The relocation of the Volkswagen of America corporate headquarters from a Detroit suburb to Fairfax County is an undeniable economic development coup for Virginia — Northern Virginia in particular. The deal will bring 400 high-paying jobs to the state. Average annual salary: $125,000, high even by Northern Virginia standards. Another major headquarters adds to the region’s prestige as a world-class business center. And you can’t buy the kind of press you get when CEO Stefan Jacoby says (to quote the Detroit Free Press), “We are a company of innovators and bold-thinking people who want to challenge the status quo and we know we will fit very well here.” By “here,” he meant Northern Virginia.
But the deal does raise questions. The Commonwealth of Virginia is providing $6 million in incentives to land the $100 million investment. That’s chump change compared to what the state spends to bring industry to other parts of the state, and NoVa economic developers can justifiably argue that it’s time they get their share of state largesse.
But here’s the rub: Does it make sense for Virginia to subsidize Volkswagen’s relocation when the creation of 400 jobs to the region’s super-heated economy can be met only by the infux of new residents to the state? According to the Virginia Employment Commission, the region’s unemployment rate stood at 2.3 percent in July. That’s not unemployment, that’s a labor shortage. (Every economy has a irreducible minimum of workers in transition — students leaving schools, moms rejoining the workforce, laid off workers transitioning to new jobs, etc.) Those 400 jobs means 400 people moving into Virginia — even more, if you include the multiplier effect created by their spending in the local economy.
Fairfax County will enjoy a nice $100 million boost to its tax base, yielding roughly $900,000 a year in tax revenues. But where will the newcomers live? Will they live in Fairfax County? If so, what will the county incur in additional public-service obligations? Conversely, what if some VW employees choose not to live in Fairfax? How far will they have to drive to work, and how much stress will they place on an already overloaded transportation system? What will the state’s financial liability be accommodate another 400 drivers on state roads?
Another question: Dominion Virginia Power is projecting that Northern Virginia will begin experiencing brownouts within four years. Does the state need to be subsidizing the influx of 400 more residents to put even more strain on the electric power grid?
Look, it’s a free country. If Volkswagen USA wants to move to Virginia, that’s great. But under the current circumstances, I wonder about the wisdom of the state inducing the company to move with $6 million in subsidies. Maybe the high salaries paid to VW executives will represent a net gain to the taxpayers of Virginia. Maybe. But we don’t know. If the state has made any cost-benefit calculations, it hasn’t made them public.
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