Economic Development Incentives Under JLARC Review

Are economic development incentives for movie making worth the expenditure?

“Evan Almighty” was filmed in Virginia. The economic impact was less than everlasting.

Virginia’s legislative watchdog agency has embarked upon an evaluation of 76 economic development incentives offered by the Commonwealth, starting with the Virginia Film Office. Grants and tax preferences cost the state at least $147 million in the most recent fiscal year, reports the Richmond Times-Dispatch.

“We don’t have any handle on what is going on,” said Del. Chris Jones, R-Suffolk, House appropriations chairman, and vice-chairman of the new subcommittee of the Joint Legislative Audit and Review Commission (JLARC).

JLARC staff has identified 76 specific incentives for study, including 34 grants, 20 income tax preferences, 18 sales tax exemptions, and four financing programs. The evaluation will focus on how much each program spends, the resulting business activity, and the economic benefits and state tax revenue generated by that activity.

Jones hopes the analysis will give General Assembly money committees a “report card” to guide the legislature when deciding whether or not it makes sense “to be putting this kind of money into incentives.”

Bacon’s bottom line: This is a welcome development. The General Assembly treats economic development incentives as “fire and forget” weapons; they enact the incentives but rarely check if they worked as advertised. In all likelihood, JLARC will find some programs to be effective and some to be obsolete or ineffective. The legislature needs to  diligently weed out the losers.

I hew to the philosophy that state and local governments should pick a few core missions — the administration of justice, public health and safety, education, transportation, utilities, environmental protection, basic social services — and dedicate their energies to achieving world-class excellence in those areas. Any activity that does not fall into one of those buckets is best left alone. The best economic development program in the world is a government that excels at providing core services with a modest level of taxation. All the rest is superfluous.