Followup: Strategic Fund helps bring Sallie Mae HQ to Delaware

Delaware's aggressive use of its Strategic Fund continues, playing a role in this week's announcement that Sallie Mae will move its corporate headquarters from Reston, VA to the First State.  The move is expected to bring at least 15 hundred jobs to Delaware.  Delaware First Media detailed Governor Jack Markell's push to replenish the fund is part of its coverage of the budget process in the General Assembly. (See State ready to spend more to lure business.)

Over a five year span, the State is using the fund in two different ways as part of the Sallie Mae deal.

First, it is offering a Strategic Fund Grant equal to 3 percent of Sallies Mae's planned $100 million capital investment in its new Delaware headquarters, a grant that is capped at $3 million dollars.  Alan Levin, the director of Delaware's Economic Development Office, says the money can be used for anything from building to computers and phones that will help facilitate the move, similar to the way Testing Machines Inc. (TMI) used its Strategic Fund allocation in its recently completed relocation from Long Island to New Castle. (See Big deal for small companies.)

The State is also offering a Strategic Fund grant for the jobs Sallie Mae brings to the First State above the 891 already working at their Newark facility.

"As an incentive, we will pay them a sum, and it depends on how much these individuals are paid.  If their are $60,000 employees, they get "X" amount.  If they are $70,000 employees, they get "Y" and so on down the road." said Alan Levin, Director of Delaware Economic Development Office.

Levin adds that Sallie Mae could also tap into the Delaware New Economy tax credit program, if they bring 50 or more high wage employees who make over 105,145 dollars.  But if they use that credit, they could not count those employees against the Strategic Fund grant.

"The Strategic Fund contributions are very much tied to investments in employment by Sallie Mae." said Governor Jack Markell (D) in  conference call Friday.

Levin and Governor Markell (D) emphasize that the Strategic Fund money wasn't a make or break part of the deal, citing factors such as a quality workforce,, location, schools and quality of life as more critical.

"Without those factors, the Strategic Fund probably wouldn't make a difference with most companies." said Gov. Markell.

"These economic incentives are really kind of a one shot deal.  They may push you one way or the other, but, in the end,  if you don't have all the attributes, quaklity of life, great schools, great environment, nobody is going to move here. " said Levin. "Yes, the incentives help, but its the whole package."

But Sallie Mae CEO Albert L. Lord suggests the Strategic Fund contributions are an important piece of the puzzle.

"They are amounts that make certain thing possible because we will incur some significant costs on our side in this transaction and I have to justify the transaction." said Albert L. Lord, CEO of Sallie Mae.

Sallie Mae is expected to begin occupying its new headquarters in Delaware in 2011.  Lord says while a core group will move from Reston, the majority of the new jobs in Delaware will be local hires.