Commonwealth’s Development Opportunity Fund (COF)

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The Commonwealth’s Development Opportunity Fund (COF) is a “deal-closing” fund to be employed at the Governor’s discretion to secure a company location or expansion in Virginia. Administered by the Virginia Economic Development Partnership (VEDP), the COF serves as a final resource for Virginia in the face of serious competition from other states or countries.

The COF grant is a negotiated amount determined by the Secretary of Commerce and Trade, based on the recommendation of VEDP, and subject to approval of the Governor.

Call Jeff Reed at 434.738.2544 or 434.265.2382 with questions pertaining to incentives.

Eligibility

All projects must meet the following eligibility requirements:

Project must be affiliated with a basic employer, meaning 51% or more of the facility’s revenue must be generated outside the Commonwealth.
Project must be an active and realistic competition between Virginia and another state or country for attracting the project.
Matching local financial participation is required on a dollar-for-dollar basis (cash or in-kind).
Public announcement of the project must be coordinated by VEDP and the Governor’s Office.

Each project must meet thresholds for capital investment and job creation. If located in certain localities (indicated on the map below), projects may qualify for Single Distressed or Double Distressed Eligibility Thresholds instead of the General Eligibility Thresholds.

General Eligibility Thresholds:

50 new jobs and $5 million capital investment, or 25 new jobs and $100 million capital investment.
The average annual wage for the new jobs must be at least equal to the prevailing average annual wage in the locality, excluding fringe benefits.
If the average annual wage is at least twice the prevailing average annual wage, the Governor may reduce the new jobs threshold to as low as 25.

Single Distressed Eligibility Thresholds:

For a locality with an unemployment rate above the average statewide unemployment rate or with a poverty rate above the statewide average poverty rate.
25 new jobs and $2.5 million capital investment.
Jobs must pay at least 85% of the prevailing average annual wage in the locality, excluding fringe benefits.

Double Distressed Eligibility Thresholds:

For a locality with an unemployment rate above the average statewide unemployment rate and with a poverty rate above the statewide average poverty rate.
15 new jobs and $1.5 million capital investment.
Jobs must pay at least 85% of the prevailing average annual wage in the locality, excluding fringe benefits.

For most performance agreements, minimum capital investment, new job, and wage thresholds must be met within 36 months.

“Capital investment” means an investment in real property, tangible personal property, or both at a manufacturing or basic nonmanufacturing facility within the Commonwealth.
"New job" means employment of an indefinite duration for which the company pays wages and standard fringe benefits for its employee, requiring a minimum of either (i) 35 hours of the employee's time a week for the entire normal year of the company's operations, which "normal year" must consist of at least 48 weeks or (ii) 1,680 hours per year. If there are existing jobs at the company’s facility, it is expected that the COF grant performance agreement will state the number of existing jobs and will require that the new jobs be in addition to the existing jobs.
Wages are defined as W-2 wages.

Process

Project is initiated with a VEDP Business Investment Manager.
Due Diligence Review – In order for a COF grant to be awarded, projects are subject to a due diligence review process. During this process, VEDP’s Business Investment Manager will work with the company to attain the information required to begin the project review process, including company information, financials, investment and job information, and intended use of the COF award.
- VEDP then performs Return-on-Investment (ROI) analysis and risk assessment for the project.
- Project is reviewed by VEDP’s Project Review and Credit Committee (PRACC) (1-2 weeks, subject to all necessary documentation being provided).
- If approved by PRACC, the proposed incentive award is forwarded to the Secretary of Commerce and Trade for preliminary approval (approximately 1 week).
VEDP delivers the financial proposal to the company.
The company accepts or rejects the offer.
A COF application is submitted. Applications consist of two documents: a community letter sent by the locality to VEDP, and a company letter sent by the company to VEDP.
A performance agreement is drafted and reviewed by the company and locality.
The Governor reviews the incentive for final approval or rejection (approximately 2 weeks).
A press release is issued and/or an announcement event is scheduled.
A COF grant is awarded to a community on behalf of the company.

The company will be asked to provide annual reports indicating progress toward achieving its investment and employment performance targets.

Verification of New Jobs – The company will be asked to report the number of jobs created and maintained through the performance period and the payment period, and the average annual wage for those jobs.
Verification of Capital Investment – The company will be asked to report the amount and type of capital investment made through the performance period, by broad categories (e.g., land, land improvement or machinery, fixtures and equipment).
Special Reporting Provisions – With each annual progress report, the company will report to VEDP the amount paid by the company in the previous calendar year in Virginia corporate income tax. Such information is considered proprietary information that is exempt from public disclosure under the Virginia Freedom of Information Act and will be used by VEDP solely in calculating aggregate return on invested capital analyses for purposes of gauging the overall effectiveness of economic development incentives.

Resources

FAQ

What can a COF grant be used for?

COF proceeds may be used for:

Public and private utility extension or capacity development on- and off-site.
Public and private installation, extension, or capacity development of high-speed or broadband internet access, whether on- or off-site.
Road, rail, or other transportation access costs beyond the funding capability of existing programs.
Site acquisition.
Grading, drainage, paving, and any other activity required to prepare a site for construction.
Construction of publicly or privately owned buildings or build-out of publicly or privately owned buildings.
Training.

In no case may COF proceeds be used, directly or indirectly, to pay or guarantee the payment for any rental, lease, license, or other contractual right to the use of any property. The COF may not be used to purchase equipment or for overhead expenditures.

How are grant awards calculated?

There is no formula for calculating the amount of the grant award. In determining grant amounts, the following criteria are considered: a Return-on-Investment (ROI) analysis, new jobs, wage levels, overall employment, capital investment, area and regional unemployment, poverty and fiscal stress, the locality’s financial support of the project, company growth potential, diversification of job base, and needs of the project.

What happens if statutory program investment and employment minimums are not met?

The company must meet the statutory minimums for both jobs and investment for the given locality or be subject to a 100% repayment of the grant.

What positions do not qualify as new jobs?

Seasonal or temporary positions, positions created when a job function is shifted from an existing location in the Commonwealth, and positions with construction contractors, vendors, suppliers, and similar multiplier or spin-off jobs shall not qualify as new jobs.

Are contract employees allowed to count as new jobs?

The Commonwealth will consider dedicated, full-time, Virginia-based contractors as eligible net new jobs should the company desire to count them toward the new job targets. The requirements for contract positions are the same as for those positions on the company’s payroll and would be required to meet the same requirements as a “new job.”

What is prevailing average wage?

"Prevailing average wage" is the amount determined by the Virginia Employment Commission to be the average wage paid to workers in the city or county of the Commonwealth where the economic development project is located. The prevailing average wage will be determined without regard to any fringe benefits.

When can a company start counting job creation/capital investment?

The performance agreement will detail the date from which VEDP will start counting new jobs and capital investment. Generally, this date will be around the announcement date of the project.

Can used equipment moved to a project site count as qualifying capital investment?

Generally, the value of used equipment transferred by the company to the project site will not count as qualifying capital investment.

Are there any local benefits? What qualifies as a local match?

Localities must at least match dollar-for-dollar with local funds the amount requested from the COF. A local match may be funded by cash grants and/or an in-kind contribution from the locality for the direct benefit of the grantee, such as infrastructure development, fee waivers, or free or reduced-price land or buildings.

What is the timing of receiving the grant? Can the grant funds be front-loaded?

Typically, COF grants are released after the Commonwealth has received revenues from the project in excess of the grant amount. This may occur within the first year of the project or over a number of years, depending upon the amount of the investment, employment and wages, and ramp-up schedule. Grants may be released over time via several tranches based upon the revenue accrual for the Commonwealth. Any additional metrics regarding payout of the grant will be included in the performance agreement.

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