Subsidy Skepticism in Arlington

Subsidy Skepticism in Arlington

County Board candidates range from hostile to uncertain on Nestle deal.

Rosslyn, site of the incoming Nestle headquarters.

Rosslyn, site of the incoming Nestle headquarters. Photo by Vernon Miles.

Arlington County had a chocolate craving. It wanted Nestle, badly, and it was willing to pay $6 million to acquire it. But some, including County Board candidates, say they’re concerned the county may have overindulged its appetite.

At the Sept. 16 County Board meeting, the first of the county funding — $1.27 million — intended to entice Nestle to move to Arlington County was allocated for reimbursement of infrastructure improvements outside the future Nestle headquarters. The funding comes right as Arlington County also begins its publicly announced courtship of, hoping to entice the online retail giant to open a second headquarters in Arlington. But the decision also comes in the middle of an ongoing race for a County Board seat vacated at the end of the year. Whoever is elected in the fall, the County Board may find their new colleague much less receptive to tax credits for major incoming businesses.

As the three-way race for County Board goes on, one thing all candidates seem to share is a uncertainty about the County Board’s decision to offer incentives to corporations like Nestle to entice them to move to Arlington. If it can meet certain goals set out by the state and local governments, Nestle will receive $16 million in tax credits. Of that $16 million, $10 million come from state funding while $6 million is coming from Arlington County. From the county funding, $4 million is allocated in the form of performance grants, given on condition that Nestle reach certain conditions like half of the hires at the new office being local; while $2 million, like the Sept. 16 funding, is being offered in infrastructure improvements.

County Board candidates Audrey Clement and Charles McCullough have expressed their disapproval of the Nestle decision throughout the campaign. After the funding was allocated, McCullough criticized the reimbursements on Twitter as corporate welfare.

“I don’t think it’s the best use for this money,” said McCullough. “Average citizens end up subsidizing wealthy corps with limited benefits for the community. Benefits mainly go to shareholders. I don’t feel when I look at things like this that the taxpayers benefit.”

McCullough argued that if the county was going to finance businesses, it should instead focus on smaller local businesses rather than large, international corporations.

“We should be focusing on our small businesses here,” said McCullough. “They contribute to the character and economy of our local neighborhood. We’re courting these huge internationals who do not need these incentives, but there are needs there for small businesses.”

The question of tax incentives to entice businesses to Arlington has been at issue in the election since the Democratic primary. Erik Gutshall, the Democratic candidate, said he had some misgivings about the approach of offering tax incentives but that he wouldn’t rule out using them as an option to help rebuild Arlington’s economy and office space infrastructure.

“We have to be competitive,” said Gutshall. “We have great talent here because of great schools, great infrastructure, great parks. But other places have those too and we have to stay competitive. I don’t think we want to race to the bottom and that we should just be throwing incentives out and mortgaging our future. We have to do deals that make sense and in the long run, add to our community portfolio.”

Gutshall pointed to recent acquisition of the National Science Foundation by Alexandria, relocating the facility away from Arlington. When incentives are being offered to undercut neighbors, Gutshall said the region as a whole suffers. But Gutshall also said Arlington can’t afford to be left in the dust if others do.

“I don’t think we should be engaged in bidding wars within our region,” said Gutshall. “NSF getting wooed away by Alexandria was a horrible precedent. We can’t go back and unring that bell. That was a wake-up call for Arlington. We had a firm ‘we don’t do deals’ so that woke us up to be more willing to do deals.”

Gutshall doesn’t take as firm a stance on the issue as McCullough. For him, it’s a more complicated issue than cutting deals with these corporations being all good or all bad. For Gutshall, one of the main distinctions is whether a deal is intended to undercut other cities or whether it is competing with other localities in the same region. As part of the Nestle deal, Gutshall noted that Atlanta was also being considered as one of the potential headquarters but did not offer any incentives.

“I’m not going to say never, because we don’t know what will come up in the future, but in general we should not be looking to make deals on an interregional play,” said Gutshall. “We shouldn’t try to steal someone from Montgomery County or race to the bottom if someone is trying to snare away from us. But we have to be willing to play the game that’s out there right now.”

Frank Shafroth, director of the Center for State and Local Leadership at George Mason University, noted that counties across the country cannot be quick to pass up the long-term economic benifits that come from greater corporate investments.

“Just as my wife and I deliberated hard with regard to how much we were willing to invest for our kids’ education … so too, one of the most signal responsibilities of an elected local official is to determine what kinds of investments are vital to the future economic and fiscal future of her or his community,” said Shafroth in an email. “It is just this kind of weighing process that Jeff Bezos [founder and CEO of Amazon] is pressing cities, states, and counties to go through now: the reward, for the winning jurisdiction: $5 billion in new private investment and 50,000 new jobs with annual projected salaries of $100,000. This is a critical exercise in governing.”