RD440 - Virginia Economic Development Partnership Annual Report Fiscal Year 2017

Executive Summary:
This Annual Report of the Virginia Economic Development Partnership Authority (VEDP) is submitted pursuant to the requirements of § 2.2-2242, § 2.2-2238 B, and § 2.2-2239 of the Code of Virginia and Chapter 836, Item 125 D of the 2017 Virginia Acts of Assembly. The Code requires VEDP to report on the status of the Commonwealth's comprehensive economic development strategy, and to prepare and report on the plan to market to high unemployment areas of the state. Chapter 836, Items 125 D.1 and D.2 of the 2017 Virginia Acts of Assembly further require that the report include the number of business prospect site visits per region of the Commonwealth and direct VEDP to identify target industries for southwest and southside Virginia. This report responds to all of those requirements. In addition, the Authority's financial statements audited by the Auditor of Public Accounts for the fiscal year ended June 30, 2017 (FY 2017) are attached to this report.

This Annual Report documents the efforts of VEDP in fulfilling its mission during FY 2017. The body of the report is organized by the major components of VEDP' s operating Divisions.

VEDP's report and plan to market to high unemployment regions of the Commonwealth are included in Appendix 1, which meets the requirement articulated in § 2.2-2238 B of the Code of Virginia.

The next two appendices address Chapter 836, Item 125 D.1 of the 2017 Virginia Acts of Assembly. The data on business prospect site visits per planning district is contained in the tables and map of Appendix 2. Appendix 3 shows the number of sites and buildings recommended to prospects and provides the number of companies assisted with site and building recommendations.

VEDP monitors economic development activity in Virginia through its economic development announcements database. The database tracks direct investments and new jobs projected in Virginia as a result of the announced plans of new and expanding companies. This information has been maintained, with modifications, since 1960. The data used throughout this report and summarized in Appendix 4 cover VEDP-assisted announcements made between July 1, 2016, and June 30, 2017. VEDP recorded the announcement of new and expanding facilities during the year. Appendix 5 sets out the number of announcements by Planning District Commission (PDC), both in terms of new facilities and expansions. This Appendix 5 also sets out the number of new jobs and amount of new investment by PDC. It is anticipated that from those announcements, a total of 19,352 new jobs will be created, with a total of $2 billion in new capital investment. Forty-six percent of the announcements were of employers locating in economically distressed areas. VEDP considers localities with higher than average unemployment or higher than average poverty to be economically distressed. These announcements are expected to create over 6,900 new jobs and make capital investments exceeding $1 billion.

This report is based on announcements of planned manufacturing and basic sector nonmanufacturing capital expenditures and associated employment; most of the new facilities announced are not yet in operation. A basic sector company or function is one that derives more than 50% of its revenue from outside of the Commonwealth. While the information indicates the kind of new economic activity occurring in the Commonwealth, it does not measure total employment growth. Information for this report is obtained from VEDP's public and private sector contacts at state, regional and local levels, as well as from published sources and VEDP staff. As with VEDP's counterpart organizations in other states, VEDP generated the lead for some, but not all of the projects included in this report. Economic development is a team sport that requires the work and cooperation of a large number of partners, public and private. VEDP considers a "VEDP-assisted" project to be one in which VEDP participated in one or more of the following support activities:

• Lead generation: the opportunity was identified by VEDP

• RFI-RFP response: VEDP received and responded to a request for information or a request for proposals from a client

• Community assistance or planning: VEDP delivered a financial proposal or made a presentation to the client

• VEDP-administered incentives: VEDP supported the project with one or more of its incentive programs or a custom performance grant

• Specialized research: VEDP provided specific or customized research based upon a request from a partner or client

• Coordination with other state agencies: VEDP coordinated with partner agencies to address client questions or concerns

• Site/building recommendations: VEDP, in collaboration with regional and local partners, identified viable real estate options to support the project

• Property tour/client logistics: VEDP coordinated a prospect visit to the community to support the project

• Workforce solution: VEDP developed a workforce solution to support the project

As noted above, VEDP is required by statute to report on the status of the Governor's comprehensive economic development plan. Upon taking office, each governor must develop a comprehensive economic development strategy. On August 27, 2014, Governor McAuliffe signed Executive Order Number Twenty-Six, establishing The New Virginia Economy Strategic Plan and Steering Committee. The Steering Committee published The New Virginia Economy Strategic Plan in late 2014, which serves as the Commonwealth's four-year economic development strategic plan. The Plan identifies five key focus areas for economic growth and prosperity: "Project Ready" Infrastructure; Diversified High-Growth Industries; Preeminent Business Climate; Innovation and Entrepreneurs; and "Credentials to Careers", Workforce. VEDP has worked closely with the Governor and his Administration to advance the priorities of this strategic plan, specifically in the areas of infrastructure and site development and targeting high-growth industries. The Steering Committee is required to report annually on the Commonwealth's progress towards achieving the goals outlined in the strategic plan and readers are directed to that report.

FY 2017 was a year of great challenge and change for VEDP. Through the early part of the Fiscal Year, much time and energy was spent responding to information requests from the Joint Legislative Audit and Review Commission. Latter parts of the Fiscal Year were spent in responding to various aspects of the JLARC report. Further, in the summer of 2016, VEDP reorganized, by (among other things) merging the Business Attraction and Business Expansion divisions. While this and other organizational changes were intended to improve the effectiveness of VEDP, the changes nevertheless have resulted in transitional challenges and strains on the staff. Still further, in November, 2016, the Board selected a new President and CEO for VEDP, Stephen Moret, with the attendant staff needs to prepare for and adjust to a new leader. And still further, in the 2017 session of the General Assembly, legislation was passed to reorganize the VEDP Board, to require a new Division of Incentives, to add an internal audit function, and to add two new Advisory Committees to the Board. Throughout FY 2017 and into FY 2018, minor restructurings of the duties and functions of various Divisions has continued.

The overall responses to the challenges and changes have made and will make VEDP stronger and better positioned to be a first-class state economic development organization for the Commonwealth.

Participation in Ongoing Special Initiatives

All of the Divisions of VEDP, have been actively engaged in VEDP's Economic Growth Strategy report and in the development and implementation of VEDP's Strategic Plan, Marketing Plan and Operational Plan. It is expected that these initiatives will become operational in FY 2018.