The Vermont Economic Progress Council has given initial approval to nearly $1 million in incentives to Keurig Green Mountain, formerly known as Green Mountain Coffee Roasters.
The Waterbury-based company is Vermont’s largest in-state business and its sales have quadrupled over the past four years.
Keurig Green Mountain’s enormous growth from a café in Waitsfield to a global company with more than 6,000 employees has been fueled by the sales of its popular K-Cup serving systems.
Since the Vermont Employment Growth Incentive Program was started in 2007, the company has qualified for nearly $7 million in state incentives.
Any company is eligible for the program, no matter how large it is or how fast it’s growing.
What is key is whether or not the company is creating jobs in Vermont that would not be created, or would be created in a less desirable manner, without state assistance.
On that basis, this week VEPC gave initial approval to another $980,339 in state incentives for Keurig Green Mountain.
“It’s a fast growing company and the issue is do we want some of that growth to occur here,” says Fred Kenney, executive director of VEPC.
Each year VEPC has up to $10 million to award to companies willing to create jobs that they would not otherwise create in Vermont. On average, VEPC has authorized about $5.6 million in incentives annually.
The incentives are cash payments made by the state over a nine year period to assure that companies fulfill the terms of the program.
The jobs must be permanent full-time positions that pay at least 160 percent of Vermont’s minimum wage.
Kenney says the state takes a cost-benefit approach to the incentives. In addition to creating jobs, the incentives must more than pay for themselves in the tax revenue they generate.
“Not only do we calculate the cost of the incentive, but also the cost to the state in services and other costs and there still has to be a benefit to the state,” says Kenney.
The central part of the incentive equation – and the one that has attracted the most scrutiny – is the question of whether or not the Vermont jobs would be created without the state money. This is referred to as the ‘but for’ test.
Kenney says part of making that determination involves calculating the natural growth of a company in order to be certain the jobs created would not materialize without the incentives.
This growth calculation is based on industry-wide figures, not the growth of the specific company.
A 2008 report by the Vermont State Auditors office said that using industry growth figures instead of measuring a company’s own growth had resulted in awarding incentive money for job creation that would have occurred normally.
The report recommends that when a company’s growth is higher than average, VEPC should focus on the company, not on the industry to make its decisions.
Keurig Green Mountain would fall into that category. Kenney says that approach puts the state at a competitive disadvantage against other places that are vying for the same jobs.
He says Vermont’s policy of factoring in industry growth figures is an accurate way of determining who should receive incentives – and it’s a more stringent requirement than other programs use.
State auditor Doug Hoffer says his office may revisit this issue in the future.
Keurig Green Mountain must submit additional information to win final approval under the VEGI program.
Total VEGI incentives, January 1, 2007 - December 31, 2012:
- $3,787,093 in incentives paid out ($33.7 million authorized).*
- $17,476,000 net state revenue generated from incentives.
- 2232 jobs directly created.
- $124,882, 851 additional payroll created.
- $232,924,173 in capital investments.
*because payments are made over a period of nine years, many approved incentives are still active. Also, some incentives were not paid because companies failed to meet performance requirements.