Brian Abraham, the Governor's Chief of Staff, testifies on Monday, Jan. 10, 2021. Photo by Perry Bennett/WV Legislative Photography.

Update: On Wednesday afternoon, Gov. Jim Justice announced that Nucor had selected Mason County as the site for a $2.7 billion sheet steel mill. That announcement came hours after Justice announced that he had tested positive for COVID-19. The in-person State of the State address was cancelled, and the governor delivered a written message to the Legislature to meet the constitutional requirement that he do so at the start of the session.

On Tuesday, West Virginia lawmakers were set to hear testimony about an area where the state could be leading the way on economic policy: Elimination of special tax break deals targeted to land specific new development projects.

George Mason University researcher Michael Farren was the key witness. He was going to tell the Legislature’s Commission on Interstate Cooperation that huge incentive packages don’t really work, and describe how West Virginia could help eliminate pointless competition among states trying to land new jobs.

“These subsidies remain a tenacious problem, even as support grows for phasing them out,” Farren planned to tell lawmakers, according to his prepared testimony. “Academic research consistently shows that economic development subsidies fail to achieve their stated goals.”

But by Monday night, Farren’s testimony was off. The committee’s meeting was cancelled.

West Virginia lawmakers, called into special session by Gov. Jim Justice, had been diverted to what elected officials across the spectrum seemed to agree was more important business. That’s right, they were rushing through a huge incentive package, apparently so it could be completed in time for Justice to make a big splash about it during Wednesday’s State of the State address.

A few lawmakers meekly questioned the wisdom of the move. But even more of them ended up voting for the bills put forth by the governor’s office. West Virginians — the taxpayers footing the bill — weren’t even given the name or the specific details of the deal the administration had worked out. Those details are down on paper, apparently in a memorandum of understanding with the company, whose name throngs of insiders know, but won’t say on the record, but the memo hasn’t been made public, despite a specific state law requiring deals that obligated state funds be released.

The scene this week at the Capitol would be remarkable, if it weren’t for the fact that West Virginia’s recent history is littered with economic development incentive plans that were rushed through, and that in the end haven’t lifted the state off the bottom of many lists of positive economic indicators.

That didn’t deter state leaders, including House of Delegates Speaker Roger Hanshaw, R-Clay, who said in a press release, “The time for us to argue whether economic development incentives should be utilized has long since passed.”


State officials made clear the legislation is meant for a $2.7 billion manufacturing investment from a steel company that will employ around 800 people. 

They have repeatedly refused to name the company, but Nucor, one of the nation’s largest steel producers, announced in September that West Virginia, along with Ohio and Pennsylvania, was in the running. 

Nucor officials did not respond to emailed questions. The proposed facility would be in Mason County, administration officials said, and there could potentially be another investment in the Northern Panhandle for a transloading facility.

Brian Abraham, the governor’s chief of staff, told lawmakers on Monday that the list of potential sites later went down to two, with West Virginia still in the running. “And one of our neighboring states laughed and said, ‘Well, they’ll never be able to play in this game, they have no money.’”

But West Virginia does have money; the state has already received half of the $1.35 billion it will get through the American Rescue Plan, intended by Congress to provide relief and recovery from the COVID-19 pandemic. And West Virginia legislators, by voting on the bill package provided by Justice, showed they were willing to devote up to $315 million of that federal money for this project.

The legislation would cut the budget of various state departments and send that money to the state Department of Economic Development to be used in the deal with Nucor. The money taken away from the departments would be replenished by the ARP money. 

Sean O’Leary, the senior policy analyst for the West Virginia Center on Budget and Policy, said the move goes against the spirit of what the federal money is supposed to do. 

“That money was meant to help us recover from a pandemic, to help those who were struggling, to help the businesses in the state that were impacted by the pandemic, to help the people in the state who were impacted by the pandemic, and to help close some of the disparities the pandemic help uncovered the racial health disparities,” he said “We’re not doing any of that, we’re giving this money to a company that has $20 billion in annual revenue.”

The bill also offers Nucor various tax incentives, including an income tax credit of up to 50% of what the company invests into the manufacturing project. Since that amount is slated at $2.7 billion, that would be a projected $1.35 billion tax credit. The tax legislation largely combines what’s already offered under state law, Abraham said.

While this legislation is geared toward Nucor, it offers its tax exemptions to any company subject to the approval of the Department of Economic Development, with the main criteria being the investment of at least $2 billion in property for manufacturing purposes and the hiring of at least 500 employees within three years.

Abraham said the project would also create at least 1,000 construction jobs, and he cited a West Virginia University report that the investment would create nearly $25 billion in economic activity and, over the same period, $438.8 million in non-exempt taxes.

“There is exponential growth that can be created by this, and that’s why we believe the investments are needed,” Abraham said. 

A rush despite history 

West Virginia politicians have made similar promises in the past when trying to entice businesses to come to the state. Those haven’t always ended well. 

Between 1988 and 1997, the state spent an average of $90 million annually for tax credits to businesses, but that program was stopped when tax analysts revealed they were ineffective. 

In response, a $25 million program was created to loan money to venture capitalists, who would repay it with interest. A recent audit found more than $20 million of that hadn’t been returned. 

Whether it be promising more than 100,000 new jobs from petrochemical expansion that never appeared, or an $84 billion investment from a Chinese company that has failed to materialize, the state’s track record on economic promises is also lukewarm.

Yet this latest bill passed rapidly. 

“I cannot see why it’s being rushed through without actually looking at it,” said Sen. Owens Brown, D-Ohio, who was the only senator to vote against the first bill of the package, which covered the tax incentives. “I read this bill, and it’s quite complicated.”

The Senate pushed through the bill package without assigning it to any committee for review and with minimal discussion, with only a handful of senators offering comments on the bill. The House only sent the legislation for review in the House Finance Committee; it passed that committee after an hour and a half of discussion on Monday, and passed the House chamber Tuesday morning.

Abraham said the state had been negotiating with the company for months. 

Del. Todd Longanacre, R-Greenbrier, said his constituents have the right to hear the deals played out in the proper committees. 

“Several delegates today on both sides of the aisle have said, ‘not sure what the rush is for,’” he said. “I’ll tell you what the rush is for. There’s a State of the State address coming up tomorrow night, and there’s a dog-and-pony show planned.”

Regardless of the state’s history, Abraham said he has confidence the company would fulfill its end of the bargain.

“You’re dealing with a Fortune 150 company, they’ve got deep pockets,” he said.

Steve White, the director of the Affiliated Construction Trades Foundation, a coalition of construction unions, said he hopes during the regular session that lawmakers modify the legislation to include incentives to hire West Virginia workers for construction. 

Before voting on the legislation, Del. Phillip Diserio, D-Brooke, said he would have liked to have seen that in the current bill.

“I’m troubled with what the rush is,” he said. “If I had time to do an amendment, it would probably look something like this, it would add an incentive for contractors to build these qualifying facilities to hire local construction workers.”

The legislature also passed a bill that gave the Department of Economic Development $15 million for a Morgantown-area medical supply and equipment company. This is on top of $31 million the Legislature has given the Department of Economic Development over the last year to secure corporate deals.

But, Farren of the George Mason Mercatus Center, which does free-market-oriented research of the sort West Virginia lawmakers often like to hear, said that on average, seven out of every eight subsidies do not change a company’s decision where to locate or expand. 

“The factors that affect its underlying profitability and production process are just much larger than practically any subsidy could compensate,” he said.

Even though his meeting with lawmakers on Tuesday was canceled, Farren was still walking the halls of the state Capitol on Tuesday, talking with lawmakers about being part of an interstate compact agreement where participating states agree not to compete with one another with subsidies. 

“The problem facing policymakers is that other states grant subsidies,” Farren said during an interview. “And so the policymakers, say in West Virginia, feel obligated to send a signal to their constituents that they are working hard to improve the economy of the state and that they are going to engage in the same kinds of pseudo-economic development practices that the other states engage in. 

“So it’s an endless race to the bottom.”

Reporter Quenton King contributed to this story.

Clarification – This story was edited on Jan. 18, 2022, to add this paragraph, which had inadvertently been left out when the story was originally published:

The bill also offers Nucor various tax incentives, including an income tax credit of up to 50% of what the company invests into the manufacturing project. Since that amount is slated at $2.7 billion, that would be a projected $1.35 billion tax credit. The tax legislation largely combines what’s already offered under state law, Abraham said.

Douglas Soule is a Report for America corps member who covers business and economic development. A Bridgeport native, he worked as an intern at the Charleston Gazette-Mail. He has served as editor-in-chief...