Days Before Announcing Essex Junction Layoffs, Company Secured $5.3 Million State Incentive
On Nov. 6, California company Marvell announced it was laying off 78 employees at an Essex Junction plant it had recently acquired.
But less than a week before announcing those layoffs, Marvell quietly secured approval for $5.3 million in job creation incentives from a Vermont state program. And, while the program is shrouded in secrecy, Marvell may be able to receive the money even after the layoffs.
Marvell bought Avera Semiconductor, a subsidiary of GlobalFoundries, for $600 million earlier this month and promptly announced it was laying off 78 of its roughly 300 Vermont workers. The company cited redundancies between Avera and its existing business.
But records show that just six days before, Marvell secured the potential for future funding from a government program designed to provide more jobs in Vermont.
On Oct. 31, the state approved an application for Marvell for what it calls a Vermont Employment Growth Incentive — also known as VEGI. The state agreed to give Marvell up to $5.3 million of taxpayer money over several years. But like all VEGI deals, the terms are secret.
Joan Goldstein, commissioner of the Department of Economic Development, said state officials began having conversations about VEGI with Marvell several months ago, when the company's plans to buy Avera first surfaced.
"Marvell is a pretty global company, has real no allegiance to Vermont, and so the idea behind VEGI is to make sure that this, Marvell, would be a new company to Vermont, that Marvell would establish and keep the jobs in Vermont," Goldstein said.
Marvell has not received any state dollars — yet. Under the incentive program, Marvell and other applicants don't receive any money up-front. The funds are paid out over several years, if they meet specific job creation and capital investment targets.
But it is possible that Marvell will still be able to receive state money, even after the layoffs.
Goldstein said the approval of a VEGI incentive for Marvell was about keeping some high-paying jobs in Vermont.
"And the prospect of all of that talent and human capital leaving the state is really, really tough for us to take,' Goldstein said. "If we did not do VEGI, I'm not sure what else would convince them to keep those jobs here."
More from VPR — Can You Prove That Vermont's Main Business Incentive Creates Jobs? It's Debatable [Feb. 16, 2018]
Under VEGI, payments can be canceled or refunded if the company falls short of its goals. But it is unclear what Marvell's job creation goals are. VEGI applications are not public records.
"Yeah, I mean, suffice to say that they represent that they're going to meet these following targets over a period of five years, and each and every year, [the] Tax Department will verify that they've indeed met and maintained those targets," Goldstein said.
State Auditor Doug Hoffer is a frequent critic of VEGI and its lack of transparency. He said he was surprised by the size of the incentive Marvell could receive.
"What could you possibly agree to do that would warrant a $5.3 million award?" Hoffer said. "Is that basically saying, 'We will not close the company?' I mean, they just bought it. They can't close it."
More from VPR — State Board Responds To Media Attention Toward Business Incentive Program [Oct. 29, 2018]
VEGI awards are contingent on the company saying the jobs or investment they're creating would not happen "but for" the incentive. Hoffer said it's impossible for him to verify whether a company would create jobs with or without the incentive, because company records are private.
"Can we rely on that 'but for' statement? I don't know," Hoffer said. "I know that they submitted the statement. That's all I know. And it's certainly true for this one as well. For every single award they make, I have to honestly say I can't determine whether the award was necessary or not. Can't be done."
Spokespeople for Marvell did not immediately respond to a request for comment. Marvell reported $2.9 billion in net revenue last year.
Marvell's layoffs are set to take effect in January.