RD105 - Annual Report on the Use and Efficacy of State Incentives in Creating Investments and Jobs in Virginia


Executive Summary:
In the 2004 Appropriations Act, the General Assembly requested the Secretary of Commerce and Trade to report to the Chairmen of the Senate Finance Committee and House Committees on Appropriations and Finance “on the use and efficacy of state incentives in creating investments and jobs in Virginia.” (*1) In apparent recognition of the wide range of programs offered by the Commonwealth and its localities, the General Assembly asked that “for the purposes of this report, the incentives to be reviewed in the study are those incentives included in the Virginia Economic Development Partnership’s publication, 'Virginia Guide to Business Incentives 1997-98'." Thus, incentives offered by local governments and various other means of recruitment and expansion are not listed herein. (*2)

Governor Warner has demonstrated his commitment to expanding and sustaining economic development in the Commonwealth. As his Secretary of Commerce and Trade, I am pleased to report that we have enjoyed tremendous success in economic development this year.

Despite this success, we must not rest on our accomplishments. Instead, we must ensure that we obtain the maximum return on our investment, both in the use of incentives and with any other economic development measures. Moreover, we must be vigilant to maintain our competitive edge. Our competitors, both in our region and across the nation and the world, are finding new ways to attract and retain business through fiscal and other policies.

This report, as requested, is a compilation of results from the last fiscal year. These results demonstrate an effective record of economic development in terms of investment and job creation. The multiplier effect on the community, including other industries attracted as a result of the new or expanded business, makes these results even more significant. Of course, in analyzing incentives, we must examine the total Virginia effort rather than only looking at each separate program in a vacuum.

In the area of business incentives, during the 2004 General Assembly session we sought passage of a new incentive program to appeal particularly to headquarters operations and financial services businesses as Virginia transitions away from reliance on manufacturing. In many situations our existing incentives are not available to these high-wage large employers, because these projects may not feature significant new capital investment. This legislation failed but we will continue to look at new programs to meet this need.

There are many examples of Virginia’s economic development successes, and they receive a more detailed presentation in the Annual Report of the Virginia Economic Development Partnership. This report is available on the VEDP website at www.yesvirginia.org/corporate_location/library.aspx.
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(*1) Chapter 4 of the Acts of Assembly, at Item 95 B.
(*2) Recruitment often generates an entire negotiated range of activities, which can include private activity bond allocation, advantageous utility rates, regulatory assistance, proposed legislative changes, assistance in accessing private capital, and assistance with environmental certifications and permitting.