House Joint Resolution No. 448 (Appendix A), agreed to during the 1991 Session of the General Assembly, established a joint subcommittee to study the incentives and obstacles facing businesses when making location decisions in Virginia. The resolve clause in the resolution directed the subcommittee to:

• Evaluate the incentives offered by the Commonwealth to encourage businesses to locate in the Commonwealth, compare these incentives to those offered by other states, and recommend legislation necessary to ensure that the Commonwealth is competitive with the other states;

• Review the various permitting processes involved in establishing businesses in Virginia to identify ways in which those processes may be streamlined and expedited and, to the extent possible, recommend appropriate legislation to expedite the permitting process; and

• Review laws related to business operations as they affect the expansion of existing facilities.

The subcommittee consisted of ten members as follows: four members of the House of Delegates appointed by the Speaker; three members of the Senate appointed by the Senate Committee on Privileges and Elections; two citizens of the Commonwealth appointed by the Governor; and a designee of the Attorney General.

Economic development has long been an area of activity in the Commonwealth. Beginning in 1984 with the creation of the Department of Economic Development, Virginia has moved ever forward in creating new jobs and increasing its tax base to improve the quality of life for all citizens of the Commonwealth. Emphasis on economic development has included reorganization at the cabinet level of state government where in 1986, a Secretariat dedicated exclusively to economic development was created from the Secretariat of Commerce and Natural Resources. Five legislative subcommittees have been established since 1986 to study various aspects of economic development. The Joint Legislative Audit and Review Commission (JLARC) has also been directed by the General Assembly to review Virginia's economic development policies and the overall performance of the Department of Economic Development.

Environmental permitting as a component of economic development has become an issue in recent years. Industry complaints about the time required for an environmental permit to be issued focused attention on the permitting process and resulted in the creation of the Permit Assistance Group (PAG), which established within state government a coordinated and consolidated service to assist nongovernmental applicants in the permitting process. Despite the creation of PAG, the environmental permitting process continued to be the center of attention.

The subcommittee met four times during 1991 to consider its charge under HJR 448. In addition to its initial organizational meeting at which testimony was heard, the subcommittee conducted public hearings, and its work culminated in a final work session at which recommendations for legislation were formulated and put to a vote.

With reference to the issue of business incentives, those offered by the Commonwealth were found to be generally diverse and effective in recruiting new industry and encouraging existing business to expand in Virginia. Additionally, the subcommittee found Virginia's incentive package to be competitive when compared to neighboring states, with few exceptions. The members examined those areas where Virginia was not competitive and determined that economic development efforts could be improved by assisting business in defraying initial start-up costs, involving the business community in promoting Virginia as a good place to do business, and expanding existing financing programs into the export area. The subcommittee, without dissent, voted to recommend the following legislative proposals:

• Establishment of a Governor's discretionary or contingency fund for infrastructure and other improvements for new industry and the expansion of existing business;

• Creation of a tax-exempt organization made up of corporate leaders in Virginia to assist in the promotion of Virginia's economic development efforts;

• Creation of regional economic development organizations and their coordination with the Virginia Department of Economic Development;

• Memorialization of Congress to extend the sunset on industrial revenue bonds;

• Development of an overall state economic development policy by the current administration; and

• Creation of an export loan guarantee program to be administered by the Virginia Small Business Financing Authority.

In the area of environmental permits, the subcommittee stressed its underlying belief that it was not their intention, nor was it in the best interest of the Commonwealth, to relax the regulatory standards by which permit applications are measured. The subcommittee agreed that the goal of industry and the regulatory community must be the issuance of permits which withstand court scrutiny and EPA review. The goal must also be the expeditious handling of permit applications. Further, the subcommittee recognized that, in the majority of permit reviews, it is the federal government and not state government which sets the minimum standards for the environmental permits. The subcommittee was reluctant to tamper with permit review processes which are essentially federally mandated.

In their deliberations, the subcommittee questioned whether the protracted permit review process is a function of an anti-business attitude by the environmental regulators or a function of state budget cutbacks resulting in reduced or insufficient staffing. Testimony on this point, however, failed to discern an anti-business attitude by regulators and, instead, pointed to the lack of necessary resources to address existing permit review backlogs. The subcommittee then considered the regulants' responsibility in sharing the cost of regulation by imposing fees on the permit applicant.

In the environmental permitting area, the subcommittee recommended:

• The imposition of environmental permit application fees to provide a reliable and continuous source of funding for environmental regulatory agencies; and

• Continuation of the Joint Subcommittee Studying the Incentives and Obstacles Facing Businesses When Making Location Decisions in Virginia created pursuant to HJR No. 448 to (i) examine and evaluate the effectiveness of changes proposed by the Secretary of Natural Resources to expedite the permitting process and (ii) consider, further, related issues necessary to develop specific recommendations to streamline the environmental permitting process and enhance Virginia's overall economic development efforts.