RD284 - Virginia Enterprise Zone Program 2014 Grant Year Annual Report


Executive Summary:
For the 2014 qualification year, a total of 215 businesses and zone investors qualified for Enterprise Zone incentives including Job Creation Grants, Real Property Investment Grants, and pre-2005 tax credits. Cumulatively, 213 businesses and zone investors received a total of 223 state enterprise zone grants and two applicants qualified for the pre-2005 tax credits.

Enterprise zone incentive usage since 2005 generally mirrors the conditions of the national and Virginia economy. The number of applications and total value of grant requests in grant years 2010-2013 were notably lower than grant years 2005-2009. The first five years of the program coincided with the build-up of the real estate boom. During that period, businesses were eligible for grants that far exceeded the funding allocation, leading to substantial RPIG proration. Lagging a year or so behind the onset of the Great Recession due to the program’s retroactive nature, incentive usage dropped in 2010. This decline also reflects the impact of the 2009 legislation that raised the RPIG qualification thresholds to help address growing concerns about RPIG proration. Grant Year 2014 is the second time since GY 2009 that proration has been necessary (Figure 1). This indicates that the construction industry is slowly but steadily recovering.

Despite being far below the pre-recession submission levels, the number of grant applications has increased continuously over the past five years. Grant Year 2014 saw a 6 percent increase in grant applications over the previous year for a total increase of 37 percent since GY 2010. This is due to an increase in both JCG and RPIG applications; however, because RPIG applications make up such a large proportion of annual grant requests, a slight increase in construction activity will impact the total number of grant requests.

Figure 1 illustrates the 10-year history of the disparity between allocations and requests for EZ grants. GY 2008 was the most substantial funding shortfall at $16,679,564, causing RPIG awards to be prorated at 46 cents per dollar. Meanwhile, 2011 was the only year reflecting a surplus, with just under $1.5 million remaining after grants were awarded. Annual RPIG proration levels for grant years 2010-2014 are illustrated in Figure 2.