HJR 75: Joint Subcommittee Studying Local Incentives Provided to Private Businesses for Economic Development

June 23, 2008

The first meeting of the Joint Subcommittee Studying Local Incentives Provided to Private Businesses for Economic Development Purposes was held at the General Assembly Building in Richmond. The joint subcommittee members elected Delegate Mark Cole as chair and Senator Mary Margaret Whipple as vice-chair.

The charge of the joint subcommittee is to:

• Determine all incentives that localities are permitted to provide to private businesses.
• Evaluate the impact of incentives on the smaller, local competitors of the businesses receiving the incentives.
• Evaluate the effectiveness of the incentives that are provided.

Presentations

Gary McLaren, Deputy Director, Virginia Economic Development Partnership
The presentation provided an overview of incentives that localities in the Commonwealth are permitted to offer.

Gary McLaren reviewed the five primary factors that businesses include in their consideration of locations: available workforce, suitability of the site or building, general infrastructure, business climate, and quality of life. Many businesses have developed weighted indexes to quantify these factors.

Mr. McLaren stated that different industries may consider these factors in different ways. He then discussed common incentives at the local level that he grouped in six general categories: product (the land for the site, utilities, roads and zoning); tax and utility rates and classifications; grants; loan programs and/or financing; creation of special zones, such as technology zones, tourism zones, etc.; and project management assistance.

Louellen Brumgard, Virginia Department of Housing and Community Development
Louellen Brumgard provided a brief overview of the Virginia Enterprise Zone Program. Ms. Brumgard reviewed the objective of the Program: a means to stimulate job creation, private investment, and revitalization through a combination of state and local incentives. The individual enterprise zones are designated by the Governor based on a competitive application process. While the competition for the designations is open to all localities, the review criteria are designed to favor distressed localities. Fifty percent of the score is based on three-year averages of the localities’ unemployment rate, median adjusted gross income, and percentage of public school students receiving free or reduced price lunches.

Based on legislation passed during the 2005 Session, the Program has transitioned from tax credits to grants. The Program offers two grants, one for job creation and one for real property investment. Ms. Brumgard noted that funding is subject to appropriation and that currently the grants are being pro-rated. The Program benefits both large and small businesses. Two-thirds of applicants for job creation grants have less than 100 employees and one-third have less than 25 employees. Ms. Brumgard indicated that for real property investment grants, one-third of the applicants had investments of less than $250,000.

Future Meetings

The members discussed possible meeting topics for the future, which include:

• Information on local incentives in other states with emphasis to be placed on surrounding states and states with which Virginia is in regular competition for businesses.
• Discussion of reliable measures for determining the effectiveness of incentives.
• An overview on the activities of the state’s 14 economic development authorities.
• Information on what is being done to assist localities in rural and other areas to expand broadband infrastructure and access.
• Use of incentives from the perspective of economic development professionals.
• Evaluation of the impact on existing businesses that do not get the incentives.

The next meeting date will be posted on the study website and the General Assembly calendar as soon as information is available.

Chairman:
The Hon. Mark Cole

For information, contact:
Amigo Wade, DLS Staff

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