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Watchdog report raises challenging questions

Watchdog report raises challenging questions

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Your tax dollars have gone to fix up a sex shop in Richmond.

Government reports aren’t usually the source of salacious reading. However, the report Virginia’s legislative watchdog agency issued recently on the effectiveness (or lack thereof) of the state’s economic development incentive programs did unearth that eye-opening fact above.

A grant program intended to help businesses located within an enterprise zone to rehabilitate their run-down property “has funded projects that may not contribute positively to local property values, one of the stated aims of the program,” the report said. “For example, address searches revealed that the program provided grants for improvements to an adult book and novelty items store in Richmond, funeral homes in South Boston and Petersburg, and at least 11 storage shed businesses in various locations.”

Your tax dollars at work, as they say.

That might be the most outrageous part of the 151-page report by the Joint Legislative Audit and Review Commission, but it’s not the section we in this part of Virginia should be most concerned with. Rather, the report poses some big and troubling questions for those concerned about economic growth in Southside and Southwest Virginia. It also invites meddling by Northern Virginia politicians, whose motives might be pure but whose impulses should still set off warning bells.

The report deals with 10 specific incentive programs, four specifically targeting Southside or Southwest Virginia and two others targeting economically distressed communities statewide. The big picture: They’re basically not working very well. Since our part of the state has the most at stake here, we should be the ones most concerned about these findings — although, as with many things, politics might get in the way. The headline out of much of the initial reporting was that JLARC concluded the state’s coal tax credit costs more jobs than it saves and should be eliminated. The Republicans who represent the coalfields have always defended the program, while Democrats who are eager to move to renewables have tried to spike it. The JLARC report won’t help Republicans. It actually musters a conservative argument against the tax credits — that tax credits for coal mean higher taxes for something else, so the bottom-line math actually costs the state $21 million in gross domestic product, $5 million in personal income and 35 jobs. We won’t litigate that today because there are bigger questions to be dealt with.

The JLARC report spends a lot of time picking apart a program that both Republicans and Democrats have embraced over the years — enterprise zones. Republicans like enterprise zones because they like lowering taxes; Democrats sometimes like them because some of those low-tax zones are in urban areas. The JLARC report is unsparing: They don’t work. More specifically, they “have little effect on employment, income, and other economic indicators.” As the kids would say today: Oof.

In fact, of the 10 incentive programs the report analyzed, it didn’t find any that were particularly effective. That raises a much bigger question than whether coal tax credits should stay or go. Namely, what should Virginia be doing to build a new economy in rural Virginia?

The report doesn’t ask that question, so it doesn’t answer that question, either — but it’s a question that politicians from both parties ought to be taking up. Of course, there’s a nagging question lurking behind that one: What if nothing works? What if there’s simply no place for rural communities in the modern economy, which puts a premium on assets that they often don’t have — namely, a large, tech-savvy workforce? We’d like to think that’s not the case, but we’d like to think lots of things. In any case, the JLARC report makes it clear that what we’re doing now isn’t working. That’s a conclusion that ought to be taken seriously.

JLARC reports like this one are typically well-documented and non-ideological — they’re audits, not manifestoes. They’re also easily ignored by both parties because audits don’t always fit party agendas. This one, however, raises some challenging questions that ought to be more deeply examined. For instance:

1. Should the Virginia Coalfield Economic Development Authority be abolished or at least reformed? The report said “the effectiveness of VCEDA should also be evaluated to determine if it should be discontinued.” Evaluating any government agency is always a good idea, but getting rid of an economic development agency dedicated to the most economically struggling part of the state seems a spectacularly bad idea. The report does raise a good question, though. Five of the authority’s 16 seats are reserved for the oil and gas industry. Maybe this made sense once upon a time, but does it make sense now? (No.) No one’s under the belief that coal is the region’s future; the challenge is to build a post-coal economy. The report suggests replacing these members “with representatives of industries with faster growth potential in the region.” That sounds more forward-thinking.

2. Should the tobacco commission be more closely aligned with the state’s main economic development agency? The so-called tobacco commission is a misnomer. It was founded in 1999 to oversee a $1 billion endowment from the master settlement with tobacco companies — specifically to build a new economy in former tobacco-growing counties. The report faults the commission for not doing sufficient due diligence on some of its grants because there’s not much staff and suggests it work more closely with the Virginia Economic Development Partnership (which sounds like a good idea). One legislator — state Sen. Janet Howell, D-Fairfax County, and, more importantly, the chair of the Senate Finance Committee — suggested the commission be folded into VEDP. This is a suggestion that raises alarms. Rural legislators have long feared the day when those outside the region will try to raid the fund — a reverse Robin Hood to steal from the poor and give to the rich. There is no doubt much about the commission that can be improved — we should take much of this JLARC report seriously — but Howell’s suggestion, however well-intended, sounds like the start of a campaign to abolish the commission entirely. The state government cannot be trusted to build a new economy in Southside and Southwest — although it can apparently be trusted to fix up a sex shop.

Tomorrow: One part of the report that we disagree with.

The Roanoke Times

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