Virginia Gov. McDonnell not shy about spending on job creation

By Anita Kumar
Washington Post Staff Writer
Tuesday, December 14, 2010; 10:53 PM

RICHMOND - In the past five months, Virginia has given $7.7 million to 13 companies to create 1,677 jobs in the state. Or, $4,592 per job.

Virginia spent $1.4 million to launch a TV campaign - the first out-of-state ads in three years - and plans to invest $450,000 to set the groundwork to open trade offices in India, China and the United Kingdom, according to state figures. It used $1.5 million to secure filming of the movie "Unanswered Prayers," starring country crooner Garth Brooks, a project that aired on Lifetime and resulted in $2.8 million in spending in the state.

The money came from Gov. Robert F. McDonnell's $58 million economic development package, approved by the General Assembly in the spring and designed to create jobs in Virginia - the governor's No. 1 priority.

"The money sent a very powerful message that Virginia is serious about economic development," said Lt. Gov. Bill Bolling (R), who serves as the state's chief jobs creation officer.

On Wednesday, McDonnell (R) will announce that he is asking state legislators for tens of millions of additional dollars for economic development. According to some legislators, he could request an additional $50 million.

Sen. Janet D. Howell (D-Fairfax), one of the state's budget writers in the Democratic-controlled Senate, said she supports McDonnell's economic-development efforts but thinks lawmakers need to know whether incentive money really helps lure businesses or whether the companies would have opened or expanded in Virginia regardless. Howell is drafting a bill to ask the General Assembly's investigative arm to study the issue.

"There is no in-depth analysis on whether we would have gotten the companies and jobs anyway,'' she said. "We do need a comprehensive job-creation analysis. I don't think they have any real grasp on whether they are successful."

McDonnell will announce a complete list of all his amendments to the two-year budget Friday. That announcement will include cuts to help offset additional spending that he has proposed, including $50 million for higher education and $150 million for transportation.

Other Virginia governors have used similar types of funds. But in his first legislative session this spring, McDonnell persuaded legislators to increase the amount he was given for economic development to far more than any other chief executive in recent history.

McDonnell received $35 million for fiscal 2011 and $23.7 million for fiscal year 2012. The commission that doles out money from a settlement with the nation's largest tobacco companies also pledged $5 million to McDonnell to help attract major projects to the state.

His package included programs to lure businesses to the state through grants and loans to large and small businesses; investments in the tourism, wine and film industries; TV and Web marketing and advertising; and international trade missions for the governor and his staff.

Six months into the fiscal year, McDonnell has spent about $25 million.

Since July 1, the start of the fiscal year, McDonnell has announced 78 economic-development projects totaling 6,493 jobs resulting in $1.22 billion in capital investments.

Only 13 of them used money from the Governor's Opportunity Fund, the state's main source of incentive money for companies. The fund received $24 million but has used just $7.7 million. Those 13 companies - which include Microsoft, Northrop Grumman, Trinity Packaging and Micron Technology - created 1,677 jobs and brought in $775 million in capital investment.

Tom Hough, president of Evatran, which has a system for recharging electric cars, said a $150,000 grant from the fund, $1.49 million from the tobacco commission and $100,000 from local government helped his company select Virginia over Ohio for an expansion resulting in 84 jobs.

Hough said that Ohio wasn't offering as much money as Virginia but that his company choose to invest $3.5 million in Wytheville for a variety of other reasons, too: It already had a facility there and had success with workers in the region.

Northrop Grumman selected Northern Virginia as the new home for its global headquarters over Maryland and the District after the state agreed to give the company more than $10 million in grants and cash incentives, including $3 million through the Governor's Opportunity Fund.

The defense contracting giant plans to relocate or hire about 300 employees, earning an average of $200,000 a year, by the summer 2011. But since the announcement has been made, Northrop Grumman, has announced that it will lay off nearly 400 at the shipyard in Newport News, Va.

Micron Technology, which manufactures semiconductors used in products including cellphones and cameras, recently decided to invest $56 million to expand in Manassas, creating 123 additional jobs. It chose Virginia after the state gave the company $1.5 million, including $500,000 from the Governor's Opportunity Fund.

The state has offered millions to an additional 22 companies, according to Bolling's office. Those companies could add more than 5,000 new jobs and provide nearly $2 billion in capital investment.

Norman Leahy, a libertarian activist and commentator who has written about his opposition to such subsidies on his blog Tertium Quids, said Virginia needs to offer low tax rates to keep and lure companies.

"These companies were already going to expand,'' he said. "They were all ready to go somewhere."

House Majority Leader M. Kirkland Cox (R-Colonial Heights) said people often think that every company receives incentive money. But very few do, and the few that are offered money need the help, he said. "If you think that you're going to compete with nothing, that's not reality,'' he said.

In addition to job-creation incentives, the money was spent on a variety of other programs, according to the state. Nearly $1.5 million was spent on TV ads in the District, Baltimore and Raleigh. An additional $1 million was used for a 35-page advertising section in Forbes, the largest economic development section in the magazine's history, and for ads viewed 17 million times on the Web sites of the New York Times, the Wall Street Journal, Forbes, Bloomberg BusinessWeek and CNN.There was an increase from $580,000 to $1,325,000 a year in spending for wine marketing and promotion.

The state spent nearly $2.4 million on grants to secure filming of 10 movies in Virginia, including productions starring Jane Seymour and Steve Guttenberg, that are estimated to result in spending of nearly $8 million in the state. Nine of the movies have yet to be released.

McDonnell is spending $1.23 million on marketing and travel, including trips to Europe, Asia and Canada and two trips within the United States. His first trade mission to Europe - an eight-day trip to Britain, the Netherlands and Germany - resulted in one economic-development project that has brought 174 jobs and $28.3 million in capital investment to the state.

Del. Terry G. Kilgore (R-Scott), chairman of the House Commerce and Labor Committee, said he hopes that legislators of both parties agree to give the money to the governor again. "It looks like we had some good successes,'' he said.

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