Incentives are ammunition in battles for jobs and investment 

So, do incentives work? According to a 140-page study released in November by the state's Joint Legislative Audit and Review Commission, the answer is "yes" but modestly so. In the past 10 years, according to JLARC, Virginia's 18 economic development incentive programs have approved nearly 3,400 grants, with a total value of $718 million. Those grants created more than 70,000 jobs during that period.

Companies look at many factors in deciding on a new location or an expansion, and factors affecting long-term profit count the most. The checklist can include the condition of the local transportation system and the quality of the available labor pool, for example. Incentive grants "appear to have a positive but small impact on their decisions," a draft copy of the study says, largely because they usually represented a fairly small percentage of project costs.

About 70 percent of the grants awarded in 2002-11 were for less than $100,000, JLARC notes. But those dollars had a bigger impact toward the end of the site selection process, especially if competition was down to just a few sites.

Martin Briley, president and CEO of the VEDP, points to its data on the state's results between 2001 and 2011. Using a smaller number of programs than the JLARC study, VEDP reports that 266 projects received grants totaling $321.7 million producing gross revenues of $2.7 billion for a net of $2.4 billion for the state. During the next 10 years, VEDP expects to provide incentives worth $436 million to companies that already have made commitments to the state, creating another 61,000 jobs and $3.79 billion in revenue for the commonwealth's general fund. These are grants and tax breaks that these companies will continue to get as long as their agreements with the state exist.

"This is economic development at its finest," says Briley, who took over the VEDP in 2011 after 14 years as executive director of economic development in Prince William County. "This is how you make the economy turn."

Briley says the state doesn't offer incentives for every potential project. They are used "very sparingly" on only about 15 percent of the deals that VEDP works on. "You use it when you have to," he says. "We're following the ROI model. There's absolutely a line you do not cross, and we've walked away from deals.

"We're very sensitive to the discussion on incentives," Briley says. "We understand that when people look at the capital outlay going to a company, when they feel that the money could be better spent in other places, we understand the argument." But, he argues, the money diverted in the short term pays long-term dividends.

Read the full article online at Virginia Business Magazine