Expansions spark strong job growth in Virginia

by Jim Strader
for Virginia Business
April 2005

If corporate expansions are any indication, companies are feeling more confident about the economy, expanding both their facilities and payrolls. Virginia had one of its best years ever in job growth in 2004, with more than 45,000 new jobs expected from corporate investments totaling $3.4 billion. While that figure was down from the nearly $4 billion investment total announced for 2003, job creation increased 60 percent, representing the second-largest employment bounce for the Old Dominion in the last quarter century.

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The tally lags only behind the 46,200 jobs announced in 1998, before the dot.com bust. Standing out was dramatic growth in technology, defense and homeland security jobs as Northern Virginia companies continue to receive fat federal defense contracts. But across the state, existing companies decided to splurge and new ones decided to invest, giving Virginia “a very good, very solid year,” says Mark Kilduff, executive director of the Virginia Economic Development Partnership (VEDP). Besides defense, job growth was particularly strong in ports and logistics and construction and building materials.

Topping the list for the biggest expansion was Infineon Technologies, the German company that announced the long-awaited start of a $1 billion expansion of its semiconductor chip manufacturing plant in Henrico County. The project will add 1,200 jobs to the facility’s existing staff of 2,200. Infineon had planned the expansion as early as 2000, but a depressed market caused a delay. The infrastructure and manufacturing expertise at the Richmond-area plant will allow the company to upgrade the facility to produce a new line of chips.

Another large expansion — a new $450 million deepwater terminal under construction on the Elizabeth River in Portsmouth — will help assure Hampton Roads’ future as a busy port. The Danish shipping conglomerate APM Terminals/Maersk Sealand is building a massive terminal that’s expected to employ 210 people. When it opens in 2007, it will provide much needed capacity at Hampton Roads, adding a 3,100-foot wharf and 300 acres for more container space. The terminal will replace APM’s existing facility in Portsmouth. Already under way is dredging for a channel leading into the terminal.

Increased port capacity in Hampton Roads could serve as a catalyst for other business expansions. “It gives Virginia a wonderful platform for import and export businesses, and we are seeing growth in distribution center operations,” says Rob McClintock, research director for VEDP. California-based discount retailer Cost Plus plans to expand its distribution center in Isle of Wight County, by investing $24 million and adding 190 jobs at the site.

The expansion of shipping operations in Hampton Roads also increases Virginia’s ability to export goods to other countries and import products made overseas. While promoting Virginia-made products for export is a big part of VEDP’s mission, Kilduff notes that goods coming into the state provide work. “Imports do create jobs, as well,” he says. “We can’t lose sight of that piece of it.”

The Portsmouth terminal project received high-level state support. Gov. Mark R. Warner met with Maersk executives in May 2003 while on a trade mission to Denmark, Germany and Switzerland. When the deal was announced, Warner approved a $500,000 grant from the Governor’s Opportunity Fund to assist Portsmouth with the project. During its first 15 years of operation, state officials say the terminal is expected to generate $269 million in local tax revenues and $260 million in state revenues.

Even the largest privately developed marine terminal in the U.S. can’t match the sheer number of jobs coming out of Northern Virginia. Four major companies there, Booz Allen Hamilton, Science Applications International Corp., SRA International and Pricewaterhouse Coopers, plan to hire more than 11,000 people, paying an average salary of $76,000.

Booz Allen Hamilton is expanding in Fairfax County and Norfolk in a $133 million project that will span five years and could create as many as 4,600 jobs, while SRA expects to grow its Northern Virginia staff by 1,400. “For SRA, it was pretty straightforward,” says company President and CEO Renny DiPentima.

“We’re staffing up for all the work we’ve won.” SRA’s revenues have grown by about 37 percent in the last two years, from $450 million in 2003 to an estimated $850 million in fiscal 2004. About two thirds of the company’s work is in national security consulting, says DiPentima, and the rest comes from civilian government contracts. In the last year, SRA won major contracts from such federal clients as the U.S. Agency for International Development.

Jobs aside, another corporate expansion that came as good news was Coors Brewing Co.’s decision to add a brewing operation to its Shenandoah Valley packaging facility. In fact, that’s the kind of deal Virginia needs, says McClintock.

Even though Coors will only add four to 10 jobs to its existing 450-member work force, what makes the expansion significant is the $160 million to $190 million investment behind it. That money, says McClintock, represents a commitment by Coors to its Virginia facility, making the jobs at the Elkton plant more secure and giving local and state government officials tax revenue to count on for years to come.

Since the expansion of the Virginia facility was announced, the company reached an agreement to merge with Canadian brewer Molson. Coors plans to close a Tennessee brewery, which will leave its Elkton brewery and the headquarters in Colorado as the company’s only U.S. breweries.

Struggling Southside and Southwest Virginia also saw an increase in activity last year. In fact, the Southside region had its biggest jobs announcement in 30 years with the decision of MasterBrand Cabinets to locate a manufacturing facility in Henry County. The company plans to hire 700 people and invest more than $20 million to build kitchen cabinets. Altogether, last year’s announced deals resulted in 5,016 new jobs in Southside and 2,687 for the Southwest.

Virginia’s job-creating efforts prompted praise from trade publications that focus on economic development. The magazine Site Selection listed Virginia as a Top 10 State in its annual Governor’s Cup ranking, with Virginia ranking number 10, just behind North Carolina and Pennsylvania.

One previously announced expansion fell short last year and resulted in the return of economic development incentive money to the state. According to VEDP, Capital One Financial Corp. missed a job-creation threshold and repaid $1.7 million to the state in November. The McLean-based credit card company announced more than 2,000 layoffs in 2004, including 610 jobs in the Richmond area, its operations hub.

In what could bode well for future corporate expansions, Warner leaves for a trade mission this month, heading in mid-April to Japan and India. It will be Warner’s fourth overseas trade mission. In addition to the European trip that helped line up the APM Terminals/Maersk expansion, Warner led trade delegations to Mexico and China.