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 spending during this time period. Total spending on incentives was $314 million in FY19. Incentive spending has increased since FY17 because of increased spending for the data center exemption and several other incentives.

• Sixty-seven percent of incentive spending was for tax incentives such as sales and use tax exemptions ($1.2 billion), tax credits ($472 million), and single sales apportionment for manufacturers and data centers ($115 million). The remaining 33 percent was spent on grants ($855 million) and other incentives such as loans and gap financing programs ($33 million).

• Economic benefits, such as increases in employment, gross domestic product, and personal income, vary widely by type of economic development incentive program.

• Although grant programs have substantially higher economic benefits—increases 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.

• Less than half of the $1.8 billion in grant awards was paid out or ‘spent’ between FY10 and FY19 because nearly $900 million in custom awards for Amazon HQ2 and three other companies 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.

• 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.