RD292 - Annual Report on Business Incentives 2006-2007


Executive Summary:
In the 2007 Appropriations Act, the General Assembly directed 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 (VEDP) 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 Kaine has demonstrated his commitment to expanding and sustaining economic development in all areas of the Commonwealth. As Secretary of Commerce and Trade, I am pleased to report that Virginia has 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 in the communities, 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, the 2006 General Assembly session passed a bill codifying many of VEDP’s existing practices with respect to the Governor’s Opportunity Fund (GOF). The primary change mandates that all projects receiving GOF grants pay at least as much as the local prevailing wage, unless that locality’s unemployment rate exceeds the annual statewide average rate.

Because GOF is a performance-based incentive, recipient companies must meet certain capital investment and job creation targets. VEDP recoups GOF awards from companies which have not performed. As a diligent steward of GOF funds, VEDP has recovered over $13 million to date from projects that have underperformed.

There are many examples of Virginia’s economic development successes, and they receive a more detailed presentation in the Annual Report of the VEDP. This report is available on the VEDP website at http://www.yesvirginia.org/About_Us/Library.aspx .
_________________________________________________
(*1) Chapter 3 of the 2007 Virginia Acts of Assembly, at Item 100 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.