Norfolk Southern may owe city if its headquarters moves

Published November 30, 2018 by Michael O'Connor

When a Norfolk Southern Corp. executive sent a letter to the city of Norfolk and a state authority outlining terms to which the company would agree to move part of its Roanoke office operations to its corporate headquarters in Norfolk rather than to its operational headquarters in Atlanta, he expressed optimism about the Hampton Roads city.

The year was 2015.

Today, Norfolk Southern again is considering a corporate office shakeup and once more has Georgia on its mind.

Atlanta’s City Council recently approved a $1.9 billion downtown redevelopment project that The Virginian-Pilot reported was key to a relocation of Norfolk Southern’s headquarters to Atlanta. The company is now waiting to see whether Atlanta’s economic development arm will sign off on $600 million in bond financing for a new 750,000-square-foot headquarters building for Norfolk Southern.

Norfolk Southern already has around 1,900 employees at an office building in Atlanta. The company has around 500 employees in its current corporate headquarters in downtown Norfolk at 3 Commercial Place and a total of 982 employees in the Hampton Roads region.
Norfolk Southern agreed to add to its corporate headquarters functions in Norfolk after signing in 2016 a 10-year performance agreement with Norfolk and its economic development authority. The company had relocated about 500 employees in Roanoke to Atlanta and Norfolk.

Under terms of the agreement, which don’t expire until 2026, Norfolk Southern would get $1.925 million from the Commonwealth’s Development Opportunity Fund and a $2.5 million parking subsidy for a Norfolk city garage.

In return, Norfolk Southern agreed to invest $8.2 million in its Norfolk headquarters and bring 165 new jobs to Norfolk that paid an average minimum salary of $97,000 a year. The terms of the agreement dictate that Norfolk Southern has to submit annual reports showing it maintains at least 90 percent — or 148.5  — of the jobs it brought to Norfolk. The company has done so for 2017 and 2018.

With Norfolk Southern eyeing a move before its performance agreement with Norfolk expires, the company may have to pay back a portion of the subsidies it received.

Norfolk Southern’s performance agreement with Norfolk and the city’s economic development authority includes clawback provisions. They say that Norfolk Southern could have to pay back an amount that is proportionate to the average number of jobs it created between the start and end dates of the performance agreement.

For example, if by 2026 Norfolk Southern had maintained an average of 50 percent of the target new jobs number, or 82.5 jobs, then it would owe Norfolk’s economic development authority 50 percent of the incentive money, or $962,500. The example is cited in the actual performance agreement. There is also a provision for how the company would have to pay back its parking subsidy.

The Virginia Economic Development Partnership and Norfolk did not respond to follow up questions about the agreement by press time.
Norfolk Southern declined to respond to questions about its Norfolk performance agreements.