RALEIGH- The state of North Carolina and local governments in Chatham County will shell out big bucks in tax incentives to bring VinFast’s Vietnam-based electric vehicle manufacturing plant to the state. But an economic formula used to analyze these corporate recruitment offers indicates that the return should be in the billions for NC.
According to the so-called “Walden model”, the VinFast project over the duration of the 32-year agreement will have:
- Estimated increase in North Carolina’s GDP (gross domestic product) of $71.6 billion
- Estimated NSR NC (Net State Revenue) increase of $596 million
The immediate impact on the regional economy in terms of payroll will be “over $383 million each year,” according to Goy. Roy Cooper.
The “Walden Model” is named after Dr. Michael Walden, a retired economist from NC State University.
Here’s how it works, according to Walden:
“The ‘Walden model’ performs a cost-benefit analysis for the use of state incentives. All forms of rebates and tax reductions are considered. The objective is to develop an estimate of the net benefit to the state of using incentives to attract business.
“It uses standard economic development formulas to estimate both the direct revenue and employment impacts of the entering business, as well as the ‘downstream’ impacts of suppliers as well as derived consumer spending. the income of new workers.
“I developed the model twenty years ago at the request of the state (I received no compensation for this work – it was considered part of my state outreach assistance).
“The General Assembly had passed a bill requiring such a benefit/cost analysis.”
Walden said that since the “model is the property of the State Department of Commerce”, he is “not at liberty to provide details”.
The incentives for what has been labeled “Project Blue” by the North Carolina Department of Commerce are substantial.
A contract signed between VinFast and the state’s Economic Investment Board (part of the North Carolina Department of Commerce) requires the company to hire at least 6,000 workers at an average salary of just over of $50,000 and invest some $4 billion in order to qualify for the incentives. This is according to the oral briefing given to EIC members during a conference call on Tuesday to give final approval of the deal.
- A Job Development Capital Grant, which is effectively a rebate of state income tax withheld from employees, of $316 million over 32 years if job creation goals jobs are achieved
- A state appropriation of up to $450 million, to cover site preparations, road improvements and additional water and sewer infrastructure.
- Community college training worth $38 million
- $50 million Golden Leaf Foundation grant
- And $400 million in Chatham County incentives
Governor Cooper’s Breakdown
Announcing the deal, Cooper explained the incentives and how they work:
“VinFast’s project in the state, which will be formally delivered through a newly created company, will be facilitated in part by a committee-approved Job Development Transformative Investment (JDIG) grant. of state economic investment earlier in the day.
“The VinFast project is estimated to grow the state’s economy by at least $71.59 billion over 32 years, the period during which the grant could be active. Using a formula that takes into account new tax revenue generated by new jobs, as well as a company investment of $4 billion, the JDIG agreement authorizes the potential reimbursement to the company of up to 316 $.1 million, paid over 32 years.
“Like all JDIG program grants, any state payouts only occur after performance verification each year by the Departments of Commerce and Revenue that the company has met its additional job creation goals and of investment.
“VinFast’s JDIG agreement provides for the transfer of up to $36.6 million into the state’s Industrial Development Fund – Utilities Account. The Utilities Account helps rural communities across the state fund infrastructure upgrades needed to attract future business.
“The state also plans to provide additional support for the project through a state appropriation of up to $450 million, to cover site preparations, road improvements, and additional water and sanitation infrastructure. sewers.
“Salaries for the new jobs will vary by position, but taken together they will average $51,096, which will increase the regional payroll by more than $383 million each year. The Chatham County average annual salary currently stands at $41,638.