Expensive attrition: $500K for zero job gains

The headlines earlier this month reported that pharmaceutical giant Merck was to expand its Shenandoah Valley operations– and the fine print beneath detailed how the Commonwealth of Virginia was going to help.

It turns out that it's state taxpayers who are on the hook to the tune of $500,000.

While Whitehouse Station, New Jersey-based Merck is indeed expanding in Rockingham County– the Elkton facility will participate in part of the manufacturing process for Gardasil, a vaccine being developed by Merck to prevent the incidence of human papilloma virus infection and the associated development of cervical cancer and genital warts– it will not mean the addition of any new jobs on the local plant's roster.

Also of note is that the Elkton plant is in the process of laying off 30 to 40 workers in a move that was announced last month.

This would seem to be unusual– the state kicking in half a million dollars to a company that's not going to add workers as a result of the investment– but is in fact planning a workforce reduction.

"There won't be any impact on the number of employees," says Merck spokesman Pat Witmer. "What this will allow us to do is retrain 30 to 40 existing employees to be able to work the new process. So the expansion will allow us to maintain the existing number of employees. That's still very good news."

Kevin Hall, a spokesman for Governor Mark Warner, whose office approved the $500,000 grant from the Virginia Investment Partnership program, explains that companies that enter into similar agreements with the state qualify for the reimbursement monies based on their adherence to certain performance standards, including a specified level of investment into operations and the maintenance of preset employment levels.

"Those standards have to be met before the companies can expect to receive any money from the state," Hall said.

That's not enough to satisfy one Virginia legislator.

"There needs to be more accountability with how these dollars are spent so that we can make sure that we're getting the value of the dollars we are doling out," said Fairfax Democratic Delegate Chap Petersen, who introduced legislation for consideration in the 2005 Virginia General Assembly session to establish accountability requirements in the Commonwealth's economic-development programs.

"In my opinion, there have been significant abuses of economic-incentive funds," said Petersen, who is running for the '05 Democratic Party lieutenant-governor nomination and is a member of the bipartisan House of Delegates Cost Cutting Caucus.

"I've heard this from local officials around the Commonwealth, from Southside to Hampton Roads to the Shenandoah Valley. People are tired of seeing businesses take the taxpayers' money and then cut operations and employees," said Petersen. "It's a slap in the face."