Douglas Says Incentive Program Needs To Expand; 800 Jobs At Stake

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(Host) The Douglas administration wants to expand an economic development program that pays companies if they create jobs in Vermont.

Administration officials say three companies are poised to hire about 800 people – but only if the businesses get the state incentives.

VPR’s John Dillon has more:

(Dillon) Vermont tries to attract business through a variety of tax programs and economic inducements. One program – called the Vermont Employment Growth Incentive — pays companies that add jobs.

But the program is capped at $10 million a year. Tayt Brooks is the commissioner of housing, community and economic development. He says the cap needs to be lifted because three companies that qualify would put the state over the $10 million limit this month. Brooks says the businesses are ready to add about 800 new jobs.

(Brooks) "The applications that are moving forward are for companies that are clean and green. They are very good, high-paying jobs with, frankly, no downside."

(Dillon) Brooks says he can’t identify the companies yet because they’re still in the confidential application process.

He says even though the state spends money to lure business, the program brings in revenue over the long run as businesses add payroll and pay additional taxes.

(Brooks) "This is a net revenue return for the state. This program brings in net dollars. It’s a very, very wise investment."

(Dillon) But the incentive program has its critics, who say there is no way to prove that companies would not add the jobs anyway – without the government giveaway.

Doug Hoffer is a policy analyst in Burlington who has studied the issue. He says the state would do a better job of attracting business by investing in housing, health care, and other areas that improve the quality of life.

(Hoffer) "It’s really important to ask the hard questions. Every dollar spent on that program is not spent on something else."

(Dillon) Companies get the money only if they can show that the incentive is needed to add the new jobs. They have to meet what’s called a "but-for" test. In other words, but for the state assistance, the businesses would not hire additional people.

Hoffer says it’s difficult to assess this test with objective data.

(Hoffer) "There’s no way to audit that. It is totally subjective. You can’t prove it. What you can do is look at the company’s growth, historically at least for those businesses that have some history in Vermont. And that is another problem. The state auditor has pointed out twice now that the methodology used to determine how much to award the companies in these incentives is based on average industry background growth rate rather than the company’s own growth rate."

(Dillon) Administration officials say the state can show the economic benefits.

The state has authorized $16 million in incentives since 2007. Officials say that money has resulted in almost 4,000 new jobs, $84 million in new payroll, and $12 million in net tax revenue.

Administration Secretary Neale Lunderville acknowledges that the program is controversial. But he says it’s needed as Vermont competes for jobs with other states.

(Lunderville) "Not having the tool like this, or not having the tool that we can use as broadly as we need, puts Vermont and the Vermont Agency of Commerce in particular, in a competitive disadvantage with a lot of states who use them to a great degree, and use them very successfully."

(Dillon) Governor Jim Douglas wants the legislature to quickly lift the $10 million cap, so the state can award the money and the companies can move ahead with their expansion plans.

For VPR News, I’m John Dillon in Montpelier.

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