Incentives lift Winchester area — or do they?

Posted: November 24, 2012

The Winchester Star

WINCHESTER — In recent months, Gov. Bob McDonnell has awarded at least five grants from the Governor’s Opportunity Fund to businesses expanding in or relocating to Winchester or Frederick or Clarke counties.

The awards are part of the nearly 3,400 economic development grants worth $718 million the state government has handed out from fiscal year 2002 to 2011, according to a study released this week by the the Joint Legislative Audit and Review Commission (JLARC) — the research wing of the General Assembly.

According to the study, the projects that received grants created more than 70,000 jobs.

The report did not determine how much of a role the grants played in business decisions, citing long-term factors such as transportation and the labor market as more important.

Patrick Barker, executive director of the Winchester-Frederick County Economic Development Commission, agrees — but has said incentives are an important part of bringing businesses to the area and keeping them here.

Incentives also help in competing with other states, he said at a Nov. 9 EDC meeting.

Some critics, however, argue that such grants or tax incentives are detrimental because they created an unbalanced playing field.

“Let’s start calling them what they really are: direct transfers of funds to businesses,” said Joseph Henchman, vice president of legal and state projects at the nonpartisan Tax Foundation.

And the “transfers” often go to well-connected businesses, putting others at a disadvantage, said Matthew Mitchell, a senior research fellow at the Mercatus Center at George Mason University.

“In a healthy economy, firms compete on a level playing field,” Mitchell wrote in a July research piece.

According to the JLARC study, 40 percent of the total grant funding over the past 10 years went to seven companies: Canon Virginia, Micron, Newport News Shipbuilding, Philip Morris, Qimonda, Rolls Royce and SRI.

Locally, in the past year, the governor’s opportunity fund has awarded at least $1.15 million, not including local matches and other grants.

For example, the opportunity fund gave $250,000 to the Navy Federal Credit Union to expand its call center in Frederick County east of Winchester. Carmeuse Lime & Stone in Clear Brook was also awarded $250,000 to expand its quarry operations.

Eight state agencies operate18 grant programs.

While JLARC recommends that the General Assembly institute a more comprehensive and consistent evaluation of the effectiveness of the grant programs, it also advises that the programs would benefit from reducing a greater share of project costs for businesses.

— Contact Conor Gallagherat cgallagher@winchesterstar.com