The state’s Emergency Board voted Tuesday to raise the cap on state grants to companies from $1 million to $1.5 million in 2016.
The board, which includes Gov. Peter Shumlin and the four lawmakers who head the Legislature’s money committees, decided unanimously in a voice vote to raise the cap on the Vermont Employment Growth Incentive.
The section of VEGI allows the Vermont Economic Progress Council to make offers to companies who promise to create jobs in areas with high unemployment or low wages. The part of the program that the Emergency Board revised is called Subsection 5. Under that provision, state grants to companies had been capped at $1 million per year since the program started in 2007 when VEGI replaced the the Economic Advancement Tax Incentive.
The vote at the meeting meant the annual cap went from $1 million to $1.5 million for 2016. The $1 million cap has been in place since the program started and the Legislature passed language in 2015 to allow the Vermont Economic Progress Council to approach the Emergency Board to increase the cap.
Over the next five years, the state is proposing to give up to $694,711 to an unnamed Canadian company that may relocate to St. Johnsbury; $1,063,378 to G.S. Precision, which had planned to leave Brattleboro; $400,545 to a pellet company in Lunenberg; and $1,169,978 to Imerys Talc in Ludlow.
Justin Johnson, the secretary of the Agency of Administration, told the Emergency Board that the four companies could create “almost 200 new full-time jobs,” add $6.5 million to Vermont’s private sector payrolls, and allow companies to make $40 million in capital investments.
Sen. Tim Ashe, D/P-Chittenden, is chair of the Senate Finace Committee and sits on the Emergency Board. He questioned the policy choices behind VEGI and asked whether the state could get companies to expand in Vermont if the state gave grants for only a percentage of the maximum awards.
Fred Kenney, the executive director of the Vermont Economic Progress Council, told Ashe that the state has offered less-than-maximum grants in the past. Some companies went forward with their projects and others didn’t, he told Ashe.
“They still went forward,” Ashe said. “Anyone that did (go forward) raises questions about what the point of Subsection 5 would be.
“A member of the public could say, ‘Would G.S. Precision have gone forward with (99 percent of the award) as opposed to the 100 percent?” he said. “And then, that would be a fair question. I don’t know what the line would be, but people might say the board didn’t scrutinize the 99 versus 100 question enough.”
Patricia Moulton, the secretary of the Agency of Commerce and Community Development, said the Vermont Economic Progress Council already scrutinizes the level of benefit.
Moulton said G.S. Precision was already planning the site plan at a new facility in New Hampshire, and if the state hadn’t intervened, the jobs wouldn’t have returned to Brattleboro overnight.
“Let’s not take the gamble,” she said. “We want that expansion. We want those jobs, so we want to be a partner and put our best foot forward.”
Ashe said: “We want to pay the best price for the desirable outcome, not any price.”
Rep. Janet Ancel, D-Calais, chair of the House Ways and Means Committee, said she was concerned that the Shumlin administration would come back in July and ask the cap to be raised again.
Shumlin disagreed.
“My view is, we know our economy like every other economy in America runs in a cycle, and we better make hay while the sun is shining because I can guarantee you that we’re going to go into a recession in the next three years like we always do,” Shumlin said.
“It’s amazing that they’re not projecting one for ’16 when you look at how long we’ve been in recovery,” he said. “If we’ve got to lift the cap again, let’s lift the cap again, because during a recession nobody wants anything. There’s no activity.”
Sen. Jane Kitchel, D-Caledonia, chair of the Appropriations Committee said in an interview the VEGI program has stimulated policy questions, and the tax committees will continue looking at the program.
The state pays cash to companies through VEGI only if capital investments are made and the new, full-time jobs and payroll are created and maintained. The VEGI program is designed to incentivize economic activity that ultimately results in new tax revenues that exceed VEGI payments.
Correction: A previous version of this article said Imerys Talc in Ludlow may receive up to $3,327,920 through the VEGI program. The correct number is $1,169,978.
