John O. Wynne Virginia FREE Remarks Friday, December 16, 2016 Richmond, Virginia Thanks, Chris, for the kind introduction. It’s a pleasure to be with you to provide an update on GO Virginia, which by now, I hope is familiar to all of you. Before starting, I want to thank many of you here today for your guidance and support in gaining passage of the GO Virginia legislation. Glenn has provided provocative remarks that challenge us to up our game in business competitiveness and economic development. He notes that all sectors are dependent on better growing our economy. That will only happen with investments, which, coupled with more ambitious and long term strategic thinking, will overcome impediments and strengthen our opportunities – all with clear goals and accountability. This is what GO Virginia is all about. GO Virginia. Go Virginia is a business-led bi-partisan initiative to innovatively expand and diversify our state economy. It was designed to address several unique challenges we have in Virginia and to take advantage of some of the opportunities Glenn outlined. An impediment would be our history of independent cities and counties which have created hard boundaries around local jurisdictions. While there has been some limited cooperation, compared to other states, we have very limited collaboration and thus we are less efficient and effective. Businesses do not see local governmental boundaries. They care about labor markets, supply chains, quality of life and the like. Operating across multiple jurisdictions can be complicated and burdensome to business. Another challenge is the Dillon Rule, whereby all powers rest with the General Assembly unless expressly conferred on localities. The Dillon Rule reinforces our triple AAA bond rating and our tradition of balanced budgets and laudable fiscal conservatism, but it has had a significant unintended consequence. Localities are driven to grow property and equipment taxes and they compete to move jobs from another jurisdiction. Such actions, especially if financial incentives are involved, are wasteful for the state and do not contribute to growing the state economy. Localities have little incentive to create high paying jobs as they get no direct tax benefit. GO Virginia assumes that these structural impediments will not change so we must find solutions around them or our growth and efficiency will be severely restrained. And our solution is all about voluntary collaboration. Coupled with these challenges, and as Glenn noted, is the fact that Virginia has been more dependent on federal spending than any other state in the country, but that DOD/military spending has been declining for many years, and, even if there is a temporary uptick, relative declines are highly likely to continue. With a decades-long expansion, we had little need to diversify our economy through enhanced innovation, entrepreneurship and new tools for economic development. And while our unemployment rate is low, it is a misleading indicator of economic strength because of two factors – the denominator in the calculation has been shrinking as 1O,OOOs of people have dropped out of the workforce, and the jobs we have added since the recession are lower paying, less skilled – roughly 75¢ on the $1.00 of what we had before. This has resulted in a $6.5 billion downdraft on our state economy – thus we are collecting less taxes and have a budget shortfall. Clearly, every one of us in this room has a huge stake in strengthening and diversifying our economy to reverse these trends. So, GO Virginia was created to address many of these issues. It has 5 significant elements: – High paying jobs. Average pay or higher in each region. We are laser focused on this objective. – Through Focused lncentivized Collaboration.Grants only if 2 or more localities voluntarily collaborate and propose a project. – Primarily from out-of-state revenue. Focus on real growth, not simply shifting market shares or living with inflationary growth alone. – Which diversify and strengthen the economy. – In every region of the Commonwealth. Identify each region’s priority opportunities so each region grows. Since the GO Virginia legislation became law just six months ago, we are getting organized this year. Our 24 person state Board has been meeting. Remember this Board is composed of 14 experienced business people, 3 cabinet members, 3 Senate and 4 House leadership positions. We have designated 9 regions to administratively consider and promote collaborating projects – remember again it only takes 2 localities, not a region, to apply for a grant. We are writing guidelines to create regional councils with a support organization, each of which will receive financial stipends to identify, and justify in depth, their best economic development opportunities with a further focus on related workforce needed. Grant money will then become available July, 2017, to fund the best ideas to diversify our regional economies. We are already seeing many new examples of collaboration in anticipation of GO Virginia. A companion bill – the Jobs Collaboration Act – rewards collaborating localities that create high paying jobs with 45°/o of the state income taxes generated for 6 years to be reinvested in further economic development. For the first time, localities have a stake in creating high paying jobs. We have also been busy developing and validating initiatives that will drive growth and diversity – cluster identification and expansion, processes to scale up companies and supply chains, educational/business partnerships that will produce the needed workforce, more focused and enhanced efforts to commercialize research, improve incubators and accelerators for start-ups, organized avenues for investment capital, and joint economic development of sites and overlaid infrastructure. We are digging into the details to validate our approaches, using business performance standards, which can be shared with every region to tailor and adapt as appropriate. Done right in each region with motivated, focused leadership, we are confident we can have a meaningful impact in growing higher paying jobs. This needs to be a sustained, long-term initiative if we want to produce lasting and significant results. As many of you know, earlier today, we learned for the first time that the Governor has proposed significant cuts to the regional economic development collaboration and research efforts advocated by GO Virginia. We think these cuts are short-sighted because they inhibit the sort of long-term thinking and collaboration we need to turn around the state’s economy. Folks, we are either going to embrace new approaches like GO Virginia and seize the opportunities Glenn outlined, or our economic future is limited. Where will new revenues come from except from long-term, strategic investments in growing our economy? We look forward to working with the members of the General Assembly to make sure the budget reflects this priority, and by working with many of you here in this room during the 2017 session and beyond, to build a better future for our Commonwealth. As we look at a more macro-level of economic development in Virginia, and to further reinforce Glenn’s suggestions, within GO Virginia, we see 5 other buckets of major opportunity, all of which can be complementary with better alignment, collaboration and focus against a set of shared long-term goals. The five are: A Strong, Focused, and Aligned State Economic Development Program. VEDP and many other agencies. We need strong recruitment; retention and expansion. GO Virginia makes no direct grants to individual companies. Regional and Local Economic Development. In addition to these state efforts, we need better alignment and collaboration at state, regional and local levels to achieve significant results. Most other states coordinate, essentially “one-stop shopping” – permitting, incentives, and other regulatory and infrastructure – to meet a recruited company’s needs. Focused Workforce Development. More specific collaboration among educators and business – id. credentials, work experience, best practices, etc. We are collaborating with the Virginia Workforce Board to be more efficient and effective. So can others. The Port of Virginia. Probably our greatest natural asset. Huge opportunity to create high paying jobs as well as through put of imports/exports. Research. We do not have a state program to commercialize research like many other states. VRIC likely to better define common objectives, align programs and set priorities. 4 of us on GO Virginia Board are on VRIC Board. All of these areas present huge opportunities where Virginia can leap ahead of competitors. Many underlying principles should be shared – focus on higher paying jobs, collaboration and alignment, clear metrics and milestones, priority setting, diversifying and strengthening the economy by driving clusters with potential, commercializing research, building and accelerating start ups and joint economic development of sites, all with a new focus on regions. As we consider our new economic development strategies, every subject area would benefit from a clear definition of what we want to achieve, why and how we intend to measure our progress. A set of guiding principles and objectives will be important. All of us are dependent on fresh approaches to move Virginia’s economy forward, to make us more competitive and to once again prove Virginia is the best state for business. Thank you. Merry Christmas and Happy Holidays.