Using a "deal-closing" fund, Virginia spent $8.3 million between July 1, 2006, and June 30, 2007, on incentives to attract businesses that agreed to expand, open or relocate in the commonwealth.

Incentives can help seal the deal when two locations have the same work force availability or training, similar costs of doing business and comparable tax laws, said Renee Chapline, executive director of Virginia's Gateway Region, an organization that works to attract businesses and assist existing ones.

In Virginia, that can mean special tax breaks, cash grants, job training, day-care credits and even special legislation. A recent example is a bill signed last week by Gov. Timothy M. Kaine.

Known around the General Assembly as the "Volkswagen bill," the legislation exempts employees at automaker headquarters and their families from paying motor vehicle sales and use taxes if they lease a car built by the automobile manufacturer.

Volkswagen Group of America Inc. announced last fall its plans to move 120 employees and its headquarters from Michigan to Fairfax County in April.

A nonemployee pays $750 in taxes when buying a $25,000 Volkswagen. After July 1, a VW headquarters employee would not. Each employee is allowed to lease up to four cars per year for 12 months. Then the cars are sold.

The tax waiver was a benefit in Michigan.

"We knew to be competitive, we had to look at this issue," said Christie Miller, communications director for the Virginia Economic Development Partnership.

Volkswagen wanted to be sure moving did not cause the company to lose a benefit, said Jill Bratina, director of corporate communications for the automaker.

Virginia also agreed to pay the company $4.5 million over five years if the automobile manufacturer meets job and investment targets. Volkswagen plans to hire 250 more people.

In the first year, if 800 cars were used by employees, the estimated loss of tax revenue will be $604,766, according to a state department of planning and budget fiscal impact statement. After that first year and once cars start hitting the market, the state incentive amounts to $66,000 to $76,000 each year.

The legislation was for Volkswagen, but any automobile manufacturer headquartered in Virginia will be eligible and there is a hope the bill may attract other companies, Miller said.

It did not sit well with some in the House of Delegates, although it passed 86-10. (The Senate passed it unanimously.)

Del. Johnny S. Joannou, D-Portsmouth, said he was displeased that the incentive did not come out of a fund created to pay for incentives. "It ought not be tax exemptions on personal property between citizens."

Incentive money most often comes from the Governor's Opportunity Fund, which is allocated by the General Assembly from the general fund. That fund gets money from taxes such as sales, personal property and corporate, Miller said.

When Infineon, now Qimonda, went looking for a production center in the Richmond area in 2000, a plan was hatched to give back a portion of the tax that the state received from sales of the company's semiconductor chips, said Greg Wingfield, president of the Greater Richmond Partnership.

In five years, the state returned $65 million in taxes that had been paid to the company. For a $2.5 billion investment in Henrico, it seemed like a bargain, Wingfield said.

"The deal here is: You build it, you hire people, you make the product, then sell the product and the community reimburses a portion of the tax," Wingfield said.

Del. Thomas Davis Rust, R-Fairfax, who represents the district where the Volkswagen headquarters will be, had similar sentiments about the Volkswagen bill. The company plans to invest $100 million to relocate and about 370 people will work in the building, live in the area and spend their money locally. "I don't think we've given away the store by any means."

In most cases, benefits do not go to the companies until after they are established here. "Virginia is not an incentive-based state," Wingfield said. "Most of these deals are back-end loaded. We're not the first money in."

And it's not without strings. An incentive to Ford Motor Co. -- a $3 million grant because the company was expanding -- was not awarded when the automobile manufacturer closed its truck-assembly facility in Norfolk last year. Contact Emily C. Dooley at (804) 649-6016 or edooley@timesdispatch.com.

Staff writer Olympia Meola contributed to this report.