HQ2 propels Virginia back to No. 1

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Print this page by Richard Foster
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CNBC interviews Gov. Ralph Northam/Screenshot courtesy CNBC.com

Following Virginia’s coup of conquering the rest of the nation to snag Amazon’s $5 billion East Coast headquarters, it shouldn’t come as a huge shock that the commonwealth has regained its prestigious No. 1 ranking on CNBC’s annual America’s Top States for Business report.

Citing Amazon HQ2 as the deciding factor in the Old Dominion’s favor, CNBC also noted that Virginia “has the nation’s best workforce, including the fourth-highest concentration of science, technology, [engineering] and math (STEM) workers. Strong school test scores, small class sizes and a wealth of colleges and universities make Virginia’s education system the best in the nation. And with Virginia Tech announcing plans to build a new campus adjacent to Amazon’s HQ2 focused on innovation, things could get even better.”

Clearly Virginia hasn’t put all of its eggs in one basket, even if one of those baskets is the size of the old-school, brick-and-mortar shopping malls that a certain online retailing colossus is swiftly putting out to pasture.  

Amazon HQ2 will create 25,000 jobs and fill some 6 million square feet of office space in Arlington and Alexandria over the next decade, but HQ2 alone doesn’t account for the commonwealth retaking the crown in CNBC’s Top States study after eight long years.

It was the result of a concerted, deliberate effort.

“I am proud to bring the title of America’s Top State for Business back to Virginia,” Gov. Ralph Northam said in a July statement announcing the win. “One of my primary goals has been to make Virginia the No. 1 place to do business, and to do it in a way that benefits all Virginians and every region of the commonwealth. This recognition underscores our work to build an inclusive and diversified economy, invest in our workforce and create quality jobs.”

The undertaking, however, dates back to 2016, when Northam was still lieutenant governor and Virginia’s ranking was tanking.

Virginia and Texas are both tied as the Top States report’s all-time winners, notching four first-place wins each since CNBC began ranking the states in 2007. CNBC bases its decisions on 60 metrics in 10 categories, including workforce, economy and cost of doing business.

During the report’s first four years, Texas and Virginia jockeyed back and forth between the top two spots, with Virginia frequently earning praise for its business-friendly regulatory climate, as well as its abundance of federal contractors and military installations. But 2011 saw the beginning of a steady slide for Virginia’s ranking on the report, with the commonwealth sinking to No. 13 in 2016. CNBC singled out factors such as the high cost of doing business and living here, as well as federal budget cut impacts and “infrastructure — specifically the state’s perpetually clogged highways.”

In direct response, the Virginia Economic Development Partnership and the Virginia Chamber of Commerce commissioned a 2016 study from Virginia Tech’s Pamplin College of Business intended to take a deeper dive into how Virginia measured up to other states so we could shore up our weaknesses. Pamplin suggested expanding workforce-training  pro­­­grams, broadband access and economic develop-ment marketing.

At the time, we quoted Virginia Chamber President and CEO Barry DuVal as saying that the study wasn’t about “chasing the rankings. We are allowing the rankings to identify any deficiencies and then working to improve those deficiencies.”

With all due respect to our friends at the chamber, the Pamplin study was absolutely about restoring Virginia’s place in the rankings. It’s good to be the king, after all. But No. 13? Not so much.

When Stephen Moret took over leadership of the Virginia Economic Development Partnership in January 2017, he placed a data-driven emphasis on raising Virginia’s ranking.

In his first major interview with Virginia Business, Moret said, “It’s not like [rankings] drive everything, but they do have an impact on the perception of states. … We found that if you peel back the layers you can see that there are policy changes that you can make to improve the position.”

And perhaps, Moret suggested, after years of reaping rock-star business rankings, “maybe there was a little bit of complacency” in Virginia.

That’s certainly no longer the case.

But we do have nagging issues to contend with — such as headache-inducing traffic snarls that are more often than not still the rule on I-95, the Beltway and the Hampton Roads Bridge Tunnels. And then there are the transportation foul-ups associated with this summer’s Blue Line and Yellow Line Metro station shutdowns in Northern Virginia, which have garnered commuter enmity.

There’s also Virginia’s chronic struggle to ensure that rural and remote areas of the commonwealth enjoy the same pace of job creation and prosperity as the state’s so-called “Golden Crescent” running through Northern Virginia, Richmond and Hampton Roads.

But with 60% of recently surveyed U.S. economic forecasters warning that a recession could hit by the end of 2020, state leaders will also have to consider whether even HQ2, touted as the largest economic development project in U.S. history, is enough to keep Virginia’s economy pumping through tough times — not to mention maintaining our ranking as the nation’s top state for business.

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