West Virginia

Open for Business

By Susan H. Burnell

Positive changes stack up to sizable business advantages in the Mountain State. Growth-minded companies are taking notice, with investments of more than $9 billion in West Virginia since 2005.

West Virginia is clearing the way for business growth with tax cuts, workers’ compensation reform, investment in university research and other strategic economic development initiatives. West Virginia racked up more pro-growth tax reforms than any other state in 2008, according to the Cato Institute in its Fiscal Policy Report Card on America’s Governors. The changes helped the state’s economy grow at a rate of 2.5% last year—more than 3.5 times greater than the nation’s meager 0.7% growth rate for 2008.

“During the last several years, West Virginia has worked hard to secure its stable financial footing and has made dramatic progress,” says Governor Joe Manchin III. “Our state is one of only a few that has been able to pay its own bills throughout this economic storm without having to drastically cut government services or raise taxes. We have paid down our state’s debt and placed ourselves on a solid financial footing. As world markets bounce back, our state is well positioned as the ideal location for new and expanding companies that want to create good jobs in West Virginia.”

Strategic Advantages Attract Leading Companies
Location, innovation and a “let’s do business” attitude are among West Virginia’s strongest assets. The state’s central location puts it within reach of half of the U.S. population overnight, and 18 major metropolitan areas are within 500 miles.  

Business costs are an impressive 13% below the national average, and skilled workers are among the nation’s most productive and loyal. Funding for education and research is a priority, with $11 million invested in education since 2005, and a new $50 million “Bucks for Brains” research endowment launched in 2008.

Businesses of all sizes are finding success in West Virginia. Among the global corporations with a presence in the state are DuPont, Toyota, Bayer, Pratt & Whitney, Lockheed Martin, SABIC, Alcon Research and Amazon.com. Growth in West Virginia’s energy, biometrics and green industries is ramping up to meet rising demand, while its chemical, high-tech and business services sectors are attracting new investment.

Reforms Target Taxes, Workers’ Comp

Open for business as never before, West Virginia has made great strides in reducing costs for companies statewide. Since West Virginia privatized its workers’ compensation market in 2006, the average loss cost has decreased by more than 40%. That shift has saved employers roughly $150 million to date.

“Workers’ compensation costs are no longer seen as a deterrent to business in West Virginia,” says Gregory A. Burton, president and chief executive officer, BrickStreet Insurance. Mutual company BrickStreet became the state’s first private workers’ compensation carrier in 2006.

West Virginia’s tax burden is light and getting lighter. The state has removed approximately $70 million of business taxes in the 2009 fiscal year and more than $100 million in the past four years. A series of phased reductions will lower the corporate net income tax rate to 6.5% by 2014. By 2015, the business franchise tax rate will be phased out entirely. High-tech businesses already receive additional advantages in the form of eliminated sales tax and significantly reduced property taxes on equipment and tangible personal property.

Energy Industries Expanding

West Virginia is ideally situated to capitalize on the nation’s demand for cleaner energy resources. The state is one of the nation’s leading energy producers and the second-largest coal producer in the U.S.

Major carbon sequestration projects now under way aim to commercialize a process that captures and permanently stores carbon dioxide underground. The Mountaineer Power Plant project in New Haven alone represents an investment of more than $70 million by Appalachian Power, a subsidiary of American Electric Power (AEP).

“Commercialization of carbon capture and storage technology is an essential component in a successful climate strategy for this nation, which relies on coal-fired generation for about half of its electricity supply,” says Michael G. Morris, AEP’s chairman, president and chief executive officer. “Coal is a low-cost, abundant domestic fuel source, but its use is a significant source of carbon dioxide emissions. We are leading the industry in efforts to develop the technology necessary to allow continued use of coal to generate electricity with less environmental impact.”

“Coal will continue to be a key part of our nation’s energy portfolio,” says Governor Manchin. “Combined with our aggressive alternative and renewable energy development, West Virginia is ready to harness the possibilities and environmental benefits that clean-coal technology, carbon sequestration and coal liquefaction bring.”

In addition to its coal reserves and abundant hydroelectric and energy infrastructure, West Virginia has vast forest resources offering potential for clean fuel and power generation purposes. The state also now has the largest wind farm in the eastern U.S.

Bucks for Brains
Energy and environmental sciences are among the fields of study that will get a portion of the $50 million West Virginia Research Trust created and passed by the West Virginia legislature in 2008 to stimulate knowledge-based research. The “Bucks for Brains” endowment will be used at West Virginia University (WVU) and Marshall University. Over the next five years, the schools will be working to match state funds with private and corporate donations.

WVU plans to use its funding for research in energy and environmental sciences, nanotechnology and materials science, biological and biomedical sciences, and biometrics for security sensing and related technologies. The program at Marshall has already attracted a pioneer in gene repair to the new Marshall Institute for Interdisciplinary Research. Discoveries that result from research at both institutions are expected to evolve into marketable products, business spin-offs and jobs.

Positive Identification: New Opportunities in Biometrics

“The north-central region of West Virginia is the Silicon Valley of America’s biometrics activity,” says Wes Bush, president and chief operating officer, Northrop Grumman Corporation. With a high concentration of biometric and identity-management firms and research facilities, the region is unmatched anywhere in the world.

The I-79 corridor is home to the FBI Biometric Center of Excellence and the FBI Criminal Justice Information Services (CJIS) Division in Clarksburg, Lockheed Martin’s Biometric Experimentation and Advanced Concepts (BEACON) Center in White Hall, and the Department of Defense’s Biometrics Fusion Center in Bridgeport. Morgantown has the National Biometric Security Project (NBSP) in addition to WVU’s Center for Identification Technology Research (CITeR).

Marshall University, which has offered its Forensic Science Graduate Program since 1994, is the first university to partner with a state crime laboratory on the Combined DNA Index System (CODIS) database. Its work with law enforcement agencies has resulted in significantly faster turnaround for crucial DNA results.

Green Businesses Are Thriving

Innovation is driving West Virginia’s green businesses. In Marshall County, the CertainTeed Gypsum plant recycles synthetic gypsum from AEP for use in high-quality wallboard, bringing its total recycled content to 99%. CertainTeed’s wallboard contributes to LEED® credits in green building projects. The company’s  $150 million investment represents the state’s largest deal since 1996, when Toyota established a $1 billion automobile engine and transmission manufacturing plant in Putnam County.

In the town of Alloy, silicon producer West Virginia Alloys, a unit of Globe Specialty Metals Inc., plans to partner with Recycled Energy Development (RED) to divert the heat exhaust from its electric arc furnaces to a steam-driven power generator. The innovative project is expected to go online in 2010 and will offset approximately one-third of the plant’s electric consumption.  

Finally, in September, a team of West Virginia University researchers received a $550,000 award from the U.S. Environmental Protection Agency for an innovative effort to grow switchgrass and other biofuels on reclaimed mine tracts.

Low Costs Draw High-Tech Business Services Operations

State leaders have demonstrated a solid commitment to the technology sector, eliminating certain sales taxes and significantly reducing property taxes for data-based businesses located in West Virginia.

The new High-Technology Business Property Valuation Act provides special property tax valuation for equipment and tangible personal property. The legislation also eliminates sales tax for all purchases of prewritten computer software, computers, computer hardware, servers, building materials and tangible personal property for direct use in a high-tech business or an Internet advertising business.

West Virginia is just the ticket for companies with extensive business services operations, including Ticketmaster, Amazon.com, CASCI, Wells Fargo, AT&T, Williams Lea, Mountain State Blue Cross Blue Shield, and DirecTV. With business and customer service centers in the state, these and other firms with major business services needs have successfully streamlined processes, reduced costs and improved the quality of their services. A prime example is global law firm Orrick, Herrington & Sutcliffe LLP, which invested $10 million to consolidate its finance, accounting and technology operations into one center in Wheeling.

A Perfect Chemistry

“West Virginia is world-class in the chemical industry,” says Keith Pauley, president and chief executive officer for Mid-Atlantic Technology, Research & Innovation Center (MATRIC). “We can compete with anyone in the world with our science and technology. Of the top 500 most-produced chemicals in the world, 286 were developed in the Kanawha Valley. During 60 years of operations in the valley, Union Carbide generated 30,000 patents—an innovation rate of 10 patents per week. Some of the best science and technical development in the last 100 years has happened right here in our community.”

A nonprofit research and development organization, MATRIC is headquartered at the Dow Technology Park in South Charleston. MATRIC has expanded its global partnerships, developing projects with companies in the Middle East, Asia, Australia and Europe, by tapping the region’s brain trust of researchers and experienced chemical industry experts.

Industry leaders DuPont, Bayer, PPG, Flint Group Pigments, Cytec, Supresta and Dow are among the prominent companies with a presence in the state. More are expected as the state partners with the Chemical Alliance Zone to develop and market existing plants as industrial parks.

A recent example of the success of this co-location strategy was the announcement by Kureha Corp. to invest more than $100 million to build a plant at the DuPont site in Kanawha County. Using breakthrough technology, the plant will produce Kuredux™ polyglycolic acid (PGA) in higher, more cost-effective quantities than was previously possible. This biodegradable chemical polymer is compatible with PET recycling processes.

“With the development of this breakthrough technology and the strong intellectual property surrounding our work, Kuredux™ PGA will become a centerpiece in the company’s strategy of focusing on value-added, highly differentiated products, setting us on a path of strong growth and profitability,” says Dr. Takao Iwasaki, president and chief executive officer of Kureha Corp.

The Chemical Alliance Zone follows the Kanawha and Ohio Rivers and offers ready infrastructure, transportation networks and suppliers to support the chemical industry. The strategically located zone is within 24-hour trucking distance of 43% of the U.S. industrial market and 50% of the consumer market.

Welcome Home to West Virginia
Tourism attracts 11 million visitors to West Virginia each year, generating more than $3 billion in economic activity for the state. Some of those visitors, drawn by the state’s natural beauty, job opportunities, lifestyle and low cost of living, decide to stay.

Another population is drawn to West Virginia, too: natives of the state who left and are now returning. South Charleston native Chris Kroger is one. After working in North Carolina for many years, he accepted a job with Pratt & Whitney Engine Services in Bridgeport and moved his family to Morgantown, home of WVU. While he noticed many changes during the time he lived outside the state, Kroger says the best things about West Virginia—its people and the things they stand for—remain the same.