Va. House proposal sets up battle with governor over economic development program

IMAGE: BOB BROWN / Richmond Times Dispatch

Posted: Thursday, February 2, 2017 12:00 am

Legislation to restructure Virginia’s principal economic development program has cleared its first hurdle, but appears headed for a showdown with Gov. Terry McAuliffe over which branch of government would control it.

A House Appropriations subcommittee on Wednesday swiftly killed a proposal that the governor favored and adopted legislation sponsored by Appropriations Chairman S. Chris Jones, R-Suffolk, that would give the legislature the upper hand in appointing the board of directors of the Virginia Economic Development Partnership.

House Bill 2471, adopted on a unanimous vote by the subcommittee, also would give a current legislative oversight committee the power to rule on high-dollar financial incentive packages proposed for economic development projects before they could be approved by the governor.

Jones said the bill would prevent the state from rushing into economic development deals before fully vetting them, as the McAuliffe administration did with a $1.4 million grant to a Chinese company — that proved to be illegitimate — to build a factory in Appomattox County that never was begun.

“If we had the fixes here in place, that would not have occurred,” he said.

The subcommittee vote marked the beginning of the legislative battle over how to restructure the partnership. A report by the General Assembly’s watchdog agency last fall said the program was poorly managed and supervised, and lacked policies and procedures essential to prevent taxpayer money from being wasted.

The Senate will have its say on Monday, when a committee considers legislation, including a bill proposed by its chairman, Sen. Frank M. Ruff Jr., R-Mecklenburg, to restructure VEDP, as the partnership is known.

McAuliffe and legislative leaders agree that the partnership needs to be restructured to require stronger supervision by its board of directors and to include safeguards in the way financial incentives are awarded to businesses that move to Virginia, as well as assurances that they live up to their promises for investment and new jobs.

But the governor and legislators are far apart on which branch of government should control VEDP. The state created the partnership in 1995 under Gov. George Allen as an independent authority within the Commerce and Trade secretariat.

Del. Terry G. Kilgore, R-Scott, introduced legislation — which the subcommittee quickly killed on Wednesday — that would have given the governor clear authority over the partnership and its board.

“I’ve always thought that whoever is over VEDP ought to report directly to the governor,” Kilgore said. “The governor is responsible for job creation.”

Hayes Framme, deputy secretary of Commerce and Trade, told the subcommittee, “There is a need for more accountability to the executive branch by VEDP.”

Jones’ bill would reduce the board from 24 to 11 members, with four appointed by the governor in addition to the secretary of commerce and trade.

The legislature also would appoint four members, but the board would include the directors of the House Appropriations and Senate Finance committees.

Currently, the executive branch controls 18 seats on the board with 12 outside appointees and five members of the executive branch, as well as the chancellor of the community college system.

“The accountability should have always been there,” Jones said. “But the communication didn’t work as well as it should have.”

Secretary of Commerce and Trade Todd A. Haymore said in an interview that the law currently does not provide the governor’s office daily oversight of the partnership’s work. “The ability to hold the board accountable to the executive branch is something the governor feels strongly about,” he said.

Haymore did not say whether the administration would raise constitutional concerns over the proposed legislation, as it did over the bill the General Assembly adopted last year to create the Growth and Opportunity Act, or GO Virginia.

“We believe VEDP bears the hallmarks of being an executive branch agency, and we will look at any legislation through that lens,” he said.

Jones said in an interview that he considers VEDP to be a separate political subdivision. “It’s an independent authority, with clearly prescribed powers and duties,” he said.

He also said the legislation would prevent the governor from approving financial incentives for economic development projects until the MEI Commission, a legislative panel that reviews projects involving more than $10 million in incentives, has endorsed them.

“It’s not a straitjacket,” Jones said in an interview, “but it certainly requires due diligence, as one would hope and expect when you’re talking about the taxpayers’ money.”