Virginia has gained almost $16 billion in capital investment through economic development since Gov. Ralph Northam took office 16 months ago, but nearly half of it — almost $7.4 billion — came from publicly unannounced projects by companies that did not want to be identified.
Most of those 25 confidential projects involved investments in data centers, which have fueled an economic transformation of Virginia’s economy and raised concerns about state tax breaks for the companies behind them. The Joint Legislative Audit and Review Commission’s staff is wrapping up a study of state tax exemptions for data centers that it will present to legislative members on June 17.
The level of capital investment in Virginia since Northam took office represents a significant increase over his business-friendly predecessor, Gov. Terry McAuliffe, who is credited for $4.6 billion in capital investment in the same period of his term, despite an ill-managed economic development agency that the state later overhauled.
“It’s probably the biggest 16-month period in state history,” said Stephen Moret, who became president and CEO of the Virginia Economic Development Partnership in early 2017 during the General Assembly session that approved sweeping reforms of the agency.
The $15.8 billion in capital investments includes two massive economic development projects that Virginia began pursuing under McAuliffe and landed under Northam — the $3 billion expansion of Micron’s semiconductor factory in Manassas and the $2.5 billion East Coast headquarters that Amazon plans to build in Arlington County.
“If that’s true, I’d say it’s fantastic news,” said McAuliffe, who called the economic results “a huge compliment” that reflects the work his administration did in laying the groundwork for the “new Virginia economy” for his successor.
In addition to capital investment, economic development deals since Northam took office Jan. 13, 2018, are expected to create more than 48,000 jobs in Virginia, according to figures from the Virginia Economic Development Partnership. That number is second only to the record 56,000 expected jobs from the first 16 months of Gov. Jim Gilmore’s administration during a high-tech boom 20 years ago.
Amazon plans to create 25,000 jobs in the first phase of its investment in Arlington’s Crystal City neighborhood. Micron will create 1,100 jobs at its semiconductor plant.
The economic development bounty gave Northam a chance to tout his success as governor, even as he struggles to overcome the blackface scandal that has crippled his ability to raise money for Democratic candidates in critical elections in November that will determine party control of both chambers of the General Assembly.
“Virginia has secured significant capital investment and created new jobs in every corner of our commonwealth,” the governor said in a news conference Wednesday. “While there is still much important work ahead of us, I am proud of our positive growth to date and remain committed to using every tool we have to ensure that all Virginians can participate in our economic progress.”
Northam declined to address questions about his ability to raise money for Democrats since the scandal that erupted on Feb. 1 over a racist photo on his 1984 medical school yearbook page that shows one person in blackface and another dressed in a Ku Klux Klan robe and hood.
The governor initially apologized for appearing in the photo, but the next day denied that it was him and promised an investigation that is still underway almost three months later. He also acknowledged darkening his face with shoe polish to impersonate Michael Jackson in a dance contest in Texas in 1984.
Since the General Assembly adjourned on Feb. 24 through the end of March, Northam’s political action committee had raised just $2,500. During the same time frame in 2015, McAuliffe raised more than half a million dollars. Northam recently canceled an appearance at a fundraiser at a Senate Democrat’s house in Northern Virginia because of protests outside by the Fairfax County NAACP and the state Republican Party.
Northam acknowledged Wednesday that “obviously we took some time off with the events that started on Feb. 1,” but said “our fundraising is going well” and vowed to work hard to support Democrats in the legislative elections.
The governor also used the news conference to sign five bills dealing with economic development, flanked by four legislators — three Democrats and one Republican — who had introduced them.
One of the legislative sponsors who wasn’t at the news conference, Del. Lashrecse Aird, D-Petersburg, said later, “I think Virginia continues to be one of those states that are attractive to new industry.”
“It really speaks to Virginia’s priority of being a business-friendly state,” said Aird, a member of the Virginia Legislative Black Caucus. “I don’t think the controversies will impact that.”
The centerpiece of Northam’s presentation was the whopping numbers for capital investment and new jobs, driven both by the Amazon and Micron projects and the surge in new data centers, including $750 million pledged by Facebook for the second phase of a project begun under McAuliffe in eastern Henrico County.
“The data center world is expanding,” said Barry DuVal, president and CEO of the Virginia Chamber of Commerce and secretary of commerce and trade under Gilmore.
DuVal, who attended Northam’s announcement, said “Virginia is at the nexus” of undersea telecommunications cables that have transformed the high-speed transmission of data and stimulated investments across the state to take advantage of it.
He said confidentiality is necessary for many data centers because of contracts with national security agencies and major financial institutions.
“Many of them work for three-letter agencies, and there is no publicity around those announcements,” he said.
DuVal credited Virginia’s success in competing for major economic investments to the governor, Moret and legislative leaders, especially those who serve on the Major Employment Investment Project Approval Commission, which vets any state incentive package of $10 million or more, including the Amazon deal.
“Virginia is moving in the right direction,” he said. “This is the first time in eight years all regions are growing and they’re all growing in the right direction.”
Moret said that most of the 306 projects the state landed in the first 16 months of Northam’s term, including some of those kept confidential, did not receive special incentives that would require public disclosure.
However, the biggest incentive for data centers may be their exemption from state sales and use taxes, which saved companies $285 million from mid-2009 through mid-2017.
“It’s a hot area,” JLARC Director Hal Greer said. “It’s one with a lot of money.”