RD456 - Effectiveness of Economic Development Incentive Grant Programs Administered


Executive Summary:
In accordance with HB1191 (*1), Virginia Economic Development Partnership (VEDP) served as the aggregator of data on seventeen different incentive programs across six separate and distinct entities (*2). The intent of the legislation is clear: entities, legislators, and the public at-large both need and deserve a way to easily assess the effectiveness of taxpayer monies expended across incentive programs.

The legislation calls for submitted data to cover three years (calendar or fiscal) prior to the report, and calls for data on projects awarded in that period as well as projects that completed (or reached a performance milestone) in that period. As many incentive programs are structured differently by statute, not all projects that were awarded in the covered period were also completed in the covered period. VEDP requested data on a fiscal year (FY) basis as this is the basis on which incentive programs are funded. The scope of data requested covered FY2012, FY2013, and FY2014. For projects that completed five years prior to the report, data requested covered FY2010. While individual incentive program results may be affected by duplicate projects (i.e. more than one entity provided an incentive to a single project and therefore is counted in both programs), whenever possible such duplicates were removed when conducting the estimated economic impact so as to not overstate estimated benefits to the Commonwealth.

The results suggest that of the seventeen different incentive programs, projects that completed in FY2012 directly created 11,590 jobs with $1.4 billion in capital investment; in FY2013 directly created 9,253 jobs with $774.7 million in capital investment; and in FY2014 directly created 6,279 jobs with $864.3 million in capital investment. For all projects that completed in the covered period, this results in a total of 27,122 jobs and $3.0 billion in capital investment.

For estimates of tax revenue, the results suggest that projects that completed in FY2012 generated $443.2 million in state tax revenue and $412.6 million in local tax revenue; in FY2013 generated $311.6 million in state tax revenue and $303.1 million in local tax revenue; and in FY2014 generated $133.9 million in state tax revenue and $100.8 million in local tax revenue. For all projects that completed in the covered period, this results in total estimated tax revenue of $888.7 million to the state and $816.5 million to localities.

The report makes great effort to explicitly state limitations of data received, and consequently, limitations on interpreting reported results herein. With this in mind, we are exploring ways to enhance the process involving improvements in data collection, data analysis, and economic impact methodology and technology. These ongoing discussions may reveal potential adjustments to the legislation that may require consideration to achieve our objectives.
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(*1) For the purposes of this text, HB1191 is used interchangeably with Chapter 817 of the 2014 Acts of Assembly.
(*2) For the purposes of this text, an entity may be an agency, authority, or other unit that is authorized to use state funds in conjunction with an incentive program.