The plan includes some rule changes for the Vermont Employment Growth Incentive program, known as VEGI, which was launched in 2007 to help business in the state recruit or retain workers for startups or expansions.
Now, the administration wants to change VEGI policies to make it more affordable for companies to participate.
Last month, the agency that oversees VEGI announced $3.8 million in funding for seven projects slated to start in 2014 or 2015. Those seven companies pledged to add 557 jobs, with average annual compensation of $50,385, according to the Vermont Economic Progress Council, which oversees the program.
“VEGI has been an important, successful economic development tool, and it’s the one that we must continue to help sharpen, to help improve our economy,” Shumlin said in his 2015 budget address.
Jobs created with the aid of VEGI money must pay at least 160 percent of Vermont’s minimum hourly wage — currently $9.15, and scheduled to accelerate to $10.50 by 2018. By then, a business would have to pay at least $16.80 per hour, and that’s too high for the more basic work needed by some VEGI applicants, said Fred Kenney, executive director of the Vermont Economic Progress Council.
“What we’re dealing with in this program are entry-level jobs,” Kenney said.
One of Shumlin’s proposals for VEGI would disconnect the program’s wage threshold from the state’s minimum wage and instead match it to the Vermont “livable wage,” assessed last year at $12.48 per hour for a single person in shared housing. In January, the Joint Fiscal Office released its livable wage analysis for 2015, concluding that same Vermonter would have to earn $13 per hour to cover a “basic needs budget.”
The VEGI program’s goal is to create jobs, so it shouldn’t exclude companies willing to do that, no matter the skill level of those workers, Kenney said. “We do want well-paying jobs, but we want a livable starting wage” to be tied to the incentive.
The VEGI program is authorized to distribute up to $10 million in incentives each year. The funds come from the additional payroll and property taxes that the businesses pay as a result of the projects that the VEGI money helps initiate.
Shumlin has proposed giving the Vermont Economic Progress Council more leeway to encourage projects outside of business-dense Chittenden County. The council, part of the state Agency of Commerce and Community Development, is an independent board of 11 members – nine appointed by the governor and two by the Legislature.
With each approved application, the council determines the incentive by calculating a portion of the extra revenue it expects that business’s project to generate, Kenney said.
Council members now have the option to boost that incentive – further reducing the revenue the state is expected to net – for projects in regions other than the Burlington area. That extra incentive money for all projects can total no more than $1 million per year under current guidelines. Shumlin would like to remove the cap entirely. That way, the council isn’t hamstrung if a worthwhile application comes in later in the year, after the current $1 million cap is reached, Kenney said.
“We may have lost a couple of projects because of it,” he said of previous years.
For a business’s VEGI application, it must show that the job growth or capital investment wouldn’t occur without the incentive. The business must meet performance requirements each year, maintaining and adding to its payroll and otherwise taking the steps it promised to secure the state money.
Swan Valley Cheese Co. of Vermont received $305,830 from the VEGI program starting in 2010, when it took over the defunct Via Cheese plant in Swanton to make mozzarella and artisanal cheeses. The company pledged to create 55 jobs.
“The VEGI program helped us considerably,” said Chris Lotito, president of Lotito Foods Inc., the Edison, N.J., company that owns Swan Valley. “It enabled us to hire some local people, put them back to work. Since that time we’ve grown threefold and our business is booming. And we’re expanding again.”
Green Mountain Coffee Roasters Inc., part of the beverage giant Keurig Green Mountain Inc., based in Waterbury, has received one of the largest distributions of VEGI money – a total of nearly $6.8 million for three separate projects since 2007. The latest of those, for which the council granted $4.7 million, is scheduled to wrap up this year.
A spokeswoman for Keurig did not respond to questions about how the company used the money.
The last of Shumlin’s proposals would change the rules to allow qualified companies to collect their VEGI dollars in the first year for training new employees. With the five-year distribution, the state can terminate the incentives at any time if the business fails to meet its obligations.
But that method leaves some businesses without the cash to both train workers, which is costly, and cover the additional wages, Kenney said. So they look elsewhere for already skilled candidates, rather than investing to expand those skills in the state’s work force.
Cabot Hosiery Mills Inc., for example, one of the seven new recipients of VEGI money for an expansion to begin in 2015, needs workers with experience operating knitting machines, Kenney said. The Northfield-based company makes Darn Tough socks. Its first-year training costs will be substantial, Kenney said, and it will have to cover that expense on its own before collecting its entire $1.5 million incentive.
Under Shumlin’s proposal, future recipients will not have to shoulder the substantial training costs up front, allowing businesses more flexibility to hire and train employees.
The other six companies most recently awarded with VEGI money are: Vermont Packinghouse LLC, based in Springfield, approved for $233,252; Twincraft Inc., in Winooski, approved for $532,584; G.S. Blodgett Corp., in Essex, approved for $754,104; Flex-A-Seal Inc., based in Essex, approved for $188,858; National Hanger Co., based in Bennington, approved for $227,668; and Precyse Solutions LLC, with locations statewide, approved for $349,742.
