HD14 - Aerospace in Virginia: An Opportunity for Economic Growth (HJR 97/SJR 97, 2016)

Executive Summary:
JCOTS' Study of the Aviation and Aerospace Industry

The General Assembly directed the Joint Commission on Technology and Science (JCOTS) to undertake a study of the Commonwealth's aerospace and aviation industries. In conducting its analysis, JCOTS relied heavily on the expertise of the Virginia Academy of Science, Engineering, and Medicine ("the Academy"). The Academy, in concert with JCOTS members and staff, prepared a thorough analysis of best practices in other states relating to attracting and growing the aerospace industry, conducted a review of federally funded opportunities, and developed a comprehensive series of recommendations aimed at growing the Commonwealth's aerospace industry. The Academy's final report, "Aerospace in Virginia: An Opportunity for Economic Growth," can be found on the Academy website at http://www.vasem.org/virginia-aerospace-study/ , and is submitted as JCOTS' report to the General Assembly.

The resolutions creating this study also directed JCOTS to analyze the potential advantages and disadvantages of eliminating the application of the Virginia sales and use tax to aviation parts and equipment. After consulting with industry trade associations, the Department of Taxation, and individuals and businesses involved with aviation, it was determined that Virginia does not currently excel in this field. Many local businesses and owners of personal aircraft travel out-of-state for routine maintenance because of Virginia's lack of maintenance and repair facilities. Many other states have recently adopted a similar sales tax exemption, which puts the Commonwealth at a competitive disadvantage. Because there does not currently exist a large aviation and repair industry in the Commonwealth, the fiscal impact of creating such an exemption would likely be less than $1 million, and could potentially generate new business and employment opportunities in the Commonwealth. JCOTS recommended to the 2017 Session of the General Assembly that the sales tax on aviation parts and equipment be eliminated. HB 1738 (Anderson) was adopted by the General Assembly, and will become effective on July 1, 2018.

Because the scope of the study set forth in House Joint Resolution 97 and Senate Joint Resolution was so broad, JCOTS elected to defer the study of some topics to the 2017 Interim. During 2017, JCOTS will identify strategies to grow Denbigh High School's Aviation Academy, a magnet school in the Newport News School Division, and to encourage its transformation into a statewide program. Additionally, JCOTS will study the impact of the interpretation and application of environmental regulations on Virginia's aviation industry.

Report of the Virginia Economic Development Partnership

The study resolutions also requested that the Virginia Economic Development Partnership (VEDP) develop a report containing its recommendations as to how to grow the Commonwealth's aerospace industry, and that such report be published by JCOTS. Below is the entire text of VEDP's aerospace marketing outreach report to JCOTS:

“The Virginia Economic Development Partnership’s recent restructuring brought back an industry focus to the organization but with a greater emphasis on team-based outreach. This approach requires VEDP’s Business Investment (BI) staff to support one another by jointly marketing to industries. For aerospace, which is covered primarily by BI’s Products team, there is one manager whose primary focus is aerospace and will be assisted by the other managers on the team when it comes to attending aerospace events. This collaborative approach will minimize any negative impacts resulting from personnel changes.

Aerospace continues to be one of VEDP’s target industries because it involves advanced manufacturing and technology services. Aerospace companies require skilled workers like machinists, electronics assemblers, engineers, engineering technicians, and software programmers. The aerospace companies VEDP contacts could create jobs for a broad spectrum of Virginians with a diverse set of degrees and credentials.

Previously, VEDP’s aerospace marketing outreach consisted of attending industry events and building relationships with individual companies. VEDP regularly attends the Farnborough International Air Show, Paris International Air Show, and AVUSI XPONENTIAL. VEPD also has attended the NBAA Business Aviation Convention & Exhibition on several occasions. VEDP would like to attend the MRO Americas conference to increase awareness of Virginia as a business location in the maintenance, repair, and overhaul sector. The American Institute of Aeronautics and Astronautics offers multiple events which focus on aerospace subsectors and could have potential for VEDP to build on some of Virginia’s existing aerospace expertise. VEDP’s past experience suggests it is more effective for VEDP to meet companies at industry events by hosting a reception, since companies are less willing to talk with people who are not potential customers on the event floor. VEDP also has had more success in attracting people to receptions when the Governor, Lieutenant Governor, or Secretary of Commerce and Trade is able to give a welcome speech. Attending additional events and hosting additional receptions requires additional funds for marketing. Advertising in industry magazines like “Aviation Week” and “Business and Commercial Aviation” also would require additional funds but would increase awareness of Virginia as a business location.

Establishing relationships with aerospace companies can be challenging because of the close-knit nature of the industry. VEDP could benefit from the establishment of a Virginia Aerospace Advisory Committee (VAAC). This group would consist of representatives of key aerospace companies in Virginia and could be used to guide VEDP in identifying subsectors to target and to make introductions for VEDP staff at other aerospace companies. VEDP’s new structure could allow more staff to be involved in aerospace, since Virginia’s aerospace industry is covered by each of BI’s three teams: Products, Services, and Technologies. VAAC would have some overlap with the Joint Commission on Technology and Science and other groups but also could involve Virginia aerospace companies not connected to those groups. Additional funding for VAAC could be minimal if meetings were held quarterly (twice in person and twice as a conference call).

VEDP considers aerospace an important sector to Virginia and plans to continue its efforts to attract growing aerospace companies to the Commonwealth. The complexity of the aerospace industry requires VEDP to identify innovative ways to capture the attention of growing aerospace companies in order to share with them Virginia’s business advantages.”