Return to Virginia Business -April 2003

Lilly, Target lead expansions list for 2002

by Peter Galuszka
Virginia Business
April 2003

Nagging economic uncertainties continue to fester as they have for nearly three years. Yet, Virginians can take heart about the state’s attractiveness as a good place to locate new factories. Against lingering gloom of a weak economy and war, the Old Dominion pretty much held its own as far as corporate expansions in 2002. The dollar total of new deals was $2.42 billion — off from $2.7 billion the year before. Yet the projects will create more jobs — 30,675 — compared to 28,000 in 2001.

As is typical, most of the new plant sites were in the richest parts of the state cutting a crescent from Northern Virginia south to Richmond and then southeast to Hampton Roads. Yet last year, there was a positive, countervailing trend. Of the top 25 announced projects, nine were in the Southside and Southwest regions where textile and coal industries have been hard hit by global competition and bad markets, showing that economic development activity there has become vigorous. All in all, says Mark R. Kilduff, executive director of the Virginia Economic Development Partnership, “These results are not record-breaking but are impressive in a weak global economic climate.”

Statewide, the single biggest deal was the type that just about every community wants. Drug-maker Eli Lilly and Company announced plans to build a $425 million factory to make insulin in Prince William County. Officials say it will create 700 new jobs with an average salary of $44,000. Site Selection magazine hailed Virginia’s coup, noting that the Old Dominion beat out North and South Carolina for the plant — the first one that Indianapolis-based Eli Lilly will build in the U.S. outside of Indiana.

What nailed the deal was a sweet package of goodies, including a $3 million grant from the Virginia Investment Partnership, a $2.2 million grant from the Governor’s Opportunity Fund and another $2 million from Prince William County. Another benefit is that the Lilly operation will help George Mason University with its ambitious plans to grow biotechnology in Northern Virginia, which already is well saturated with savvy people skilled in engineering.

The No. 2 project overall was a $400 million gas-fired power station near Scottsville that will produce 886 megawatts of power. A so-called “merchant plant” because it will add to the energy wholesale market during times of peak demand, the project is being built by Tenaska, a power engineering company based in Nebraska. The plant is one of scores that had been planned throughout the state to take advantage of Virginia’s strategic location where major gas pipelines and high-voltage power lines intersect. However, many of the merchant plants are in jeopardy because electricity deregulation, which will help build markets for them, has slowed down.

Strategic location was another reason for the third-largest expansion — a $125 million distribution center for Target Inc. in Suffolk. The warehouse complex, which will handle imports of goods that Target will distribute at all of its stores east of the Mississippi River, is another major win for state and business officials, led by the Virginia Port Authority. The port of Hampton Roads will benefit from imports of goods, many from China whose entry into the World Trade Organization in 2001 has boosted its exports of consumer items immensely. Like the Eli Lilly case, Virginia faced stiff competition, this time from ports in Charleston, S.C., and Savannah, Ga., for the Target prize. Other parts of the state had a more mixed record.

Of more than 300 projects only about 15 percent were in the Southside and Southwest parts of the state, showing, once again, that snaring new industries is a tougher pull for them. However, they did manage to win some of the biggest deals. One, for example, was a Universal Leaf Tobacco Co. leaf processing plant in Danville worth $28 million.

Return to Virginia Business - April 2003