Ambitious agenda for a final year

John Malbon believes a recent reorganization of the Virginia Economic Development Partnership and stronger ties with the Virginia Port Authority and the commonwealth’s higher education system will reap benefits in the coming year.

Malbon, 60, was elected chairman of the board of the commonwealth’s economic development agency in December. He is the chairman and CEO of PAPCO Inc., a wholesale and retail distributor of petroleum products based in Virginia Beach.

Appointed to the VEDP board by Gov. Mark R. Warner in 2002, this will be Malbon’s final year in two six-year terms. He doesn’t plan to coast to the finish line.

The VEDP board has ambitious goals for the state’s economic development agency. “This year our goal is to create 14,000 jobs, $2.5 billion dollars in investment,” Malbon says.

He sees great promise in reaching those goals because of new agreements with the Virginia Port Authority and the state’s higher education institutions that make promotion of Virginia as a top state for business a high priority.

He also cites a recent reorganization of the partnership that gives new emphasis to the needs of existing businesses, helping them to expand and thrive in a slowly growing economy.
Malbon also wants the partnership to assist Virginia defense contractors, who may be facing tougher times because of federal budget cuts. He would like to see whether VEDP can help these companies diversify their customer base, perhaps exporting to new clients overseas.

Malbon is a native of Virginia Beach and a lifelong resident. His father, also a Virginia Beach native, was a member of the Commonwealth Transportation Board. Malbon bought the company that became PAPCO in a bankruptcy sale in 1976.

PAPCO is primarily a petroleum products marketer. Through a logistics company, PAPCO supplies large- and medium-size companies in the mid-Atlantic. Its market territory includes 140 stations and stretches from South Carolina to New York. The company has 130 employees.

“We are the distributor for Citgo, Shell, BP, Valero. And through that distributorship, we brand other independent operators and supply them with those brands,” he says.

In addition to serving on the VEDP board, Malbon is a member of the boards of Sentara Healthcare, TowneBank, Virginia Beach Vision and the Hampton Roads Community Foundation. He is past chairman of the Virginia Beach Neptune Festival and was named First Citizen of Virginia Beach in 2007.

Virginia Business interviewed Malbon at his company’s headquarters in Virginia Beach in mid-January. The following is an edited transcript.

Virginia Business: What sort of goals does the board have for VEDP for the coming year?
Malbon: This year our goal is to create 14,000 jobs, $2.5 billion in investment.  And we’re going to do that through some targeted initiatives we have, looking at certain sectors and categories.  But where we’re very competitive, and we think we can have some good success, is in the areas of advanced manufacturing, logistics and information technology.  But that doesn’t mean we are not flexible enough to address any opportunity that comes to the Commonwealth of Virginia.

VB: What do you consider to be the major achievements that have taken place in the past year?

Malbon: Well, we’ve had three pretty big successes in a very tough economy in the Intelsat [headquarters moving from Washington, D.C., to Fairfax County], McKesson [putting a distribution center in Frederick County] and The Vitamin Shoppe [placing a distribution center in Hanover County]. In this tough economic environment, I think we’ve done pretty well in that area. 
The other achievement is that we’ve restructured and reorganized the partnership.  We’ve got it structured better to meet where we think the market has moved to, and we are positioning ourselves where we think we can be most effective. 

And through that reorganization we have targeted focus areas while protecting our existing business expansion, supporting them and creating stronger partnerships with potential partners and allies. That kind of restructuring, alignment and focus is going to put us in a better position to really take opportunities that we think would be coming our way.

We continue to look where we can align ourselves more strategically with current assets that are in the commonwealth. For example, higher ed.  There are clearly opportunities where VEDP and higher ed should be more closely aligned, more targeted.  They have economic development initiatives on their own, but we should be aligned together, support each other and have a unified message to the marketplace. And have them educated a little bit in terms of how they can provide lead generation to us and how we can support them. We should have been doing more of that before. 

We recently signed a memorandum of understanding with the Virginia Port Authority.  That alignment and that affiliation clearly presents better opportunities, having a united message, meeting more closely together, understanding what their opportunities and challenges are as well as some things we see, and aligning those assets where we can be more of a unified force, not only internally but externally, too …
Also I think there’s an opportunity that we could do a better job aligning ourselves with our local economic allies. I think it has worked fairly well, but I think there could be stronger alignment, stronger partnership there.

VB: Are there any kinds of specific programs that you have started, like say with the colleges and universities, any kinds of joint projects that you all are involved in there?

Malbon: We have a memorandum of understanding.  Specific projects probably have not emerged yet, but we have the commitment from everyone that we’re creating this partnership and alignment.  We are going to develop some metrics probably during the course of this year to measure our effectiveness.

But the key thing is we’re setting a structure up where we’re going to have points of contact at the higher ed level as well as the VEDP level.  We’ll have quarterly or semi-annual meetings where we’re reviewing some projects or initiatives that we’ve both adopted. 

And you’ll see the same thing with the Port Authority as well.  I think as we develop the stronger alignment and relationship, we’ll understand better how we can really leverage our forces to be a much more powerful voice in recruiting and retaining our existing business here.

VB: We talked about goals as far as targeted areas that you want to recruit new business.  What sorts of things are you doing for existing businesses in the state?

Malbon: Well, one, I think we’re clearly staying in touch with our existing businesses. We want to make sure that they’re supported.  We also want to know when there are opportunities that they have for expansions. We want to make sure that we’re protecting and nurturing that relationship, that when there is an opportunity for that particular business or that industry for growth, we want to make sure that’s in Virginia.

If you’ve noticed, 75 percent of these jobs we’re creating are from existing businesses.  And that’s why one of the three categories under our reorganization is to maintain that business expansion opportunity with our existing business.

VB: So within the organization, you have a group dedicated to working with existing business?

Malbon: Yes, we do.  Three buckets:  new business, existing business and international.

VB: What sort of interest are you seeing from international companies right now?

Malbon:   Through the help of the General Assembly, we’ve opened offices in India, China and the UK.  Those are areas of geographic focus where we think we can be very competitive in recruiting industry out of those markets.  We constantly are at industry conferences.  We’re creating our value proposition.  We’re showing where Virginia is the place to be.  We’re increasing our profile.  We’re making sure we’re using our marketing dollars wisely to target specific areas we’re interested in. 

VB: I know that the governor and many state officials have made trade missions abroad.  Have those been effective in getting people interested in Virginia?

Malbon:   I think you have to do that.  You have to constantly keep your profile out there …  Sometimes, you plant that seed and the opportunity may not exist then, but when it does, they know what your values are.  So you’re on the list to be considered.

VB: What sorts of challenges do you see for the VEDP in this coming year?

Malbon: I would say helping existing businesses to grow in a tough economy.  One of the bigger challenges we talk a lot about is the [possible] cut in defense spending.  Virginia is heavily dependent on defense spending.  And with sequestration and defense cuts, obviously Virginia is going to be impacted more so than other states … 

What we want to do is take that defense industry, and the products and services it develops, and see if we can’t create an export market, and see if we can’t use the infrastructure and the relationships that we’ve developed internationally, where we can export that technology and still keep the business in Virginia.  That’s a big initiative, and that’s a big effort.  And that’s a challenge.

VB:  What can the General Assembly do to make sure that Virginia remains competitive?

Malbon: Continue to support us the way they have.  Make sure there is funding available for incentives where appropriate.  And what we need to do for the General Assembly is make sure we give them a full report or a full accounting of the progress and the good stewardship of the investments we’re making on the commonwealth’s money.

VB: In recent months Michigan and Indiana have become right-to-work states.  This has been a big calling card for Virginia.  With more states moving toward right-to-work status, is it going to be tougher for Virginia to compete?

Malbon: That’s a good attribute that Virginia has, and I understand [why other states made that change].  But to what extent that moves the needle in terms of how competitive we are with new or existing businesses, I’m not sure about that.  What Virginia has to offer is a lot more than the right-to-work issue.  There’s the low cost of business environment, our work force, our transportation infrastructure with Dulles Airport and the ports.  There are a lot of other attributes and values that go into the decision of whether you expand or locate in Virginia.

VB: What sort of concerns do business prospects have?  What are the things that are central to their decision when they’re coming to Virginia to look for a possible place to expand?

Malbon:   I would say as a business owner myself, the first and foremost thing is: What positive impact am I going to have to my bottom line in coming to Virginia?  What is it that Virginia offers me that’s going to be in the best interest of my business?  That includes a lot of things we’ve already talked about: low-cost business environment, work force, transportation infrastructure, higher-ed capabilities.  Those would all be absolutely critical, because those elements are what brings the best business environment to succeed. 

VB:  We talked about VEDP’s efforts abroad. Are there also efforts to recruit companies from other states, such as California?

Malbon: I think that’s always on the table.  I think that’s just part of the marketplace and part of positioning ourselves. If other states, for whatever reason, are having some of their industries looking, we want to make sure that Virginia is presented in a positive way with the assets and the attributes we have.  If the marketplace provides that type of opportunity, Virginia is going to be there.

VB:  What does VEDP do to ensure that the state gets a return on any incentives?

Malbon: Incentives are very well vetted and analyzed in every case.  In some cases, incentives are necessary to be competitive with whatever environment we are in.  In some cases, they’re not.  It all depends on the type of business, what they’re looking for and what other assets we have within the commonwealth that are going to meet their needs.  It’s all put into one pie, but sometimes we may need the incentive to level the table.  And the incentives Virginia offers may not be anywhere near competitive, but with everything considered, Virginia can be the best choice. 

I know that’s a sensitive issue, but if you look at the history of what we’ve done on incentives with [Governor’s Opportunity Fund grants], the return on capital that we’ve had has been pretty impressive.  That goes to the quality of the staff, the analysis and how incentives are structured to make sure that it’s an adequate return to the commonwealth.  And it has been very good.

VB: My impression is that Virginia has not been as big into incentives as some other states.  Is that correct?

Malbon: I hear that.  I hear we’ve lost some things because we weren’t as rich as other states were.  You never want to lose one, but sometimes from where we sit and how we look at the business, we don’t see the economic return.  You don’t get every deal, but we learn from the deals we don’t get, and we make sure that we re-examine ourselves and see if we’re missing something in our analysis that we should have looked at.  But it does get disappointing when you miss a deal, particularly if it’s over a little bit of money.

VB: Would you be willing to mention any that got away, that Virginia was very close?

Malbon: I think we were pretty competitive with the BMW [manufacturing plant] that went to South Carolina [in 1992].

VB: Does the state need to increase the amount of money it has available for incentives?

Malbon: Ultimately, it may.  It just depends on the changing marketplace.  But if we still maintain our discipline, and we still get the return on invested capital, personally I don’t see that as an issue, because the investments we make have been very good.  They’ve been creating jobs and getting a return back that is acceptable in the marketplace.  That’s my personal opinion.

VB: One area of the state I think we ought to touch on is Southwest and Southern Virginia, which have lost a lot of industries …

Malbon: Always a focus of VEDP.  All those areas that have higher unemployment rates than the rest of the state.  There are constant efforts to understand strategies, taking what we have and bring some jobs in those markets.  We’ve had some successes but not as much as everyone would like.

VB: Can you be any more specific about what sort of strategies you might have?

Malbon: We have teams of people who have looked at several sectors and seen if we can take care of the needs of those sectors …  Do we need to have some more site-ready opportunities there?  Do we need to have some mega-sites? … Does the necessary infrastructure exist?  So when that opportunity comes, we’re able to plop them in a ready-to-go environment.  I think those kinds of analyses and research are going on.

VB:  Is there anything we haven’t covered, other points you wanted to make?

Malbon: Julien Patterson was our past chairman, and he was awesome.  I really enjoyed his leadership.

The other thing is [VEDP President and CEO] Martin [Briley] has really, in my view, shown strong leadership, particularly with restructuring, realigning and positioning VEDP where we think the marketplace is going.  I think he probably did that in a difficult environment … but I think he has done a good job.  We’re fortunate to have him …

Martin doesn’t do it by himself.  The quality of the staff, the people that run this organization, is very impressive.  And I would be remiss if I didn’t tell you I’m proud of every one of those people and the jobs they do and the commitment they have to get them done.