MONTPELIER — Gov. Peter Shumlin says Vermont’s small-ball approach to economic subsidies for businesses is paying dividends in the nationwide incentive battle with other states.
Vermont, like other states, is engaged in a battle to both attract new businesses and retain existing ones. The high-stakes game involves vast sums of taxpayer funds to lure companies. In Vermont, the main tool available to state government is the Vermont Economic Growth Incentive.
The program provides incentives from the state to businesses to encourage economic activity that would otherwise not occur without the incentive. The incentive is available to Vermont companies or companies considering locating in Vermont. The incentives are earned and based on performance requirements.
Shumlin, in an interview with the Vermont Press Bureau, said the VEGI program has helped create thousands of jobs since it was implemented in 2007. It has also added $187 million in payroll in Vermont, and $30 million in new revenue for the state since 2007, he said.
“I remain incredibly proud of Vermont’s ability, between VEGI and the enterprise fund and our job training partnerships, to grow jobs and provide incentives that actually result in job creation and higher tax revenue for Vermont,” the governor said.
The program, however, is small compared to business incentives in other states. In neighboring New York, Democratic Gov. Andrew Cuomo has created START-UP NY. It is the state’s flashiest incentive program, and arrived with a large-scale media blitz with the hope of attracting companies to the Empire State.
The START-UP NY program offers new or expanding businesses 10 years of no taxes if they locate on or near an eligible university or college campus in the state. New York also offers a wide range of other incentives, including tax credits, loans and grants.
New York’s program is a prime example, Shumlin said, of how states “are cannibalizing each other for jobs.”
“Do I wish all 50 states would have a cease-fire? Of course, but I don’t think that’s likely to happen any time soon,” he said. “The downside of all of this competition is that we are all using taxpayer dollars to subsidize corporations that, in my view, in a perfect world, would stand on their own without hardworking taxpayer money. I would be the first to lead a cease-fire if we could get all governors to join up.”
Despite New York’s efforts, the state has faced its own struggles. The Albany Times Union reported Tuesday on a spate of bad economic news for upstate New York. According to the report, Alcoa will close one of its aluminum smelters and will be “idling” another one near the Canadian border. That will result in the loss of about 500 jobs, according to the Times Union.
Meanwhile, Entergy Corp. announced it will close its FitzPatrick nuclear power plant near Oswego next year when its fuel rods run out. The Times Union said 615 jobs will be lost.
Those announcements followed one from Kraft Heinz, which said it is looking at closing three upstate New York plants that employ a total of 930 people.
And, GlobalFoundries “is offering buyouts and instituting modest layoffs at Malta as well,” according to the Times Union.
Shumlin said Vermont’s VEGI program, along with an enterprise fund the Legislature created to allow targeted state investments in businesses, is helping Vermont remain competitive.
“We’re in a world where states, for decades now, have been cannibalizing each other for jobs. Vermont can’t stand here with our hands tied behind our back and say we’re too small and we’re too cocky,” he said.
The governor said Vermont’s programs limit exposure to taxpayers by requiring incentives to be based on performance.
“We compete with all of these states by being smart, by having programs that actually result in jobs, by not just throwing taxpayer money down the tube,” he said.
The START-UP NY program, and others around the country, put more taxpayer money at risk and generally do not ensure long-term commitments from companies, he said.
“Generally, these big, ambitious programs don’t get results,” he said.
The state relies on what Shumlin said are major assets. The state provides a quality of life that is attractive to many. And its small size provides opportunities for companies that do not exist elsewhere. Shumlin said he often “gets in the car and visits” companies the state is trying to recruit. And U.S.
Sen. Patrick Leahy often gets on the phone to help.
“Small is beautiful. When they need us they get us,” Shumlin said.
“These folks come to Vermont and they check on our downtowns, they eat local food in our restaurants and they drink our beer … and they think they’ve landed in the promised land, and they have,” he added. “I had one company that we’re still working on that literally came down from Canada … saw the ads on TV for New York, checked it out, and came back a year later and said, ‘I can’t get my employees to go live there.’”
The state is also utilizing a new enterprise fund created by the Legislature. Originally $5 million was committed to allow for strategic cash infusions for businesses. But the fund was cut in half as the state dealt with budget cuts last year.
Still, a $500,000 boost for GW Plastics in Bethel allowed the company to stay in Vermont and expand, Shumlin said. “We basically gave them enough incentives to be able to grow in Vermont without other state’s poaching a great company’s jobs,” he said.
A $200,000 payment to an unnamed Canadian company is pending and will be paid if the company opts to relocate to Vermont.
Many in Vermont expected devastating news for the state when IBM in Essex was purchased by GlobalFoundries. But while the company’s plant in New York faces cutbacks, the company recently announced a $55 million capital infusion in Vermont.
Shumlin said the company was motivated by stable electric rates here. He said Vermont has seen electricity rates in Vermont decline in the past two years while other surrounding states have seen increases.
“GlobalFoundries is a huge success story. If we had lost IBM, that would have been a dramatic loss,” he said. “That’s been every governor’s nightmare.”
Shumlin said Vermont has had “big and small” successes with its incentive programs and is disheartened by candidates seeking to succeed him who disregard them.
“I listen to these gubernatorial candidates talking about the doom and gloom of Vermont. Those guys are depressed,” he said. “Employers tell me every day that it’s not that they’re not growing. It’s that they can’t find employees.”
Shumlin said the state’s job training programs are crucial to the state’s success in attracting employers.
“Our challenge is training enough people to do those jobs,” he said.
According to statistics compiled by the National Association of Manufacturers, manufacturing in Vermont compares well to surrounding states.
Manufacturing in the state accounts for 10.87 percent of Vermont’s total economic output and employs 10.22 percent of the workforce, according to 2013 statistics, the latest available from the association. Total manufacturing output in 2013 reached $3.21 billion.
In New York, manufacturing accounts for 5.18 percent of output, while in New Hampshire and Massachusetts it accounts for 11.37 percent and 10.10 percent, respectively.
Shumlin said his administration will continue to utilize the state’s incentive programs in a targeted way and compete with larger states, despite the economic limitations.
“Being small has its advantages and disadvantages,” he said. “One is we can’t throw millions and millions of dollars at companies.”