Amazon’s announcement that it will split its HQ2 has generated dozens of articles on the  process, the factors that led to the decision, and various points of view on the importance of incentives. We are going down a different path and will devote several blog articles to understanding the details of Virginia’s, New York’s and Tennessee’s state and local incentive packages. We will be looking for good practices and lessons learned that can be applied in other economic development programs.

This article starts the series with a look at some of the terms of Virginia’s Major Headquarters Workforce Grant agreement with Amazon.

 

What is incentivized

  • The Workforce Grant incentivizes new job creation and requires company reporting on wages and capital investment.
  • The maximum possible grant total is $750 million for 37,850 new jobs by 2038, during two phases. Phase I grants are $22,000 per qualifying new job and $15,564 per job during Phase II.
  • The MOU specifies a “new jobs” definition based on number of hours worked and location, noting that seasonal or temporary positions do not qualify. Positions shifted from elsewhere in Virginia do not count (unless the company certifies that the previous position in the same location was filled by a new employee). Neither do jobs supporting federal contracts that are above a specified threshold.
  • Jobs may only be incentivized once. Qualifying jobs may not be counted under a previous incentive agreement, and there will not be other discretionary incentives from the Commonwealth. The grant is not provided for the same job for multiple years.
  • Average annual wage targets that increase annually are established, starting at $150,000 in 2019. The MOU also specifies the maximum amount of wages for any one new job that may be counted toward the calculation of the average.
  • While it is called a workforce grant, the proceeds can be used for any purpose, including workforce development, recruitment, instruction or training.

Process

  • Amazon must submit an application for the grant every spring. The application includes the number of new jobs created in the prior calendar year, average annual wage for the aggregate number of new jobs, previous year’s capital investment, any job shifting that occurred, and certification of the percentage of jobs in federal contracting. Payment is then made in September of that year.
  • Jobs may be verified with company filings with the Virginia Employment Commission and through additional company documentation that may be requested.
  • Payments lag job creation, with the first grant scheduled for fiscal year 2024 for the jobs created and reported in the base year application, so prior to 12/31/19. The last payment for Phase I jobs would be in fiscal year 2035 for jobs created in calendar year 2030.
  • The maximum aggregate amount of grant payments through each fiscal year is established, with no more than $550,000,000 related to Phase I jobs and $200,00,000 for Phase II jobs allowed.

Reporting and transparency

  • Legislation to authorize the workforce grant is expected to be enacted during the 2019 General Assembly session. This is important because it brings elected officials into the process and provides another layer of oversight, approval and commitment.
  • The Secretary of Commerce and Trade must certify the information provided in the annual grant application to the Comptroller of the Commonwealth.
  • All documents may be shared with the Joint Legislative Audit Review Commission and VEDP’s internal auditor.
  • The amount of each grant payment and the information used to calculate the grant payment will be public records.
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