When companies win their pitches for state incentives to fund a new plant or expansion in Virginia, they sometimes end up hiring fewer people than they said they would.

But a shift away from making upfront grants — to require that companies show that they have hired and invested before the state releases funds — has made a big difference, according to a Richmond Times-Dispatch analysis of state economic development spending data.

In the two years before what’s now called the Commonwealth’s Development Opportunity Fund stopped making upfront grants to win projects, companies receiving that money hit just 34% of employment goals and 59% of investment targets, The Times-Dispatch analysis found. But since 2020, the five firms that received full grants actually hired more workers than they promised. Three firms that missed their targets received only fractions of the grants authorized for their projects.

Gov. Glenn Youngkin speaks in 2022 about LEGO’s plan to invest at least $1 billion in a factory in Chesterfield County. It will be LEGO's seventh facility worldwide — two in Asia, three in Europe and one in Mexico.

Virginia moved to paying for results — rather than promises — after an embarrassment.

In 2015, Gov. Terry McAuliffe released a $1.4 million grant from what was then called the Governor’s Opportunity Fund to the Chinese firm Lindenburg Industry. The grant never produced a single one of 350 promised jobs or a proposed $113 million investment in the struggling town of Appomattox.

The Governor’s Opportunity Fund was a sweetener that was supposed to help economic development agencies bring home deals — and ensure governors get to announce new jobs.

‘Skin in the game’

The change to paying for results has not hurt Virginia’s ability to compete for new businesses or for business expansions, said Pryor Green, a managing director at the Virginia Economic Development Partnership , the state’s economic development authority.

“We do have to be competitive, but you want the companies to have skin in the game,” said Del. Rodney Willett, D-Henrico, who sponsored a major bill in 2020 to enhance reporting on economic development results.

“I do think we have a good balance,” he said.

The reformed opportunity fund, now called the Commonwealth’s Development Opportunity Fund, is still in business.

But in 2020, during Gov. Ralph Northam’s term, it shifted from making upfront grants to paying for results. It’s still seen as a deal-closing fund, meant to secure projects where Virginia faces serious competition from other states or nations. It’s still up to a governor’s discretion to authorize grants.

In 2018, after the Appomattox loss, the General Assembly started tightening standards for the fund. Between 2018 and the 2020 shift to releasing funds only when firms showed results, the companies receiving grants hit just 34% of employment goals and 59% of investment targets, The Times-Dispatch analysis found.

The Virginia Economic Development Partnership has secured repayments from those firms amounting to 70% of the $18.8 million the state originally granted. In addition, the partnership has asked Attorney General Jason Miyares to seek repayment of a $130,000 grant from 2019 for the abandoned Polycap plant in Southwest Virginia’s Russell County. The company had said it would hire 48 people and invest $11.8 million, but when the state checked in after extending the deadline to 2023, it had no employees. It’s the last clawback still pending.

From 2020, for firms that are through what the partnership calls its performance period — deadlines to reach employment and investment targets – the opportunity fund has done a lot better.

Five firms that received their full grants hired more workers than they promised — anywhere from 27% more to nearly 4½ times as many. Three firms that missed their targets received only a fraction of the total authorized for their projects. In all, the state paid $4.2 million of the $5.1 million authorized for these projects.

Larger incentive programs

The larger incentive programs VEDP manages — from its big custom grants to job training funding — also work on a pay-for-performance basis, releasing funds when firms hit goals, VEDP data from fiscal year 2018 to date shows.

Projects that have passed their performance period hired 52,400 people, hitting 79.1% of their combined goals, while the total investment of $17.89 billion was 99.8% of the target.

The state paid 74.6% of the total grant amounts authorized, or just under $265.2 million.

That amounts to $5,060.20 per new job and $67.49 of new capital for each dollar of state funds.

The biggest single sum paid so far was the $46 million of state support approved in 2016 to help Newport News Shipbuilding invest in new facilities to work on the new Columbia class of submarines. The shipyard’s target was to create 1,120 new jobs and invest $750 million in new facilities; it hired 1,502 people and invested $1.82 billion.

Merck & Co. and Amazon Web Services also exceeded their employment and investment goals and earned the full amount of their grants: $7.5 million and $10.5 million, respectively.

Merck hired 284 people at its Rockingham County plant, 87% more than its target, and invested $54 million more than its $1 billion goal. Amazon hired 1,682 people, 12% more than its goal, while its investment of $113.3 million was 35% above its target.

Projects that missed targets

Some of these projects missed targets, however.

The economic development authority partnership authorized a $70 million grant in 2018 for a Micron Technology Inc. project in Manassas, but the state recovered $38.2 million from the escrow account holding the funds when the project felt short of its employment goal.

Micron had promised to hire 1,106 people with average salaries of $92,000, but it added just 150 positions, although it invested $2.31 billion, partnership records show.

Late last year, the state’s Major Employment and Investment Project Approval Commission decided that Micron could be eligible for $70 million of state support for a $2.17 billion project to expand its Manassas facility and create 340 jobs, and the General Assembly enacted bills authorizing up to $60 million in support.

President Barack Obama tours the Rolls-Royce Crosspointe jet engine disc manufacturing facility in Prince George County on March 9, 2012. The facility, which closed in 2021, ultimately did not reach its projected investment or jobs.

Virginia paid $11 million from a grant authorized at $35 million to support Rolls-Royce’s now-shuttered Prince George County plant, where the company said it would invest $501 million to make components of airplane engines and employ 642 people. In the end, before it finally closed the facility in 2021, it invested $273 million and at one point employed 391. By the time it closed, it employed 280.

Because the state’s agreement with Rolls-Royce released some of the grant when the company hit interim employment and investment goals, the $11 million is not subject to repayment.

Nor is the $500,000 out of an authorized $7 million grant approved in 2019 for Morgan Olson’s step-van plant in Southside’s Pittsylvania County, where it missed its goal of hiring of 703. The economic development partnership says it is canceling its agreement with the firm after learning the company laid off all of its employees. In a 2023 filing under the Worker Adjustment and Retraining Notification Act, the company said it was laying off 435; a letter to 139 employees last year said they would lose their jobs by the end of the year.

Volvo Trucks North America added only 111 of a promised 777 jobs at its Pulaski County plant in the New River Valley, and lost a $12.5 million job-linked grant, but it did receive $4 million after investing $134 million in the facility. Because that investment hit a target, the $4 million is not subject to repayment.

Lagging investments

The partnership is still looking at what has happened with $7.2 million of old, up-front Commonwealth’s Development Opportunity Fund grants to eight firms. So far, these have generated 95% of jobs promised, but investment has lagged.

The fund has authorized $106.8 million in grants for projects still underway, where funds will be released as they reach their goals, a combined total of 17,536 jobs and $6.57 billion of capital investments.

Most of these grants are much smaller than the old-style ones, but they include such high-profile projects as the $681 million cable plant where LS Cable plans to hire 338 people to make the underwater high-voltage lines connecting Dominion Energy’s offshore wind farm to the grid. The authorized grant for this is $13 million.

Chesterfield projects

The Danish firm Topsoe wants to make the solid oxide electrolyzer cells used to produce hydrogen fuel in a $400 million Chesterfield County plant. If it hits its investment target and its promise to employ 150 people, the company would receive a $6 million opportunity fund grant.

Also in Chesterfield, the indoor farm that the California firm Plenty is building would receive a $2.4 million grant if it hits its goals of 300 jobs and $300 million in investment.

Other big authorized grants include $8 million to support defense contractor Northrop Grumman’s plans to build a $201 million electronics and testing plant in Waynesboro to employ 331 people, and $5 million for nuclear energy services giant Framatone’s plans for a $49 million expansion in Lynchburg that would employ 515.