Senate Joint Resolution No. 171, adopted by the 1998 Session of the General Assembly, established a joint subcommittee to study economic incentives to promote the growth and competitiveness of Virginia's shipbuilding industry. The joint subcommittee was charged with determining whether, and at what level, tax benefits or other economic incentives would be an effective tool in ensuring the continued health of Virginia's maritime industries.

The joint subcommittee was requested to examine five proposals to assist the Commonwealth's shipyards in making the transition from their traditional focus on United States Navy work to a new economic era in which firms will need to compete with yards in other states and other nations for commercial shipbuilding and repair work while exploring nontraditional opportunities. These proposals included:

1. Extending deadlines for complying with state tributyltin (TBT) regulations;

2. Establishing a Virginia Marine Industrial Commission, similar to the Virginia Film Commission, to promote and provide marketing assistance to the shipyard industry;

3. Establishing a study committee to review the federal and state workers' compensation acts to eliminate duplicative coverage that make the benefit programs confusing and costly;

4. Establishing a study committee to conduct a comprehensive study of the tax structure of the Commonwealth and its impact on the shipyard industry; and

5. Considering future proposals for incentives for firms to invest in capital improvements in their shipyards.

These proposals were presented to the joint subcommittee at its meeting on December 17, 1998, and consequently there was insufficient opportunity to address them prior to the 1999 Session. The complexity of the issues prevented the joint subcommittee from completing its mission in a single year.

Continuation of Study in 1999

Senate Joint Resolution No. 436, adopted by the 1999 Session of the General Assembly, provided for the continuation of the study by the joint subcommittee. The joint subcommittee was charged with re-examining and exploring the five proposals put before the subcommittee in December 1998.

The joint subcommittee met in 1999 and began to address two of the five proposals: promoting and providing marketing assistance to Virginia's shipyard industry and designing incentives for firms to invest in capital improvements in their shipyards. As the amount of shipbuilding and ship repair work generated from contracts with the Navy continues to decline, Virginia's shipyard industry must diversify its customer base and compete in the commercial shipbuilding and repair work marketplace. A coordinated and comprehensive marketing program will assist Virginia's shipyard industry in expanding into the commercial marketplace. The joint subcommittee believes such a marketing program could emphasize and communicate to potential commercial customers the advantages of using Virginia's shipyards to build and repair ships and vessels.

Along with a coordinated marketing program, performance grants are another mechanism that can be used to facilitate expansion into the commercial shipbuilding and repair work marketplace. Many businesses making up Virginia's shipyard industry do not have the profits or earnings to finance the retrofitting of their equipment and operations needed to successfully compete in the commercial marketplace. The joint subcommittee believes that performance grants from the Commonwealth to these businesses, awarded based upon investments in capital and operations made by such businesses, will encourage these businesses to retrofit their equipment and operations accordingly.

The joint subcommittee is also particularly concerned with skills training for shipyard workers. The subcommittee heard testimony that there generally is a dramatic falloff in skills training for shipyard workers once they have completed entry-level training programs. The joint subcommittee believes that ongoing skills training for shipyard workers is crucial to the long-term success of Virginia's shipbuilding industry. A workforce trained to use current technology is seen as paramount to the economic livelihood of Virginia's shipyard industry.

Finally, at its meeting in December 1999, the joint subcommittee concluded that the complexity of the issues involved in the five proposals requires a further continuation of the study in order that all issues are sufficiently addressed.

Recommendations: Based on its study, the joint subcommittee recommends the following:

1. An appropriation of $100,000 for each year of the 2000-2002 biennium to the South Tidewater Association of Ship Repairers (STASR) to help fund the development of a coordinated marketing program promoting Virginia's shipyard industry. STASR is a nonprofit trade association organized for the purpose of maintaining the integrity and high professional standards of the ship industry in Hampton Roads, Virginia and to promote the interests of the industry;

2. Legislation providing investment performance grants for capital investments made by businesses comprising Virginia's shipyard industry. The minimum capital investment required should be $50,000, and the grant amount from the Commonwealth should be equal to 10 percent of the cost of the capital investment. Under the legislation, the aggregate amount of grants to individual shipbuilding and ship repair companies should not exceed $25 million, and any grants awarded should be limited to actual moneys set aside or appropriated to a special, non-reverting fund;

3. An appropriation of $800,000 for each year of the 2000-2002 biennium for use by STASR in providing enhanced skills training to shipyard workers; and

4. Legislation continuing for another year the joint subcommittee's study of economic incentives for Virginia's ship building industry.