Coming into focus

In 2016, amid concerns over how the Virginia Economic Development Partnership was being run, the General Assembly directed Virginia’s Joint Legislative Audit and Review Commission to examine VEDP’s organizational management and performance.

“There was a perception, at least publicly, that [VEDP] was a fairly good organization that was successful in bringing in business,” says Hal Greer, director of JLARC, the state government’s watchdog and oversight commission. However, “when we got there, we were just shocked to learn what was going on there in terms of the management of the organization — or lack thereof.”

Greer’s team at JLARC found that VEDP, the state authority charged with expanding and diversifying Virginia’s economy, lacked “fundamental things” like performance metrics, a marketing strategy, strong communication with partners and operational guidance for staff responsibilities, he says.

“It was very dark days” for VEDP, recalls Jay Langston, who worked at VEDP for nearly 14 years before becoming executive director of the Shenandoah Valley Partnership in 2018. “There was a little bit of this attitude, ‘We’ll tell you how to operate,’ rather than, ‘We’re here to assist.’”

There was also no structure around awarding incentives to businesses or monitoring whether companies were doing what they had promised in order to receive those incentives, resulting in a consistent problem of clawing back funds when businesses did not meet performance metrics.

VEDP “lacked a strategic plan,” says Greer.

A lot has changed in the seven years since Greer’s team reviewed VEDP, though. With new leadership, the organization is still working to catch up after inefficiency and mismanagement left Virginia behind many of its competitors as an attractive spot for business expansion and development.

As it aims to make up for lost time, VEDP’s plan for fiscal 2024 reaches far beyond the next year, representing a pivot from solely focusing on attracting major business developments to a more holistic approach aligned across government sectors to achieve overall economic well-being.

Catching up

Amid JLARC’s investigation, VEDP’s governing board of directors began to initiate a restructuring. VEDP’s CEO at the time, Martin Briley, stepped down in March 2016 following a closed board session to discuss personnel issues. An interim CEO was appointed the next day. JLARC released its report in 2017, outlining the many dysfunctions at VEDP and recommending a slew of structural changes.

“I would say it really started at the top. You had leadership that just was not committed to the fundamental aspects of running an organization,” says Greer.

Steven Moret, Louisiana’s former secretary of economic development, was hired as VEDP’s new CEO in 2017 and brought on his assistant secretary from Louisiana, Jason El Koubi, as his second-in-command.

“We basically set to work to make VEDP a stronger organization,” says El Koubi, who took over as VEDP’s president and CEO after Moret left in 2021. “We’re catching up fast, but we are still catching up.”

A big part of that is expanding VEDP’s marketing of Virginia as a great place to do business and positioning it higher on rankings of the best states for business climate, according to El Koubi.

“Virginia tends to do better on the rankings that are based on objective data than it does for the rankings based on the perceptions of corporate executives across America,” he says.

Before the JLARC report, VEDP was investing $0 in marketing, according to El Koubi, who says the state economic development authority now spends about $2.7 million annually on marketing. Still, VEDP is trailing its competitors by a significant margin, with some other economic development organizations investing more than $10 million per year, he says.

“We do a fantastic job of marketing Virginia to tourists,” Secretary of Labor Bryan Slater says. “But we need to do the same thing when it comes to attracting business and work. That involves taking an aggressive marketing approach.”

Another goal of VEDP is ensuring every region in Virginia plays a part in economic growth so anybody who lives in a particular region has access to jobs and other economic opportunities within commuting distance.

Innovative framework

To spur VEDP forward, El Koubi and his team have designed what he calls an innovative framework to guide their economic development strategy in the coming years starting with the state’s 2024 fiscal year, which began July 1.

The framework has three primary focuses: investing in Virginia’s strongest industries, building “ecosystems” that attract and drive business, and improving collaboration with other government agencies for a more holistic approach to economic development.

VEDP hopes to capitalize on the largest sectors within Virginia’s internationally tradeable industries: logistics, manufacturing and knowledge work (software, cybersecurity, financial services, etc.). Together, those three areas make up almost 65% of economic growth within the tradeable sector, according to VEDP.

“If we can lead in these core growth sectors, we’re going to lead overall,” says El Koubi.

Particularly in manufacturing and logistics, Virginia is not yet a leader but has enough momentum to move toward becoming one with enough investment, El Koubi adds. VEDP has been working closely with the Virginia Community College System to accomplish that goal, as VCCS has been focusing on increasing the number of manufacturing graduates it produces, according to VCCS Chancellor David Doré.

“When you invest in talent development at the community college level, that is going to drive economic development,” Doré says. “These go hand in hand.”

This was certainly true for the Lego Group when it chose Chesterfield County to be the site of a $1 billion factory complex, which broke ground in April. The Danish toymaker is using the Virginia Talent Accelerator Program, a training and recruitment service managed by both VEDP and VCCS, to help fill the 1,700 new jobs it’s bringing to the area.

“We are very pleased with our experience working with VEDP, beginning with site selection and as we’ve pivoted to hire and train our first group of colleagues,” says Carsten Rasmussen, chief operations officer, for the Lego Group. “VEDP and the talent accelerator have been instrumental in our ability to recruit, hire and train our new team.”

Working collaboratively with VCCS is also part of building the business-friendly ecosystems referred to in VEDP’s innovative framework, which ideally will provide strong workforce talent to incoming or expanding businesses, as well as housing and health care for new employees.

“The innovation framework talks about building a stronger ecosystem,” says Doré. “I see the Virginia colleges as pivotal to that talent pipeline, which I think is central to VEDP’s plans.”

Creating site development opportunities across the state is another crucial aspect for building those ecosystems, El Koubi says. Virginia has had some major successes in attracting development projects, including Lego’s Chesterfield County facility and Amazon Web Services’ January announcement that it plans to invest an additional $35 billion building data centers in Virginia by 2040, but El Koubi says consistent funding is necessary to ensure these types of developments keep coming to the state.

“In selecting the Chesterfield County site,” Lego’s Rasmussen says, “we prioritized shared values, a skilled and diverse workforce, and infrastructure needed to support regional and national consumer demand.”

In January, Gov. Glenn Youngkin announced $90 million in site development grants through VEDP, and, in September, the General Assembly put another $200 million for site development into the revised budget. This kind of investment needs to be consistent going forward because Virginia is “decades behind” competing states, El Koubi says.

While Virginia has landed some major corporate headquarters in recent years, including Amazon.com’s multibillion-dollar HQ2 East Coast headquarters in Arlington County, it lags behind other Southern states in industrial site development. Out of more than 120 industrial development megaprojects landed by Southeastern U.S. states from 2015 to 2022, Virginia landed just one: the Lego plant.

“What we have not done at the state level is really assisting regions and localities with developing sites to address local expanding businesses … and new businesses that are coming in,” says Langston with the Shenandoah Valley Partnership.

Site infrastructure and many other attracting factors for business, such as low taxes, fewer regulations and better quality of life, are beyond VEDP’s direct control, which is why collaboration is such a major part of the authority’s plan going forward.

The final aspect of the innovative framework is a “whole-of-government approach” to economic development, with VEDP working closely in alignment with other state and local agencies, according to documents outlining the plan. This is something that will become even more important as Virginia establishes its new Department of Workforce Development and Advancement.

A bigger picture

The new department, which is still being formed, is charged with consolidating a litany of workforce-related agencies under one roof. In September, Youngkin appointed Carrie Roth, commissioner of the Virginia Employment Commission, as the department’s first leader.

Previously, the state’s workforce initiatives were spread across six cabinet secretaries,
12 agencies, roughly 30 individual divisions, 14 local boards and more than 40 websites, according to Slater, who spearheaded the creation of the consolidated department.

As the new department comes to fruition over the next year, VEDP will be a close partner and will act as a liaison between workforce development initiatives and prospective businesses looking to expand or locate in Virginia, Slater says.

“The VEDP is working on bringing all of the pieces together so that you’re really kind of working in a synergistic way,” he says. “I think that’s really the key … [to] how we deal with workforce development and economic development on a more comprehensive map and taking a 30,000-foot view of how it all fits together and how it all works.”

How workforce development is handled and who’s responsible for it have been hotly debated topics for several decades in Virginia’s legislature, as competing sides viewed it as something that should be business-focused versus worker- or education-focused.

The new department’s focus will be “a combination of the two,” working with agencies across state government and putting money directly into their hands, according to Bill Leighty, who served as chief of staff to Govs. Mark Warner and Tim Kaine and is helping to develop the new department.

“There’s a vast difference of opinion out there of exactly what workforce training entails,” Leighty says. “That is the whole point of the agency … to bring it under one common thread where everybody can work together and row in the same direction.”

The budget for the new department passed at the end of the summer, so it won’t be until July 2024, when the new budget goes into effect, that the department officially opens. Until then, it will be a matter of consolidating back-office operations like email addresses and accounting codes, which will likely cut back on some inefficiencies, Leighty says.

The real work will begin in summer 2024, when the department will be fully in motion — and VEDP will play a critical role in defining the department’s future.

“Then the great debate will … center on, ‘What are we going to use all these resources to do?’” Leighty says. “VEDP has to be very astute about what the future needs are going to be in targeting those training programs to the needs of the business community.”