Virginia
A Commonwealth of Opportunity

By Susan H. Burnell

Virginia’s place in history is well established, and its place in the future of the world’s economy is assured by its support for innovation and its pro-business policies.

Four hundred years ago, the Virginia Company of London was formed to bring profits to its shareholders and to establish an English colony in the New World. That colony, now the Commonwealth of Virginia, extends a legacy that supports, promotes and creates business success.

"We continue to welcome businesses from around the world to Virginia," says Governor Bob McDonnell, who was inaugurated as the Commonwealth’s 71st governor in mid-January 2010. "We are fortunate that significant players are bringing headquarters operations here, and that existing companies are choosing to expand in Virginia.

"We are pro-business and pro-free enterprise," McDonnell continues. "The General Assembly supports that with new incentives and a regulatory climate that encourages investment. And while access to the federal government is one of our strong advantages, we realize that private-sector business, entrepreneurs and small enterprises are essential economic drivers. We want those innovators here, and we will continue to provide an environment in which they are free to grow."

Forbes.com has named Virginia the "Best State for Business" for four consecutive years. In August, Pollina Corporate Real Estate, Inc., ranked Virginia as the "most pro-business state" in America, marking the fourth time the Commonwealth has held this distinction. In July, for the fourth straight year, Virginia earned CNBC recognition as one of the top two states in the nation for business. In May, the U.S. Chamber of Commerce ranked Virginia first for lowest cost of living for adjusted median family income and second for overall growth. 

"These rankings matter," said Governor McDonnell in remarks to the joint meeting of the Virginia Senate Finance, House Appropriations and House Finance Committees in August. "They tell employers big and small, domestic and foreign, that if they want to grow and prosper, they need to be in Virginia. Truly, the Commonwealth is the best state for business."

A Stable Pro-Business Legacy
Businesses of all sizes thrive in Virginia because of its proximity to the nation’s centers of influence and power, its pool of hardworking and highly educated workers, and, most important, their customers. The pro-business course charted in the Commonwealth’s earliest days still runs smoothly, regardless of who is at the helm.

"We are always proud to say that Virginia was formed as a venture capital company," says Jeff Anderson, president and chief executive officer of the Virginia Economic Development Partnership (VEDP). "Our business environment has consistency and stability, no matter who is in office. That is one of the first things that comes up in conversation when we talk to executives of companies who have a history here."

"In Virginia, our governors can serve only one four-year term," explains Jim Cheng, secretary of commerce and trade. "So Governor McDonnell knew he had to hit the ground running."

McDonnell’s comprehensive economic development package of budget amendments and legislation to create jobs, attract new investment and encourage existing businesses to expand has been funded in the amount of $63.3 million. Since February, 71,500 jobs have been added in Virginia, the third-highest total in the country.

"The governor has also set up a Commission on Government Reform and Restructuring, which looks at how we can be more efficient, run our government better, get rid of excessive regulation and let business get down to business," Cheng adds.

New investments have been made to support the state’s tourism and technology industries, as well as to open new overseas trade offices. The Governor’s Commission on Higher Education Reform, Innovation and Investment is already engaging top educators and business leaders to hone the state’s education competitiveness.


Proximity to Every Competitive Advantage
Companies around the globe take notice of Virginia because of its proximity to customers, ample technology and transportation infrastructure, a steady flow of available workers, and access to government and financial centers. The presence of every major federal government civilian and defense contractor in Virginia creates a wellspring of opportunity.

The supply of ready brainpower in Virginia is substantial: Nearly 20,000 doctoral scientists and engineers are employed in Virginia, the second largest concentration in the Southeast. Research and development resources continue to expand at universities around the state and at numerous federally funded research and development centers, including those of the Department of Homeland Security and the Department of Defense.

Incentives Reduce Cost of Starting and Expanding a Business

Virginia’s pro-business attitude is apparent in its substantial incentives and services designed to help companies grow, open and expand within the Commonwealth. Incentives include financial assistance, infrastructure development grants, tax credits and exemptions, customized training and technical support programs.

Among the most significant discretionary incentives are the Governor’s Opportunity Fund (GOF) and the Virginia Investment Partnership (VIP) grant. Both funds are awarded when performance objectives are met.

Individually negotiated GOF grants can be awarded to a Virginia locality to help it secure a company location or expansion in highly competitive situations. The VIP grant program provides performance-based incentives to manufacturers and research and development services that support manufacturing. The VIP grants were designed to encourage continued capital investment by Virginia companies that have operated in the Commonwealth for the last five years.

Virginia’s substantial menu of incentive programs includes tax credits for green jobs, small-business financing and foreign-trade zones. An Enterprise Zone program provides state and local incentives to businesses that invest and create jobs within designated zones throughout the state. Two dozen localities have set up Technology Zones to encourage growth in targeted industries. Investment partnership grants, major employer grants and the Tobacco Region Opportunity Fund are all part of the incentives mix. Many local governments offer additional business incentives to further reduce the costs of growing a business in the Commonwealth.

"We keep Virginia competitive with the use of incentives," says Anderson. "Yet Virginia’s best business incentive is its pro-business climate. Corporate decision makers, including those who have recently located headquarters here, recognize the strategic advantages of this climate."

Northrop Grumman: A Strategic HQ Move

One of the newest headquarters on the scene in Virginia is that of Northrop Grumman Corporation. In April, the global security company announced it would relocate its corporate offices from California to the Falls Church area of Fairfax County. The company already employs about 31,000 people in the state at 22 locations.

"Proximity to our major customers was the key," says Gaston Kent, vice president of finance and point person for the relocation. "It’s hard to be spontaneous from 2,500 miles away. We circled our customer locations and said, ‘This is where we’re going—somewhere in Virginia, Maryland or Washington, D.C.’ Sites in all those areas met our primary criteria. Then we had hard decisions to make. We looked at overall economics and availability of adequate space in a timely fashion. We considered schools and the other things that attract people to a particular area. Then we asked, ‘Is it a welcoming environment for business?’ Everything came up positive for Northern Virginia."

The buzz of energy around the state is palpable, says Kent. "It’s a popular place to be, and everything seems to key off that pro-business attitude. Virginia has figured out how to bottle that buzz and use it to its benefit."

Kent says that, without exception, economic development organizations at the state, county and local levels were highly professional. "Every one of those groups, including the Fairfax County Economic Development Authority, Governor McDonnell and legislators, made us feel wanted here. That made our decision easier. Since we announced the move, that welcoming attitude has continued."

The headquarters for 30 major corporations are located in Virginia,
and there are 700 international companies from 46 countries around the state.

Altria Group: A Clear-Cut Case for Relocation

Another company with a newly expanded Virginia presence is Altria Group. As a result of restructuring and acquisitions over the last seven years, about half of the company’s 10,000 workers now live and work in Virginia.

Altria earned the number one spot in the Barron’s 500 List of America’s Top Companies for 2010. The company conducts business with more than 1,375 Virginia suppliers, purchasing more than $513 million worth of goods and services (not including tobacco leaf purchases) annually.

Altria’s roots in Virginia began with the incorporation of Philip Morris & Co. in 1919. A decade later, the company began to manufacture cigarettes in Richmond. Today, Philip Morris USA, U.S. Smokeless Tobacco Company, John Middleton and their parent company, Altria, are headquartered in Richmond.

“Following the merger of Mead and Westvaco, we had many offices and plants all over the country.
Centralizing in the Commonwealth has allowed us to focus and prioritize our resources and
collaborate more effectively across all businesses. Virginia is remarkably pro-commerce.”

Linda Schreiner, Senior Vice President, MWV

In 2003, Philip Morris USA moved its headquarters from New York to Richmond. Brendan McCormick, vice president of communications for Altria Client Services, was among those who relocated. "Anytime you ask people to disrupt their lives, it’s a tough thing to do," he says. "Yet when we looked at the business case for relocation, it was clear cut."

In 2007, Philip Morris USA opened a $350 million Center for Research and Technology in Richmond’s Virginia BioTechnology Research Park. The Center promotes collaboration and creativity to develop technologies that improve Altria’s current products and lead to innovative new ones. The company also has funded a $25 million research partnership with the University of Virginia, expanding the company’s relationship with the McIntire School of Commerce.

MWV: Bringing Talent Together

Virginia’s talent base and transportation infrastructure are essential to global packaging solutions company MeadWestvaco (MWV). The company operates in 30 countries and serves customers in more than 100 nations. MWV has had a presence in the western part of the Commonwealth for more than 100 years. It chose to bring its headquarters to downtown Richmond four years ago, and opened its new sustainably designed building on the James River earlier this year.

"Following the merger of Mead and Westvaco, we had many offices and plants all over the country," says Linda Schreiner, senior vice president. "Centralizing in the Commonwealth has allowed us to focus and prioritize our resources and collaborate more effectively across all businesses. Virginia is remarkably pro-commerce.

"We came here expecting a good talent flow from Virginia universities and colleges, and we have been very pleased with the availability of professional and technical talent," she adds. "We are pleased with the labor environment and the strong work ethic in the Commonwealth."

With substantial holdings of forestlands, MWV has long been committed to sustainable business practices. "We believe in effective stewardship of environmental resources, and our mills are a part of that. Our new energy-efficient headquarters building gives us another way to show how we can live a green existence and do our part for the Commonwealth," says Schreiner.

Collaboration with Virginia universities on research is helping MWV develop the products and sustainability advances of tomorrow. The company maintains partnerships with Virginia Commonwealth University’s da Vinci Center for Innovation in Product Design and Development and its Center for Environmental Studies, as well as with the University of Virginia Darden School of Business.

Easy Access to Major Hubs and The World

Virginia’s transportation system provides considerable competitive advantages. "That’s another reason we are pleased with Virginia," says Schreiner. "The highway and rail systems allow us to move products easily throughout the Commonwealth. Virginia’s location gives MWV access to the world. From Richmond, it is a very short drive for us to get to Dulles International Airport, and from there it’s a one-hour plane trip to New York or Atlanta. For those of us from Connecticut, accustomed to having to travel to JFK International Airport, our travel time is now less. We can easily get where we need to be to reach our customers."

Transportation infrastructure upgrades are continuing at a rapid pace. Work on the Dulles Metrorail project in the Dulles Corridor is a prime example. The Metropolitan Washington Airports Authority (MWAA), the Washington Metropolitan Area Transit Authority (WMATA), Fairfax County, Loudoun County and the town of Herndon are constructing a 23.1-mile transit system in the Corridor that connects Fairfax and Loudoun Counties. When complete, the new Metrorail service will result in travel time savings between the Corridor and downtown D.C., expand the reach of the existing regional rail system, offer a viable alternative to automobile travel, and support future development along the Corridor.

Fourteen commercial airports serve Virginia, including two of the nation’s busiest:
Washington Dulles International and Ronald Reagan Washington National.

International Business: Virginia Thinks Globally

The Commonwealth’s network of modern transportation routes and ease of access to trading partners around the globe are among the essential elements that make it attractive to expanding international businesses.

Over the summer, Governor McDonnell, along with the First Lady, Secretary Cheng, and Secretary of Agriculture and Forestry Todd Haymore, traveled to Great Britain, Germany and the Netherlands to meet with business officials, encourage investment in Virginia, and promote tourism and Virginia products. The mission follows a recent month-long economic development trip to Asia by Secretary Cheng, during which he and other economic development officials met with numerous business prospects with interests in Virginia.

Since the Commonwealth’s founding days, its leaders have recognized that globalization is critical to job creation, capital investment and overall economic health. In the fiscal years 2004 through 2009, 49% of new investment in the state came from international companies. On average, international companies invest three times the capital and create more jobs per project than U.S.-based companies. Virginia’s main trading partners are based in Europe, with fewer from Asia and the rest of the world when compared to the nation. Seeking to expand the scope of international investment, Virginia plans to add international trade representatives in China, the U.K. and India.

To help Virginia-based companies compete in the global marketplace, the VEDP offers assistance in the form of its Virginia Leaders in Export Trade (VALET) program. VALET combines three essential ingredients—planning, expertise and capital—to generate on average an 88% increase in international sales opportunities for Virginia businesses. Participating firms share a commitment to international success with VEDP and private-sector service providers. Since its inception, over 100 companies representing a wide cross-section of industry have been accepted into or graduated from the VALET program.

Virginia Ports Offer New High-Tech Capacity
Deepwater, high-tech terminal facilities and ample land for expansion make Virginia’s East Coast port system ideal for import and export operations. Virginia’s ports are within a day’s drive of two-thirds of the U.S. population. This strategic location is recognized by such companies as Altria, Wal-Mart, MWV and other international firms that use the port and its adjacent warehousing and distribution facilities. A recent study by the Mason School of Business COMPETE Center at The College of William & Mary calculated the direct and indirect economic impact of the Port of Virginia at $41 billion in total revenue.

The Port of Virginia ranks third in market share out of the top East Coast container ports, with 1.7 million 20-foot equivalent units (TEUs) shipped annually. As the deepest port on the U.S. East Coast, the Port of Virginia already has the ability to handle the largest container ship afloat. With federal authority in place to increase depth from 50 feet to 55 feet, it will be able to accommodate the next generation of even larger vessels.

In July 2010, the Port of Virginia added a fourth marine terminal to its existing facilities in Newport News, Portsmouth and Norfolk. The leased port terminal in Portsmouth, APM Terminal, constructed by A.P. Moller-Maersk Group, is the most technologically advanced container terminal in the world. The Port of Virginia will double its containerized cargo capacity when the terminal is fully developed. The $500 million project is the largest private investment ever made in a U.S. port. Its 55-foot channel depth will differentiate it from other ports.

"Overnight, we added the capacity to handle a million more containers," says Port of Virginia Media Relations Manager Joe Harris. "As the economy comes back, we expect an increase in volume, and we are ready for it." The Port Authority also has room for expansion on Craney Island in Portsmouth. This spring the Port Authority received the necessary environmental permits to begin building Craney Island Marine Terminal; the first phase of this fourth state-run marine terminal is expected to be operational between 2020 and 2022.

The port’s Suez-class cranes can handle ships loaded 25 containers across. Recently completed renovations at Norfolk International Terminals brought in new cranes, straddle carriers and a wharf almost a mile long. The port also maintains a strong commitment to the environment, working toward the goal of becoming the greenest port in the country.

"The recent and continuing expansion at the Port of Virginia sends a message to companies around the world that our collection of modern terminal facilities can handle whatever volume they require, without congestion," says Harris. "We also have excellent labor relations with our union. There have been no major work stoppages in more than 25 years." The port offers convenient access to two Class 1 railroads—Norfolk Southern and CSX—and major interstate highways.

Targeting 21st-Century Industries

Virginia is giving top priority to companies in the advanced manufacturing, information technology (IT) and energy sectors. These target industries already have a considerable presence of skilled workers and successful companies, as well as great growth potential.

The advanced manufacturing sector includes aerospace, transportation equipment and pharmaceuticals. Within Virginia, some 239,000 workers are employed in the manufacturing sector and contribute more than $34 billion to the state’s economy.

Industry leaders in Virginia include Northrop Grumman Shipbuilding, DuPont, Stihl, Rolls-Royce and AREVA, a world leader in nuclear energy.

AREVA’s presence in Virginia dates to 1957. Two years ago, the company formed a $363.4 million joint venture with Northrop Grumman Shipbuilding, a sector of Northrop Grumman Corporation. The AREVA Newport News LLC venture, now under way, manufactures equipment and pressure vessels for the nuclear industry and provides nuclear engineering services. Virginia successfully competed with Alabama, Indiana, South Carolina and Tennessee for the project. "Our depth of expertise—including workers skilled in nuclear engineering, manufacturing and welding—helped clinch the deal," says VEDP’s Anderson.

Industry and university collaborations serve as the platform for bringing Virginia’s university research assets together with the production needs of the manufacturing arena. One example is the Commonwealth Center for Advanced Manufacturing (CCAM), a research facility formed by the Commonwealth of Virginia, the University of Virginia, Virginia Tech, Rolls-Royce and other partners.

Rolls-Royce has supported the creation of CCAM with the donation of 20 acres at its new aerospace facility at Crosspointe in Prince George County. The global power systems company will participate with university faculty and students on advanced aerospace propulsion systems and manufacturing research, creating educational opportunities for students and establishing a pipeline of engineering leaders.

“The technology corridor is rich in intellectual capital and positively charged with
opportunities that draw educated workers from around the world. Innovators
of every kind understand this and know this is the logical place to be.”

Bobbie Kilberg, President and CEO, Northern Virginia Technology Council

Information Technology: Connect Here

Technology innovators of all sizes are drawn to Virginia for its wired-to-the-world status, proximity to the federal government, access to top research and development facilities and highly qualified workforce.

Virginia’s communications infrastructure assets are well known. More than half of the world’s daily Internet traffic flows through the Commonwealth on a sturdy and secure backbone with the capacity to meet industry needs well into the future. Multiple energy providers keep the state supplied with reliable and abundant electricity, at rates that are among the lowest in the nation.

"Proximity to power is the region’s longtime advantage, made even stronger now that Washington has an increased role in the world’s financial markets," says Bobbie Kilberg, president and chief executive officer for the Northern Virginia Technology Council (NVTC). "The technology corridor is rich in intellectual capital and positively charged with opportunities that draw educated workers from around the world. Innovators of every kind understand this and know this is the logical place to be."

NVTC was formed to support and promote the region’s technology community. It now has about 1,000 member companies representing more than 200,000 employees. Member companies are engaged in all aspects of the technology industry, including software, systems integration, federal IT, green IT, health IT, Internet, data centers, cyber-security, telecommunications, bioscience, aerospace and the service providers that support these companies.

In addition to its member networking and professional development programs, NVTC serves as a public policy advocate on technology issues. As an example, Kilberg serves on Governor McDonnell’s Commission on Government Reform and Restructuring and his Commission on Military and National Security Facilities.

Kilberg highlights Northrop Grumman’s headquarters move as strong evidence that Northern Virginia is an ideal location for technology companies. That move echoes closely the 2008 decision of CSC (formerly Computer Sciences Corporation) to relocate its corporate headquarters to Falls Church from El Segundo, Calif.

"Virginia has a dual economic development strategy for technology business," Kilberg says. "Attracting relocating companies is one part. The second is to ‘grow our own.’ That means making Virginia a top destination for entrepreneurs, innovators and investors. Governor McDonnell and the legislature recently enacted several new initiatives to help us do that. For instance, we now offer a 100% capital gains tax exemption for entrepreneurs and investors when they form or invest in an early-stage technology company within the next three years."

Support and Capital for Innovative Start-Ups

The Center for Innovative Technology (CIT) in Herndon has been accelerating entrepreneurship and innovation in the Commonwealth for 25 years. "Globally, innovation is recognized as the premier path to economic expansion," says Peter Jobse, president and chief executive officer. "In Virginia, innovation can accelerate recovery from the current recession and propel the Commonwealth into a new economy that creates new jobs, cuts costs and improves efficiencies."

CIT’s GAP Funds program is available to emerging life sciences and technology companies throughout the state. It provides seed-stage investment that leverages federal and private investments. Since its inception, GAP has invested almost $3.5 million to create 36 companies that, in turn, were able to attract an additional $41 million in private equity.

Correctly gauging the heightened demand for green IT, CIT GAP Funds invested $100,000 in Blacksburg-based start-up MiserWare, Inc., in 2008. "The company’s software helps companies cut the energy usage of servers and PCs significantly beyond what can be achieved by using conventional methods such as virtualization, server consolidation and machine upgrades," says Jobse. "The licensing, patenting, marketing and funding assistance we provided is just one example of how we help innovators become successful."

Energy: Power Up Here
The Commonwealth has strengths in four main energy sectors: In addition to its nuclear business cluster and significant coal resources, it has shallow water suitable for offshore wind generation beyond sight of shore. Its significant biomass resources, with the support of a $100 million commitment from the Virginia Tobacco Commission, are creating opportunities for new energy products and services. With the goal of achieving energy independence for the state, Governor McDonnell has emphasized the importance of using all of Virginia’s available resources.

"Governor McDonnell’s goal for Virginia to become the energy capital of the East Coast will take advantage of the energy infrastructure already here and further develop capacity in the areas of wind, biofuels and other green energy production," says Thomas F. Farrell II, chairman, president and chief executive officer of Richmond-based Dominion Resources Inc.

As one of the nation’s largest producers and transporters of energy, Dominion is an integral part of the Commonwealth’s energy story. In Virginia, Dominion has 2.3 million residential, industrial and government customers. It is investing $4.2 billion over the next three years for transmission, generation and facility upgrades.

Dominion offers economic development services free of charge
to businesses seeking to operate in the regions it serves.

Farrell says there has been a definite change in the way its prospective customers view their energy suppliers: "In addition to asking about price and whether we can meet their power needs, they are starting to ask about our energy supply mix. They are highly attentive to the environmental impact and the potential impact of climate change legislation on costs going forward. We take this very seriously, and environmental issues are an important part of our corporate social responsibility activities."

In a recent comparison of the carbon intensity of the nation’s largest power companies—using a measurement in which lower is better—Dominion is in the lowest third. "That seems to resonate with corporate decision makers," says Farrell. "We offer a good balance between price and environmental impact."

Dominion offers economic development services free of charge to businesses seeking to operate in the regions it serves. "When companies are looking to locate or expand in Virginia, we can help them perform due diligence," says R. Kent Hill, the company’s senior manager of economic development. "For a large energy user, for example, we could perform a power-quality review so they know whether a site will accommodate their requirements. We can provide electricity cost estimates for comparison of multiple sites. For certain high-impact projects, we have done helicopter flyovers with corporate executives so they can see multiple sites in a short period of time. We also have the ability to put together interactive video tours of available sites and buildings."

The American Nuclear Society has estimated that 700 nuclear engineers need to graduate every year to support the industry’s potential demand. Currently, only about a third of that number is available. To increase the supply, Dominion has partnered with Virginia Commonwealth University (VCU), funding programs to train the next generation of nuclear engineers. The pipeline of nuclear engineers coming through VCU’s undergraduate and master’s level programs will ensure the company has adequate capacity in the years ahead.

Dominion also has contributed to the College of Engineering at Virginia Tech. A 2009 donation of $400,000 in smart-grid equipment and a $45,000 fellowship fund will help graduate students gain experience using state-of-the-art technology to help improve the U.S. power infrastructure.

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