Last month, Gov. Glenn Youngkin withdrew Virginia from consideration for a Ford Motor Co. battery plant over concerns about Ford’s ties to a Chinese company. The plant could’ve created 2,500 jobs in Virginia, had it located here.
This decision, which sparked backlash from some and support from others, prompted questions about the process of recruiting a large company like Ford.
What does this kind of recruitment look like? How long does it usually take? What makes a site competitive? Does the governor typically get involved in potential economic development projects?
Current and former economic development officials at both the state and local levels described the recruitment process as fairly standard, though the timeline varies.
It’s important to note that the following information describes how large economic development deals typically happen. It is not specific to the Ford deal, which economic development officials have been unable to talk about due to nondisclosure agreements.
A Freedom of Information Act request submitted in January to the Virginia Economic Development Partnership for correspondence about the recruitment of Ford turned up 1,700 emails and documents — all of which were withheld, with VEDP citing proprietary information and working papers exemptions.
Though the process is standard, the beginning stages of a potential economic development project can vary.
“A project or an opportunity can come to a state, or it can come to a locality or region, in many different ways,” said Ron Flanary, who worked with the LENOWISCO Planning District Commission for 33 years and is now retired.
During that time, he said he was involved in almost everything related to economic development in Lee, Wise, and Scott counties, the city of Norton, and the 15 incorporated towns in the district.
“Lots of companies these days use site selection consultants to basically pre-vet possibilities,” Flanary said. “They look at, what’s the price, what are the potential incentives, labor force characteristics, all the data.”
Site selection consultants can connect a state and a company, or a company can reach out to a state, or vice versa. Sometimes economic development officials will cold call a company.
Eventually, there will be a dialogue between the company and economic development officials, either at the local or state level, Flanary said. At the state level, that would be VEDP.
Suzanne Clark, managing director of communications at VEDP, said the organization’s main role is to help a prospective company make an informed site location decision in Virginia. These decisions are based on project requirements like site size, infrastructure needs, proximity to highways or port facilities, workforce and timeline, she said.
“There’s not always one cookie-cutter way these things flow,” said David Manley, executive director of the Wythe County Industrial Development Authority. “But in a classic situation, a lead would come to the VEDP, and they would work with a locality to identify a site.”
Manley worked with VEDP to attract a medical glove manufacturing plant called Blue Star to Wythe County in 2021. The project is expected to bring 2,500 jobs to the area and was one of the largest manufacturing job announcements in the past 30 years.
“The VEDP had been working with the Blue Star team for some time, trying to identify a site,” Manley said. “I know they looked at some other communities, and those didn’t move forward for differing reasons, so they came to us.”
A company has certain criteria when looking for a site, said Michael Schewel, who was secretary of commerce and trade under Gov. Mark Warner from 2002 to 2006.
“They’ll say they’re looking for a site with 500 acres, or 80 acres, or 33 acres, or whatever they’re looking for,” Schewel said. “There might be a lot of parameters. They might want a workforce, or a certain electric rate, or access to interstates.”
Sites are more attractive to companies if they are shovel-ready, with good access to water, sewer and electric utilities, and are close to interstates, railways and a workforce.
After hearing a company’s wants and needs, VEDP looks at sites in Virginia that match the criteria, Schewel said.
And state or local economic development officials run the numbers to determine the project’s worth in terms of public incentives versus return on investment, Flanary said.
“You don’t just wildly throw money at a project, hoping for an announcement,” he said. “You want to make sure it’s prudent.”
Simultaneously, the company is usually doing this same thing in other states, or sometimes even other countries. A company might narrow its site search to a specific geographic area, like North America or the Southeast United States, for example.
“You’re flying blind because obviously you’re probably in competition with other places, other states, and they’re doing the same thing,” Flanary said. “And obviously, companies play one against the other. That’s the reality.”
Flanary said that he was on the winning side and the losing side of this process many times during his decades in economic development.
“I’ve been on the losing side far more, just because there are so many options out there available for a company, and there’s so many powerful incentives that can be offered,” he said. “It’s just really difficult to score points, for lack of a better term.”
Eventually, the company will notify economic development officials if their site is still in the running. Company representatives typically visit in person if they are seriously considering it, Flanary said.
The governor’s office and incentive packages
The point at which the governor becomes aware of the deal can vary, depending on both the size of the project and who occupies the Governor’s Mansion.
“Different governors are more or less interested in economic development,” Schewel said. “But the Virginia Economic Development Partnership is a very expert organization. They are getting potential projects all the time, and they’re not calling up the governor or the secretary of commerce and trade every time.”
Schewel said that VEDP has to determine when a project looks “big enough and real enough” to notify the executive branch. Not all potential projects are going to amount to something, so not all potential projects come to the governor’s attention, he said.
Often, VEDP will approach the secretary of commerce and trade before the governor, he said, although again, this depends on the people in those positions.
Schewel described what he believed to be a likely timeline for alerting a governor about a potential project.
“This would usually go up the chain through the secretary to the governor, after you’ve made the first cut or two and it’s down to a few competitive sites around the country,” he said. “That’s when I’d probably take it to the governor.
“But on the other hand, it’s entirely possible that, in the administration, there’s something like a monthly meeting between the head of VEDP and the secretary, and maybe the governor, who knows, when they go over what look like hot prospects. I can see that being the case, in which case, the governor might get involved a little earlier. But there’s so many potential deals that come over the threshold, most of which don’t become anything, so the governor wouldn’t usually get involved until we’ve at least made the first big cut down to three or four or five sites.”
Clark said that VEDP does have regular meetings with the secretary of commerce and trade “to review economic development projects that are considering Virginia, including a regular weekly meeting to review incentive proposals.”
Meetings with the governor himself, however, are scheduled on a case-by-case basis, usually when a major project opportunity “reaches the advanced stage of the site selection process,” Clark said.
The governor’s office declined to answer questions about when Youngkin first became aware of the Ford deal, and at what stage of negotiations.
However, state Sen. Frank Ruff, R-Mecklenburg County, did provide some clues about the timeline of the Ford project in a recent opinion piece in the Danville Register & Bee.
“Ford wanted a commitment from the state prior to the first of the year in hopes of accessing those federal dollars,” Ruff wrote. “To accomplish that, Ford/CATL had to make a commitment by Dec. 31.”
Ruff said that he and Jason El Koubi, president of VEDP, put final touches on the proposal the Friday before Christmas.
Flanary said that in his experience, a governor’s involvement was often a formality, not a requirement.
“[A deal] does not need the governor’s participation unless it needs money through the governor’s office,” Flanary said. “Matter of fact, most projects I worked on never involved any governor at all. These were deals made between businesses, site development consultants, local economic developers and regional people.”
Only rarely did he work on a deal that needed money from the governor’s office through what was then called the Governor’s Opportunity Fund, now called the Commonwealth’s Development Opportunity Fund, Flanary said.
The COF is a “‘deal-closing’ fund to be employed at the governor’s discretion to secure a company location or expansion in Virginia,” according to the VEDP website.
These funds can be included with other incentives — things like tax credits and discounts — in a package that states offer companies to entice them to locate there.
The website describes the COF as “a final resource for Virginia in the face of serious competition from other states or countries.”
“If we did need that, we went to the VEDP and made our case,” Flanary said. “If they’re inclined to give the money, then it goes to the governor for him to sign off. So the governor’s participation is usually a formality.”
But Schewel said that any large deal would definitely come to the governor’s attention.
A project fits the general eligibility guidelines for COF funding if it will bring at least 50 new jobs and a $5 million capital investment, or at least 25 new jobs and a $100 million capital investment, the VEDP website says.
Eligibility guidelines differ if the area is considered a single-distressed locality or a double-distressed locality. A locality is single distressed if it has either an unemployment rate or a poverty rate above the statewide average. An area is considered double distressed if it meets both of these criteria.
“If it’s going to be a significant grant, the governor and the governor’s office is always going to be involved,” Schewel said. “It’s extremely unlikely that a project of good size would have an incentive package that was prepared that was not approved by the governor.”
Clark said that the governor signs off on all discretionary state incentives — like the COF — prior to an announcement. Even before that, the secretary of commerce and trade must give preliminary approval of a potential incentive package before an offer is sent to the prospect, she said.
For larger economic development projects where Virginia is shortlisted, the governor and a legislative advisory commission approve the financial offer, Clark said.
The Major Employment and Investment Project Approval Commission consists of members in the state House and Senate who review and approve financing for individual incentive packages.
Both Ruff and Del. Danny Marshall, R-Danville, are on the commission.
“If it gets to a point where VEDP and a locality think that they have a good prospect, and they want to extend an offer to them, one of the steps they’ll do is come to MEI,” Marshall said. “The VEDP gives us a recommendation on what they think we should offer, and of course they have to justify that to us. And then we say yea or nay.”
If the commission doesn’t approve it, it goes back to the drawing board, Ruff said. But Marshall said the projects coming before the commission are “mammoth projects,” and they typically get approved.
“It’s usually a pretty compelling case, with the number of jobs, pay for the jobs, and what the economic pluses are for the state and also for that region,” Marshall said.
The commission meets as needed, Ruff said, which can speed up the process for putting together incentives, since the alternative is waiting for the General Assembly, which only meets once a year.
“We don’t meet once a year or once each quarter, because business doesn’t respond to that kind of silliness,” Ruff said. “They like to make decisions one way or another.”
During this process, the state is in the dark about what its competitors are offering as incentives, unless the company specifically discloses it, Clark said.
Ruff said the best approach is to not be concerned with what other states are offering.
“We just try to tailor our offer to what we believe is the best long-term for the business, rather than trying to beat the low dollar,” he said.
Companies differ on what they want as incentives. With the glove factory deal in Wythe County, Manley said the package was unusual because Blue Star didn’t want cash incentives.
“The company wanted any incentives available to go to improving the infrastructure and the supporting systems for the infrastructure in Wythe County,” Manley said.
He said that “state and local partners work hand in glove” to create the incentive package.
Schewel said that officials have to be careful about the incentive money they hand out and make sure that the company will hold up its end of the deal.
He referenced the deal between Virginia and Chinese company Tranlin Paper for a paper-making facility in Chesterfield County, which was announced in 2014. After getting a $5 million grant from the state, Tranlin missed payment deadlines and reported delays.
By 2018, Tranlin was no longer expected to build the plant or pay back the money.
“You have to be careful with some of these companies,” Schewel said.
Still, there are safeguards in place to prevent this sort of thing from happening. Clawback clauses allow the state to collect, or “claw back,” unpaid money from companies that receive incentives in state economic development deals.
The process of creating an incentive package differs depending on the size and nature of the projects. The length of the recruitment process also depends on the project’s size and the company’s needs.
Clark said that the site selection process can take anywhere from several months to more than a year.
“The timeline is driven entirely by the company’s desires,” Flanary said. “They know what their timeline is. They know what they need to build and how quickly, and more times than not, these things were fairly fast-tracked.”
With Blue Star in Wythe County, the process was “exceptionally fast,” Manley said, even though it was a large deal. It was finalized in a matter of weeks, instead of months or years, he said.
“With economic development, you have to move at the speed of business,” Manley said. “The private sector expects quick responses and substantive responses, and otherwise opportunity can evaporate, because you can rest assured other communities and other states are competing very hard for those same investment dollars.”