Inside a Vermont Employment Growth Incentive (VEGI) Application

posted by   Ian Wyatt   |    February 4, 2010

Posted in   Economy   |   Comments

With unemployment in Vermont at 6.9 percent, the people and government in our state recognize that job creation is at the top of a list of concerns about our economy. And like many states, Vermont has a program in place to give tax incentives to companies that create new jobs within the state. The program is the Vermont Employment Growth Incentive (VEGI), and aims to give payroll tax credits to companies that expand within the state and create jobs.

Today I’ll give you a quick overview of the program and my application.


The Vermont Employment Growth Incentive (VEGI)

The VEGI program provides a tax rebate to companies that apply with a job creation plan and are approved by the Vermont Economic Progress Council. An applicant to the program must meet a defined standard to evaluate whether the jobs and business would be “good” for Vermont. If these standards are met (which my company did) than the next step is to present to the council comprised of seven local business owners and two members of the state legislature. The primary focus of the council is to determine the “But For” component of the application is met, and whether the economic activity would happen regardless of the incentive.

The program isn’t simply a hand out to businesses (which is a good thing). Rather, it is more like a rebate based upon a company achieving its payroll and hiring goals, whereby Vermont gives back a portion of what the company pays in to the state for its portion employee state payroll tax.

Incentive programs like this are important. Speaking from my own personal experience as a business owner, I’ll say that tax and incentive programs do impact decisions.  If a state wants to encourage economic activity such as job creation, than creating programs that reward business owners who create jobs is a very positive thing – it’s good for residents and businesses.

This is that the Vermont Department of Economic Development says about the VEGI program:

The VEGI program and the property tax programs are intended to provide incentives from the State of Vermont to businesses to encourage prospective economic activity in Vermont that is beyond the applicant’s “organic” or background growth and that would not occur, would not occur in Vermont, or would occur in a significantly different and less desirable manner, except for the incentive provided. The economic activity can be generated by a Vermont company or a Vermont division which plans to grow and expand, a company that is considering Vermont to locate a new business or division, or start-up business activity. Once authorized, the incentives can only be earned and installments paid if targets are met and maintained. Authorization for any of these programs occurs through application to the Vermont Economic Progress Council, who must determine if the company and project meet statutory requirements, including:

•    Whether the proposed economic activity would not occur or would occur in a significantly different and significantly less desirable manner except for an incentive (But For).
•    Whether the proposed economic activity will generate more incremental revenue for the state than is paid out by the incentive (cost-benefit modeling).
•    Whether the company and economic activity meet a set of “quality control” guidelines.

Business Financial Publishing: VEGI Applicant

My wife and I are full-time Vermont residents, having moved here a year ago from Washington, DC. I was born in Vermont, and have family ties to the state. After living in a big city for nearly a decade, we decided to relocate to Vermont.

Since I am “self-employed,” the move was fairly easy.  My company, Business Financial Publishing, is based in Washington, DC where we employ six full-time employees.  I travel down to Washington, DC regularly to connect with my staff and otherwise direct our operations from my home office.

Business Financial Publishing is an Internet company that publishes investment newsletters and generates revenues from the sale of advertising and paid subscriptions. Given the nature of our business, my company could be located anywhere in the world or operate virtually. In the past we have operated a core office and also employed freelance contractors throughout the United States. At the height of our business before the recent recession, we employed 18 full-time employees in Washington, DC and another 20 freelance contractors that were the equivalent of five additional full-time employees.

Last year I became aware of the VEGI program and was encouraged by several local business owners to consider relocating Business Financial Publishing to Vermont and to seek out incentives. After a positive meeting with the Greater Burlington Industrial Corporate (GBIC), the local economic development organization for Chittenden County, I decided to apply to VEGI.

My VEGI application was for the relocation of my company’s headquarters and core operations from Washington, DC to Burlington, Vermont and requested the incentives in order to help pay for recruitment, relocation and training of new employees in Vermont. Over a period of three years, I planned to create 15 new jobs in Vermont through the creation of new positions. My company currently has four job openings and plans to hire additional employees in the coming years as we emerge from the economic downturn.

I believe our company is a good employer and would be beneficial to the state. We pay our employees nationally competitive salaries, and offer a host of benefits including health insurance, dental insurance, paid vacation, a company sponsored 401k plan, profit sharing and cash bonuses. I know that our employees are the most valuable asset, and share generously with them when the company is successful.

The VEGI program administrator who reviewed our application felt that everything was in order, and that our company would be a positive contributor to the state by creating new, high quality jobs. After completing the extensive online application, I was slated to present my case for the VEGI program and field questions from the board at a hearing on January 28.

My company was seeking approximately $160,000 in tax incentives from the state, which calculated that the net benefit to the state from our job creation plan would be about $70,000 after paying the incentive. The tax benefit would be paid out over a period of five years only if the payroll tax goals were achieved.

While this may not seem like a significant amount of money, it is relevant to a small company like mine. In my next blog post, I’ll discuss the decision of the council to reject my application to the VEGI program on the grounds that we didn’t meet the “But For” standard. Plus, I’ll share my thoughts on their decision, what could have happened if we were approved, and what will happen because we were declined.

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