State’s VEGI program bears fruit in first year, 265 jobs, $600K in taxes

first_imgFirst Year of New Economic Incentive Program Successful New Tax Revenues Generated Exceed EstimatesMONTPELIER, Vt. – The numbers are in, and the state’s new job creation incentive program had a strong rookie season, creating 265 new jobs and generating nearly $600,000 in new tax revenues for Vermont in 2007.A final report released by the Vermont Economic Progress Council and the Vermont Department of Taxes, which jointly administer the Vermont Employment Growth Incentive program, shows that the seven companies approved for activity during its first year created $10 million in new payroll.They also made $23 million in capital investments, and the new jobs and economic activity generated an estimated $583,000 in net new tax revenues to the state, almost twice what was initially estimated.”We are extremely pleased with the performance reports from companies participating in the Vermont Employment Growth Incentive program,” said Karen L. Marshall, Chair of the Vermont Economic Progress Council. “The authorized incentives leverage important economic drivers: New, well-paying jobs for Vermonters, new payroll, and capital investments in our communities.”According to the data, the five companies that met their December 2007, first-year targets projected they would create 247 new jobs and $8.6 million in new payroll in 2007, but actual job creation by these companies was 259 new jobs and $9.5 million in new payroll.The average wage of the jobs is $42,282 and the companies all offer full benefits packages, including health care coverage. The average total compensation of the jobs is $51,073, and the authorized companies also exceeded their capital investment targets.”This new economic activity generates additional tax revenues to help pay for other programs,” Marshall said. “For 2007 alone, the state invested about $845 per job and reaped a positive return on investment with new jobs and payroll, capital investment, and a net tax revenue return of $2,158 per job.” “This is truly a good investment for Vermont,” she said. “These are jobs and tax revenues that the state would not have realized unless the incentives were authorized.”Two other companies authorized to receive incentives created a total of 6 jobs but did not meet their first-year targets for job creation and investment.Under reforms proposed by Governor Jim Douglas and passed by the Legislature in 2006, the VEGI economic incentives are authorized based on job and payroll creation and capital investments that must occur before the company receives incentive payments over a period of years.During consideration of the incentive authorizations, the Council determined that these projects would not occur or would occur in a significantly different and less desirable manner if not for the incentives being authorized.So if targets are met, the state is using a small portion of all the new revenues generated by the new activity of these companies – revenue that would not have otherwise been generated – to pay the incentive over a period of several years.The previous program had companies earning tax credits that were applied against future tax liability. The new program allows start up companies, which may not have tax liability, to take advantage of the incentives as well as providing greater program accountability.During the first year of VEGI, the Council considered 17 applications, of which two were denied, 6 rescinded for various reasons, and 2 were approved in 2007 but did not commence until 2008.The remaining 7 projects were authorized for incentives totaling $5.8 million to be earned, if targets are met, between 2007 and 2011 and paid out between 2008 and 2016.These projects projected the creation of 1,000 jobs between 2007 and 2011, with $37.1 million in new payroll and an average compensation of $48,432, and the investment of over $45.7 million in new facilities and machinery and equipment in Vermont. Over the five years, this activity will generate over $5.8 million in net new revenues for Vermont.Final reviews by the Vermont Department of Taxes of the 2007 claims filed by the companies indicate that five of the seven companies with activity in 2007 met or exceeded their Year 1 (December 31, 2007) targets.Two of the companies did not reach their 2007 targets by December 31, 2007. This does not mean that the companies did not do any of the activity they projected. They added new jobs and payroll and made substantial investments. But they did not meet the strict targets required to earn the incentive as of December 31, 2007.Under new legislation, these companies have 24 months to meet their 2007 targets. No incentive will be paid to these two companies until the targets are met and no incentive will ever be paid if the targets are not met.In addition, if any of the companies that did meet their targets do not maintain the jobs and payroll, future installments of the incentive they earned in 2007 will not be paid. Incentive payments for the 2007 activity to the five companies that met their 2007 targets totaled $208,653. Even accounting for the cost of the incentive payment and other costs to the state, the net tax revenue gain for 2007 alone was an estimated $582,792.The companies authorized to earn VEGI incentives for activity in 2007 were:* Monahan SFI: The incentives allowed family-owned brush manufacturer Thomas Monahan to purchase and reopen the Specialty Filaments plant in Middlebury, putting over 100 laid off Vermonters back to work.* Vermont Timber Frames: After moving to New York several years ago, the incentives convinced this building component manufacturer to locate an expansion project in Vermont, reutilizing an empty industrial site in Bennington.* Omni Measurement, Inc.: This small R&D company was preparing to take its product from the drawing board to assembly line and could have outsourced production, but the incentives instead mean Vermont shares in the company’s success supplying our Air Force personnel with necessary equipment and reaps the new jobs, capital investment and the reutilization of an industrial building in Milton.* NEHP: The incentives helped this Williston manufacturer of process piping modules for the Semiconductor, Solar & Life Science industries jumpstart its R&D efforts to take advantage of new market potential.* Green Mountain Coffee Roasters: Because of the incentives offered the company established its second Vermont facility in Essex Junction instead of outside the state, bringing more than 100 jobs there. In addition, jobs were added at the Waterbury headquarters and hiring continues at both sites.* Burton: The incentives helped ensure that this Vermont company did not follow in the steps of others in the winter sports equipment sector by moving their headquarters out west. Instead, a major expansion will be located in Vermont.* Energizer: A new battery line that could have been installed in any of the company’s many offshore facilities will be in Vermont because of the incentives, along with many new jobs and capital investment that helps ensure the future of Energizer in St Albans.The Council authorized the companies to earn incentives after assuring compliance with nine program guidelines and applying a rigorous cost-benefit analysis that ensures an increase in state tax revenues even after payment of the incentives.The Council also determined that these projects would not occur or would occur in a significantly different and less desirable manner if not for the incentives being authorized.The Vermont Economic Progress Council is an independent board consisting of nine Vermont citizens appointed by the governor that considers applications to the state’s economic incentive programs.The Council is attached to the Vermont Agency of Commerce and Community Development, whose mission is to help Vermonters improve their quality of life and build strong communities.To view the full 2007 VEGI Annual report, visit:http://economicdevelopment.vermont.gov/Portals/0/VEGI_2008_%20Annual%20R…(link is external)For more information on VEPC and VEGI, visit:http://www.thinkvermont.com/vepc(link is external)-30-last_img