‘Ice water on the bonfire:’ Delegate bucks convention on economic development deal

By: - October 22, 2018 6:15 am

State Del. Lee Carter, D-Manassas. (Ned Oliver/Virginia Mercury)

Public officials in Virginia love jobs announcements. The governor trumpets at least a handful every month and elected officials all the way down the food chain, regardless of party, tend to get in on the action, offering laudatory quotes and posing for pictures at ceremonial groundbreakings.

So eyebrows collectively shot skyward when Del. Lee Carter, D-Manassas, came out in opposition this month to a massive semiconductor plant expansion in his home city that Democratic Gov. Ralph Northam promoted as one of the largest manufacturing investments in the state’s history.

“I don’t support the project at all,” said Carter, who first privately declined an offer from the governor’s staff to provide a supportive quote for a press release and then penned an op-ed this month outlining his opposition.

“‘Economic Development,’” it began. “As a socialist elected to public office, no other phrase gives me more heartburn. …I knew instantly that I would have to be the ice water on the bonfire of ecstatic politicians and effusive headlines. ”

A $3 billion investment and $70 million in taxpayer subsidies

The company, Micron, manufactures computer chips used in everything from cellphones to cars and has promised to invest $3 billion to expand its existing operations in Manassas, hiring 1,100 new employees in the process who will make an average salary of $92,000.

The deal comes with a $70 million taxpayer subsidy in the form of direct incentives from the state, which the General Assembly will vote on next year. It’s easily one of the priciest deals in the state’s history, but Virginia Economic Development Partnership CEO Stephen Moret said that’s largely a function of the sheer size of the investment, which eclipses all of last year’s deals combined.

The state expects to break even in 12 years.

“For context, incentive packages for semiconductor manufacturing facilities are among the largest in the U.S. for any type of economic development project,” he said, noting New York state, who Virginia competed against for the project, has put forward billion-dollar incentive packages for similar plants in the past.

“These tend to be highly-desired projects in large part because of the high wages and huge capital investments involved. In our case, the Micron expansion also will result in a 3 to 5 percent increase in total exports for Virginia.”

Republicans have been dogging Carter about his position for more than a week, posting images on Twitter where his face morphs into that of Bernie Sanders and incredulously demanding Democrats account for his dissent.

“He came right out as overtly hostile to a major development for his district,” said Del. Todd Gilbert, R-Woodstock, the House majority leader. “I’ll give him credit, if anything, he is so committed to his socialist ideology that he cannot even bring himself to be supportive of a project that any other legislator, anywhere else, would be delighted to embrace for their district.”

Both Gilbert and a spokeswoman for House Democrats indicated they expect the $70 million in subsidies will find ready support among their membership. As for Carter’s opposition, Democrats wouldn’t comment other than to say their party “is a big tent with a diversity of viewpoints.”

While Carter may be unusual for his opposition to a cash infusion headed directly for his own district, his disapproval is in line with many mainstream academics who have studied economic development subsidies and, to a point, mirrors concerns about a trend toward bigger and bigger corporate subsidies raised by Republicans, who rail against “crony capitalism.”

“This is an interesting place where the left and the right meet, but it’s not where you usually find elected officials,” said Bob Holsworth, a longtime political observer and former political science professor at VCU. “Because elected officials, generally believe even if you dislike these incentives, you’re in a competitive state and need to do what you need to do to land the company.”

‘We don’t have a joblessness problem, we have an affordable housing problem.’

Carter, elected last year as the first and only Democratic Socialist to sit in the Virginia General Assembly, opposes the project on several grounds.

First, he doesn’t think the state should be subsidizing giant, wealthy corporations. Second, even without the taxpayer money on the line, he doubts the project will do much for his city.

He argues Manassas already has a low unemployment rate, 2.5 percent, and semiconductor manufacturing is a highly specialized field. Most new jobs, he says, are likely to be going to people moving in from out of state, putting pressure on an already tight housing market and raising the cost of living for everyone.

“Having 1,100 new families moving into an area where we don’t have a joblessness problem, we have an affordable housing problem – you’re attacking the wrong thing by throwing money at this,” he said.

“It sounds to me like (Northam) wants Northern Virginia to be the next Silicon Valley, but, frankly, look at all the problems in Silicon Valley. People can’t afford to live anywhere near where they work.”

Carter is hardly alone in his concerns. Academics and advocacy groups have for years been calling on states to rein in taxpayer subsidies for economic development projects.

“Because Manassas is not Boston, it’s not San Francisco, it doesn’t have a huge existing tech labor market,” said Greg LeRoy, the director of Good Jobs First, a nonprofit that tracks corporate subsidies. “It’s reasonable to expect that a large majority of job takers will be from someplace else, and that will induce growth. There’s no doubt about it. So you’re going to have to build homes, hire teachers, build classrooms, widen lanes, pick up trash and all those things cost money. There’s no such thing as free growth.

“So the question is, who’s going to bear the cost of that growth. … The burden goes to everyone else who’s already there.”

Micron executives stand with state and local officials to break ground Aug. 29 on the company’s $3 billion expansion in Manassas. (Contributed photo/Office of the Governor)

Local officials back project

Local officials say Carter’s assumptions about who will get the jobs Micron is creating are wrong. And they say the idea that the money could instead be put towards welfare programs or other enterprises (he proposed establishing worker collectives) ignores the fact that new tax revenues from the expansion will more than cover the cost of any direct subsidies over time.

Manassas Economic Development Director Patrick Small noted that as part of the expansion deal, Micron has committed to donating $1 million to state higher education institutes to support science and engineering programs. He also touted the company’s internship program and local hiring practices.

Most of the company’s employees, he said, will come from within the state and be hired from state colleges. Additionally, he said, due to the breadth of Micron’s operation in the city — it’s their largest single taxpayer already — he says jobs are available to folks with all levels of education.

“You can get a job with these folks right out of high school,” he said.

But as to the larger question about state and local governments’ role in incentivizing corporate expansions, Small concedes Carter has a point.

“There’s a national debate about incentives and he’s not wrong and he’s not an outlier, but the issue is so complex,” he said.

Calls for a ‘mutual non-aggression pact’ between states

For any movement on the issue, states would have to jointly agree to reign in their economic development incentive programs. And so far, none have come close to signaling they’re interested in moving in that direction, said Richard Florida, who teaches business at the University of Toronto and launched a petition urging cities and states competing for Amazon’s HQ2 to “sign a mutual non-aggression pact.”

“The overwhelming consensus among those who study the subject is that economic development incentives are an overwhelming waste of money,” he said. “Some believe modest incentives are reasonable, others are anti-incentives, but most everyone believe that the kind of large-scale incentives say in the FoxConn or HQ2 deals are a waste of taxpayers’ money.”

A regional version of Florida’s proposed “non-aggression” pact was floated and quickly shot down in the House of Delegates earlier this year.

Del. Michael Webert, R-Fauquier, introduced legislation to create a compact between Virginia, Maryland and Washington “that would have all three competitors for a new Redskins stadium avoid a bidding war by agreeing not to offer the team tax breaks or other public incentives,” according to the Richmond Times-Dispatch.

The measure, along with another that would have simply barred state subsidies for a new stadium for the team, died in a 7-0 subcommittee vote.

Bipartisan skepticism of corporate incentives

Webert isn’t the only Republican to take issue with a project pitched as an economic development opportunity. Last year Speaker Kirk Cox, R-Colonial Heights, and Amanda Chase, R-Chesterfield, came out in opposition to the creation of a mega-site for industrial development in Chesterfield pursued by former Democratic Gov. Terry McAuliffe, though in that case they cited local opposition, which Republicans note hasn’t been an issue in the Micron deal.

“I think that had a lot more to do with whether something was a good fit or a net benefit to that area,” Gilbert, the House majority leader, said.

“I just have a hard time imagining that 1,100 good-paying new jobs for your area is not a net positive. … We all may have issues with economic incentives, but I think it’s interesting that he can’t even find anything good about it.”

Consultants projected the Chesterfield megasite would create between $75.7 million and $151.3 million in net economic impact over 30 years and create 2,000 to 4,000 jobs.

Carter’s opposition to Micron’s expansion is almost certain to figure front and center in any campaign against him when he comes up for reelection next year, said Holsworth, the political scientist.

The delegate says he’s not worried at all.

“I’m confident in the voters’ ability to see that there’s something beyond just that 1,100-jobs number and actually think about what consequences this has on our community,” Carter said.

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Ned Oliver
Ned Oliver

Ned, a Lexington native, has been a fulltime journalist since 2008, beginning at The News-Gazette in Lexington, and including stints at the Berkshire Eagle, in Berkshire County, Mass., and the Times-Dispatch and Style Weekly in Richmond. He is a graduate of Bard College at Simon’s Rock, in Great Barrington, Mass. He was named Virginia's outstanding journalist for 2020 by the Virginia Press Association.