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 (48,907) and capital investment and other spending ($7.9 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 (20,526 jobs)
and business spending ($7.3 billion).
Furthermore, Table 7 on page 18 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 (105% of goal), spending/investment (148%), and average wage (117%). 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 report also demonstrates that grant award amounts per capita tend to align with the local unemployment
rate, indicating more funds are generally provided to localities that are economically distressed. Moreover, the
reported noted that, “The number of awards per capita is even more highly correlated with the local
unemployment rate.”
The side bar on page 16 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.
901 E. Cary Street, Suite 900
Richmond, Virginia 23219
VEDP.org
Mr. Greer
Page 2 of 2
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. 50-51)
would be better represented by the actual funds paid/disbursed during each fiscal year, versus a blend of
funds paid and projected award amounts reported in the years the funds were awarded. In no fiscal year has
VJIP disbursed more funds than were available in its allocated VJIP Fund budget and roll-over fund.
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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