Norfolk Southern paying back Virginia, Norfolk

As Norfolk Southern gears up for its move to Atlanta, it is trying not to burn any bridges in Virginia – and paying the state back more than what the company owes.

Norfolk Southern says it plans by Dec. 31 to repay Virginia $1.925 million and Norfolk $581,575.50 as a way of making good on the performance agreements the company is breaking in relocating its headquarters to Atlanta.

On Wednesday, Norfolk Southern concluded talks with Norfolk and Virginia about settling up the performance agreements, which were to be in effect through 2026, Norfolk Southern spokesman Tom Werner said in an email.

“We recognized that the spirit in which the two agreements were forged was no longer intact, and immediately set about setting things right with the City and the Commonwealth in accordance with our corporate values,” Werner said. “Those discussions progressed easily.”

Stephen Moret, the president and CEO of the Virginia Economic Development Partnership, said in a statement that Norfolk Southern is paying the state more than it is required to pay under the terms of the performance agreement. He said the actual amount Norfolk Southern would have owed depended on how quickly the company ramped down in Norfolk.

“Certainly, they would have owed the majority of the original grant back, but not all of it,” Moret said. “While we are very disappointed about the headquarters move, we are grateful to the company for handling this reimbursement in such a forthright and prompt manner.”

Asked why the company planned to pay more than what it owes to Virginia, the Norfolk Southern spokesman said the company felt it was the right thing to do.

“Sometimes the correct answer isn’t in a spreadsheet,” Werner said.

The 10-year agreements with Virginia and Norfolk were entered into in 2016 as an incentives package so Norfolk Southern would move high-paying, white collar jobs from Roanoke to Norfolk rather than to Atlanta. The company got a $1.925 million grant from Virginia and lined up a $2.5 million parking subsidy with Norfolk.

In return, Norfolk Southern agreed to invest $8.2 million in its Norfolk headquarters and bring 165 jobs to Norfolk that paid an average minimum salary of $97,000 a year.

Last week, James A. Squires, Norfolk Southern’s chairman, president and CEO, announced it would relocate its headquarters to Atlanta. The decision was tied to an Atlanta redevelopment project where a $575 million headquarters will be built for the railroad company.

Last month, Virginia Business reported on the possibility of Norfolk Southern owing Virginia and Norfolk money if it broke the terms of the agreements and what the headquarters relocation would mean for Hampton Roads.

Werner, the Norfolk Southern spokesman, said that officials in Atlanta and Georgia had asked whether the company’s agreements with Virginia and Norfolk would be an impediment to its decision to move. He said the topic was discussed but never part of negotiating the move to Atlanta.

“As rumors of our move surfaced in the news, so too did the existence of the agreements and the obligations therein,” Werner said. “We indicated that those agreements would be handled between Norfolk Southern, the Commonwealth of Virginia and the City of Norfolk.”

Werner said key Norfolk Southern executives and about 100 employees are planned to begin moving to temporary offices in Atlanta at the beginning of summer 2019. The headquarters move is planned to be completed in summer 2021.

Despite its headquarters relocation, Norfolk Southern, a major charitable giver in Hampton Roads, won’t be cutting ties completely with Virginia. The company is working on finalizing a plan for its Virginia donations in the coming years.

“While our donations will likely change, as a whole they won’t stop,” Werner said. “Norfolk and Virginia are, and will remain, key components of the Norfolk Southern transportation network, and we will continue to support the communities in which we operate – Norfolk and Virginia included.”

The City of Norfolk did not respond to a request for comment for this story.