RD365 - Virginia Biotechnology Research Park Authority Report on Audit for the Year Ended June 30, 2006


Executive Summary:
The Authority is a political subdivision of the Commonwealth of Virginia (Commonwealth) created pursuant to Chapter 946, Virginia Acts of Assembly of 1993, as amended by Chapter 731, Virginia Acts of Assembly of 2000, and Chapter 788, Virginia Acts of Assembly of 2005. The Authority provides a mechanism for financing construction of the Virginia Biotechnology Research Park (Research Park) through bonds and other authorized means. The Park Corporation (Corporation) is an IRS Code Section 501(c)(3) corporation and is organized and operated exclusively for scientific, educational, and charitable purposes. The results of operations of the Corporation are presented in blended format in the financial statements of the Authority. Corporation revenues and expenses each totaled $45,010 for fiscal year 2006.

On March 26, 2005, the 2005 Session of the Virginia General Assembly passed House Bill [HB1801] amending the original legislation that created the Authority. HB1801 clarifies certain powers of the Authority that can be used throughout the Commonwealth and expands the Board of Directors of the Authority in the event of such initiatives that may be funded by the Commonwealth of Virginia. Effective July 1, 2005, these changes renamed the Authority to the Virginia Biotechnology Research Partnership Authority.

The Board and staff of the Authority manage daily operations of the Research Park. The Research Park is a life sciences community adjacent to Virginia Commonwealth University that houses; companies, research institutes, non-profits, and government laboratories on a 34-acre campus in downtown Richmond, Virginia. The mission of the Authority is to advance life sciences by promoting scientific research and economic development through the attraction and creation of new jobs and companies.

The Authority does not have taxing powers. Operations are funded from lease and ancillary service revenues. Bond issuances, long-term notes payable, and appropriations from the Commonwealth and contract support payments from Virginia Commonwealth University have funded the acquisition and construction of capital assets. The Authority has also received funding in previous years through bonds issued by the City of Richmond. The Research Park as of June 30, 2006 was occupied by 35 private and non-profit companies, four state laboratories, and five research institutes/administrative functions of Virginia Commonwealth University, filling approximately 565,000 square feet of laboratory and office space in eight buildings and employing more than 1,200 researchers, scientists, engineers and support personnel.

In 2005, the Research Park assembled and sold land within the Research Park to Philip Morris USA for the development of a new global Center for Research and Technology. The Center is currently under construction and occupancy is anticipated in the spring of 2007. The Center is expected to have a capital cost of $350 million and employ approximately 600 individuals. This is the largest single investment in the history of the Research Park and the largest single private sector investment in the City of Richmond. Upon completion of the new Philip Morris USA Center for Technology, the Research Park will be two-thirds developed.

Biotech Eight will be a new multi-tenant building in the Research Park. It will be located on 5th street in the current location of Biotech Four. Biotech Eight will be three floors with an approximate total of 76,000 square feet, and will have an adjacent 300-space parking structure. The project will be owned by the Biotech eight; LLC with construction scheduled to begin the fall of 2006 and is due to be completed in mid-2007. This will bring the total square footage in the Research Park to approximately 1,100,000 square feet, and bring employment to approximately 2,000 individuals.

When fully developed, the Research Park will contain 1.3 to 1.5 million square feet of research, office and laboratory space in 13-15 buildings and employ 3,000 scientists, researchers, engineers and technicians, working in fields that include drug development, medical diagnostics and devices, biomedical engineering, environmental biosciences, forensics and laboratory services.

The Research Park is not limited to its 34-acre downtown campus. Recognizing the growth of this dynamic industry, the Research Park has developed partnerships with neighboring Henrico and Chesterfield counties extending the reach of the Research Park to future satellite parks that can accommodate larger companies on suburban campuses in the Greater Richmond area.

Authority Highlights

• Effective July 1, 2005 the Virginia Biotechnology Research Park Authority was renamed the Virginia Biotechnology Research Partnership Authority. This was part of House Bill (HB1801), which also clarified the powers of the Authority, which may be used throughout the Commonwealth and prospectively expands the Board of Directors of the Authority.

• The Research Park purchased two parcels of property from Virginia Commonwealth University during the fiscal year. These properties were important in that they were the remaining parcels needed to give the Research Park the entire ownership of land in the block bounded by E. Leigh, North 7th, North Jackson and North 8th Street. This will enable the Research Park to hold this property for a future build-to-suit building site.

• On February 1, 2006 a celebration was held at the Research Park marking the 10th anniversary of the Research Park’s opening. The Biotech Center, the first building to be completed in the Research Park, welcomed its first tenants in December of 1995 and the Research Park was dedicated on January 17, 1996. Business Leaders, Dignitaries, Board Members, and Supporters who were instrumental in the Research Park’s formation and subsequent success attended the 10th anniversary ceremony.

• Philip Morris USA will occupy Biotech Nine, a 450,000 square foot facility now under construction in the Research Park. The $350 million dollar complex will be home to approximately 600 employees. The facility is scheduled to open in the spring of 2007.

• The Research Park successfully completed a Federal Earmark award from the U.S. Department of Education to incorporate recent research on the brain and the mind, as well as related areas of play and cognition, and to develop a prototype after-school program aimed at improving academic performance using a cognitive skills approach. During fiscal year 2006 all required deliverables were satisfied under the scope of the award.

• During the 2006 session of the Virginia General Assembly, the Authority sought budget authorization to issue up to $20 million in revenue bonds backed by the Commonwealth’s moral obligation. This mechanism has previously been utilized by the Commonwealth to finance water and sewer, housing, schools and other projects undertaken by political subdivisions created by the State, analogous to the Authority. Ultimately, the authorizing language was not reported out in the final version of the fiscal year 2006-08 biennial budget presented to the Governor by both houses of the General Assembly.