CORPORATE
       EXPANSIONS
     

Bob Miller is heading up Geico's $45.1 million, 4,500-job expansion in Virginia Beach. The insurance company's project was 1998's largest employment announcement.

photo by Mark Rhodes

Thus began a whirlwind courtship, initiated with that informal lunch chat and followed by Virginia Beach brochures, key chains and pens to keep the city on Geico executives' minds. Then came more serious negotiations and a visit from Bob Miller, Geico's mid-Atlantic vice president. The scope of the original project changed.

"We knew ... Hampton Roads was a good labor market in terms of the quality of associates we've hired there," Miller says. The company has had a presence in Virginia Beach for 36 years. "We had no idea the size of [the area], though. It's a much larger economic base than I thought." More than 1.5 million people live in Hampton Roads.

"The cost of doing business in terms of salary scales, tax rates and those factors is very similar to our offices in Fredericksburg and very competitive -- much more so than Northern Virginia, D.C. or Maryland."

Geico's $45 million expansion in Virginia Beach will bring 4,500 more jobs to that area. It was the Old Dominion's largest employment expansion of 1998.

"Geico had been in Virginia Beach for many, many years, and we could have lost it all in this particular project," says Robert Ruhl, Virginia Beach's business development manager. Economic development is high stakes. "They're going from 200 employees to 4,500, but if we don't team up with the state and retain this business and help them expand, we have nothing."

According to Miller, Geico was also looking at sites in New York, Pennsylvania and Ohio. But the company announced in February 1998 that it would build a new facility on 27 acres in the Virginia Beach Corporate Landing Business Park.

For its part, Virginia kicked in $850,000 from the governor's opportunity fund for site preparation and offered incentives in work force training. Virginia Beach came up with attractive land-option agreements.

"One thing led to another and we just said, 'This is going to work,'" Miller recalls. "The Virginia Beach economic development folks and the mayor are certainly very aggressive and very persuasive."

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The first phase of construction on Geico's 250,000-square-foot facility was completed last fall. "Although it's very exciting to get a new company here, the real payoff is when your own businesses see this as a great place to do business and are willing to reinvest," says Rick Richardson, communications director of the Virginia Economic Development Partnership.

Geico had the biggest job numbers, but it's not alone. MCI WorldCom came close: It is expanding its Internet technology campus in Loudoun County by 4,000 jobs through a $200 million investment. Science Applications International Corp., an information technology consulting group, plans to add 2,000 jobs in Fairfax County as part of a $75 million expansion. Another Loudoun County-based company, satellite builder Orbital Science Corp., is investing $50 million and adding 1,500 employees as it expands its manufacturing and research facilities.

Statewide, the partnership recorded 436 announcements of plans to locate new facilities in the commonwealth or expand existing facilities. Expansions alone accounted for 258 announcements this year, representing more than $1.35 billion in investments and 15,371 new jobs.

According to Richardson, it was Virginia's best year ever for job expansion -- at least in the 30 years that such numbers have been tabulated. Total announcements for 1998 accounted for 48,308 new jobs, a significant jump from the previous high of 30,860 set in 1995. Richardson credits much of this year's success, particularly in expanding businesses, to the Department of Business Assistance.

Established in 1996 by the General Assembly, the department assists state businesses in work force training, financing and small-business counseling and training. The 47-employee office -- plus 18 part-time workers -- serves more than 4,000 state businesses, acting as principal point of contact with the state government.

"It's like a doctor-patient relationship," says Dean Bailey, senior project manager in the existing industry development branch. "We make house calls and regularly check in with our patients to give them a physical. We know their history and we know how to help them."

Serving as ombudsman to Virginia's businesses, the department continually "checks the pulse" of existing businesses, visiting them, answering questions, asking what the state can do to help them and what the state can stop doing that might be hurting them.

Bailey says while the partnership's involvement has a definite timetable, particularly in recruiting and helping larger businesses expand, the Department of Business Assistance's work is ongoing. The department maintains contact and helps guide businesses through expansions, projects and red tape. "For an awful lot of businesses, particularly the smaller ones, we are the [organization] that can make their dreams come true," Bailey says.

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The forecast for 1999 already looks promising. Volvo Trucks is ready to break ground on a $148 million capital expansion that will create 1,300 new jobs at a plant in Pulaski. AOL has a $520 million expansion on the drawing board in Prince William County, and Gateway announced 1,200 new jobs at a new vendor campus in Hampton. "We have a very diverse and strong base of businesses in the commonwealth," Richardson concludes. "There's a very positive climate, and not every state has that."

A key in business expansion, says Virginia Beach's Ruhl, is to diversify while expanding the local economy. "You don't want all your eggs in one basket," he says. "Geico was at the high end of the type of business we were looking for. They're in the finance and insurance sector, and that's at the top of our list just behind information technology, telecommunications and computer businesses." They are high-paying jobs, and add diversity to the Hampton Roads region, which has historically relied on Defense Department jobs.

Modern expansions aren't as easy as making a deal with local government and issuing a press release. In Pulaski, managers at the Volvo factory issued an ultimatum to the local United Auto Workers Union in their negotiations: Endorse an acceptable contract or kiss the expansion and the thousands of jobs goodbye. Eventually, union incentives were hammered out, but it wasn't easy, and some management-employee acrimony may remain.

Bailey says a universal concern for all of business is work force preparedness. Training programs and related incentives are becoming more important in deals like the Geico expansion, according to Bailey. "We're here to do whatever we can to help these businesses," he says. "We're all working together."

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© May 1999, Media General Business Communications, Inc.
publisher of Virginia Business Magazine