Vermont Rejects 15 New Jobs

posted by   Ian Wyatt   |    February 5, 2010

Posted in   Economy   |   Comments

With my application in good shape, last Thursday I headed to Montpelier for the Vermont Economic Growth Incentive (VEGI) meeting with the Vermont Economic Progress Council, expecting to be awarded tax incentives for the relocation of Business Financial Publishing to Vermont and creation of 15 new jobs in the state.

After all, my company was currently located outside of the state with no Vermont-based employees. We met the standards for the types of jobs and benefits that the state seeks under the program. And we are a high-growth, profitable business in the expanding Internet information sector.

During my presentation I discussed that my company was based in Washington, DC, and that while my wife and I were full-time Vermont residents, we had not made a decision regarding the potential relocation of my company’s operations to Vermont. I made it clear that my company could be based anywhere, including Washington, DC or Vermont, and that approval by the council was a determining factor in my decision-making process. 

Unfortunately, the council found that my application didn’t meet the “But For” requirements of the VEGI program. The “But For” is a judgment that the council must make to determine “whether the proposed economic activity would not occur or would occur in a significantly different and significantly less desirable manner except for an incentive.”

In an eight-to-one vote against my application, the council judged that I would relocate Business Financial Publishing to Vermont regardless of their decision to give me incentives, and therefore I did not meet the “But For” requirement in their opinion.

Earlier in the month, it appeared that Vermont was committed to continuing to encourage job creation. The Burlington Free Press reported that “Gov. Jim Douglas and the heads of the Legislature's four money committees -- who make up the Emergency Board -- voted unanimously to raise the cap on the employment growth incentives that the Vermont Economic Progress Council could award this year from $10 million to $23 million.” Half of the 2010 incentives had already been awarded and four applicants slated for the January meeting were requesting a total of $12.7 million in incentives.

The three other applicants at the VEGI meeting included Dealer.com, Hayward Tyler and Skypoint Solar. Combined, these companies were approved for $12.5 million in incentives for the creation of 815 jobs. I certainly congratulate these other applicants for their success, and hope that these VEGI incentives help to bring many much needed jobs to Vermont.

However, the council’s decision to reject my application – which was by far the smallest of the proposed job creation initiatives – led me to question their decision and examine the key factors and differences that may have contributed to the rejection of my application.

Like the other applicants, I was personally located in Vermont as a resident. But unlike the winning applicants, my company is also the only one that is not currently headquartered in Vermont.

Unfortunately, state politics played a role in the rejection of my application. There is currently increased pressure on the council to closely scrutinize VEGI applicants. With the current tax revenue shortfalls, the council (including two state legislators) doesn’t want to appear to be simply rubber stamping applications for approval.

By rejecting my small application for incentives to create 15 new jobs in Vermont, the council demonstrated that they closely examine applications and aren’t simply handing out taxpayer money to anyone who applies. This resonates well with most Vermont residents who are skeptical of the incentives in the first place, because they assume every company should want to be based in Vermont, and will create jobs here regardless of any incentives from the state.

But at the same time, by approving the incentives for the three largest applicants, there were news headlines like “Three Firms Get Preliminary OK for $12.5 Million In Job Creation Incentives.” After all, just think of the backlash that would have occurred had the headlines read “Vermont Council Rejects 830 New Jobs.” If the council wanted to show that they were thorough and diligent, but also pro-jobs, my application was clearly the easy one to reject.

Based on my discussions with the other applicants, there was one key difference between my company’s VEGI application and those companies’ that were approved. And that one difference was that every one of the companies that was approved by the council at the January meeting had received competing incentive offers from at least one other state.

The other applicants pled their cases to the council for the job creation incentives, and presented competing offers from California, New York or Oregon. They then told the council that if they didn’t get the appropriate financial incentives from the state of Vermont, they would seriously consider defecting to other place that would reward them for economic progress and job creation. This appears to be what the council wants to hear, because these incentive packages from other states can be used to justify their decision to issue tax incentives.

My company had not met with economic development officials from other states, since our consideration was either to stay in Washington, DC or relocate to Vermont. I didn’t feel the need to shop around for a deal from other states, since my consideration was simply a continuation of our current business in Washington (for which I assumed the DC government would be unwilling to grant incentives) or relocation to Vermont.

After the voting, during which my application was shot down, one friendly council members thanked me for my time and explained that the council thought that I would relocate Business Financial Publishing to Vermont regardless of any incentive from the state – and that any incentive would therefore be a waste of taxpayer dollars.

While the council members may think that their decision will have no impact on my decision, I think it’s important to point out what would have happened if I was approved, and what will happen since I was rejected.

If I was approved, I would have:

•    Started hiring for four vacant jobs exclusively in Vermont
•    Looked for ways to further grow our Vermont presence with additional employees
•    Planned for meeting the goal of 15 new employees within three years
•    Searched for suitable office space expansion with growth options in Chittenden County

But since my application was not approved, I have no incentive to do any of these things.  Will I hire employees in Vermont at some time? Yes. Will I begin aggressively hiring employee immediately? Perhaps not. And will I work to assure that I add 15 new employees in Vermont to my staff in the next three years – certainly not.

The VEGI program is designed to encourage companies to develop an aggressive and achievable hiring plan focused on job creation. The incentives would have encouraged me to grow my business in Vermont by hiring employees locally.

However, without a VEGI from the state, I have no incentive to hire people in Vermont. I’m equally inclined to hire someone in Washington, DC, Boston, Chicago or San Francisco.

It is unfortunate that the council voted against my application, since their approval would have created four new jobs in Chittenden Country within the next month, and added at least 15 new jobs over the next three years. Compared with the incentives that were passed to create 815 jobs, my plans were tiny. But for unemployed individuals in greater Burlington with experience in advertising, marketing or writing, these jobs would have meant full-time employment with many benefits right now.

Thanks to the ruling of the Vermont Economic Progress Council, these jobs may not be created in Vermont. They may be created elsewhere, or given to contractors or freelancers who can do their job from home without the benefits of full-time employment.

While the council may feel that my relocation to Vermont was certain, I can assure you that their decision will guide my business decisions in the coming years as I consider my options for expanding Business Financial Publishing.

When I moved to Vermont, I thought that this was a forwarding thinking state that supported the small business owner. While my plans didn’t involve hundreds of jobs, I assumed that the state would welcome a small business with 15 new jobs to the state, and proactively take actions to encourage that relocation. I was apparently mistaken.


You can read part one and part two of this blog series about the Vermont Employment Growth Incentive using the following links:

• Part 1: Is Vermont Committed to Job Creation?
  
• Part 2: Inside a Vermont Employment Growth Incentive (VEGI) Application

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