12. FUNDING REQUEST REINVENT HAMPTON ROADS

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1 SOUTHAMPTON COUNTY BOARD OF SUPERVISORS Regular Session i September 25, FUNDING REQUEST REINVENT HAMPTON ROADS As you recall, this item has been carried over from your July and August meetings. Reinvent Hampton Roads began in 2012 as a regional economic competitiveness initiative that is focused on generating high-paying, satisfying jobs in Hampton Roads. Jim Spore, the former City Manager for the City of Virginia Beach, became President and CEO in January They ve taken the lead in developing a collaborative approach to advancing the region s economic performance and preparing the Hampton Roads region to apply for new state incentives (GO VIRGINIA) intended to encourage collaboration on economic development projects. Their recent analysis identified 7 core areas that are prime for growth in the Hampton Roads economy: Advanced Manufacturing, Food & Beverage Manufacturing, Ship Building & Repair, Life Sciences, Port Operations (including logistics and warehousing), Business Services and Tourism/Recreation. Reinvent Hampton Roads has entered into partnership with GENEDGE, to provide the necessary resources - advisors, consultants, and mentors to companies within these sectors that are looking to grow. GENEDGE is offering its services at a deeply subsidized rate, with 25% coming from the company and 75% from Reinvent Hampton Roads/GENEDGE. Reinvent Hampton Roads is reaching out to Hampton Roads communities for assistance on 2 fronts: 1. To identify potential companies in each community that might benefit from this program; and 2. By participating financially in a small, but meaningful way. They re asking for $25,000 annually from communities with population larger than 150,000, $10,000 from communities between 50,000 and 150,000 and $5,000 from communities with less than 50,000 people. At this writing, Norfolk, Virginia Beach, York County and Franklin have all appropriated local funding in support of the project; Chesapeake appears likely. James City County, the City of Williamsburg and Accomack County have all requested additional information. Other communities are still in various stages of discussion - no one has said no at this point. Reinvent Hampton Roads is looking for a response by the end of September. MOTION REQUIRED: If the Board is so inclined, a motion is required to appropriate $5,000 to Reinvent Hampton Roads for the Industry Cluster Scale-Up Project.

2 RECEIVED MAY HAMPTON ROADS May9,2017 Southampton County Attn: Mike Johnson, County Administrator P.O. Box 400 Courtland, VA Re: Industry Cluster Scale-Up Project "'" ~ ). " Dear Mr.,~nson: At your April 15 1h CAO monthly meeting I provided an update regarding the State's GO VA program and several initiatives underway by Reinvent Hampton Roads. Thank you for the opportunity to meet w ith you. This letter is prepared since several CAO' s could not be present and several others asked for more detai l on the regional Industry C luster Scale-Up project. Background In 20 16, the Hampton Roads Community fou ndation and Reinvent Hampton Roads (RHR) funded the preparation of a detailed examination of our regional economy. This ana lysis confirmed that the performance of the Hampton Roads regional economy is lagging the Commonwealth of Virginia and national economies as well as the performances of it' s peer metropolitan areas. This is not a one-time event but reflects a long-term trend dating si nce 20 I O. This lagging performance is apparent in both the region's generation of new jobs, the value of these jobs and contribution to the region' s gross regional product. The region's economy still has not replaced all of the private sector jobs that it lost during the Great Recession and the jobs that it has added during the recovery have had a lower average salary than the jobs it lost during the recession resulting in a six-year period (20 I ) in which annual economic growth averaged only 0.3 percent. The Hampton Roads regional economy has undergone a major structural change since 20 I O. Cutbacks in federal spending, in payroll but particularly in contractin g, have resulted in the region ' s economy registering little or no growth between 2009 and 20 14, and losing more private sector jobs during the recession between 2007 and 20 I 0 than the regional economy has generated during the recovery between 20 I 0 and The Hampton Roads region had the smallest job growth rate among its 35 peer metropolitan areas over the period. This pattern of under-performance is projected to continue into the future as long as the region's economy remains overly dependent for it 's growth on increases in federal spending and fa il s to shift its growth-generating activities to its competitively positioned, core industrial clusters. The analysis concluded that the focus of the Hampton Roads "new" economy must shift to non-federally dependent businesses that serve non-local markets, that are characterized by higher- James K. Spore President & CEO 101 W. Main Street Suite 415 Norfolk, VA 235 t O reinventhr.org Jspore@reinventhr.org

3 va lue added, hi gher-wage jobs and for which the Hampton Roads region possesses distinct competiti ve advantages. The longer that the Hampton Roads economi c growth lags its peer metropolitan areas and the nation more broadl y, the more di ffi cult it will be to successfully pivot the region's economy within the highly competitive non-govern ment markets fo r its products and services. Economic growth and development are cumulati ve and Hampton Roads' peer metropolitan areas are gaining traction, add ing val ue and strengthening their competitive positions while the Hampton Roads' economy has struggled to remain positive. Hav ing j ust completed the preparation of your respective municipa l budgets, you undoubted ly appreciate the fin ancial and economi c impacts these trends are presenting all of us throughout the region. T he question becomes, what can we do about these trends to alter the economic traj ectory of the region? Industry Cluster Scale-Up Pro ject Our analysis of the I-Iampton Roads regional economy identi fied seven core ind ustrial c lusters that have developed over time reflecting the region's competitive assets that provide goods and services to nonlocal markets, th at have growth potential sufficient to compensate the contraction of the federal market and that can support long-term accelerating growth to the benefit of the Hampton Roads region. These core clusters are established, they are export-based, they have above average growth potential and most have above average wage levels that can help grow the region's local service business base. Seven existing regional core c lu sters were identified: Advanced Manu fac turing, Food and Beverage Manu factu ri ng, Ship Building and Repair, Li fe Sciences, Port Operations-logistics-Warehousing, Busi ness Services, Tourism and Recreati on. In addition, fo ur aspi rational c lu sters were identifi ed: Cybersecurity, Unma nned Systems, Advanced Materia ls, and Alternative Energy. These aspirational or emerging clusters are areas that are not yet we ll-establi shed/dense in Hampton Roads but are areas that we bel ieve have significant growth potenti al in the region. Hampton Roads' core industrial clusters employ nearly 154,000 workers or 20% of the region's workforce. They are adding jobs signifi cantly fa ster than the rest of th e economy and paid annual wages in 20 I 5 on average of $60,524 versus $39,542 in the non-core c lusters and in predominately local-serving businesses. Therefore, we have designed a project to pl ay to our strengths and to scale-up or accelerate the growth of ind ividual small and medium sized businesses, in these core c lusters. We have generall y defined a small to med ium sized business as one with 10 to 50 employees that has a revenue produc in g ($2+ million/year) product or service. As these finns grow their clusters will deepen and grow as well and in turn add to our abi lity to attract associated supply chain operati ons to the region. Pro ject Approach and Descri ption A Cluster Scale-Up model was developed and is shown in Attachment One. Stal1ing at the top, the various c lusters were identified and confirmed by the G MU/ODU cluster analysis work. Next moving clockwi se on the model, an in-depth Situati on Analysis is cond ucted for each cluster. The analysis is prepared by a C lu ster Steering Commi ttee foc used on each cluster. The Steering Committees are lead by co-chairs and are comprised of six to eight members that have "skin-in-the-ga me" - actua l businesses in the particular c luster. In addition, one member from either a uni versity or federal laboratory is involved that is knowledgeable on trends in research and potential opportunities in the c luster area. 2

4 The situational analysis is intended to develop a better understanding of each cluster area, identify who is in that space, what challenges and opportunities are present. The Cluster Steering Committee via the Situational Analysis identi fi es a li st of sma ll and mid-sized businesses operati ng in the C luster that they feel have the potentia l and desire to accelerate their growth and scale-up. Generally, a company that's scaling up would be able to achieve at least a 20% growth rate ann ua lly five consecutive yea rs - doubling its size in five years. Once those potential companies have been identified, those interested in participati ng in the program are "on-boarded" and utili ze a diagnostic tool ca lled Core Value to quickly and easily d isplay information on 18 key business elements. The Core Value tool has been developed on research at MIT and successfully used for years. The tool flags areas where problems may exist based on comparison with an extensive data base of comparable companies. Reinvent Hampton Roads has entered into a partnership with GENEDGE. GENEDGE, as the Commonwealth of Virginia affiliate of the National In stitute of Standards and Technology Manufacturing Extension Partnership is committed to the long term success of Virginia enterpri ses through the provision of high qua lity, affordable consulting services. GENEDGE was created and partially fu nded by the General Assembl y and has been in operation since 1994 serving thousands of industrial businesses across the Commonwealth. According to the U.S. Department of Commerce, GENEDGE provides a 25: I return fo r every dollar invested by clients in its services. GENEDGE provides the resources - advisors, consu ltants and mentors needed at various stages of the analysis, strategy development and growth process to facil itate the companies growth and scale-up. The services provided to participating companies are offered at a deeply subs idi zed rate - 25% from the participating company and 75% from Reinvent Hampton Road s/genedge. Init ia l assessments are provided at no cost to the company. Once completed, in a few hours, the compa ny elects to proceed fu rther or not in the process. Previous participants have provided very positive feedback on the va lue of the process and tangible resu lts achieved. Local Part nership Proposal As explained above, Reinvent Hampton Roads has conducted the needed analysis of the regional economy, developed a process to accelerate company and cluster growth, and partnered with GENEDGE to provided cost effective services. The project offers real promise to achieve higher paying j obs growth and positive economic activity in the identified industry clusters. We have piloted the process and are currently working with companies in the cybersecurity and unman ned systems c lu sters. Fu nding is being provided by various sources includi ng, state/federal, foundation, private donors and RHR sponsors. We be lieve this effort will provide real results fo r regional economic growth and that the regions cities and counties ought to want to be involved as partners. You can help in two ways - by helping to identify potential scale-up compani es in your jurisdiction th at might benefit from the process and by participating in a minor, but symbolically important financial way to help cover a small portion of program costs that wi ll all ow more companies to benefit and in turn create additional job growth in the region. A suggested local jurisd ictional financial support schedule has been prepared, which was distributed at your April CAO meeting, and is included here as Attachment Two. The Local Value Proposition Although the individual support amounts suggested are sma ll and represent a minor percentage of program costs, the benefit to each city, county and the region as a whole can be very substantial: 3

5 Conclusion Higher paying job growth and associated increased revenues to localities. As existing companies scale-up and associated cluster density' increases in the region thi s wi ll encourage additional companies to locate in the region. As each cluster becomes more dense' elem ents of support ing supply chains will consider location in Hampton Roads, causing further job and tax base growth. As companies in the core clusters sca le-u p additional j obs/establ ishments in support sectors. retail, restaurant, entertainment and personal serv ices wil l be crea ted. Localities can market the scale-up program to local companies within their jurisd iction as a beneficial and business improvement option. By strengthening and deepening our core industry clusters we wil l collect ively assist in HR EDA's efforts to recruit new fi rms to Hampton Roads. This is consistent with HR EDA's new cluster foc used attraction strategy and goals. Participating in th e co llaborative scale-up program would send a concrete and pos iti ve message to constituents as a rea l example of localities working together to improve the regional economy. The Cluster Sca le-up Project offers an innovative approach consistent with established economic growth theory, to target higher paying job creation where the region is most likely to sllcceed - in those areas where we are already hi ghly competiti ve. This effort is one of several initiatives being collaboratively pu rsued with our partners by Re invent Hampton Roads. Its foc us is growth among existing companies in our identified competiti ve clusters in the areas most likely to succeed. Most authoriti es confirm that at least 70% of job growth will occur in existing bu sinesses. The Cluster Scale-Up project prioriti zes the areas of highest probability for success and growth. Reinvent Hampton Roads encourages your jurisdiction to join with us and others to extend the reach of thi s innovative effort and thereby im prove the economic performance of the entire region. I am avai lab le to respond to questions you may have or meet persona ll y to disc uss the project at your convenience. Attachment Best Regards, ~.s p ore President and CEO 4

6 AITACHMENT ONE Confirm Cluster Situation Analysis Regional Prioritization & Team Building Partnerships & Transitions,..... ~ On-Boarding Research Investment Capital I I Diagnostics & Validation Individualized Reports.-,,# "Resources" Metrics & Milestones Mentors & "Chairmen" Continuous Improvement Advisors & Consultants Cluster- & Business Specific Engagement

7 ATTACHMENT TWO Local Jurisdictional Financial Support: Scale-Up Project Population Jurisdiction Amount 'Membership' Category 450,980 Virginia Beach $25, ,000 + up 245,428 Norfolk $25, ,371 Chesapeake $25, ,965 Newport News $25, ,879 Hampton $10,000 50,000 to 150,000 96,004 Portsmouth $10,000 86,806 Suffolk $10,000 72,583 James City County $10,000 66,342 York County $ 10,000 37,141 Gloucester Cowlty $5,000 Under 50,000 36,007 Isle of Wight County $5,000 32,973 Accomack County $5,000 18,059 Southampton County $5,000 14,691 Williamsburg $5,000 12,155 Northampton County $5,000 12,048 Poquoson $5,000 8,526 Franklin $5,000 8,220 Smithfield $5,000 6,790 Surry County $5,000

8 RECEIVED JUL HAMPTON ROADS June 30, 2017 Southampton County Attn: Mike Johnson, County Administrator P.O. Box 400 Courtland, VA Re: Industry Cluster Scale-Up Project ~~~ y:>t. Dear Mr. J~nson: By letter of May 9 1h J wrote to outline the nature and rationale behind an important regional effort designed to accelerate the growth of small and medium sized businesses in your jurisdiction and to request your help in furthering the initiati ve. Since that letter our GO VA Regional Council has received State approval of our budget to include the Industry Scale-Up project and partnership with GENEDGE. Also, several of you have responded and joined thi s collaborative regional effort. This letter is intended to invite your jurisdictions' participation or remaining questions you may have prior to reaching a decision to join this effort. For all the reasons outlined in my previous letter, I know you will give this job creating opportunity serious consideration. For your convenience an invoice is attached to this letter. Please note the effective date of September 30 lh That date is intended to correspond to the end of our current initial cohort of companies and fit with the project schedule of our partner GENEDGE. While financial participation is three months out, I would appreciate your questions or decision as soon as possible for planning and scheduling purposes. Thank you for all the great work you do for our communities. It is understood and sincerely appreciated. Best Regards, Attachment James K. Spore resident and CEO James K. Spore President & CEO 101 W. Mai n Street Su ite 415 Norfolk, VA reinventhr.org Jspore@reinve nthr.org

9 RiCEIYEO JUL HAMPTON ROADS Invoice TO: Southampto n County P.O. Box 400 Courtland, VA ATTN: Mike Johnson, County Administrator I)csCI"iption Local Jurisdictional Financial Support: Scale-Up Project Amount $5, DUE: September REMrTTO: Reinvent Hampton Roads 101 West Main Street, Suite 415 Norfolk, Virginia 23510

10 ----- HAMPTON ROADS June 30, 2017 Southampton County Attn: Mike Johnson, County Administrator P. O. Box 400 Courtland, V A Re: GO VA Potential Projects 'fn~ Dear Mr':J ~on: Recently, we have received inquiries about the nature of the application process for potential collaborative projects under the GO VA program. While no specific infonnation has been provided to Reinvent, my sense of the process and schedul e would indicate that the nine Regional Councils across the Commonwealth would be encouraging applications by mid-october. Therefore, as I have mentioned to many of you, please be thinking of those opportunities that can creatively bring jurisdictions together in ways that wi ll lead to a strengthening of the economy and create higher paying jobs. As soon as a schedule and application process is available we will send to your attention. J know several of you are actively engaged in joint efforts that may be eli gible for GO VA funding. That's great; but wanted to remind everyone to be thinking now about potential approaches - don't wait until mid-october to start collaborating. Best Regards, Cc: Bob Crum, HRPDC James K. Spore resident and CEO James K. Spore President & CEO 101 W. Main Street Suite415 Norfofk, VA reinventhr.org Jspore@reinventhr.org

11 RECEIVED JUL HAMPTON ROADS July 20, 2017 Southampton County Attn: Dallas O. Jones, Chairman 7427 Southampton Parkway Drewryville, VA Re: GO VA Schedule Dear Mr. Jones: Last year the Virginia General Assembly and the Governor authorized an innovative program called GO VA which has as its goal the creation of more higher paying jobs throughout the commonwealth. The program provides fu nding to encourage and incentivize collaborations among va rious local governments that will resu lt in job creation and improved economic performance. The effort focuses on nine economic regions across the Commonwealth. In order to qualify for funding, projects need to represent a collaborative effort between two or more juri sdictions. Specific project proposals will be sol icited by the Hampton Roads GO V A Regional Council in late August. Detailed in formation wi ll be prov ided soon including a project application form and criteria. The purpose of this letter is to bring this opportunity to your attention as soon as possible, since the schedule for candidate submissions will be on a fairly short timeframe. Project applications wi ll be due to the Hampton Roads GO VA Regional Council (c/o Rei nvent Hampton Roads) by close of business on October 31, All project submissions will be reviewed, prioritized and recom mended for consideration by the Regional Counci l by November 15, Applications submitted by all nine GO VA regions will be considered and finally approved by the State GO V A Board, presently schedule to occur on December 12,2017. For those projects selected, funding would flow immediately upon the completion of project agreements. The General Assembly and the Governor have provided this unique opportunity for our jurisdictions and regions to creatively work together to enhance our economies. If you have questions, please feel free to call. Cc: Michael Johnson, County Administrator Amanda Jarrall, E.D. Di rector Best Regards, ~~,~~ \James K. Spore President and CEO James 1<' Spore President & CEO 101 W. Ma in Street Su ite 415 Norfolk, VA rei nventh r.org Jspore@reinventhr.org

12 GO Virginia's regional councils named Travis FainContact GO Virginia, the state's new economic development program to boost regional cooperation by dangling taxpayer grants for job creation, has its regional boards in place. Ideas are meant to bubble up through these nine regional councils, made up largely of area business leaders, with a statewide board then deciding what to fund. That statewide board is chaired by John O. "Dubby" Wynne, retired president and CEO of Landmark Communications Inc., which publishes The Virginian- Pilot, who is one of the chief progenitors of the GO Virginia concept. A number of state officials also serve on the board, including Senate Majority Leader Thomas K. "Tommy" Norment, R-James City. The program has some $35.5 million at its disposal for now, though Gov. Terry McAuliffe may tinker with that number between now and April, when he's set to send budget amendments back to the General Assembly for more debate. Once finalized, GO Virginia will join a number of existing state programs for job creation, which provide hundreds of millions a year in business incentives. The difference here, organizers hope, is GO Virginia's built-in reliance on regional cooperation. Grants won't be funded unless two or more localities join forces to help a project get off the ground.

13 "Cumulatively, hopefully, this will begin to transition a way of thinking," said Thomas Frantz, who's slated to chair the 27-member regional council that will serve the Peninsula. This is Region 5, which will also include South Hampton Roads, including the cities of Norfolk, Virginia Beach and Portsmouth, as well as the Eastern Shore. The Middle Peninsula will be in Region 6, which stretches to the north. Frantz, a former president and CEO of powerhouse law firm Williams Mullen and now chairman of that firm's board, has also been a co-chairman of the Hampton Roads Partnership. He acknowledged Wednesday that regional cooperation has been a talking point in Hampton Roads for years, but he said GO Virginia presents a strong incentive. "Not just talking about it, which we've done... for as long as I can remember," Frantz said. "But let's economically incent people to do it." Next up is planning. Each region is eligible for up to $650,000 in state funding to review challenges in their region and to prioritize next steps. These regional plans will be due by September, then the regional councils solicit grant applications. Frantz said that, despite years of regional development plans and the extensive business experience represented on the new council, a deep dive will be needed to identify industries and areas best prepared for growth. He compared the coming planning process to expanding a business: It makes sense to have consultants review what other companies have done to avoid wasting time and money in the future. "Some of that we will know, and some of that we will need some help with," Frantz said. Anne Conner, president of Public Finance and Community Investment at TowneBank, will be the Region 5 council's vice chairwoman. She and Frantz

14 are named to their positions in startup documents filed with the state, but Frantz said they won't be official until the council meets and votes on leadership. Reinvent Hampton Roads, an outgrowth of the Hampton Roads Community Foundation, will staff the regional council. That group is headed by former Virginia Beach city manager James Spore. The council in Region 6, which includes Gloucester and Mathews, will be chaired by C. William Beale, president and CEO of Union Bankshares Corp. Carlton Revere, the head of propane distributor Revere Gas, will be vice chairman. The councils are purposefully stocked with successful business people, with a majority of members coming from the private sector. Some local politicians in Region 5 Newport News Mayor McKinley Price, Norfolk Mayor Kenny Alexander and Virginia Beach Mayor Will Sessoms are members, as are professional planners and representatives of local schools systems and colleges. Many projects are expected to include partnerships with colleges and universities. Hampton Roads Region 5 GO Virginia Regional Council Chair*: Mr. Thomas R. Frantz, Chairman-Emeritus at Williams Mullen Vice Chair*: Anne C. H. Conner, President of Public Finance and Community Investment at TowneBank Kenneth C. Alexander, Mayor of Norfolk Shawn Avery, President of Opportunity Inc. Roland "Butch" Bailey, Owner of Butch's Car & Parts Timothy J. Bentley III, Resident Vice President of Government Relations at Norfolk Southern Corporation

15 John R. Broderick, President of Old Dominion University Robert A. Crum, Executive Director, Hampton Roads Planning District Commission John T. Dever, President, Thomas Nelson Community College Deborah M. DiCroce, President, Hampton Roads Community Foundation William B. Downey, President, Riverside Health System Jack L. Ezzell Jr., President, Zel Technologies Michael Gentry, Senior Corporate Vice President and COO of Sentara Healthcare System Maria Herbert, Founder & President, MCH Consulting Services, LLC Michael F. Kuhns, President & CEO, Virginia Peninsula Chamber of Commerce J. D. Myers II, Senior Vice President & Regional Manager, Cox Virginia Jerry Miller, CEO, The Miller Group McKinley L. Price, Mayor, City of Newport News John F. Reinhart, CEO & Executive Director, Virginia Port Authority Frank Roach, CEO, Ferguson Enterprises William D. Sessoms Jr., Mayor, City of Virginia Beach Jeffrey Smith, Superintendent, Hampton Public Schools Bryan K. Stephens, President & CEO, Hampton Roads Chamber of Commerce Bruce Thompson, CEO, Gold Key/PHR Rick L. Weddle, President & CEO, Hampton Roads Economic Development Alliance Thomas G. Tingle, President of Guernsey Tingle Architects Gary P. Warren, President and CEO of ivwatch LLC * Chairs designated but not yet formally elected by the council. Copyright 2017, Daily Press