Competition in the business world grows ever tighter in tough economic times. So Henrico County, just north of Richmond, recently launched a promotional campaign to encourage businesses to “Think Outside the Beltway.” As in, move away from the Beltway and down here to the less expensive Richmond suburbs.
Graham Moomaw in the Richmond Times-Dispatch reported recently that the Henrico County Economic Development Authority targeted about 500 companies in Maryland, the District and Northern Virginia, “contacting key people via e-mail and sent brochures about the benefits to be had in Henrico.”
Henrico’s pitch notes that, “Our average gross office lease rate is $17.46 per square foot per year. That’s more than 50% lower than Washington, D.C. and 10 – 20% lower than Maryland. For cost-conscious businesses, we’re an ideal locality.”
Henrico’s Web site even offers a handy calculator, in which you put in your current county of business — only D.C. and surrounding counties are available — and other data to determine how much money your company would save by moving south. I was able to calculate that The Washington Post, currently searching for new digs, would save more than $17 million per annum by moving to Henrico. But the commutes would be hellish.
Henrico’s approach got deeply under the skin of Gerald Gordon, the executive director of Fairfax County’s economic development authority, and one who isn’t afraid to throw a few punches in defense of Lord Fairfax’s realm. “This is a blatant attempt to move employers from one part of Virginia to another,” Gordon wrote in a letter last week to Gary McLaren, his Henrico counterpart.
I asked Gordon if this wasn’t just a little fair competition between jurisdictions. He did not think so.
“What Henrico County, which has the same tax considerations, has proposed to do is to benefit its budget situation at the cost to residents of Fairfax County,” Gordon said in an e-mail. “When a company comes from outside of Virginia into the Commonwealth, its employees add revenues in the form of income taxes, which is the basis for the services provided by the state. There is no such benefit from moving a company from one part of Virginia to another. The many economic development professionals throughout the Commonwealth frequently collaborate to market Virginia as a whole. We present ourselves collectively as ‘allies’ working for ‘Team Virginia.’ Allies do not seek to attract companies from their teammates.”
I asked McLaren, executive director of the Henrico County Economic Development Authority, for his response. He wrote back:
“Dr. Gordon is correct that Virginia localities do jointly market (on occasion) in an effort to convince a company to consider Virginia as a corporate location. However, what hasn’t been acknowledged is the fact that Virginia localities fiercely compete with each other for projects every day. We are all out in the marketplace trying to differentiate our communities in an effort to grow our business tax base so that we can provide our citizens the services they desire at the lowest possible cost. If one follows Dr. Gordon’s logic (that we shouldn’t call on companies within the Commonwealth) to the next level, then Virginia wouldn’t be competing with Maryland or North Carolina as part of these United States…and that’s certainly not the case.
“Henrico County has targeted an industry group, defense contractors, with the idea that sequestration and budget cuts may force some of them to seek lower cost locations; while some of those companies are in NoVa, many are outside of Virginia. We think it would be in the best interest of the Commonwealth to have those companies relocate all or part of their business to a lower cost environment within Virginia than to leave for another lower cost state. Ultimately, it will be the overall business value proposition that determines whether a company will move or not. With a population 3.5 times Henrico County and an economic development staff 6.2 times larger than the Henrico EDA, I don’t think Dr. Gordon has too much to fear. Although our business community does appreciate Henrico’s ‘lean approach’ to local government which allows a real estate tax rate of 87 cents per $100 of valuation -17% lower than Fairfax County. Sometimes gentlemen disagree, and I have the highest regard for Dr. Gordon’s professionalism even if we do see things differently.”