What happens when one of Virginia’s corporate welfare schemes falls apart? The resides of Martinsville and Henry County are about to find out, as StarTek, a “business process outsourcing company” that, to great fanfare, opened a large call center in Collinsville in 2004 is closing-up shop and laying off over 600 employees. It was the largest private employer in the area.
The company cites “a client’s changing business requirements” as the reason for the closure. But as Jason Kenney notes, StarTek has a history of opening and then closing facilities in Virginia…all the while creating far larger facilities overseas, including opening a 500 person operation last November in Costa Rica and, in 2008, an 1,100 person facility in the Philippines.
That’s hardly a comfort to the people in Southside who are losing their jobs. But the pain extends to taxpayers, as well:
When it announced plans to open here, StarTek said it would invest $5 million in the facility and create 500 new jobs over 30 months, company officials said at the time.
In return for the investment and job creation, StarTek was to get $250,000 from the state Tobacco Region Opportunity Fund plus $200,000 from Henry County toward setting up the building. The county also was to pay StarTek $400 for each new job created, officials said, which amounts to another $200,000.
The company hit all the economic development benchmarks, so the entities that forked-over the cash will be unable to recover a dime.
But the stunner is that Henry County was paying the company $400 a head for new employees. That’s quite a sum. It’s also not the first time the County has paid a company handsomely to create jobs, only to watch those jobs soon disappear. An economic development deal with furniture maker American of Martinsville consumed around $280,000 of taxpayer money. The company closed its local operations, which means that the public investment is gone:
Trying to protect its investment, Henry County put liens on the sofas and loungers still on the premises, but the furniture maker filed for bankruptcy reorganization in June. The court ruled the county an unsecured creditor and it never was repaid, says county administrator Benny Summerlin. “Now we’re stuck,” he says.
And now they are stuck again.
Not all economic development deals come to such unfortunate ends. But the bad ones should serve as reminders to Virginia taxpayers that the local political class, which loves to make deals with other people’s money, sometimes loses it all.
