A roadmap of how one governor used economic development to create a new Virginia economy
Credits & Incentives talk with Deloitte
“Credits & Incentives talk with Deloitte,” is a monthly column by Kevin Potter of Deloitte Tax LLP, featured in the Journal of Multistate Taxation and Incentives, a Thomson Reuters publication. The August issue of "Credits & Incentives talk with Deloitte" discusses how one governor used economic development to create a new Virginia economy.
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A comprehensive, long-term strategy
Last October, Kevin Potter had lunch with Virginia Gov. Terence McAuliffe and a team of his closest economic development advisers. What impressed him most about Virginia's new governor was how open-minded he was about confronting the legacy economic challenges he inherited. Gov. McAuliffe was focused on more than just winning jobs from other states in the union. His approaches form a comprehensive, long-term strategy to turn his state into a modern-day leader in global economic development.
His proactive approach to economic development may serve as a possible model for other states to attract a diverse pool of private sector employers, reinforce infrastructure assets and align education and skills of local workers to match the needs of businesses. But it's far from a sure win. Several obstacles—including state budget cuts, partisanship, critical constituents and term limitations—potentially stand in the way of the plan's success.
Excerpts from this month's issue
Facing legacy challenges
Defense is one of Virginia's largest industrial sectors, and the Commonwealth is the top recipient of US. Department of Defense (DOD) contracts. With 5,000 defense companies in Virginia facing DOD-announced spending reductions of more than $300 billion in the next five years or so, Virginia stands to lose many high-paying jobs. Gov. McAuliffe's priority is to grow and diversify the state economy to reduce dependency on the federal government.
Regional differences within the state in terms of prosperity and levels of educational attainment also present challenges. Nearly 12 percent of Virginians still live below the federal poverty level, even though Virginia consistently ranks among the top 10 states for per capita personal income.1
Agriculture and forestry remain vital to Virginia's economy today. But farm commodities-such as cattle, grains, tobacco and cotton-won't make Virginia a powerhouse in an advanced global marketplace.
Devising a game plan
Where others might see insurmountable challenges, Gov. McAuliffe seeks solutions that require decisive action to enhance Virginia's fiscal resilience and foster economic growth. The New Virginia Economy strategic plan is aimed at establishing a diverse economic infrastructure critical in the 21st century. His overarching goal is to improve the average standard of living and build an economy that's "diverse, cutting-edge and attractive to the world."2 He plans to achieve that goal by leveraging Virginia's existing assets: its robust education system, wealth of natural resources and extensive transportation system.
During a speech in New York to launch a Virginia advertising section in the 2014 Forbes 400 magazine issue, Steve Forbes referred to Gov. McAuliffe as "the Derek Jeter of economic development."3
Much as Jeter would inspire his teammates to perform, the governor has charged Virginia to, "Take risks. Be bold. We cannot hope to accomplish great things if we are not willing to take chances. Our economy demands it, and the future of the Commonwealth depends on it."4 The first part of the governor's bold plan is to attract businesses with the Commonwealth's pro-business policies and some direct financial incentives.