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A Small Community Carves a Niche in the New Economy |
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Winchester, Virginia, (population 22,600) has parlayed two underused assets—a charming old downtown area and its nearness to Northern Virginia’s “NetPlex” technology corridor—into a high-tech employment zone on 125 acres of the city’s old downtown. Unable to attract federal or state incentive programs, it created the Winchester Technology Zone by a 1996 city ordinance. It also took advantage of existing investment in state-of-the-art telecommunications infrastructure and used local tax incentives to attract high-tech businesses to its historic commercial core. Putting a puzzle together. “There was a definite evolution to our tech zone,” reports Winchester economic development director June Wilmot. “It was like pieces of a puzzle coming together.” The first piece appeared in 1993 when a private-sector group and U.S. Representative Frank Wolf approached the city to establish a federal telecommuting center in Winchester. “We thought this would be a great idea,” says Wilmot, “because it would mean that federal employees who lived in Winchester wouldn’t have to drive 75 miles to Washington, DC, every day. In addition, we’d no longer be missing out on tax revenues whenever they bought a sandwich or an airline ticket at lunchtime.” Here, Winchester’s civic leaders believed, was an opportunity to use technology to stimulate business in their historic downtown district. The tech zone would enable the city to encourage rehabilitation and redevelopment of the vacant and deteriorated properties in Old Town Winchester. “The next piece to the puzzle was learning that we were sitting on a powerful telecommunications infrastructure on a par with major urban areas,” says Wilmot. The city discovered this while seeking a location for the federal telecommuting center, eventually located in the downtown technology zone. “We found out that Shenandoah Telephone and Bell Atlantic had gone ahead and put world-class telecommunications infrastructure in here—with a major fiber [optic] pipe up and down Interstate 81 and connecting over into Washington.” This meant that Winchester would not need a major upgrade of its communications infrastructure to institute the technology zone. Winchester leaders figured it would not take long for other jurisdictions to catch up on physical infrastructure, robbing the town of its competitive advantage, so they pushed ahead to establish a technology zone. The city was disappointed when Virginia failed to choose Winchester as a state enterprise zone, but another vehicle soon appeared. In 1996 the state passed legislation allowing localities to create technology zones. Cities and towns would receive no special federal or state benefits and could not offer real estate tax abatements. However, localities could offer limited local tax incentives and choose where to locate the tech zone. Winchester became the first community in the state to set up a tech zone, passing a local ordinance establishing the zone in its historic downtown effective January 1, 1997. Although unable to offer property tax breaks, the city has devised other tax incentives, such as rebates on local telephone and utility taxes and business licenses. Payment of business licenses can be especially onerous, says Wilmot, because entrepreneurs must pay them up-front before a new business has any earnings. With creation of the technology zone, the city has successfully attracted several new tech firms. Businesses locating in the zone include Judd’s OnLine (1998), a leading builder of Web site solutions for customers such as Martha Stewart and Reba McEntire; CFW Communications (1998), a directory assistance provider; and Virtual Training Company (1999), a producer of training CDs for computer software programs. Winchester’s historic buildings boast tin ceilings, tile floors, and original woodwork, but require rehabilitation to serve as offices. Judd’s OnLine moved into a building redeveloped by a previous owner, while CFW bought and rehabbed a building, taking advantage of historic building tax credits. Pieces still missing. High-tech Winchester still has its challenges, however. One problem is a lack of available large spaces (10,000 square feet and larger). “Judd’s OnLine was tremendously successful,” recalls Wilmot. “It grew by leaps and bounds. But guess what? The business didn’t have anywhere to expand and had to move out of the tech zone.” Judd’s OnLine, however, remains in the Winchester area. Some companies that recently located in the surrounding county have expressed strong interest in moving into the tech zone as soon as space can be found. In response to these kinds of challenges, Wilmot wants Winchester to become more entrepreneurial in encouraging development. She points to the George Washington Hotel, which she describes as a “wonderful old facility” with 50,000 square feet of usable space. She wonders if the city can help a developer risk moving ahead with refurbishments even before the first lease is signed. Here, according to Wilmot, is where the prohibition against real estate tax abatement in the existing tech zone legislation really pinches. Developers can, however, take advantage of state and national historic tax credits to help finance remodeling. “But we need to go one step further than that,” says Wilmot. “Let’s take a high-tech incubator that needs about 30,000 to 40,000 square feet to make it work. It would make sense if [the incubator] could use industrial revenue bonds or some other financing innovation to help a developer come in and undertake this sort of project.” Educating its longstanding business base about the importance of e-commerce for economic survival is another ongoing challenge for the city. Winchester has always had a strong manufacturing base (making up more than one-fourth of its current employment force and growing)—including enterprises such as printing, food processing, plastics, and metalworking. “What I’m talking about here is more than the need for a Web site,” says Wilmot. “It is teaching businesses about all of the ways they can be supported electronically, such as how to use business-to-business applications in order to reduce costs.” As part of its education effort, the city has an upcoming e-commerce fair with presentations, case studies, and one-on-one consultations with service providers to help businesses learn more about how to make e-commerce work for them. A final challenge for the city, says Wilmot, is ensuring that it has the selection of bandwidth that companies are now demanding. Small communities that would like to get involved in the telecommunications/e-commerce revolution could learn from Winchester’s experience, says Wilmot. But she does not deny Winchester’s real advantage in being so close to the Northern Virginia Netplex where companies such as America On Line, Oracle, Network Solutions, and Cisco have a large presence. “There are other pretty communities in the Shenandoah Mountains, but they can’t overcome the distance gap,” she says. “We have a specific advantage in being on this perch near the Northern Virginia Netplex. With all of this Internet activity going on in the DC area—particularly on the Virginia side—where else can you go and get this sort of access with this quality of life?” For more information, contact: June Wilmot, Executive Director, Winchester-Frederick County Economic Development Commission, 45 East Boscawen Street, Winchester, VA 22601, (540) 665–0973, or visit the Winchester-Frederick County Economic Development Commission Web site: www.techzoneva.org. Or see: “Case Study: Winchester Technology Zone,” by Alfie Meek in Innovative Local Economic Development Programs, November 1999. Economic Development Administration, U.S. Department of Commerce, Washington, DC 20230.
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