VIRGINIA Time for an Incentives Tune-Up? Even without one, Virginia s business climate is enviable, according to two measures. hird out of 50 is a more-thanby MARK AREND respectable nish in Site Sem a r k . a r e n d @ c o n w a y. c o m lection s latest ranking of state business climates (see p. 788), and Virginia routinely nishes one ranking speaks volumes about the in the top ve or 10. Half of that ranking consistent way in which Virginia does is based on what corporate site seekers business and demonstrates that we re say are their top states in which to locate up for the challenge, said Virginia Gov. operations Virginia ranked sixth in Timothy M. Kaine when the ranking was that poll and half is based on new or released. expansion activity tracked by the magaHow To Do Even Better zine s proprietary New Plant database. Virginia is one of two states with a guBut another gauge of state business climates ranked the Commonwealth rst bernatorial election this November. So it in the nation in June. The Pollina Cor- will be up to term-limited Gov. Kaine s successor to keep the porate Top 10 Pro-BusiCommonwealth s business States for 2009: ness climate attractive, Rebuilding Americans and one place to start Economic Power remight be the competiport is an annual study tiveness of incentives. of job retention and The Economic Incencreation by all 50 states tives Group (EIG) of and the federal govCB Richard Ellis rated ernment produced by Virginia s incentives Chicago-based Pollina potential not competiCorporate Real Estate, tive for a project the Inc., a leading site lo- Term-limited Gov. Tim Kaine acted rm was working on in cation consultancy and on several economic development measures in early 2009. late summer nor for brokerage rm. The Pollina study evaluated states comparably sized projects. A webinar, based on 33 factors, including taxes, hu- Economic & Tax Incentives: Is There man resources, right-to-work legislation, Still a Pulse? conducted September energy costs, infrastructure spending, 3 by Phoenix-based John Lenio, EIG workers compensation laws, economic economist and managing director, clasincentives programs and state economic si ed the lower 48 states as aggressive, development efforts. Rounding out the competitive, or not competitive. Asked what Virginia might do to be top ve states are Utah, North Carolina, Wyoming and South Carolina. Virginia more competitive, Lenio identi ed two also held the top spot in the Pollina study items. Because of the non-competitive in 2003 and 2007. The Commonwealth ranked second from 2004 to 2006 and nature of the state, whether we re looking at nancial services or distribution, third in 2008. During these tough economic times labor costs tend to be relatively high in particular, reclaiming the number compared to peer markets, maybe in 826 N OVEMBER 2009 S ITE SELECTION T North Carolina or South Carolina, he says. That tends to be a disqualifying factor, but they really have no control over that. What could be done to get them to the competitive stage, in my opinion, is the communities can do away with their gross receipts tax or their mercantile inventory tax. That s a huge problem for distribution centers. The only tools the Commonwealth has at their disposal for general users is a $1,000-per-job tax credit under their enterprise zone program, he adds. Job training is always part of the offer, which tends to be around $800 to $1,000 per job, but almost every other state does that. If I were advising the governor s of ce in Virginia, I d want them to model a new incentive program, maybe after what Kansas or Oklahoma or Missouri are doing, which is a payroll rebate program, says Lenio. It s easy to sell and easy to understand you get X percent for every dollar of new payroll you generate. From a scal perspective, the state is showing a positive impact on their tax rolls, meaning taxes coming in are greater than subsidies going out. Everybody wins. Gov. Kaine acted on several economic development measures in March 2009, including passage of the Major Employment and Investment Act with funding made available for potentially transformative economic development projects of 400 or more employees; additional capacity for the Virginia Investment Partnership Grant Program; greater exibility in eligibility requirements for the Virginia Economic Development Incentive Grant Program; and an extension of the Major Business Facilities Jobs S ITE Tax Credit Program. 0911Virginia.indd 826 10/23/09 4:32:44 PM