Virginia: Building the Information Technology State, Part 1

Well-educated workers, a first-class educational system and aggressive recruiting are only a few reasons why Virginia's "Silicon Dominion" has emerged as a premier East Coast high-tech hot spot.

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Virginia is increasingly recognized as "The Information Technology State." Over the past few years, high-tech companies such as Siemens, Motorola, IBM, Gateway 2000, Merck & Co., Toshiba and MCI have located or expanded in Virginia to confirm the state as the technology center of the East Coast.

The American Electronics Assn. (AEA) has ranked Virginia ninth in
the nation in high-tech employment. Significant expansion by prominent technology firms will propel it to sixth place within the next five years, the AEA estimates.

With all this activity, Virginia's Silicon Dominion takes its rightful place alongside Oregon's Silicon Forest, Austin's Silicon Gulch in Texas, Phoenix's Silicon Desert in Arizona and California's Silicon Valley.

The state nicknamed the "Old Dominion" possesses an impressive technology base. For example, the largest concentration of computer companies in the country is located in Northern Virginia, with more than 1,100 firms, including UUNet, PSNET and America OnLine located in the region. These firms comprise just 3 percent of the region's businesses, yet employ 16 percent of the population and produce close to 25 percent of private-sector earnings.

Electronics and electric equipment comprise the largest portion of the high-technology sector, shipping more than US$3 billion worth of products each year. Over the past five years, this sector has continued to grow, with the number of electronics establishments increasing 2.85 percent and the number of employees rising more than 5 percent.

Virginia is well on its way to becoming the acknowledged world capital for applied and emerging information and telecommunications technologies as well as the leading exporter of related products and services.

The state has the world's largest concentrations of information technology, telecommunications and Internet companies, with 3,000 such firms. Virginia is the birthplace of the Internet, which was developed by the Pentagon, and more than 50 percent of all Internet traffic worldwide passes through the state. More than 50,000 miles (80,000 km.) of fiber-optic cable and state-of-the-art digital switching equipment provide an advanced telecommunications system. The information technology and telecom sectors account directly and indirectly for more than 9.4 percent of Virginia's jobs and 10 percent of state income.

Virginia is also emerging as a premier location for the development and production of pharmaceutical and biotechnology products. Over the past seven years, pharmaceutical companies in the commonwealth have announced $277 million in new capital investment and created more than 800 jobs. Today, 16 drug manufacturers thrive in Virginia. More than 70 biotechnology, R&D, service, supply and manufacturing firms are located in the state, placing Virginia among the nation's most rapidly developing biotechnology centers.

Why is Virginia being recognized as a global leader of technology-based industry? By all accounts, the state's healthy economy, enviable geographic location, prime work force, superior educational opportunities and pro-business climate make Virginia a first-rate place to do business.

Suffolk's high-tech cluster includes Allied Colloids, a British chemical firm.

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A Strong Economic Foundation
Over its long, rich history, Virginia has experienced a stable and growing economy, which has evolved from a primarily agricultural base to a broad industrial and corporate mix, making the economy strongly resistant to recession. During the last three years, the state has seen over $12 billion in new business investment and the creation of 76,204 direct new jobs.

This rock-solid economic foundation provides for highly competitive costs of doing business. Average hourly manufacturing wages in Virginia are lower than the U.S. average, while other competitive aspects include low unemployment insurance premiums, the nation's lowest average net cost for workers compensation insurance, moderate and stable taxes and low electric rates.

Keeping Pro-Business Traditions
Virginia succeeds not only in maintaining sound fiscal management and a growing economy, but also in fostering a pro-business climate.

The state offers both broad-based and specific incentives and services to assist business growth and help reduce the cost of operating or expanding a business facility in Virginia.

Some of the more notable incentive programs include the Industrial Access Road Program, which assures qualifying new and expanding companies of quality roads, the Governor's Opportunity Fund, which provides site development, transportation access, training and construction for industrial development projects that create new jobs and investments; and the Solar Photovoltaic Manufacturing Grant, designed to encourage the full value-added product development and manufacture of high-tech, renewable energy resources in Virginia.

The state's tax laws are also pro-business. In Virginia, real estate and personal property are taxed at the local level. Counties and cities are separate taxing entities, meaning a company pays either county or city taxes, depending on its location. There are several items that are not taxed at either the state or local levels. These include intangible property, manufacturers' inventory and manufacturers' furniture, fixtures or corporate aircraft.

While Virginia does not offer traditional property tax exemptions and investment tax credits, it does have 50 Enterprise Zones, which allow substantial tax benefits for qualified businesses, and five foreign trade zones, which allow businesses to store goods for unlimited periods of time.

The corporate income tax rate is 6 percent and accounts for only about 4 percent of the state's revenue. A variety of tax credits is also available. For example, there is a $1,000 corporate income tax credit for each full-time job created past the first 100 (in economically distressed communities, the job threshold is 50). The state is also noted for its willingness to tailor tax and incentive programs to meet the individual needs of businesses.

Virginia's right-to-work law is a central feature of the state's pro-business climate. It's one of the least unionized industrial states, with the percentage of manufacturing employees belonging to unions about 40-50 percent less than the national average of 20 percent.