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THIRD QUARTER 2019

CONVERSATIONS WITH THOUGHT LEADERS: Tom Barkin Federal Reserve Bank of Richmond Beth Macy Author of New York Times Best Seller “Factory Man”


This moonlit barn sits in the Clover Hollow area of Giles County, home to a natural area preserve, which includes Stay High Cave, which protects several invertebrate species not found anywhere else. The county bills itself as “Virginia’s Mountain Playground,” with approximately 50 miles of the Appalachian Trail passing through its borders.

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Contents 32 America’s Rural Growth Challenge No state has cracked the code on addressing America’s rural growth challenge, but Virginia seeks to be one of the first to do so

38 Connecting the Broadband Dots Virginia is at the forefront of bringing broadband to its underserved areas thanks to a bold vision, legislative inroads, and collaboration at the local level

42 The Business of Creating Business-Ready Sites Virginia looks to increase the availability of development-ready sites through the two-pronged approach of characterization and development

54 Virginia Eyes Top of   Workforce Development Space The new Virginia Talent Accelerator Program, developed by leading industry experts, will deliver custom workforce solutions to companies

60 A New Frontier for Tech Talent Companies are finding tech talent in the mountains and valleys of Virginia, from Southwest Virginia and the New River Valley to the Shenandoah Valley

04  Facts & Figures 06  Virginia Wins 14  M  oving the Needle in Rural Communities: A Conversation with Tom Barkin 22  Rural Challenges and Opportunities 52  Securing Southern Virginia’s Future: A Conversation with Ben Davenport 58  Closing the Skills Gap: A Conversation with Seth Martindale 74  Virginia’s Rural Storyteller: A Conversation with Beth Macy 84  Connecting Virginia Agriculture to International Markets 88  Economic Development Partners in Virginia

The cover design reflects the evolution of rural America over time, with agriculture, manufacturing, and technology/services each contributing to the economies of rural communities.

Subscribe today. Visit www.vedp.org/Virginia-Economic-Review

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Virginia Steps Up to Tackle America’s Rural Growth Challenge The Brookings Institution recently published an analysis highlighting an expanding economic divide between metro areas (especially large ones) and rural areas in the U.S., as large metro areas have enjoyed considerably faster growth than smaller metros and rural localities. With stagnant or declining employment and population, many rural communities across our country are struggling with a lack of economic opportunity, outmigration of talent, hospital and school closures, dying downtowns, and an opioid crisis, among other challenges. In this issue of Virginia Economic Review, we explore the various dimensions of America’s rural growth challenge, and we feature thought leaders and others who are making a difference. For example, Roanoke, Virginia-based Beth Macy is a three-time New York Times best-selling author who has become America’s rural storyteller. Tom Barkin, the new CEO of the Federal Reserve Bank of Richmond, has prioritized rural development. And Ben Davenport has helped launch and lead GO Virginia, a groundbreaking regional development initiative. In the midst of a worrying national context for rural areas, Virginia has embraced a relatively radical goal — to position every region of the Commonwealth 2

for economic growth. To achieve that ambitious objective, rural development leaders across Virginia collaborated to craft a set of high-impact initiatives that are now being implemented, such as rural broadband deployment, world-class custom workforce solutions, and developmentready sites. Learn more inside. With a wide array of stunning landscapes and world-class employers, as well as some of America’s best public schools and nicest small towns, rural Virginia has a strong foundation to build upon. Working together, state, regional, and local leaders are leveraging those strengths and others to position rural Virginia to buck national trends. I like our odds. Best regards,

Stephen Moret President and CEO, Virginia Economic Development Partnership


LETTER FROM THE PRESIDENT

A fly fisherman enjoys an autumn day at Red Bud Run, a limestone creek in Frederick County and a popular location for catch-and-release fishing. Agritourism, horticulture, and apple production are among several other thriving industries in Frederick County.

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Facts Figures

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Travel and Leisure, 2019

Best City Hotels in the U.S. Bristol Hotel

USA Today 10 Best Reader’s Choice, May 2019

Best Small-Town Food Scene Abingdon

Top Digital Cities in America (Pop. 75,000 – 124,999)

Lynchburg

Blue Ridge Outdoors, 2018

Top Small Adventure Town Clifton Forge

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Center for Digital Government, Digital Cities Survey, 2018

Livability, January 2018

Best Affordable Places to Live Roanoke

Condé Nast Traveler, 2018

Top Resorts in the South Primland


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Business Facilities, 2019

Best State Business Climate in the U.S.

Garden & Gun, 2017

The South’s Most Charming Christmas Town Middleburg

Travel and Leisure, 2019

Top Hotels in the World Inn at Willow Grove

Southern Living, 2019

The South’s Best Food Towns Charlottesville

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USA Today 10 Best Reader’s Choice, May 2019

Best Coastal Small Town Chincoteague

Smart Asset, 2018

Best Place to Work in Manufacturing Martinsville 5


Virginia Wins The Volvo Group will invest nearly $400 million to expand its Volvo Trucks North America New River Valley (NRV) assembly operation in Pulaski County. Major components of the investment include a new 350,000-square-foot building that will ultimately house truck cab welding operations; an expansion of the existing plant to allow for further improvements to the facility’s paint operations and overall material/production flow; and a variety of equipment upgrades, including installation of several state-of-the-art dynamometers for vehicle testing. Volvo considered sites in multiple other states for the expansion project, which will create 777 new jobs within approximately six years. The Volvo Trucks facility in Pulaski County is the company’s largest in the world, with 1.6 million square feet on nearly 300 acres and 3,500 employees.

This investment will give our employees the tools they need to continue providing our customers the highest quality products. We’re very grateful to the Commonwealth of Virginia, Pulaski County, and the citizens in this community for their continued support of our business and our people. Creating more value-added processes through these investments is good for our employees, our plant, and our region. FRANKY MARCHAND Vice President and General Manager, New River Valley (NRV) Plant, Volvo Group

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VIRGINIA WINS

Central Virginia Castle Hill Gaming

Jobs: 106 new jobs CapEx: $1.3M Locality: Albemarle County

Greater Richmond Amazon

Jobs: 150 new jobs Locality: City of Richmond

Greater Richmond/ Virginia’s Gateway Region Petal

Jobs: 80 new jobs CapEx: $300,000 Locality: Chesterfield County

New River Valley Ozmo

Jobs: 40 new jobs CapEx: $200,000 Locality: Montgomery County

BimmerWorld

Jobs: 15 new jobs CapEx: $1M Locality: Pulaski County

Northern Virginia Aireon LLC

Jobs: 56 new jobs Locality: Fairfax County

Roanoke Region Metalsa Structural Products, Inc. Jobs: 25 new jobs CapEx: $6.4M Locality: Botetourt County

Shenandoah Valley The Hershey Company Jobs: 65 new jobs CapEx: $104M Locality: Augusta County

Southern Virginia Litehouse, Inc.

Jobs: 160 new jobs CapEx: $46M Locality: City of Danville

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The Martha Washington Hotel & Spa in Abingdon was constructed in 1832 as the retirement home for a general from the War of 1812. The entrance to the 35-mile Virginia Creeper Trail, one of the nation’s premier rail trails, lies in the backyard of this luxurious and historic getaway.

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Abingdon The annual Blue Ridge BuskerFest in Abingdon draws residents and tourists alike to Main Street for a unique and family-friendly experience. Thousands of visitors also gather in Abingdon each year for the Virginia Highlands Festival, one of the most popular arts and music events in the Commonwealth.

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Somerset Located at the foothills of the Blue Ridge Mountains, Liberty Mills Farm in Orange County is home to the largest corn maze east of the Mississippi. The County is also the largest skydiving area in the Washington, D.C., and Northern Virginia area, serving as a hotspot for the adventurous.

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Farmville Hampden-Sydney College, the 10th-oldest college in America, was founded in Farmville in 1776, followed by Longwood University in 1839. A 2016 resolution passed by the Virginia General Assembly officially commended Farmville as the United States’ first two-college town.

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Moving the Needle in Rural Communities A Conversation with Tom Barkin

Tom Barkin is the president and chief executive officer of the Federal Reserve Bank of Richmond. Barkin joined the Richmond Fed in January 2018. In his time in Richmond, Barkin has taken an interest in the issues leading to a divide between urban and rural areas in the Fed’s Fifth District.

Stephen Moret: How did you come to lead the Fed in Richmond? Tom Barkin: I led McKinsey’s offices in the Southeast for 10 years, and I spent 30 years as a consultant. I was a very young person in my own mind, but I was one of the oldest people there. When I retired, I got a call from the Richmond Fed asking me to interview to be the president. I wasn’t a complete stranger to the Federal Reserve. I’d been on the board in Atlanta, I had chaired that board in ’13 and ’14, and I really enjoyed watching what the Federal Reserve did, especially during the last downturn. When I got the call, I thought, this seems like a great opportunity for me to continue to give back. I know there’s a ton to learn. I’d been in Richmond a bunch and thought it was a fun town, and so we embarked on a new adventure.

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Moret: Can you tell us about both the geography that the Fed’s Fifth District covers, as well as the broad function it plays?

at the beginning is one thing I’d put on the table. States like West Virginia and Georgia have gone to basically universal pre-K.

Barkin: There are 12 Federal Reserve Banks. Our district starts in South Carolina and includes all the states up through Maryland, West Virginia, and D.C. Virginia, obviously, is a very important part of our district. What you read about in The Wall Street Journal is our role in monetary policy. But in addition to that, we supervise the banks in our districts, so our oversight includes Bank of America, BB&T, and Capital One.

Second is connecting people to jobs. The job market is as hot today as it’s been in 50 years, and employers I talk to all over the district are struggling to find workers. On the other hand, a lot of people are on the sidelines. How do we get those people connected to jobs?

Moret: You’ve been on the job about 18 months. Can you give us a sense of what you’ve learned about the Fed’s Fifth District that you perhaps didn’t know before, and any general observations of the region you’ve gotten to know better in that time? Barkin: I’d spent a lot of time here, but hadn’t really thought about it as a central banker. Our mandate involves stable prices and maximum employment. One of the first things I tried to do was to understand the employment situation in our district. I’d say Washington, D.C., and Baltimore are pretty unique. And then you’ve got seven or eight vibrant, thriving new Southern cities that have their issues. But, on the whole, employment’s very strong. Richmond would count in that. I’d put Northern Virginia there, Charleston, Greenville, Charlotte, Raleigh. But the thing that really hit me in the analysis is that most of our district is small towns, and employment isn’t working the same way in the small towns as it works in the bigger cities. Moret: You gave a talk in March at the Virginia Governor’s Conference on Agricultural Trade. For context, we’re very passionate about rural development in Virginia here at VEDP. I’ve read quite a bit about it, and I have to say, your talk was one of the most thoughtful presentations I’ve seen. It was entitled, “Moving The Needle In Rural Communities.” Really outstanding piece of work. Could you tell us how this came to be a passion for you and a focus in your work at the Fed? Barkin: We’re very focused on labor markets working for everybody, and four things got us interested. One is education. It’s absolutely the case wherever you go that higher education is associated with higher life outcomes, whether that be health or wealth, resiliency in a downturn, or employability. One metric might be the percentage with a bachelor’s degree. It’s 35% in the bigger cities, 22% in the smaller towns. So, we look hard at education, and when we get into it, one of the things you find is it starts at the very beginning, in pre-K, again with very significant differences between the smaller towns and the bigger cities on completion of pre-K enrollment. And, so, our Fed and the Minneapolis Fed have done a lot of work on this. The notion of how we think about helping people in smaller towns get engaged

Moret: It’s one of the great paradoxes of the current United States labor market. Barkin: It’s true. When I took economics in college, one of the assumptions economists make is that labor markets are perfectly mobile, that any person who wants a job can get a job, and any employer who wants a worker can get one. It’s not that true. In these small towns in particular, a lot of people don’t have access to the jobs. Moret: There’s a skills gap. It’s a geographic inequality. Barkin: An access gap. One of the things I’m really intrigued with is the role community colleges play in connecting people to jobs. Virginia is a great example of a program where we’re really investing in helping people who want jobs, and what it takes to get certificates so they can get access to those jobs. One of the things I’ve run into is that it’s hard to get funding for a lot of these things. Degree programs, for example, are funded by Pell Grants, but certificate programs aren’t. A certificate program is actually cheaper and has a higher job placement rate, so, why wouldn’t we try to funnel both scholarship money and community college money toward those things? A third thing we’re focused on is isolation. It’s almost definitional. If you’re in a smaller town, you’re more isolated. But that doesn’t mean you don’t have social networks. Actually, a lot of research shows people are more socially connected in smaller towns than in bigger cities. But if you’re looking for role models — if, for example, you want to go to college or become an entrepreneur — your odds are a lot higher if you grew up with people who had gone to college or were entrepreneurs. In particular, in a world where hospitals, banks, and colleges are closing, you lose some of these great role models in some of these small towns. And then I wouldn’t be complete if I didn’t talk about health. A lot more people are on disability in smaller towns. Some of it’s disability, but some is also economic, and the incentives are very clear. Once you’re on disability, it’s hard to get off, but I’m hopeful a hot job market will move that. And then, of course, we have opioids, which are a tragedy across our district, but particularly so in the smaller towns.

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Moret: One of our interviews for this issue is with Beth Macy, who wrote “Dopesick” and “Factory Man.” She’s spoken articulately about that, and it’s an issue that has crushed many rural and small town communities, not just in Virginia, but across the country. Barkin: There’s a lot of work being done at the front end of that in terms of prescription rates and everything else. But there’s an embedded base of folks who are not well, sadly. I’m intrigued with some of the conversations we’ve had with people in addiction-to-work programs, including folks who apply for a job and fail a drug test. You immediately give them the opportunity to get into an addiction-to-work program. There are some interesting things happening there that I hope can get scaled and be even more successful. Moret: The more I look at America’s rural growth challenge, there’s clearly no silver bullet, but there’s almost a constellation of topic areas to be tackled simultaneously. Have you seen any states or regions that you think are standing out here, or do you think the leaders in rural development have yet to emerge in the country?

Downtown Winchester

Barkin: When you find small-town markets that are really succeeding, there’s always a story that means you’re going to discount it. For example, you could say Charlottesville would be a small-town market that’s truly succeeding, but maybe it helps to have the University of Virginia there. So, I focus less on saying, “Oh no, no, here’s a winner,” because someone will explain it away. I try to focus on the elements of those people I see winning. One element is they can articulate a story, and the story isn’t necessarily marketing to companies or people to come there, but actually marketing to themselves. If you’re in a town that’s making it happen, and you talk to the people in the town, my simple little metric is: They can describe why their kids would come back. I actually walk out of most of those discussions more encouraged than discouraged. There are, of course, difficult cities and markets, but I think there’s a lot to sell in these small towns. Then, obviously, you’ve got to work together on it. The fourth piece is funding. There’s more funding available than people think. You will see in the ones that seem to be making the most progress, a clever, opportunistic set of access to funding. That could be GO Virginia funding, it could be federal funding, but they’re really being creative and thoughtful about bringing funds into the market. And I don’t want to be too much of a downer, but patience is a pretty important piece of it. This does take a long time. Transforming a community takes a generation. It’s done a day at a time.

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Downtown Charlottesville


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Moret: One of the things we’ve embraced at VEDP in looking at each of our rural regions and smaller metro areas is that we want to ensure we’re doing everything we can to help position them to grow. I think relatively unique is that Virginia now looks at its success not just as the state as a whole, but how we’re doing in each of our constituent regions across Virginia. It’s something we’re tracking and trying to be very deliberate about. Barkin: I like what I understand of the GO Virginia model, where you really do try to think about it in regions. I think that’s a superb way to go. Moret: That’s a great example, and one with a lot of promise as it continues to develop. How important do you think broadband is for rural communities? Barkin: If you want to break down isolation, I think you have to start with infrastructure. Infrastructure 50 years ago meant highways, and there was a lot the highway system did to bring this country together. I think infrastructure today is the internet. It’s a fundamental. You’ve got to have access. That’s true for operating every day, shopping, whatever. How could one be an entrepreneur and build a business if you didn’t have access to it? So, if you believe as I do that we can’t find a Toyota plant for every city, then you have to have small businesses starting up. I think broadband is critical there. If you want to grow the population of a community, it starts with people who grew up there wanting to come back. I think it’s awfully hard to imagine a millennial coming back to a city where they didn’t have access to high-speed internet. And so the answer is yes, it’s very important. I would also make the point, there’s a lot of money out there, there are lots of fights about who pays. You can lay the pipe, but you’ve also got to make it at a price that people can afford it. As difficult as it was, we somehow did rural electrification in the ’30s. If we can do rural electrification, I don’t see why we can’t do rural broadband access. Moret: I love hearing that. We believe that, too. We’ve been really grateful for the work the Governor and General Assembly have done to dramatically increase funding for rural broadband access. They’re essentially trying to subsidize the private sector to come into areas that would not be economic to serve, or it would be a long time before the private sector got to them. Virginia, for the first time, is starting to think about getting to near-ubiquitous broadband access over seven to 10 years, which is a pretty exciting prospect. Are there other things that you think Virginia or other states should be thinking about and how state, local, and regional leadership can strike a balance to most effectively support rural development?

Barkin: I think building any small town requires inclusive local leadership, period, but not every place will have that. By the way, it’s hard to say the strategy is to grow absolutely every small town anywhere. As we were saying earlier, I think of it as regions. You’ve got to grow regions, and you need inclusive, integrated local leadership at a regional level. But there are things that are very important for states to think about. I talked about pre-K and getting every kid in every region the chance to get off to the right start. As I said, some states have invested more in pre-K, and I think that’s a very useful place to start. I’ve been impressed with the public school systems in many of Virginia’s rural markets. If I compare Virginia to some other states, I think several of your rural markets are solving public school problems. But let’s not forget that we need that in all rural districts. I think FastForward is a very good program in Virginia, and I know it’s funded at some level. I think expanding that is well worth thinking about. Moret: Is there a role for federal monetary policy to support the needs of rural America? Barkin: Federal monetary policy is a relatively blunt instrument. We move rates up and we move rates down. It’s true that when we run an expansion as long as the expansion we’re currently overseeing, it does help people on the fringes of the workforce get back into the workforce. Our chairman and many others have talked about the advantages we see in that. We always have to be watchful on the other half of our mandate, which is stable prices. We do watch and we’ve been running a very hot economy for some time now under the theory that we’re bringing more people back into the workforce. Of course, that would include small towns. Moret: Indeed. In what ways do you think the Fed and state leaders can connect with these communities to help them grow their economies? Thinking about things like labor force participation, clearly there’s a big gap. There are different reasons for that, but I don’t know if anyone has cracked the code on what it would take to close those labor force participation rate differences between rural areas and more urban areas or metros. Barkin: One of the pieces of research I’m doing right now — and I caution you that it’s just research in process — is: Who are the people on the sidelines? I think there are probably tailored answers for different segments. It’s well worth looking at what I’ll call the economic incentive for people to go back to work. In that segment, you clearly have some who are unhealthy, as I’ve described, whether that be diabetes or disability, opioids or whatever. Working hard on

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Greenhill Winery & Vineyards, Middleburg

treatment and getting those back into the workforce is another segment worth thinking about.

instance, how much to plant next year if you don’t know what pricing is likely to be.

I think there’s a national conversation about people who have been incarcerated and the barriers that may play in there. And there’s some interesting work being done on things like expungement programs to make it easier for people to employ those who want to get their lives back together. I don’t have this fully laid out, but I’m thinking about what are some tailored efforts that could be done after those segments.

My hope is that as we work our way through these negotiations, we will land in a stable trade regime so that people can make investments and grow. There’s no question that if you’re on the wrong side of a tariff, which we impose or one of our trade partners imposes, that can be painful.

Moret: One of the more interesting things I read in your talk in March was about the impact that trade policy has on many rural communities. Barkin: Many small towns in my district are heavily involved in trade in ways you wouldn’t have thought. For example, manufacturers and farmers are engaged in export. The place I always start is not with policies, but do you have a tariff or not? I start with the uncertainty because it’s hard for business people to figure out where to go if you don’t know, for 18

Moret: That’s created a dynamic market for those involved in exports. We actually have as part of VEDP one of the largest and best state-level trade development teams in the country. We’re seeing a lot of folks rethinking their export strategy based on what’s happened with tariffs. Some folks are essentially eating it. Others are looking at reorienting both imports and exports. Barkin: I’m a believer in the ingenuity of our business people. I think it’s really hard to be clever if you don’t know what the rules are. I just hope we can learn the rules of trade and whatever the right answer is for the health of our economy. Once we do that, we’ll re-sort supply chains in a productive way.


Moret: One of Virginia’s big goals to help our smaller regions and rural communities is to increase exports from the Commonwealth. We’re one of the bigger states from an export perspective, but that’s mostly because we’re one of the bigger states in general. Barkin: You also have a great port. Moret: Absolutely. We have one of the most advanced ports in the world, with natural deep water access and no bridge restrictions. The Commonwealth is wrapping up a billion dollars of investment in The Port to give it about 40% more container cargo capacity. Currently, Virginia exports per capita are about 39th in the country, partly because our economy is heavily based in the federal government. We have a smaller private-sector economy than many other states. But that’s one of the things we want to change over the next decade. We’re going to release our first comprehensive International Trade Plan in the next few months. The Governor’s going to announce it, and one of our goals is to materially improve our position in exports per capita, to become a more export-intensive

state. That will involve getting more small- and medium-sized firms into trade that don’t currently trade, providing services to help firms already engaged in trade to expand their activity, and also to attract significant export-oriented projects. A recent example is the Micron expansion in Manassas. It’s going to add about a billion and a half in exports per year, a 3% or 4% increase in our total statewide exports. The ag piece of that is very important, obviously, to the smaller communities, as are many of the manufacturing opportunities. Barkin: That’s great. I have to say, as a guy who just moved to Virginia in the last year, this is a very attractive place to live. I think it would be a very attractive place for businesses to locate. What I see you and Virginia’s government doing is pretty clever in terms of what it takes to build an economy. I think you’ve got a great product to offer. Moret: We do. And what we’ve noticed about Virginia is there are so many built-in advantages based on our location, 19


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the proximity to D.C., the natural deep water port, proximity to all these other assets. In part, because of that, there’s great educational attainment and all these other things. But, sometimes we’ve not been as competitive with other southern states that had to work a little bit harder, like North Carolina, South Carolina, and Georgia. Now, we’ve identified things that have held us back, particularly in smaller metro areas. Things like being able to offer worldclass customized workforce solutions. Are you familiar with Georgia Quick Start? Barkin: Very much so. Moret: We’re launching something similar here in the Commonwealth, looking at preparing more sites for advanced manufacturing opportunities. Virginia is typically competitive in logistics, workforce, education, and taxes, but we often lose simply because we don’t have prepared infrastructure and sites for those facilities to go. Barkin: I get to travel my district and I think you’re right. South Carolina and North Carolina are also very attractive places. And folks in Maryland are working very hard. It’s a competitive market out there. Georgia, where I used to live,

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took great pride every year in being the best state for business, and they spent a lot of money doing that. Moret: When you look at the Carolinas, I think one of the things that gave them an advantage over Virginia the last few decades is that they didn’t have the big D.C. Metro MSA in their states. They were a bit more oriented toward being competitive in small niches, whereas Virginia often relied on that one big driver of the economy. One thing that there’s now statewide passion around is ensuring that the whole state is growing. As an example, 10 years ago, the last time Virginia was ranking No. 1 in Forbes and with CNBC, there were years Northern Virginia represented more than 100% of all the Commonwealth’s growth. The rest of the Commonwealth on average was actually losing jobs. We want to create more balanced opportunity going forward. Barkin: As I get out into the markets, which I am quite a lot, I do see evidence that the state is working in each of these geographies. I think that’s very healthy.


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Moret: We’re making progress, but we’ve got a lot more work to do. Talent availability, quality, and pipeline are the biggest factors in economic success. What do you think smaller communities can do to build the kind of workforce to attract high-quality employers, or help the ones there now to grow? Barkin: As I said, I’ve been impressed. I was in Southwest Virginia a few weeks ago. The education system is performing very strongly against the various metrics that you look at. The biggest challenge to build a workforce in that market, for example, is getting people to stay, move there, or come back. You’ve got to have the education system in decent shape because no one moves to a place where you don’t have confidence that your kids will get raised with a decent education system. They’ve got that. What you then need is a story on why people should stay or come. Importantly, that story includes you and your working spouse, jobs for both. That includes education and amenities. Often, that includes proximity to an airport or other lifestyle things, and a hospital.

a 10 out of 10 on those sets of things, but actually it’s quite doable to find a region that would have them. You can find a beautiful place to live, with a local hospital and a university. You can find a good school system, and the airport’s only 30 minutes away, which all might seem like a lot from a small town. As I said, I was in Atlanta for 30 years. Thirty minutes got you halfway to the airport. I think there’s a real opportunity if we broaden the horizon to put together a story that people can not only get educated there, but that educated or talented people would want to come back or move there. Moret: Is there anything else you wanted to share, either about rural development or your work at the Richmond Fed that we didn’t cover? Barkin: I’ll just say that our emphasis very much is on maximum employment. When we see opportunities in small towns, we’ve got a great research team out there, we’ve got a great outreach and community development team trying to engage, and we’re very committed to continuing to stay engaged with these issues in the towns in our district. We really appreciate those people who have opened their doors to us so far, and those who will in the future.

That’s partly why I got so focused on thinking regionally rather than locally. It’s very hard to find a small town that would have

The Omni Homestead Resort, Hot Springs

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Rural Challenges and Opportunities:

Perspectives From Across the U.S. While each region of the country has its own unique issues, many rural areas across the country are dealing with similar problems when attempting to catalyze economic growth. VEDP President and CEO Stephen Moret spoke with a group of four leaders from across the country to get their perspectives on the issues that rural communities in their states face. Paul Costello is executive director of the Vermont Council on Rural Development, a member of the Housing Vermont Board of Directors, and president emeritus of Partners for Rural America (PRA).

Charlotte Davis is executive director of the Rural Maryland Council and the chair of PRA. She previously served as chief of staff for a member of the Maryland General Assembly.

Kimber Lanning is the founder and executive director of Local First Arizona. She was honored as the Citizen Leader of the Year by the International Economic Development Council in 2014.

Bill Menner is executive director of the Iowa Rural Development Council and the founder of the Bill Menner Group, a consulting firm focused on community development, rural partnerships, and economic vitality.

Harrisonburg

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RURAL CHALLENGES AND OPPORTUNITIES

Stephen Moret: How can we position our regions for growth? When you look at rural America broadly, what do you think the outlook looks like from where you sit? Paul Costello: In Vermont, we have a deeply valued rural heritage and rural landscape that’s essential to us. We’re interested in how the democratic process works town to town, region to region, where people are empowered to set priorities and look at realistic opportunities for growth that are appropriate to their place. So, a lot of economic development in Vermont is place-based, driven by local communities, and it’s all at scale. Vermont communities don’t compete for hog farms or chicken manufacturing places. We’re really all about local, indigenous, industrial and small-scale tech, and tourism, ag and wood products development, incubation, and innovation. This place-based, appropriate growth is a key theme to what each community does. Vermont is the second-oldest and most rural place in the United States. We probably also have one of the most significant challenges in retaining and attracting youth. That said, to answer your larger question about America’s rural growth, I believe strongly that there’s a tremendous opportunity for the health and well-being of rural America by embracing some of our key strengths. They are local democracy, quality of life, safety, and health. In line with that, issues around broadband, energy development, local business incubation, and strong agricultural foundations are going to remain crucial to the future. I often say we’re at a point where, together, we’re going to build a new ruralism, just as this country did a new urbanism 40 years ago. It’s a time of opportunity for a rural resurgence because rural America still retains all the services and values. Moret: Do you think the opportunity for a rural resurgence is one that would be rendered nationally? Or do you think it will be just in some places with the right particular mix of activities? Costello: I think it has to be both. No one’s coming from Washington, D.C. with the answer for rural development. They can respond to rural needs, and they can support conditions to help communities move forward. But entrepreneurial energy, community energy, attractiveness, attitude, values, inclusion, connectivity, all of these are things that communities, states, and regions need to build for themselves. They can’t sit back and wait for it. One of the things we see is communities that are flat. They don’t have a sense of direction or energy, and they’re sinking.

When towns and regions build a sense of direction and common cause, a vision and strategy, they build a trajectory that changes the atmosphere for those communities and regions. And so we see lots of people engaged in making progress, even in the face of some of the fundamental challenges we all face. Moret: Where’s the right balance in local leadership, at least ownership of a vision for communities, versus the state being more or less expected to save rural communities? Costello: Nobody’s saving anybody. Institutions and businesses are in a process of reinvention and re-creation. No one can save the past. We can protect a local country store in a small town, not by making it what it was 10 or 30 years ago, but only by looking at what its market opportunity is today. What’s the transformational moment for that particular building? What are the new things people are looking for? We need to encourage the entrepreneur who’s got a business case and needs help and support. But the state’s not going to lead that. The state provides resources and vehicles to support local and business initiative, but it’s not the inventor. Bill Menner: Iowa has 3 million people. I think the answer to the big question — is rural America going to survive or not? — is: It depends. It depends on local leadership and local capacities. You can have great leaders with good intentions, but if they’re not sure how to accomplish things, they don’t have the capacity, knowledge, or ability to write grants, there’s an inability to make things happen. The capacity-building element is where the bottom-up model could use support from the state and federal government. Our biggest challenge in Iowa is workforce. Our state unemployment rate is around 2%, so how do you get people to come and live in communities? The biggest issues we face are broadband, access to housing, access to capital, and sustaining health care services in small towns. Those are all key elements if you want to find people to work and live in your communities, raise kids, and be productive citizens. Quality of life has lots of different elements. It’s fun stuff like arts and culture, and recreation, it’s clean water, it’s safe communities. But without housing, without a good job, without a hospital or a doctor to care for you, you’re probably out of luck. Iowa has 900 small towns, and they’re very independent. Some of them think it would be best if they could return to a 1950s style of existence. Others understand that they have to look to the future and build community coalitions around that. Moret: Now, thinking from a regional perspective, the biggest challenge is health care, right? You don’t tend to have a hospital in every locality, but an entity sustained by the regional population. 23


Menner: It depends on how you define “region.” If you have to drive 60 miles to get to a doctor, you may not survive long enough to be part of a region. But there can be purposeful work as far as how a region addresses its health care needs. You can establish a clinic in a small town, recognizing that the nearest hospital is 25 miles away. A lot of what has to go into this is an intentional analysis of what the assets and needs are, not just of the community, but of the region. Kimber Lanning: Arizona is geographically the sixth-largest state, so, our communities are really isolated from one another. We have 500 square miles just in Phoenix in Maricopa County. The rural areas jokingly call it the Great State of Maricopa.

done in the last three years, but no dollars to implement any of them. What the feds are really missing is that we can’t just have planning dollars without capacity-building dollars. Menner: Right now every planning grant in Iowa has to have something to do with opioids. You can’t get a grant for anything else unless you can somehow work opioid mitigation into it.

Our big challenge is jobs. We have 22 tribes. If you go north to Navajo and Apache Counties, our unemployment rates are 17%. And we have a power processing plant that’s going to close down, so, those numbers will be on the rise.

Costello: Vermont has a good structure for planning, and we use Community Development Block Grant money for planning dollars. Some USDA, some Northern Borders Commission, which was established a few years ago to leverage dollars into rural development. But we also help communities build pipelines to capture more significant dollars for implementation from those kinds of funds. There’s never enough, but we’re seeing a lot of good traction right now in those kinds of investments.

We have a lot of mining presence, but we also have about six mines that have been closed down. We work with current mining companies to meet with communities and determine what their largest areas of need are. I feel like we’re being somewhat reactive rather than proactive. If you look at jobs created in Arizona, 86% last year were in the Phoenix area. So, for us, jobs would be No. 1, I think.

Charlotte Davis: Maryland has been focused on the economic gardening approach to business development. We put a lot of our funds into small business development accelerator programs and business competitions. We don’t want to wait for the Amazon distribution centers or the Walmart distribution centers. We tried every other approach, from prisons to casinos, and we’re still struggling.

Broadband is at the top of everyone’s list as well, and then, access to capital. We have 15 counties in our state, and eight of them don’t have a local bank that lends in the community. They have branches for behemoth banks, but those don’t actually lend back into the communities. So, lack of access to capital is really choking off our micro-enterprises.

And we see in renewable energies our potential future. Our agriculture industry is under incredible stress right now. We have a robust housing industry in Maryland, so we’re seeing a lot of intense competition for land use in a small land base state. We have a lot of conversations over how to best maximize the land we do have.

We also have an affordable housing crisis, so economic development teams are trying to attract companies completely in a silo, not recognizing that the housing crisis will prevent them from attracting any business.

Moret: From where you sit in your states, as you think about rural development, what’s the thing that your state currently does that’s most helpful? And what’s the one thing you wish they would do, or do more of ?

I think our main focus is elevating and advancing conversations around community needs that don’t include business attraction. That’s not a priority. We’re focused on entrepreneurial development. So, we work on, and our communities are asking for, more opportunities to strengthen existing local businesses. What that looks like is increasing access to capital, new technology training, and workforce development. We have a crisis around kids coming out of our rural high schools that lack the soft skills to hold a job.

Lanning: The Arizona Office of Tourism has this wonderful matching grant. If a community comes up with $2,500 they will do a matching grant, dollar for dollar. It’s been really helpful for the small towns to stretch their dollars. Tourism is huge in Arizona, as you can imagine.

I think another trend is that the feds are offering all kinds of dollars for planning, so our rural communities are planned up to their eyeballs. But they don’t have implementation know-how or dollars to implement. I’m working in a community right now that has five strategic plans for one particular region that were all

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As for what they could do more of, to me, the sleeper subject is access to capital. Our state should move some of their deposits into community banks that demonstrate their willingness to lend in rural areas. Menner: In the last nine months, the Governor created an Empower Rural Iowa Taskforce. She appointed 66 people to three different committees for broadband, housing, and leadership development. The groups came together and made some recommendations immediately. One was to create a job


Institutions and businesses are in a process of reinvention and re-creation. No one can save the past. We can protect a local country store in a small town, not by making it what it was 10 or 30 years ago, but only by looking at what its market opportunity is today.

Boydton

PAUL COSTELLO Executive Director, Vermont Council on Rural Development Cape Charles

in state government focused on rural. There was nobody who got up every day and cared only about rural communities. The Department of Economic Development found an FTE and created that job. They also got a small broadband grant program funded. Little by little, Iowa is accomplishing some projects and addressing some issues this taskforce identified. The grant program was $5 million. Illinois has a $400 million broadband grant program. So they’re willing to talk about things, but the state’s not willing to spend its money.

What I wish they would do more of is to find more funding to take significant leadership on strategic directions. Our agency — and I suspect this is true in other states — has a philosophy around commerce that all business is equal. We’re not going to attract a business that needs to connect to a particle accelerator, we’re going to attract businesses that fit into the economic ecosystems of our communities. So, that’s really looking at the current kinds of businesses, and the current kind of culture, and then how do we attract other folks like that.

Costello: In Vermont, our Agency of Commerce does a good job of providing business support and attraction. I think it’s pretty effective with workforce education and workforce development, though they’re never satisfied.

Davis: Maryland distributes a little over $6 million a year in grants to promote business development, infrastructure, community and economic development, and health care services. That generally improves the quality of life in rural areas. State departments have been directed to get out to rural areas. Traditionally, they’ve always asked constituents and interested parties to come to state agency headquarters, typically in Annapolis or Baltimore. Now they have to go out to the rural areas. I think it’s given state employees a better understanding of the differences between all of the areas in Maryland.

Tourism and marketing does a good job. We’ve got a strong outdoor recreation component that everyone’s paying attention to, so we’re seeing good growth. That’s attracting young people to very rural parts of the state, some of whom are doing online jobs from San Francisco while living in a rural community. We have a good program that coordinates with the 250 small downtowns in the state and helps them connect to resources, to tax incentives, and so forth, to support downtown businesses. Many communities are still super-challenged, but it’s good progress. We also have rural assets that people don’t talk about very much. We have a strong Department of Libraries and 220 local libraries that fulfill a variety of local functions in terms of building cultural life and a sense of community identity. We have a strong Arts Council that’s doing work statewide on creative opportunities, events, arts, and cultural activities that are all very encouraging to people in local communities to help establish identity. They bring people together in a positive way and make for stronger communities.

They’ve also done that with funding opportunities, making sure someone from a small rural county has the same chances at getting a grant, or an agreement, or a contract, as someone from a suburban or urban area. Getting out and seeing these communities in person, and getting to know and understand who the residents are, and what they’re looking for, has been really important. What I wish they would do is be a little more innovative. I think there’s a tendency to protect the status quo. When the status quo isn’t working for rural communities, it’s difficult to push the needle on. So it’s just understanding that sometimes small changes need to happen so that we can improve economic development for everybody. 25


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Staunton

The American Shakespeare Center’s Blackfriars Playhouse in Staunton is the world’s only re-creation of Shakespeare’s indoor theatre. After the show, guests can enjoy the vibrant and historic downtown district or visit one of the many awardwinning wineries in the area.

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Cape Charles, located on Virginia’s beautiful Eastern Shore, is a historic beachfront community on the Chesapeake Bay. The town continues its amazing transformation, recapturing its 1880s glory days when the railroad gave birth to the post-Victorian beauty. Cape Charles has one of the largest concentrations of late Victorian and turn-of-the-century buildings on the East Coast, and has been designated as an Historic District on the Virginia Landmarks Register and is on the National Register of Historic Places.

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Cape Charles The Bay Creek Resort and Golf Club is a prime destination located on scenic Cape Charles, the southernmost town on Virginia’s Eastern Shore. Visitors to Bay Creek enjoy a rare opportunity to golf on the water, and the nearby sandy beaches and relaxing small-town vibe make for the perfect getaway.

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FloydFest is an award-winning world music and arts festival held annually near Floyd in the Blue Ridge Mountains. The event began in 2002 and features over 100 performers across eight-plus stages. Floyd County is also the home of the famed Friday Night Jamboree, featuring world-renowned local and visiting musicians, solidifying the region’s reputation as a live music destination.

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Floyd

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America’s Rural Growth Challenge ‌and how one state has set out to tackle it

The cover design reflects the evolution of rural America over time, with agriculture, manufacturing, and technology/services each contributing to the economies of rural communities.

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AMERICA’S RURAL GROWTH CHALLENGE

The Brookings Institution recently published a troubling analysis highlighting an expanding economic divide between metro areas (especially large ones) and rural areas in the U.S., as large metro areas have enjoyed considerably faster growth than smaller metros and rural localities. Metro areas (especially big ones) have been outperforming smaller metros and rural regions Employment growth since 2008 by community type, United States 10%

Large metro

8% 6%

Medium metro

4%

Small metro

2% 0%

Micropolitan

-2%

Adjacent rural

-4%

Non-adjacent rural

-6% -8%

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: Brookings Institution analysis of Emsi data

Source: Brookings analysis of Emsi data WITH STAGNANT OR DECLINING EMPLOYMENT AND POPULATION, many rural communities across our country are

struggling with a lack of economic opportunity, outmigration of talent, hospital and school closures, dying downtowns, insufficient digital infrastructure (i.e., broadband), and an opioid crisis (see page 78), among other challenges. Economic conditions have become so difficult in some rural areas that some economists have called for the creation of incentives to encourage individuals and families to relocate to cities where good jobs often are more readily available. Virginia is taking a decidedly different approach. In the midst of the worrying national context for rural areas, Virginia has embraced a relatively radical goal — to position every region of the Commonwealth for economic growth.

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To formalize this transformational goal, VEDP now measures its success not just based on the amount of jobs and capital investment it helps secure, but also on how many of Virginia’s regions experience employment growth each year. Faced with many years of stagnant or negative growth in much of rural Virginia — economic conditions exacerbated by the decline of coal and natural gas extraction activity — rural development stakeholders in Virginia formed a “Rural Think Tank” group in 2017 to collaboratively identify, prioritize, and advocate for the top things Virginia could do (that it wasn’t already doing) to position the Commonwealth’s smaller metros and rural regions for growth. Members of the group were encouraged that each small metro area and rural region in Virginia needs just 100–300


AMERICA’S RURAL GROWTH CHALLENGE

Commonwealth for sustained employment growth. That meant (and means) that rural growth is an achievable, if difficult, goal.

broadband access is not just about economic development — it is also essential for education, healthcare, social connectivity, and agriculture, among other things.

After evaluating current and past rural development initiatives, as well as exploring what other states and communities have done, the think tank group prioritized several high-impact initiatives. Among the top priorities identified by the group are the following five initiatives. Thanks to the support of Virginia’s executive and legislative branch leaders, substantial progress is being made on each of these initiatives.

RURAL THINK TANK MEMBERS MARY RAE CARTER

Marketing Ambassador, Virginia Coalfield Economic Development Authority

CARRIE CHENERY

Principal, Valley Pike Partners

Broadband is to the 21st century what electrification was to the 20th. Rural communities need it to thrive and survive. DIDI CALDWELL Past Chair of the Site Selectors Guild

TAD DERISO

President & CEO, Mid-Atlantic Broadband Communities Corporation

EVAN FEINMAN

Executive Director, Virginia Tobacco Region Revitalization Commission/Chief Broadband Advisor

KATIE FRAZIER

Director of External Affairs, Farm Credit of the Virginias

DAVID HUDGINS

Director, Member and External Relations, Old Dominion Electric Cooperative

ERIK JOHNSTON

Director, Virginia Department of Housing & Community Development

JAY LANGSTON

Executive Director, Shenandoah

A recent report from Jobs for the Future (JFF) stated, “The nature of work in rural America is changing. In regions where broadband internet is adequate and affordable, remote employment and telecommuting are gaining momentum in industries such as IT, healthcare, and sales and marketing.” In recent years, state investments in rural broadband access in Virginia have more than quadrupled, and rural broadband deployment is accelerating. For the first time in Virginia history, state leaders are now planning to secure near-ubiquitous broadband access for rural Virginia (learn more on the article starting on page 38).

Valley Partnership NED MASSEE

President, Croatan Advisors

LIZ POVAR

Principal Officer, Middle Peninsula Alliance

KRISTIE PROCTOR

Executive Director, Center for Rural Virginia

CASS RASNICK

Deputy Secretary for Rural Economic Development, Office of the Secretary of Commerce and Trade

UBIQUITOUS BROADBAND ACCESS In Virginia, as in nearly all other states across America, there is an enormous gap between broadband access levels in urban and rural communities. In recent years, state leaders in Virginia have embraced near-ubiquitous rural broadband access as a top priority, recognizing that it is as essential to the full development of rural communities in the 21st century as electricity or telephone access was in the 20th century. Indeed,

If we want kids in rural areas to have access to the latest curriculum, and to be able to work on their homework once they leave school, we need wide access to broadband. KATHRYN DE WIT Manager of the Broadband Research Initiative at The Pew Charitable Trusts

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MARKETING RURAL VIRGINIA

EXPANDED PREPARED SITES INVENTORY

There are many more rural communities seeking quality economic development opportunities than there are good economic development projects. Indeed, according to project data collected by Site Selection, roughly 80% of localities in the country don’t secure a single greenfield economic development project each year.

In recent years, the lack of a prepared site was one of the most common reasons that rural Virginia communities missed out on high-impact advanced manufacturing and distribution projects. Billions in capital investment and many thousands of jobs were lost.

Virginia’s rural communities were doubly challenged in competing for economic development projects a few years ago, as Virginia was one of the only states in America without a marketing budget for economic development. State leaders have now embraced a goal to brand and expand national awareness of rural Virginia as the highly compelling business investment destination that it already is — one of the most attractive, competitive locations in the U.S. for manufacturing and other sectors interested in rural locations (e.g., business process outsourcing, data centers, distribution facilities, onshore IT delivery centers). With a wide array of stunning landscapes and world-class employers, as well as some of America’s best public schools and nicest small towns, rural Virginia has a strong foundation to build upon. Funding is now being provided for targeted marketing initiatives to help ensure corporate executives and top site selection consultants across the U.S. — and key markets around the world — are aware of these distinctive assets.

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State leaders are now making smart investments to characterize every identified development site in Virginia of 25 acres or larger, enabling the state and its local partners to understand the competitiveness level of each site as well as the investments needed to prepare them for quality economic development projects. Moreover, the state has begun investing to prepare these sites through both the GO Virginia initiative and the Virginia Business Ready Sites Program. See the article beginning on page 42 for more details.

WORLD-CLASS CUSTOM WORKFORCE SOLUTIONS One of the top obstacles to attracting economic development projects to smaller metros and rural regions is the concern many executives have about being able to attract a qualified, welltrained workforce in those smaller labor markets. States like Georgia and Louisiana have addressed this challenge in part by offering world-class customized workforce recruitment and training programs. Working in partnership with the Virginia Community College System (VCCS) and four-year colleges


Buggs Island Lake, Clarksville

and universities, VEDP is launching a cutting-edge, turnkey, customized workforce recruitment and training program, with a goal to be the best such program in America within 3-5 years. Learn more on page 54.

TRANSFORMATIONAL ECONOMIC DEVELOPMENT PROJECTS Recognizing the unique challenges facing smaller metros and rural communities, state executive and legislative leaders have prioritized special initiatives to secure high-impact, quality economic development projects. For example, Virginia committed $2.5 million in new higher education programs at Blue Ridge Community College and James Madison University to secure a $1 billion Merck investment in Rockingham County that will create 100 high-quality jobs. Additionally, the Commonwealth recently secured a $400 million expansion of the largest Volvo Group plant in the world in Pulaski County, which will result in 777 new advanced manufacturing jobs. Equally exciting, VEDP has collaborated with its state, regional, and local partners to launch a rural and small metro technology centers initiative that is working to attract top tech companies interested in locating domestic software development and tech services operations in lower-cost markets outside of big cities. Through this new initiative, the Commonwealth will leverage a statewide investment in computer science education of up to $1.1 billion to more than double the production of computer

science degrees — a historic investment in tech talent that was the result of Virginia’s novel (and successful) bid for the Amazon HQ2 project. Much attention has been given to Virginia Tech’s new Innovation Campus in Northern Virginia, but most of the Commonwealth’s new computer science investments will occur in other smaller communities in Virginia, such as Blacksburg (Virginia Tech), Charlottesville (University of Virginia), Harrisonburg (James Madison University), Petersburg (Virginia State University), Radford (Radford University), and Williamsburg (The College of William & Mary), enabling big increases in the tech-talent pipeline inside or nearby nearly every smaller metro and rural region of Virginia. Learn more about Virginia’s rural and small metro tech centers initiative on page 60. No state has cracked the code on addressing America’s rural growth challenge, but Virginia seeks to be one of the first to do so. Working together, state, regional, and local leaders are leveraging the Commonwealth’s distinctive strengths to position rural Virginia to buck national trends.

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Connecting the Broadband Dots Virginia is at the forefront of bringing broadband to its underserved rural areas thanks to a bold vision, legislative efforts, and collaboration at the local level.

It doesn’t matter how many major media markets a state can claim. Nor is it relevant how many Fortune 1000 companies call it home. Or the number of internet service providers (ISPs) that work within its borders. Every state has a digital divide — a tipping point most often driven by population density — that determines the haves and the have-nots. The make-or-break resource whose availability impacts everything from a populace’s education attainment to economic success? High-speed internet, the always-on connection also known as broadband. In mountainous and just plain remote terrain stretching from California to Wyoming, and Florida to Vermont, millions of businesses and residences still await the necessary infrastructure to connect online with the world. Throughout the United States, it’s not a question of whether a state lacks ubiquitous broadband, it’s a question of what they’re doing to bridge the gap and when they’ll get there. Virginia is no exception. Dubbed the Internet Capital, an unofficial honor owed to having more than 70% of all internet traffic flow through its dense 38

concentration of data centers, the Commonwealth is deploying an aggressive strategy to provide access to an estimated 660,000 Virginians. It’s a vision shared by Governor Ralph Northam, who in 2018 challenged his administration to lead the charge toward ubiquitous broadband within 10 years. It’s a big, bold goal. And it’s already working, thanks to a savvy plan of allocating grants to public-private partnerships comprising localities and ISPs, as well as the Commonwealth Connect Coalition, whose members include the Virginia Education Association, Virginia Chamber of Commerce, and major employers. With more than 70,000 homes and businesses having been connected since the program’s inception, Virginia’s leaders are optimistic about the future. This includes Evan Feinman, Virginia’s chief broadband advisor and executive director of the Tobacco Region Revitalization Commission, one of broadband’s primary funding sources. Despite all of the moving parts, pieces, and players, Feinman says they’re essentially solving a math equation. “And we think we’re ahead of projections,” he added.


This program does two things. It lowers the cost of getting high-speed internet to rural Virginians, and it opens up the competition to the entire world to serve these folks. EVAN FEINMAN Virginia’s Chief Broadband Advisor

A N AT I O N A L V I E W O F T H E D I G I TA L D I V I D E As individual states, including Virginia, work to plug the broadband accessibility gaps in their rural areas, the Federal Communications Commission (FCC) is working in a parallel path. Tasked with ensuring advanced telecommunications capability such as broadband “is being deployed to all Americans in a reasonable and timely fashion,” the agency discloses the national state of high-speed internet accessibility in its annual Broadband Deployment Report. The 2019 report shared that this gap decreased more than 18% from the end of 2016 through the end of 2017; in other words, the number of Americans without access to a fixed broadband connection meeting the FCC benchmark of 25Mbps/3Mbps decreased from 26.1 million to 21.3 million. Additionally, according to the report, “The majority of those gaining access to such connections, approximately 4.3 million, are in rural America.” Gaining this critical access is about more than having the opportunity to game online or scan social media sites for the residents and businesses in these increasingly connected remote areas.

“I’ve heard stories of families with a child who has extreme health issues where they meet remotely [online] with their doctor to assess whether their kid needs to go to the hospital,” said Sandie Terry, president of Rural Broadband Consulting. But without access to broadband, telemedicine is a distant reality in parts of rural Virginia. K-12 education and work-from-home businesses are two other areas stymied by having to connect with the outside world in the most archaic ways. Terry, whose career includes working as an IT director for a rural Virginia county and who served as vice president of the Center for Innovative Technology’s Broadband Program, now works directly with localities such as Botetourt, Grayson, and New Kent counties. But she keeps her eye on the national picture of broadband expansion/adoption, too, pointing to states, including Minnesota and Colorado, as ones to watch. Colorado, in particular, is nearing its 2020 goal for broadband ubiquity, with 86% of its rural areas now possessing high-speed internet. “Everybody is focused on the broadband gap now and working very hard,” Terry said. “I see now there is more activity

in every state than was occurring five years ago. I think we’re too early to judge who’s making the greatest progress.” CONNECTING VIRGINIA All states may have their eyes on the prize of ubiquitous broadband — and the advances that access promises. But Virginia has joined the top tier of states outpacing and out-funding the pack as it follows a trajectory for universal broadband coverage within a decade (by 2028) at speeds “significantly greater” than 10Mbps. To get there, leaders have laid out a three-pronged approach to enact its plan throughout rural Virginia. The plan’s engine, the Virginia Telecommunication Initiative (VATI) program, works by funding grants to public-private partnerships between localities and ISPs. And it’s being executed in part by Feinman and his counterpart, Courtney Dozier, chief deputy of the Virginia Department of Housing and Community Development (DHCD) and deputy broadband advisor. The pair owes their dual roles and busy schedules to the fact that Dozier’s DHCD and Feinman’s Tobacco Commission lead the public funding for Virginia Broadband through VATI, the Last Mile Broadband grant program, and other programs.

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Virginia’s broadband plan at work: M A K I N G T H E M AT H W O R K Like many massive state undertakings, Virginia’s broadband gaps — or those of any state — might best be described as a math problem. “We’re making the math work,” Feinman said. “We’re solving a fundamental economic problem. It’s an infrastructure problem.” And the numbers aren’t on Virginia’s side — or any state that’s looking to elevate access and adoption of high-speed internet access in their most sparsely populated areas. “If there was a single address covered, the whole area was considered covered according to FCC maps,” Feinman said. So, in order to dig deeper than FCC estimates and arrive at an access shortfall of around 660,000 — a number that’s still susceptible to change given the real-time nature of VATI — the Commonwealth and localities had to get a closer lay of the land and sharpen their pencils. Key to getting the lay of the land has been the deployment of a Broadband Availability Survey, which asks localities to self-report areas with, and without, high-speed access. Now, even as maps are dialed in with the most accurate information possible, there was still another math problem to solve: if only a small number of people live in a given geographic area, it’s simply not cost-effective for an ISP to build the necessary infrastructure to connect them. That’s the void filled by VATI grants, a coffer which the Virginia General Assembly funded with $19 million for the 2020 fiscal year, representing an exponentially larger sum than the previous award of $4 million. And that’s before matching funds from private entities and localities are figured in. G R O U N D B R E A K I N G L E G I S L AT I V E E F F O R T S Virginia’s geographic outliers were now accounted for, but they still needed the critical infrastructure and a plan to get them connected. One playbook emerged from an innovative spin on a smart grid modernization effort that had succeeded previously: leveraging the literal groundwork already being laid by electrical utilities to locate the needed fiber optic cable for high-speed internet. In this pilot program, laid out in state legislation by the General Assembly, Dominion, and Appalachian Power would be co-locating the cable beside their own wiring. This will bring the broadband connection as far as rural substations, known as the “middle mile,” after which third-party ISPs could then compete to bridge the gap between these substations and businesses and consumers — the final destination — known as the “last mile.” 40

“This program does two things,” Feinman explained. “It lowers the cost of getting high-speed internet to rural Virginians, and it opens up the competition to the entire world to serve these folks.” L O C A L C O L L A B O R AT I O N Skim through the newspapers of record in Virginia’s rural communities spanning from Fauquier to South Boston, and you’ll consume a steady stream of stories detailing the efforts and wins of localities applying for VATI’s public-private grants, as well as available federal grants and other funding. But quantifying the problem from the weeds of their own backyard, and then building a business case for funding, can be a tall order when you’re short on bandwidth or experience to bring your locality across the digital divide. There’s some good news: help is available. At the top is the aforementioned Commonwealth Connect Coalition, a group of public and private-sector leaders championing meaningful funding for ubiquitous broadband in Virginia through VATI. Members include the Virginia Chamber of Commerce and Virginia Education Association, as well as Amazon, Facebook, and Google. Additionally, Virginia’s Center for Innovative Technology, or CIT, provides technical assistance to the effort, which includes working with localities to develop strategic plans and find partners to meet their broadband goals. The coalition’s website — commonwealthconnect.virginia.gov — provides a number of online resources to empower local leaders to chart a course toward high-speed internet access in their localities. A robust virtual toolkit was deployed this past July, and it includes a step-by-step guide for leaders in pursuit of broadband to follow, FAQs, and sample RFPs from Virginia localities seeking ISPs to fill broadband gaps. Broadband ubiquity isn’t solely a top-down model. Local economic developers dotted across Virginia’s rural landscape also have plenty of motivation to make their areas more attractive for prospective companies. This includes Ken McFadyen, Director of Economic Development for Botetourt County, where they initiated a broadband gap analysis in 2017. “We truly identified a need in the county,” he said. In real-world terms, that need translates to such critical areas as telemedicine and education. What followed was a broadband summit including Brookings Institution representation, as well as an effort to work more closely with local incumbent ISPs and telephone companies.


“We’re taking this very aggressively and starting to show some results,” McFadyen said. “It has been a major effort on our end to address broadband.” This includes working with ISP Lumos Networks Corp. to begin the expansion to unserved rural areas, which officials ballpark at 30% of locations throughout the county. Funding for the effort comes from VATI, matching funds from a local electric cooperative subsidiary (many of which are playing a major role in increasing broadband connections throughout Virginia), and the FCC’s Connect America Fund. Key to this effort has also been partnering with Sandie Terry, the broadband consultant who credits local leaders with taking the initiative in bringing broadband to his county instead of waiting for it to arrive — a consistent characteristic of localities and their leaders who are ahead of the curve in getting connected. And she cautions that the effort doesn’t end with bringing broadband right to someone’s front door — it just begins then. “As I tell these communities, it’s not just about providing access. There needs to be a holistic approach,” she said. “The barriers to adoption are household income, age, and education attainment. There needs to be a concerted effort with the rollout of broadband to get beyond those barriers.”

Goal: Universal Broadband Access Within 10 Years (2028) Shortfall when Virginia Telecommunication Initiative (VATI) began: 660,000 Virginians brought online since VATI launch: 70,000+ (as of July 2019)

Broadband Speed Guide Activity

Minimum Download Speed (Mbps)

General Usage General browsing and email

1

VoIP calls

> 0.5

SPEEDING AHEAD What’s been a long-distance race to get rural Virginia’s internet up to speed is developing into a relative sprint.

Student

5–25

Telecommuting

5–25

As mentioned, Virginia has already brought 71,000 homes and businesses to the right side of the digital divide since this latest sweeping broadband effort. But what’s maybe even more impressive is the speed and cost-effective manner in which the Commonwealth is flipping the switch.

Social media

Right now, when they compare how much the FCC is spending to connect homes over the next decade, Feinman and Dozier estimate Virginia is doing it four times as fast and six times more cost-effectively. “That puts us in the top tier of states — the top five or six,” Feinman said.

File downloading

10 1

Watching Video Streaming standard definition video

3–4

Streaming high definition (HD) video

5–8

Video Conferencing Standard personal video call

1

HD video teleconferencing

6

Source: FCC Broadband Speed Guide

41


The Business of Creating Business-Ready Sites

Mid-Atlantic Advanced Manufacturing Center, Greensville County

Virginia looks to increase the availability of development-ready sites with a twopronged approach of characterization and development, working to bring businessready sites online with greater speed and transparency than ever before.

THE FUTURE OF SITE SELECTION IS BOTH A SPRINT AND A MARATHON.

Virginia has embraced this dichotomy, simultaneously dialing up the speed at which it brings sites online and creating a turnkey process for certifying sites as business ready that’s built for the long haul. The genesis for this undertaking occurred when Virginia’s economic developers at the state and local level saw that, here and there, would-be project wins were instead unexpected misses. They were losing out to sites in other states that were bigger, available faster, and already classified as business ready. For the Commonwealth’s leaders, being out of sites meant being out of mind for companies and site selection consultants. And that was unacceptable. In turn, Virginia rallied a cross-functional team of state agencies, utilities, and a host of other stakeholders to launch the Virginia Business Ready Sites Program (VBRSP), an in-progress, all-hands-on-deck effort, including site characterization and site development phases. Now, with the program well underway, and with additional funding in place, the Commonwealth has an inside track to get business-ready sites online and in front of site selection decision-makers. 42


T H E B U S I N E S S O F C R E AT I N G B U S I N E S S - R E A D Y S I T E S

For most of the projects we’re working on today, shovel-ready sites are truly becoming a screening factor. We’re requesting information from states and localities with shovel-ready sites only. MICHELLE COMERFORD Project Director and Industrial and Supply Chain Practice Leader, Biggins Lacy Shapiro & Co.

WH AT I S BU S I NE SS R E A DY ? “Our clients are really looking at sites and asking, ‘Is it ready?’” said Brad Migdal, senior managing director at Cushman & Wakefield.

This can apply to utilities, where — for example — she would much rather pore over an aerial or even interactive map to see what exactly lies between an electric line and a site than simply read in a static report that they’re one mile apart.

While the caveat of “it depends on the project” always applies, Biggins Lacy Shapiro & Co.’s Michelle Comerford says that in order to make it on her radar, a site needs to be prepared.

This is the output of VBRSP: not just ramping up Virginia’s availability of business-ready sites, but also evolving Virginia’s online site database to the peak of credibility and accessibility. Then, decision-makers and influencers can access more prepared sites and scan key features virtually, performing initial vetting remotely before deciding to visit Virginia for a boots-onthe-ground tour.

“For most of the projects we’re working on today, shovel-ready sites are truly becoming a screening factor,” said Comerford, a project director and industrial and supply chain practice leader with 16 years of site consulting experience. “We’re requesting information from states and localities with shovel-ready sites only.” Today, companies want to be up and running in 18–24 months from the word “go.” And that’s in a tight real estate environment when companies are willing to look farther afoot from population centers, Migdal said.

DIG G IN G IN TO V BRSP Virginia’s General Assembly established the VBRSP in 2015. It was a collaborative effort, boasting representation from state, regional, and local stakeholders, including VEDP, the Virginia Department of Environmental Quality (DEQ), railroads, utilities, civil engineers, and other government, business, and industry organizations.

“I’ve been in economic development for over 20 years, and I can tell you that the timeline from when a company starts talking to a state or locality, to when they want to make a decision has shrunk dramatically,” echoed Michael Burnette, director of economic development for Franklin County.

The objective is twofold: enhancing the Commonwealth’s infrastructure, while promoting Virginia’s competitive business environment.

Part of being a business-ready site means that consultants such as Comerford and Migdal can glean any of more than 100 data fields at a glance to see if a site merits further consideration.

The program includes two primary workflows. Site characterization is designed to assess and designate a site’s current level of development, while site development is intended to further develop a pool of potential sites across the Commonwealth that are well prepared and positioned for development.

“The availability of information is key to our business,” Migdal explained. “The bigger challenge we run into is determining how good the information is.” Comerford points out that not all data points can be defined in a cut-and-dried fashion. “There’s a lot of gray area,” she said.

When a site reaches Tier 4 or Tier 5 status (tier levels are an indication of site preparedness), it’s considered “business ready.” This designation means that a motivated company can often move in within 12 months of making a site commitment.

43


Virginia’s Certified and Characterized Sites 77

VEDP recently characterized substantially all identified development sites of 25 acres and above across Virginia, as well as assessed their

79

strategic fit for several target industry sectors. Virginia likely now has the best site intelligence of any state in the country, and will be prepared to proceed with a more substantial site development program. The map shows all characterized and business-ready certified sites in Virginia. 64

West Virginia

220

B e c k l ey

220

R o a n o ke

460

77

19

23 19

Wi s e

Wy t h ev i l l e

81

58

26 Johnson City

221

58

M ar t i n s v i l l e

74

Wi n s to n - S al e m Kn ox v i l l e

40 44

220

77

B r i s to l

Tennessee

46

B l a c k s b u rg

Kentucky

G re e n s b o ro


B al t i m o re

Maryland Wi n c h e s t e r

7 L e e s b u rg

Was h i n g to n , D. C .

66

Delaware

Alexandria

95

211

81

33

Culpeper

17 Fre d e r i c k s b u rg

H a r r i s o n b u rg

250 301 S t au n to n

17

C h ar l o t t e s v i l l e

360

29

64

15

33

L e x i n g to n

64

13

81

17

Richmond

60

60

288

Far m v i l l e

Ly n c h b u rg

360

460

Pe t e r s b u rg

Wi l l i a m s b u rg

460

501

95

64

85

360

460

Norfolk

29 S o u t h B o s to n

V i rg i n i a Beach

58 South Hill

Danville

Emporia

501

North Carolina

Certified Sites* 60 Sites

85

Additional Sites in Development 430+ Sites Durham

Raleigh

Total Site Acreage 100 and below 100 to 499 500 and above

*includes sites with at least one of the following qualifications: VEDP's Business Ready Sites Program Certified (Tier 4 & 5), AEP Qualified Data Center Site, Dominion Certified Data Center Site, TVA Data Center Site, CSX Certified Megasite, CSX Select Site, AEP Quality Site, AEP Food Processing Site, Ady-Austin Food Processing Site

45


Virginia has made tremendous progress in site data collection efforts

466

T O TA L S I T E S

103

LOCALITIES Southern Virginia Megasite at Berry Hill, Pittsylvania County

130,000+

A C R E S E VA L U AT E D

1,000+

PROJECT CONTRIBUTORS

Size Category

Number of Sites

25-50

Local and regional economic developers, property owners, utility providers, project engineers, and VEDP staff

103

50-100

114

100-250

121

250-500

65

500+

Commonwealth Crossing Business Centre, Henry County

63

Percentage of Sites with Accurate Data

96% 92%

46

L O C A L I T Y I N F O R M AT I O N W AT E R & S E W E R C A PA C ITY

94%

E L E C T R I C A L D ATA

80%

N AT U R A L G A S D ATA

Wildwood Commerce Park, Carroll County


T H E B U S I N E S S O F C R E AT I N G B U S I N E S S - R E A D Y S I T E S

The VBRSP goes to great lengths to define its “business ready” classification, even seeking the input of third-party site consultants to ensure it’s beyond reproach. While VBRSP enables companies and consultants to make faster, more informed decisions, there’s also a big payoff for those at the other end of the under-construction database: knowledge. Economic developers are more aware than ever which characteristics the most sought-after sites possess — and how their sites measure up. “A big thing we do at the local level is help prep these sites for companies to move in as quickly as possible,” said Burnette, whose county of 55,000-plus residents has a manufacturing focus. “The more we can get done prior to them getting interested saves companies months and months of time.” PUTTING GOALS WITHIN SIGHT Leveraging new funding from the General Assembly, a major bulk site characterization effort is wrapping up. This sites effort is unique among peer states in its breadth, depth, and ambition. Through the end of July 2019, Virginia, working with third-party engineering firms, has characterized more than 460 identified development sites of 25 acres or more in 103 localities. The ultimate goal of this initial assessment work is to increase the number of project-ready sites. Assessment is the first step in determining what’s needed for each site to reach a businessready status. Virginia currently has designated more than 60 certified sites, a number that will increase in coming years as a result of these efforts. Once the assessments are complete, there is more work remaining to determine the costs and model funding structure to bring strategic sites to Tier 4 and 5 levels and certifying them as business ready. Funding partners for targeted investments intended to bring sites from one readiness tier to the next may include a number of entities, such as the

Virginia Department of Transportation, GO Virginia, and utility companies. The objective is to drive holistic, coordinated investment rather than embracing a piecemeal financing approach. One of these certified business-ready sites is in Burnette’s Franklin County. The Summit View Business Park, spanning 550 acres, has already netted two top-flight enterprises since achieving its critical Tier 4 business-ready certification: ValleyStar Credit Union (a multi-state administrative operation) and Stik-Pak Solutions, which together represent nearly $20 million in capital investment. Meanwhile, in Botetourt County, which has experienced a 10% spike in job growth over the past three years, two sites have already been characterized. Director of Economic Development Kenneth McFadyen now looks at some of the states that touted leading site characterization and site development programs and sees Virginia narrowing the gap. “We’re gaining ground,” he said. “We’re getting into a much better spot.” Of course, as Virginia makes gains, others are also racing to optimize and showcase prepared sites. “We’re definitely seeing a lot more states, regional groups, and utilities recognizing the need to have sites that are prepared for investment,” Comerford noted. While she hears from some economic developers, especially those in rural communities, that they don’t always have the funds to invest in sites upfront, she advocates helping decision-makers connect the dots rather than failing to address steps needed for development. “The more you can do to save time for a prospective company to get up and running faster, the better,” Comerford said. For example, if you don’t have permits in place but boast a fast permitting process, demonstrate it. Or if a planned effort to extend a water and sewer line hasn’t yet been undertaken, share the

needed steps. “If you have a plan and the documentation, show that; do anything you can do to reduce that speed to development.” As the team, which included more than 1,000 stakeholders and contributors assisting with the initial characterization effort, deploys and assesses data collected from these initial assessments, they’ll also be watching how site selectors compare potential destinations within the state and, ultimately, across different states, as they’ll have more data to act on. “We may think we understand how competitive we are with other localities,” shared McFadyen. “But until we can see it quantified, and see the thorough analysis VEDP is doing, we can’t be sure.” After all, Migdal says, available data is always good — especially when a site is good to go. But you can’t lose sight of the fact that it’s simply another piece of input to help a company solve its unique site selection math: aligning the human capital with real estate and cost. “This information is never going to replace the need for economic developers,” Comerford added. “It’s just helping us be a little more efficient. We’ll never be able to make final decisions off of this data, but it’s an opportunity to get on our radar and show you’re qualified.” Migdal sees the growing accessibility of site data as another input in site selection math. “We help companies figure that big equation out,” he said. “Every company has an optimal position they can be in from a cost perspective.” If Virginia continues doing its homework right, that math adds up to more companies selecting the Commonwealth.

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Smithfield 48


The Lighthouse at Smithfield Station is ideal for travelers seeking a one-of-a-kind lodging experience, and is the only lighthouse on the East Coast where you can stay overnight. Smithfield’s prime location on the water has made it a popular destination for tourists since its founding in 1752.

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Established in 1820, Sperryville is a charming farm town nestled in the foothills of the Blue Ridge Mountains, just below the Panorama entrance to Skyline Drive. Visitors and residents alike enjoy the town’s cozy restaurants, country inns, and monthly bluegrass “pickin” parties.

50


Sperryville

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Securing Southern Virginia’s Future A Conversation with Ben Davenport

Ben Davenport has been a champion for economic development in rural Virginia for decades. Davenport is chairman of First Piedmont Corporation as well as Davenport Energy. He is vice chairman of the board of GO Virginia and serves on the boards of Mid-Atlantic Broadband Communities Corp., the Virginia Chamber of Commerce, and the Institute for Advanced Learning and Research.

Virginia Economic Review: What drew you to get so involved in championing rural economic development? Ben Davenport: Around 2000, we began to see a real sea change in manufacturing. The textile industry, the apparel industry, the woodworking industry, the tobacco industry were all being hit hard. It was ironic, but it was fortunate right at that time that the tobacco industry was being attacked by the attorneys general across the United States. And, so, tobacco companies raised the white flag and said, “We’d like to reach an out-of-court decision or settlement with you guys.” And, so, out of that the tobacco companies did a big settlement, with a large amount guaranteed to be paid over the next 25 years. 52

The General Assembly of Virginia adopted legislation which allocated how the money from the settlement would be spent. Tobacco was primarily raised in Southside and Southwest Virginia, which coincidentally was the area that had been hardest hit with the exodus of manufacturing plants and jobs. A major part of the settlement was directed to help reinvent these economies. A group of business people joined together in our city/county to form a group called the Future of the Piedmont (FOP). We hired a group from Chapel Hill by the name of MDC, Inc. to help us craft a master plan on how to rebuild our economy. The report was named “Learning, Working, Winning.” The group is still active today, meeting monthly.


A C O N V E R S AT I O N W I T H B E N D AV E N P O RT

Regionalism has worked for us. Pittsylvania County and Danville have worked hand in hand to move our region forward. Perhaps some of our success helped to incentivize the thinking behind the legislation that produced GO Virginia, where regionalism is promoted and rewarded by grants from the Commonwealth fund administered by the GO Virginia Board. Regional thinking, especially in rural areas, is critical. Along the same time, we sold our hospital to create a $200+ million Danville Regional Foundation. That foundation has invested over $100 million in our region since 2006 and today is valued at over at more than the original $200M. The investments have focused on the critical elements of rebuilding our region’s economy. VER: What do you see as the biggest challenges facing rural areas generally? As you could look across Virginia maybe to some extent across the country, what do see as the economic challenges holding back rural areas? Davenport: The biggest challenge and the biggest opportunity is an educated workforce. We have been focused on building a highly educated, credentialed workforce that is appealing to advanced manufacturing. The worker today has got to be very, very capable in math skills and ability to do computational work. In our area, we’ve probably done as good a job as has been done in America on creating a trained worker in machining and metallurgy, in particular that now we’re attracting companies from the U.K. and Europe to come to the Danville area to set up satellite operations. Right now, we have a lot of young people in the pipeline getting this advanced training. We look forward to matching these newly trained graduates to the new jobs being created. VER: One of the things we think about is this series of structural changes or actions that you all took. Can you just talk a little bit about some of the outcomes that have come from those actions? Davenport: When we developed our original playbook, we highlighted three things. One of them was to create an icon, which would be like a beacon of what the future of the region would be. Out of that was birthed the Institute of Advanced Learning and Research (IALR), which continues to be one of those “wow” factors of the area. The second thing that we highlighted in the very beginning was the lack of fiber. In the late 1990s, we aggressively tried to attract a satellite location of AOL to locate in our area. When they had a look at us they said, “We’re very sorry, but you don’t qualify. You don’t have adequate fiber.” We convinced the Tobacco Commission that this was a critical investment that needed to be made. Out of that came the establishment of Mid-Atlantic Broadband Communities Corporation, which

has been an enormous success story of a regional fiber optic network that spans 26 counties and cities. Microsoft’s largest cloud center came to our area and would not have come had it not been for that fiber. We hooked this fiber optic system into every one of our industrial parks. The third thing was we were concerned about was the quality of instruction that our educators were giving. We set up a program and paid for every public school teacher to go to a summer program at Virginia Tech to be ramped up in their skills of whatever their curriculum was. There’s been a rebirth of downtown Danville. There are a lot of people living in the area of the old Tobacco District. New restaurants are sprouting up and the quality of life is constantly improving. We are extremely proud of this dramatic change where old buildings are being brought back to life. VER: What partnerships have been most important to you in getting these projects off the ground? Davenport: Virginia Tech. They were the ones who allowed us to validate what we were doing by having their name associated with everything we did.  Their research component has been, and still is, a part of what we lean on for leadership and validation. In so many ways, they helped us understand what we didn’t know. Also the partnership between Danville Community College and the IALR. Many things that have been accomplished would not have been without this partnership. VER: What do you see as the industry sector, or sectors, that have the greatest potential, that sort of drive future growth in rural Virginia? Davenport: I like to think that we’ll be very focused on our training. I think that there’s some things that’ll come along like with Microsoft now putting a development center in South Boston. Right now, the Southern Virginia Higher Education Center is trying to cater to the software needs and the educational needs that are required to credential people to work in that area. With cybersecurity, and the fact that we’re far enough away from Washington, there’s going to be an appeal to have more satellite locations. In Henry County, there is major growth and development in the film industry and other businesses that are complemented with the Patrick Henry Community College training programs. In my dream, I would say that 10 years from now, there’ll be at least 50 companies that will have manufacturing divisions that deal with the machining industry and the aerospace industry that require highly skilled labor. It takes that highly trained worker, which is what we can provide. 53


Sumitomo Drive Technologies, Chesapeake

54


WORKFORCE DEVELOPMENT LEADERS

Virginia Looks to Workforce Development Leaders on Its Way to the Top Virginia Talent Accelerator Program Delivers Custom Workforce Solutions to Companies How does a company find and train the skilled employees that will ultimately determine whether it succeeds or fails? How much does it change location decisions if the company has to create that workforce itself through investments in training — or if it can have a ready workforce delivered by a team of instructional design and facility start-up experts on Day One? As it turns out, recruitment and training support is vital to winning competitive site location searches. Evidence indicates that state-supported custom workforce training programs are a powerful way to fill skilled job positions, particularly in rural areas. In Georgia, for example, the Quick Start workforce development program has been a key factor in securing major new corporate investment, such as SK Battery America’s $1.7 billion investment in a lithium ion battery plant in rural Commerce. Workforce development programs can help mitigate a major cost on corporate balance sheets. The 2018 Training Industry Report from Training magazine found that large companies spent an average of $19.7 million on training in 2018, while the smallest companies spent $355,731 on average. The growing labor shortage amplifies the need for a full-service approach to recruiting and training. Manufacturing, for example, is projected to have 2.4 million jobs unfilled over the next 10 years, per research from Deloitte and The Manufacturing Institute. In these

industries, companies must create the skilled talent that is critical to stemming these shortages. Creation of a custom workforce incentive program has been repeatedly identified as one of the top priority initiatives of rural development leaders in Virginia. Now the Commonwealth is acting. VEDP has announced its launch of a new worldclass customized workforce training incentive to complement the Virginia Job Investment Program (VJIP) training grant. LEA RN IN G FROM OTH ER STATES’ EFFORTS VEDP is launching a custom workforce development program that will accelerate new facility and expansion ramp-ups by shortening the new-hire learning curve. The program will completely customize recruitment and training programs to support companies’ unique processes, equipment, procedures, and culture. It’s easy to see the appeal to companies considering Virginia for new facilities. The program will be fully customized for each individual company, providing recruitment and customized training down to the position level at no cost to participating companies. The assurance that companies will have access to a quality trained workforce can remove talent acquisition and development from potential concerns about an area. The success of service-based custom workforce programs in other states provides excellent case studies. Georgia launched Quick Start, the oldest program of its kind in the U.S., in 1967 based on the idea that custom training can help companies more quickly ramp up to production. “Quick Start realized that the most efficient solution to workforce training was also the most cost-effective: provide direct workforce training for new employees in full-time jobs,” notes Jackie Rohosky, deputy commissioner for Georgia Quick Start. To date, Quick Start has provided training for more than 1 million employees across 6,500 projects. Louisiana launched LED FastStart in 2008 and set out to raise the bar on what a best-in-class workforce program should look like. To date, the program has trained more than 26,000 workers for expanding employers across the state, including rural successes like ConAgra Foods Lamb Weston’s processing facility in tiny Delhi in the state’s northeast corner. LED FastStart has been listed as the gold standard in workforce training by Business Facilities magazine every year since 2010.

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Area Development: Leading Workforce Development Programs (2019)

Business Facilities: Workforce Training Leaders (2019)

#5 #3

#5 #3

#4

#1

#2 1 GEORGIA

#2

#4

1 LOUISIANA

2 SOUTH CAROLINA

2 ALABAMA

3 LOUISIANA

3 TENNESSEE

4 ALABAMA

4 GEORGIA

5 NORTH CAROLINA

5 VIRGINIA

MAKING STRONG INVESTMENTS FOR GREAT RETURNS Despite these programs’ track records of success, getting one into the top tier of programs is no easy feat. During his 20-plus year career, Jeff Lynn has supported custom workforce development as director of regional project operations for Quick Start, executive director of FastStart, and now as vice chancellor of workforce and economic development efforts for the Alabama Community College System. Lynn has a unique perspective into the challenges facing other states in developing a customized training program. “Typically, it ties to leadership, innovation, the ability to listen to clients, and over-delivery of sustainable results that impact the companies’ ROI,” Lynn says. State-driven workforce development training is most effective when it anticipates the needs of those companies seeking support and presents an array of flexible solutions. But it also comes down to understanding the true cost of the investment and budgeting accordingly. As Rohosky points out, these training programs only spend resources when full-time jobs are created, so there is no loss of resources diverted to administering grants, helping the state’s bottom line. “The impact of that job creation can be measured in many various ways, such as tax revenues and the multiplier effect of circulating payroll dollars,” she adds. Well-considered partnerships can also help a program scale quickly. With funding in place, VEDP is now working closely to develop a training plan with its partner, the Virginia

56

#1

Community College System (VCCS). Over the last two years, VEDP and VCCS leaders have collaborated to create a shared vision for their custom workforce training program. “This collaboration is such an exciting opportunity for our colleges,” says VCCS Chancellor Glenn DuBois. “Our institutions were created to address Virginia’s unmet needs in higher education and workforce training, and we’re always looking for new ways to fulfill our mission. This program will allow us to be part of important projects right from the beginning and build lasting relationships to ensure businesses get the trained and skilled employees they need to succeed.” ACCELERATING SUCCESS WITH CUSTOM SOLUTIONS “Custom workforce recruitment and training incentive programs typically serve as halo-like programs for their states,” VEDP President and CEO Stephen Moret points out. This customized support proves a particular draw in attracting companies to rural areas that have a smaller labor force than bigger metros. Lynn explains the process like this: “Many companies in rural areas have a limited team, and you must embed you and your team into their unique company situation. Once you understand the needs of the company, you look at all the scenarios that you have to recruit and train people that live in that community.” In rural areas, it becomes more critical to use appropriate marketing techniques for attracting talent that, for example, may have to make a longer commute for employment. “Digital media is critical, but you need to use the right platform to reach your intended audience,” Lynn adds.


Stihl, Virginia Beach

Novozymes, Salem

The key, however, is to customize the training regardless of location based on unique processes, equipment, shift setup, and other criteria of a company. “Sometimes I would need to bring in an expert on a new process or piece of equipment that that rural company did not have to support the start-up and develop the standard operating procedures, then provide train-the-trainer programs for the team leaders or supervisors,” Lynn shares. OFFERING MORE OPTIONS FOR TRAINING SUPPORT Virginia has carefully watched the success of training leaders and aims to build upon this foundation. What makes VEDP sure of its success is the fact that the Virginia Talent Accelerator Program is a second option alongside the already successful VJIP. The VJIP grant remains an option for companies that want to execute their own workforce recruitment and training efforts. In addition, VEDP has tapped Mike Grundmann, a 20-year veteran of Georgia’s top-ranked Quick Start program, as its senior vice president for talent solutions. In Georgia, Grundmann developed more than 100 custom workforce solutions for a range of leading companies. Grundmann is eager to hit the ground running. “It’s early, but we have started presenting the program to companies who are looking for support in anticipation that some of them will be ready to start hiring around the end of the year or the beginning of 2020,” he says. “We’ll be ready.”

Given historically tight labor markets across the country, companies making strategic location decisions must ask themselves which states and communities can mitigate hiring risk and help them ramp up operations as quickly as possible, whether that’s 10, 100, or 1,000 workers. CHRIS SCHWINDEN Senior Vice President, Site Selection Group

57


58


Closing the Skills Gap A Conversation with Seth Martindale

Seth Martindale is a senior managing director with CBRE Consulting. He has extensive experience in real estate strategic planning, working with both private and public sector clients. Martindale has extensive experience working on multiple location analysis and incentive negotiation engagements, which have varied widely in size, function, and scope. They include everything from corporate HQ relocations to manufacturing plants. Virginia Economic Review: When you look specifically at manufacturing, what do you see as major trends and how they’re going to play out over the next few years? Seth Martindale: It’s a cliché answer, but everything’s about talent. Whether or not you can supply the talent needed to make your manufacturing plant or distribution center run is critically important. I think with manufacturing, it’s even more so, because if you’re going to sink a quarter-billion or a billion dollars into some place and then you can’t find people to work there, that’s a big mistake. You can’t just pick up and move it somewhere else. I think attention to talent and being able to hire the people you need has been critically important for us to review. VER: When you look across the country, are there any states that come to mind which you think do a good job helping to close that manufacturing skills gap? Martindale: There are quite a few. You could probably take the Southeast generally and say they’ve had a really good run at it. A lot of manufacturing is pushing that way. Tennessee comes to mind. They’ve made a lot of investments in their education programs at the college and lower levels. I think that’s starting to pay off and they have a good story to tell. Some of it’s around the investment you’re making. Some of it’s around the story you’re telling. If you’ve got them both lined up, it works out pretty well for potential manufacturers or industrial employers. VER: One of the big trends we’ve seen in U.S. economic development over the last several years is the relative underperformance of rural areas and small metro areas versus mid-sized and larger metros, particularly with respect to employment growth or decline. What do you think is driving that under-performance, and what do you think states, regions,

and localities can do to better support growth in smaller metros and predominantly rural regions? Martindale: I’ve seen a lot of success stories where a state and a local community have said, “OK, we’re going to make a concerted effort to train people in this particular skillset that’s going to serve a particular requirement.” Whether it’s plumber, electrician, carpenter, welder, whatever it may be, the states that have not only the ability to fund that, but the ability to convince a potential employer they can make it happen is something that’s really required to win that kind of project. I say the convincing part is so important because, as a manufacturer or industrial employer, you have to take a little bit of risk and you have to go in with the state or the community and say, “OK, we’re going to put this capital in and try to hire these people.” There’s a little scariness to doing that. You don’t know if it’s going to work out. Being convinced that it can work out is, I think, pretty important. VER: One of our hypotheses or beliefs is that if we can create one of the best, world-class customized workforce recruitment and training programs in the country, particularly with a focus on manufacturing, it could allow us to have some success in geographies that are a little bit smaller. Does that resonate? Martindale: For sure. Again, if the companies know you can train the talent they’ll need and they’re willing to go in together with you on it, that’s the recipe for success. There’s something special about going into a rural place and being able to revitalize that town. I’ve seen it happen. I’ve seen people who didn’t have jobs all of a sudden have these $22–$24-an-hour jobs. That really changes a community. It’s nice to be able to say you’re partially responsible for that.

59


A New Frontier for Tech Talent

Companies find tech talent in the mountains and valleys of Virginia BIG CITIES HAVE LONG BEEN SYNONYMOUS WITH ECONOMIC OPPORTUNITY. BUT WHAT IF THAT’S NOT

companies to capture and retain this talent in areas where costs are lower than more densely populated urban locations.

UNIVERSALLY TRUE? What if good opportunities also can be

found in rural areas or smaller cities, where the cost of living and doing business is much lower? MIT economist David Autor caused a stir by daring to ask these questions at a recent meeting of the American Economic Association. But his supposition was no surprise to the many tech companies that call Virginia’s rural areas home. “We just believe that there are pockets in rural America that allow for scalability and sustainability, and don’t have some of the detractors that urban environments have,” says Brendan Walsh, senior vice president of partner relations for IT consulting firm 1901 Group. In large cities, he says, there’s a lot more job-hopping and competition for tech talent. In the college town of Blacksburg, 1901 Group is able to easily recruit and retain top employees. To encourage other technology firms to make the move, VEDP launched the Rural and Small Metro Tech Centers Initiative in 2019. This program aims to bring 8,600 tech-related jobs to the Commonwealth’s rural areas and small metros by 2029 by highlighting and facilitating attractive environments that will support attraction of tech companies. Rather than look overseas for this talent, more companies and leading site consultants that advise them are discovering they can save money and increase efficiencies by onshoring. “It is not so wild a dream that we can create digital literacy and tech talent hot spots in rural communities that will generate higherpaying jobs and attract businesses seeking lower costs,” notes Dean Barber, principal of Barber Business Advisors. Computer science graduates continue to stream out of the Commonwealth’s well-regarded colleges and universities. Virginia has the second-highest concentration of tech workers and the sixth-largest net tech employment in the country, according to Cyberstates 2019, and data from Cyberseek shows that the Commonwealth has the largest cybersecurity workforce on the East Coast. VEDP’s initiative aims to enable tech 60

The initiative aligns with a larger push at the state level to scale up tech talent across Virginia. Another initiative, the Tech Talent Investment Program, focuses on increasing that talent base. Virginia has committed $1 billion to more than double the annual number of graduates in computer science with bachelor’s and master’s degrees in computer science and related fields. The initiative will ultimately result in 25,000 to 35,000 additional graduates over the next two decades in excess of current levels. As part of the Rural and Small Metro Tech Centers Initiative, VEDP staff use a data-driven process to match companies and communities, with the first phase focused on onshore delivery centers. First, they weigh various criteria to identify the sectors that make sense for Virginia’s rural and small metropolitan areas. Then they identify companies within those sectors that might consider an investment in Virginia, as well as community-specific criteria that could entice them to make a move. At that point, they identify Virginia communities that fit those criteria before developing company-specific proposals that include specific incentives to offset employers’ real estate, operational, and recruitment costs. The initiative will be rolled out in phases. Future phases, which will start in late 2019, will focus on different subsectors or project archetypes in the tech space (e.g., IT government contracting offices and software product companies). The initial target areas — Southwest Virginia, the New River Valley, and the Shenandoah Valley — have three key traits in common. One, they all offer access to a highly educated workforce, with local public, four-year higher education institutions producing computer science graduates. Two, they share a low cost of doing business, with median salaries for tech occupations approximately 25% below the U.S. average, according to Emsi. And three, their low cost of living, cultural assets, and natural beauty make them attractive places to live.


Rural and Small Metro Tech Centers Initiative Phase One Communities

Target Virginia Locations Have Far Lower Average Tech Wages Than Large U.S. Metros Location

Median Annual Earnings, Tech Occupations, $1

Southwest Virginia (UVA-Wise)-VA

68,848

New River Valley (RU & VT)-VA

67,246

Shenandoah Valley (JMU)-VA

67,517

United States Average

90,393

Atlanta-Sandy Springs-Alpharetta, GA

91,170

Dallas-Fort Worth-Arlington, TX

93,118

Boulder, CO

97,467

Boston-Cambridge-Newton, MA-NH

101,002

New York-Newark-Jersey City, NY-NJ-PA

103,422

Washington-Arlington-Alexandria, DC-VA-MD-WV

108,739

Seattle-Tacoma-Bellevue, WA

115,525

San Francisco-Oakland-Berkeley, CA

121,105

Computer and Information Systems Managers, Computer and Information Analysts, Software Developers and Programmers, Database and Systems Administrators and Network Architects, Computer Support Specialists, Miscellaneous Computer Occupations

Housing Costs % lower than national average Big Stone Gap Micropolitan Area

67.3%

Blacksburg MSA

29.9%

Harrisonburg MSA

13.8%

Source: Zillow Home Value Index (8/18 – 7/19)

Annual Tech Graduates Region

Annual graduates from tech programs2

New River Valley

768

Shenandoah Valley

636

Southwest Virginia

537

Post-secondary tech-program graduates from educational institutions within a 50 mile radius

1

2

Source: Emsi, 2019.3

Source: IPEDS, 2017

61


University of Virginia’s College at Wise

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A NEW FRONTIER FOR TECH TALENT

Southwest Virginia:

Reliably connected

Years ago, Southwest Virginia was known mainly for its coalfields. Today, it has an extensive fiber optic broadband network that offers reliable connectivity with built-in redundancies. The University of Virginia’s College at Wise offers the state’s only bachelor’s degree in software engineering. Mountain Empire and Southwest Virginia community colleges train students in cybersecurity, mobile app, and software development. This combination of connectivity and access to talent has drawn major IT companies to Virginia’s southwest. One often-overlooked asset for the area is its protected location in the Appalachian Mountains, which makes natural disasters like hurricanes and earthquakes — and the attendant downtime and loss of productivity — much less of a concern. Examples include SAIC, a technology integrator working with defense, space, federal civilian, and intelligence agencies; Northrop Grumman, an aerospace and defense technology company; CGI, an IT consulting firm; and the Mineral Gap Data Center, a Tier III data center. CGI opened its Information Technology Center of Excellence in the town of Lebanon as part of a nationwide onshoring strategy, says Kirk Lortz, director of consulting for CGI. The company selected Russell County for three reasons, he says: its proximity to commercial and public-sector clients; its access to a large, qualified talent pool from local universities, colleges, and technical institutes; and the strong business incentives and collaboration among government, industrial and economic development agencies, academia, and local businesses. “A community like Lebanon also allows us to recruit employees to an area that — unlike many urban tech centers — offers a lower cost of living, affordable housing, an easy commute, and other important quality-of-life upsides,” Lortz says. “These and other factors help CGI attract and retain a skilled workforce to the community, including local residents who want to live and work in their hometown.” The center, a full-service software development and systems integration facility, employs more than 350 people.

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A NEW FRONTIER FOR TECH TALENT

New River Valley: A community of innovators

1901 Group CEO and founder Sonu Singh had a vision. Some 13 years ago, Singh began thinking about what the second Industrial Revolution would look like in IT; in other words, how an assembly-line philosophy might apply to enterprise IT services. “The origin of our company, the essence of our firm, is about automation, is about streamlining, is about continual improvement,” Brendan Walsh, senior vice president of partner relations for 1901 Group explains. To run a company where such continual improvement would be possible, Singh needed a place that would satisfy a three-part equation: “access to talent, high quality of life, and low cost of operations,” said Walsh. Singh found it in Blacksburg, home of his alma mater, Virginia Tech. In addition to Virginia Tech, the New River Valley serves as home to Radford University and New River Community College. These institutions contribute a steady pipeline of talent for innovative area companies. The region offers magnificent mountains, eclectic small-town vibes, arts and culture, and a business-friendly, academically enriched environment. Rich in outdoor activities and breathtaking views, residents of the region enjoy a high quality of life at a reasonable cost. A decade after its founding, 1901 Group provides IT infrastructure monitoring and management, application migration to the cloud, and cybersecurity services for major clients, including federal agencies. While headquartered in Northern Virginia, it employs 200 people in Blacksburg, with plans to hire up to 580 people there over the next four years. The company recently broke ground on a 45,000-square-foot Enterprise IT Operations Center. It joins nearly 200 other tech- and research-related companies in the Virginia Tech Corporate Research Center, collectively employing more than 3,000 people. Another is Block.one, a Hong Kong-based provider of high-performance blockchain solutions. Blacksburg is one of Block.one’s key global locations and has provided the company with a rich source of talent in software development, product management, information technology, and other areas. The company has built a close relationship with Virginia Tech, donating $3 million to the Department of Computer Science to help students build blockchain skills. Block.one’s co-founder and CTO, Dan Larimer, is a regular guest lecturer who advises the university on the emerging blockchain-focused curricula. Larimer is a Virginia Tech alumnus, too. “It isn’t a hard sell at all to get people who grew up or went to school in this area to come back,” says Alec Siegel, managing partner of Blacksburg recruiting firm Siegel Link. He ticks off the advantages: affordable houses, fantastic schools, outdoor recreation, the energy from Virginia Tech and Radford University, and access to developable sites in charming downtowns in communities like Radford and Pulaski. It’s easy to keep great people, too, Walsh says. “If you develop and grow the talent, if you invest in your people and develop that skillset, you want them to stay with you and stay in that area. It’s common-sense management.” Radford University

64


Virginia Tech

65


A NEW FRONTIER FOR TECH TALENT

Shenandoah Valley: A home, not a “stepping stone”

Chiedo John didn’t wait for a diploma. He founded his web app development company in 2012, when he was still an undergraduate at JMU. In the seven years since, he’s built Chiedo Labs to an innovative, thriving, web development company with a diverse array of clients. And he never thought about moving. “I love the quality of life and the people,” he says. “Harrisonburg is a beautiful place to live, with an amazing community.” While some tech entrepreneurs might balk at setting up in a less established market, Chiedo embraced the opportunity and committed to get local graduates into the area workforce. His solution: an intense program for computer science students that identifies the best candidates and prepares them for entry-level roles. Last year, Chiedo offered seven students paid internships. They had a strong computer science foundation, but not the specific skills and experience needed to do web application development. So, Chiedo gave each student three months to work through some real-life exercises and be mentored by a member of his team. “We ended up hiring four of them for junior developer positions when they finished the internship, and they’ve been contributing members of our team,” he says. The resources offered by Shenandoah Valley colleges and universities are a major attraction for tech employers. James Madison University is Virginia’s fourthlargest issuer of undergraduate computer science degrees, graduating more than 200 CS students this year. A GO Virginia state grant allowed the cities of Harrisonburg and Waynesboro to partner with Blue Ridge Community College to develop a cybersecurity training program which is working to train dozens of cybersecurity analysts by July 2020. These tech education programs enable companies to tap into high-quality talent while reducing salary costs. One of the aims of the rural tech initiative is to provide more employment opportunities in the area to allow for talent to remain after graduation. That talent is abundant with eight colleges and universities in the region. Harrisonburg and the Shenandoah Valley have another significant asset: location. The city sits within Rockingham County, home of the Innovation Village @ Rockingham, a planned community designed to combine research and office facilities with living space and outdoor amenities. The Valley is also a paradise for outdoors enthusiasts, with ski resorts (Massanutten and Bryce) and two vast recreation areas (Shenandoah National Park and the George Washington and Jefferson National Forests). Yet it’s just two hours from Greater Washington, D.C., an easy trip for companies doing business with companies located in that major tech cluster. “My experience has been that more people see Harrisonburg as a home rather than a stepping stone,” Chiedo says — just as he does.

66


James Madison University

67


Lexington is a college town rich with history, charm, and natural wonders. Home to Virginia Military Institute and Washington and Lee University, and surrounded by the breathtaking beauty of the Shenandoah Valley, its bustling downtown offers unique restaurants, artisan shops, and galleries. Outdoor enthusiasts can enjoy mountain vistas on a walk along the Woods Creek trail or on a drive along the Blue Ridge Parkway. History buffs can follow the Civil War and visit the final resting places of Robert E. Lee and Stonewall Jackson.

68


Lexington

69


Ashland

70


A turn-of-the-century railroad town, Ashland was originally developed by the RF&P Railroad as a resort for Richmonders. Today the railroad tracks still send trains rumbling through the center of town, past Randolph-Macon College, lovely historic homes, shops, and unique eateries.

71


Urbanna

72


Located off the Chesapeake Bay on the Rappahannock River, Urbanna is best known as the home of Virginia’s official oyster festival.

73


Virginia’s Rural Storyteller Beth Macy is a three-time New York Times-bestselling author. She is the author of “Factory Man,” “Truevine,” and “Dopesick,” books that tell separate stories, but all stories through which the challenges, issues, prospects, and hopes of rural America are studied in different ways. Macy was a reporter for The Roanoke Times from 1989 to 2014. VEDP President and CEO Stephen Moret recently visited with Macy in Roanoke to discuss her work and unique perspective on issues facing rural America. 74

Stephen Moret: Beth, you have a unique perspective, having written books that talked about some of the challenges facing rural Virginia, which are largely the same issues faced in the rest of rural America. Tell us about your background and what drew you to telling these difficult stories. Beth Macy: I’m from a little town in Ohio called Urbana. Not very urban, despite the name of it. I was the first person in my family to go to college. I went fully on financial aid; we were so poor, I got money left over at the end to buy my books with. Moret: Where did you go? Macy: I went to Bowling Green State University for undergrad. That, more than anything, changed my life. I have more than paid back those grants and scholarships, times a hundred. And it’s shown me just how hard it is for people to get out of poverty. I’ve always had a heart for outsiders and underdogs because I was definitely an outsider, I was definitely an underdog. I consider myself that last generation able as a poor kid to go to college and have it be totally paid for — mostly with


government grants, but I worked three jobs, too. So I just have always written from the point of view that we don’t all start out at the same place, and when we’re generous, when we help others come along behind us, we all prosper and profit. Moret: How early did you know that you wanted to be a writer? Macy: I loved English class in high school. But I had a paper route, the only little girl that had a paper route in my little town. And I used to go around and spend a lot of time collecting. So, think about all the skills you learn as a reporter and a writer and a negotiator, just going out, talking to strangers. Pulling out of them their stories. Everybody has a story if you dig deep enough. Many were lonely older people, so I learned to talk to all kinds of people. I also learned that people weren’t exactly as they presented. Moret: As economic development practitioners, we’re drawn in particular to the book you published in 2014, “Factory Man,” which takes a look at the effects of globalization on the furniture industry in rural Virginia through the lens of Bassett Furniture and related companies. One of the things I think is really special about this book is that the story told, while it is unique to Bassett and that particular community, has many themes that relate to rural development and the challenges of shifts in manufacturing as a whole over similar periods of time. The concept of a factory town,

especially in the South, how one employer influenced that town. So many small towns have been dominated by a single major employer and source of jobs. We saw that in Virginia with the furniture and textile industries which were once huge creators, now quite small compared to what they used to be. I think about Danville and those big hulking facilities that are still there, hoping to perhaps one day be revitalized with new industry. What do you think the future looks like for small towns like those places in Southern Virginia? Macy: It’s pretty shocking when you just go back a few decades. They used to say Martinsville had the highest per capita number of millionaires in America. I mean, it was Virginia’s economic powerhouse ­— it was our factory floor, if you will. People used to say you could quit your job that morning and get another job by noon. One person told me they had three jobs in one day. One person said, “What we need is some unemployment around here.” And when I set out to write about what was happening in Martinsville, I didn’t have a big agenda. I was still writing for The Roanoke Times. All I knew was that Martinsville had had the highest unemployment rate in the state for at least 12 years, and I wanted to see what that looked like. Nobody had ever tallied up all the losses. Just every time a factory closed they’d say, “Stanley Furniture is going out, that’s going to put...” The last story was 600 and some people were going to lose their jobs. Nobody said, “That’s on the heels of…” and added them all up. 75


A C O N V E R S AT I O N W I T H B E T H M A C Y

Roanoke-based Beth Macy has published three New York Times best sellers

And not just those jobs, but also where the people spent their money. That means the mom-and-pop diners, all the furniture stores, the little places where people spent their money went out of business, too. When you added them up, on the ground that looked like — I got this from the Martinsville-Henry County economic development data cruncher — 50% of the jobs had gone away. Among those people who were still working, most of them had to drive outside of the county for work. So, my job when I first went down there was to answer this question: What happens when half of your jobs go away? What does that look like on the ground? So I went to a food pantry where people would line up two hours before the doors opened. Disability rates had gone up 64.1% just since China joined the WTO in ’01, just in Martinsville. Food stamps had tripled. It was shocking. And as I was finishing up the reporting on that, the police were saying, “Drug crime is through the roof.” People committing crimes were desperate and unemployed. But many of them were committing crimes because of their fear of being dopesick. I didn’t really get the connection between opioid use disorder and what I was reporting until much later. By 2015, Case and Deaton, those Nobel-winning economists, dropped their bombshell study showing that for the first time in America, life expectancy was going down. Moret: One of the things you explore in “Factory Man” is how low-cost Asian imports caught the furniture industry off guard. You go into some of the impacts those imports have on industry, workers, and the towns they called home. What stood out to you as you started digging into those issues, and the impact that that sort of trade situation had on places like Martinsville? Macy: So many things stood out. I first set out just to describe what it looked like, the aftermath story. When I was doing 76

some early reporting, I interviewed a friend of mine just on background. “Tell me everything you know about the furniture industry.” Of course, he described how the textile plants started closing in the ’90s and going to Mexico and Central America in the wake of NAFTA. And then the WTO in ’01. And how the furniture factories went next after that. What was interesting about “Factory Man,” and I found this in that first interview, was my friend said, “Well, you know, there’s somebody that didn’t close their factory.” Everybody else did this thing, John Bassett III did something else. And not only that, he was successful. He sued China in a court of international trade to keep his factory going. Wasn’t exactly a lawsuit, but he petitioned the government to investigate whether the Chinese were cheating, not abiding by the WTO rules that they said they would. He found out that they were, in fact, cheating. He basically went against members of his family back at Bassett Furniture. Members of the industry, a lot of people were already so invested at that point in off-shoring, they didn’t want him to succeed because they would have to pay higher duties for the imported goods coming in. And he’s saying, “But what about these families here? What about those families that made our family rich? Don’t we owe them something?” Moret: So you can think of that as a case study for, at least partially, the unintended effects of trade. Now we have trade more front and center in the political debate than it’s been in a long time. Can you describe the core thing they were doing with respect to cheating? Macy: They were dumping. There are many definitions. But the main one is selling a product for less than you paid for the goods to make the product.


I have always written from the point of view that we don’t all start out at the same place, and when we’re generous, when we help others come along behind us, we all prosper and profit. BETH MACY

Moret: Are there any lessons you think we can take from that for what might be happening now, or what could happen in the near future? Macy: As I was writing the prologue of the book, the line came to me that nobody was minding the backroom of this new global store. The WTO was supposed to, but it cost millions of dollars for an industry, like the bedroom furniture industry in this case, to hire lawyers to make sure that they investigate this charge of illegal dumping. We have to have a system in place. Because by the time a factory realizes they’re competing against people who are cheating, that are literally breaking the law they signed onto, they’re already in a bad financial spot. Only somebody like John Bassett, with a huge chip on his shoulder because of the way he had been treated in his family and his industry, would have the chutzpah and money to prove his case. By the way, he was born a millionaire. Moret: Your latest book, “Dopesick,” takes a look at the opioid epidemic in America, which as you noted earlier is quite a correlation with many of these towns that have had dislocation of their major employers due to trade and automation. It’s particularly acute in rural America, where often traded goods are over-indexed in those communities, where a single sector or even a single employer is the major driver. Can you talk about what you found in writing and researching “Dopesick,” and what impacts you may be seeing in folks’ ability to enter and stay in the workforce? Also, could you expand on where you see this going? It seems like America’s only now starting to wrap its head around the scope of the problem. I haven’t followed as closely as you have, but it doesn’t seem to me that it’s started getting better yet. Macy: The number is still through the roof, with 2.6 million Americans addicted. One in five people who have a heroin or

opioid addiction have access to what science says are the best treatments, which are buprenorphine or methadone. I call it MAT in the book for medication-assisted treatment. There’s still a real scarcity of that, especially in rural communities where overdose death rates can be as much as 65% higher than the national average and in urban areas. There are a lot of reasons for that. The first reason it’s worse in rural areas is because it’s been happening longer there. Pharmaceutical companies literally targeted rural areas because they bought data that showed them which doctors were prescribing competing opioids. They knew that Dr. John Smith in Martinsville or in Galax or in St. Charles, Virginia, was already prescribing a lot. There were legitimate workplace injuries because of the factories and tough jobs, mining and what not. So they went to those doctors and, using false data, they claimed that their new drug, Oxycontin, was safer than the competing opioids. “You should prescribe this.” They also funded trade groups — they call them astroturfing groups — to say these drugs are safer, too. They flipped the narrative that we had known for 100 years, that opioids were addictive and only to be used in end of life, cancer, and very severe pain post-surgery. So now, “Opioids are safe to use for moderate back pain, bronchitis pain, sore throat, TMJ.” I mean, anything went. They purposefully targeted rural areas because the data showed that’s where the biggest need was. And the army of sales reps they hired was incentivized to get doctors to prescribe everhigher doses. They got bigger bonuses the higher the dose. Then you flip all that on top of the job losses and areas that tend to be more conservative and where treatment isn’t readily available. 77


More than 70,000 Americans died from a drug overdose in 2017. Rise in Drug Overdose Deaths in U.S. 2003

Overdose deaths per 100,000 0

10

20

30

2017

Source: National Center for Health Statistics, National Vital Statistics System, mortality data United States, 1994–2017

3 Waves of the Rise of Opioid Overdose Deaths 10 Other Synthetic Opioids

Deaths per 100,000 population

9 8 7 6

Commonly Prescribed Opioids

5

Heroin

4 3 2

Wave 1

Wave 2

Wave 3

Rise in Prescription Opioid Overdose Deaths

Rise in Heroin Overdose Deaths

Rise in Synthetic Opioid Overdose Deaths

Source: National Vital Statistics System Mortality File 78

201 7

201 6

201 5

2 01 4

201 3

201 2

201 1

2 01 0

200 9

2008

2007

20 06

20 05

20 04

2003

200 2

2 001

20 00

0

199 9

1

40


A C O N V E R S AT I O N W I T H B E T H M A C Y

And you add that cultural element. “We’re from Appalachia, we’re country people, we’re tough, we should be able to kick this on our own.” It’s just a nightmare in these communities. Moret: What do you think is the answer, and where’s action needed the most? Macy: That’s a good question. When I finished the book, I didn’t want to write about this ever again. It was so depressing. In the year since, I’ve been reporting on solutions. I have a piece coming out in The Atlantic this fall about a kick-ass rural treatment provider from Appalachia who is now working in a small town. She’s figured out that the main place where people die is this fundamental dissonance between treating the addicted person as a person worthy of medical care, and treating them as a moral failure or a criminal. In a rural county so small in Indiana that they didn’t have money to fund a drug court, she talked the judges in her courts into allowing her to set up a treatment center in the courthouse. That forced the probation, the law enforcement, and the judges to talk to the social workers and treatment providers. The people have to have jobs; they help them get jobs. They have to have Medicaid. I don’t think this would work in a non-Medicaid expansion state, so, yay, Virginia! And they have to pass all these drug tests, four times a week, random, so they never know when they’re going to show up. For the first time, they’re breaking the cycle of people getting out of jail, having a dirty drug screen, going back to jail. I think it’s something that could be replicated in small towns everywhere. Drug courts are great. We have 3,300 drug courts in America, but they’re mostly in urban areas. A lot of rural areas can’t even afford a drug court. Moret: Wow. So there may be some hope in front of us. Macy: There may be some hope. Moret: Stepping back for a second, the theme of this issue of Virginia Economic Review is all about the great American rural growth challenge and how Virginia hopes to be the first state in the country that positions each of its regions for growth. Maybe not the same level of growth, but for sustained growth. We certainly have a number of great things happening in Virginia with broadband investment, site development, workforce training. A lot of different issues are being tackled. Based on what you’ve seen and reported in your books, I’d be curious if you have any thoughts about what the state and/or localities and regions could do to help achieve that goal of positioning rural Virginia, and some ways rural America, for growth?

Macy: I think we have got to get our arms around this opioid crisis. A Pew Center Survey said most Americans think it’s the number one drug addiction issue facing America. We need some leadership on this issue. Where I see successes happening are on the ground. They’re these rural innovators who are taking this issue on for a variety of reasons. I just interviewed, down in Mount Airy, N.C., a retired DEA agent, Marine Corps sergeant, and law enforcement officer. He came out of retirement to head the opioid response in Surry County, which has the highest rate of overdose in North Carolina. Now, this is Mayberry, literally, the town where Mayberry of “The Andy Griffith Show” was based. He’s saying nobody’s collaborating. The hospital doesn’t know what the jail’s doing, doesn’t know what the town council’s doing. Little efforts are being made, but none of it is being curated from above. He was hired to do that. That’s a really cool example of somebody that law enforcement respects, because he’s one of them, really figuring out a way to get people to work together. I think if we had more leadership on the state and regional levels, these things would be more likely to come about. Moret: So, essentially, more effective addiction treatment would help lead us to a place where you have more people who are really able to be productively employed, and that would be a big contribution. Macy: That would be huge. It would be huge. Moret: There’s a miniseries coming up with Tom Hanks. Can you talk about that at all? Macy: I can talk a little bit about it. It was originally going to be an HBO four-hour limited series, like the company did with “Olive Kitteridge.” It’s now with a film production company. Still, Tom Hanks is attached and wants to play John Bassett, because who wouldn’t? The screenwriter is very well-regarded, a Pulitzer winner. He wrote “Doubt” and “Moonstruck” and his name’s John Patrick Shanley. It’s still in development, they’ve hired a director, and I’m still pretty hopeful about it. Moret: We can’t wait to see it. I think the combination of your wonderful story with one of America’s favorite actors is going to be really special. It’s a wonderful story, we’re so grateful that you made time to be with us today. We’re hoping to pull off perhaps for Virginia what John Bassett pulled off for his company. Macy: That’d be awesome.

79


Bristol

The Birthplace of Country Music, downtown Bristol hosts one of the premier music festivals in the Southeast, Bristol Rhythm and Roots Reunion, each September. The annual three-day festival features more than 150 artists and draws in excess of 50,000 music lovers.

80


The state line between Virginia and Tennessee runs down Main Street in Bristol, uniquely dividing the city between two states. Steeped in history, the city of Bristol bridges the gap between new and old with a bustling downtown and Bristol Motor Speedway, or the “World’s Fastest Half Mile.”

81


South Boston 82


The 650-acre Berry Hill Resort & Conference Center is nestled amongst a tree-lined forest in the heart of historic South Boston. This former antebellum plantation estate and National Historic Landmark welcomed its first guests to the beautiful Virginia countryside in 1728. Those in search of more urban activities will find the South Boston Speedway, “America’s Hometown Track,” and the town’s charming downtown district just miles away.

83


Rappahannock Oyster Co., Middlesex County

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C O N N E C T I N G V I R G I N I A A G R I C U LT U R E T O I N T E R N A T I O N A L M A R K E T S

Connecting Virginia Agriculture to International Markets With State Support, Virginia’s Rural Growers Navigate Overseas Demands BRANTLEY IVEY, general manager of River

Ridge Land and Cattle Co. and managing partner of Landcrafted Food, recalls overhearing a farmer comment at the Virginia Governor’s Conference on Agricultural Trade: “If you’re not selling everywhere you can domestically, don’t consider exporting.” But as Ivey shares, “We’ve found that to not be the case.” At that same conference, Ivey acknowledges, he laughed when presented with the idea that Landcrafted Food consider exporting. After all, it was a small Grayson County company with a simple mission: to return more dollars to local farmers. The farmers supporting the joint venture were focused on traditional animal husbandry and processing. Exporting seemed like an outlandish idea at a glance. Yet representatives with the Virginia Department of Agriculture and Consumer Services (VDACS) made a convincing case. “Virginia’s total agriculture and forestry product exports in 2018 were $2.97 billion,” shared Stephanie Agee, director of marketing and development at VDACS. “It’s a major part of our economy.” VDACS is dedicated to opening markets and supporting companies in their export endeavors. And so Landcrafted Food found itself part of a team exhibiting at Gulfood in Dubai in 2018. The Virginia company was already distributing beef sticks made up of its 100% grass-fed,

antibiotic-free, hormone-free beef across 35 states. It took samples of those brands to Dubai, along with a Carne Diem halalcertified product. “Quite frankly, it was the best show we’ve ever attended,” Ivey said. At that event, the company realized that the vast network of resources available to rural growers made an export business not only possible, but potentially lucrative. “If you’ve got a product that’s shippable, marketable, and is wanted by the consumer, you can find a way to get it there,” said Ivey. “We felt like our product would be a good fit overseas given that it’s not a saturated market.” STRATEGIES TO MEET OVERSEAS DEMAND Exports have a significant impact on Virginia’s agricultural and forestry industries. A 2017 report from the University of Virginia’s Weldon Cooper Center for Public Service put the total impact of agriculture and forestryrelated industry exports at roughly $9 billion. One in nine Virginia farm jobs depends upon international exports. With the state’s strong international support and infrastructure, even small rural farmers and foresters are discovering healthy worldwide demand for their products. In fact, like Landcrafted Food, Rappahannock Oyster Co. finds that demand is often high because Virginia growers offer healthy products.

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C O N N E C T I N G V I R G I N I A A G R I C U LT U R E T O I N T E R N A T I O N A L M A R K E T S

If you’ve got a product that’s shippable, marketable, and is wanted by the consumer, you can find a way to get it there. We felt like our product would be a good fit overseas given that it’s not a saturated market. BRANTLEY IVEY Managing Partner, Landcrafted Food

After decades of working to revive the Chesapeake Bay oyster population, the Topping-based company has found that many overseas companies are interested in their bivalves due to a unique growing method that produces a cleaner oyster. In 2004, the oyster harvester began shipping oysters from waterways near Topping to New York City restaurants. Today, the company looks a bit farther abroad. It exports oysters to China, Hong Kong, Colombia, the United Arab Emirates (UAE), and Canada. “Growing our international sales is a critical part of our strategy to expand our business and develop not only the Rappahannock brand, but the Chesapeake Bay oyster brand as well,” commented owner Travis Croxton. For Montague Farms in Center Cross, a town with a population of just over 1,200, exports are the business. The Essex County soybean grower incorporated in 1976 and sent its first shipment of non-GMO food-grade soybeans abroad in 1987. Tom Taliaferro, business manager for Montague Farms, recalls that it was the horrific economic conditions facing farmers in the late 1980s that pushed his father and uncles to explore valueadded opportunities for their products. A VDACS trade representative in Tokyo called their attention to a Japanese breakfast food called natto. “That market was looking for a small soybean with some special characteristics in terms of texture, color, and flavor,” 86

Taliaferro explained. The farmers worked with Virginia Tech researchers to breed the desired bean and have since built their business on meeting demand in a range of Southeast Asian markets. In the early years, the farm worked closely with state representatives who could identify markets and help with outbound and inbound trade missions. “They helped a small family business like ours reach other parts of the world where we really wouldn’t have any background knowledge,” Taliaferro said. Today the company exports 100% of its products. CONNECTING GROWERS WITH BUYERS In general, Agee explains, VDACS supports rural exporters in multiple ways. The department works closely with representative offices around the world to scour overseas markets for strong fits with Virginia exports and supports growers in overseas activities. VDACS also brings Virginia brands to international trade shows and brings buyers to Virginia to show them firsthand how the supply chain works. It was the latter technique that caught the attention of James Latham PLC, one of the U.K.’s oldest and largest wood importers and distributors. In 2015, the company was invited to tour Virginia hardwood operations run by Blue Ridge Lumber, Turman Lumber, Virginia-Carolina Forest Products, and W.R. Deacon & Sons Timber. “Without VDACS’ U.K.-based representatives reaching out to Lathams, I doubt we would have found these lumber companies on our own,” Latham’s

director James White commented in a news release. That mission, which cemented sales with all four rural lumber companies, helped Virginia’s agriculture and forestry exports to the U.K. reach a new high in 2015 of $133 million, of which about $110 million were wood products exports. Through his attendance at Gulfood, Ivey discovered another important resource. An introduction to distributor McLean Global launched a partnership that simplifies the export process for Landcrafted Food. “Until we have done it enough that we’re comfortable with sending our own loads across the ocean, it just made sense for us to partner with a company that already knows how to do it and has a sales staff that goes with it,” said Ivey. In 2018, Landcrafted Food signed a twoyear deal to give McLean Global time to help them grow their customer base in the UAE. That launch has gone better than projected, and today the team is planning its introduction into Malaysia. NAVIGATING MARKET DYNAMICS Taliaferro emphasized the value of the state’s inbound trade and outbound trade missions. “You never know when the dynamics of the market are going to change.” While media reports on the turbulence of international markets may seem unsettling to growers considering


an export business, the truth is that markets may shift but don’t necessarily disappear. Take China as a case in point. With recent tariffs levied on China, the country has slipped from the leading market for Virginia’s soybeans. But the numbers indicate a twist to the story. As Agee explained, “Our soybean exports to China decreased by 80%, yet our overall soybean exports increased.” Taliaferro elaborated, “The Chinese market has not gone away, and there are only a certain number of places that can supply the Chinese market. It’s essentially become a round robin of soybean supply.” With Eastern Bloc and South American soybeans now headed toward China, Taliaferro has found himself fielding calls to supply deficits in those regions. Agee gives credit to Virginia’s grain and soybean merchandisers. “The companies that merchandise these products are really good at figuring it out and finding the market. Last year most were able to pivot and find other markets to send the soybeans that previously were going to China.” With the support of experienced merchandisers, exporters can feel confident that their product will have a market.

Virginia Agricultural and Forestry Product Exports (2018) Rank

Destination

World

Amount ($)

Change 17-18 (%)

2,953,687,870

12.35

1

Canada

342,319,498

4.79

2

China

234,779,328

-59.81

3

Switzerland

209,639,471

0.55

4

Netherlands

132,334,925

599.14

5

Italy

119,631,917

612.24

6

Taiwan

115,069,226

5.79

7

Mexico

111,407,761

-3.21

8

Morocco

102,884,914

79.94

9

Vietnam

89,810,203

40.81

10

Indonesia

86,088,458

128.56

Source: Global Trade Atlas, August 2019

THE VALUE OF DIVERSIFICATION For Taliaferro, the recent market changes are one more reminder of the importance of consistently seeking new opportunity. “Moderation and risk mediation are good for everybody. Having different markets, different ways to make money on the farm in case there’s a downturn in one area, is really the key factor in longevity.” Today, rural growers are more connected to the world than ever before. With the sprawling network of support that Virginia offers, the international market is ripe for the picking.

Montague Farms, Essex County

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Economic Development Partners in Virginia VEDP works in close partnership with local and regional economic development organizations. For a full list of local and regional partners, visit www.vedp.org/regions In addition, VEDP regularly works with a wide network of statewide partners, including: State Leadership Partners

Project Delivery Partners

Governor

Center for Innovative Technology

General Assembly

Policy and Programmatic Partners Virginia Department of Housing and Community Development

Major Employment and Investment (MEI) Commission

Colleges and universities across the Commonwealth (e.g., UVA, Virginia Tech, William & Mary)

Secretary of Commerce and Trade

CSX, Norfolk Southern, and short-line railroads

Virginia Department of Small Business and Supplier Diversity

Secretary of Finance

Dominion, AEP, and other electric utilities

Virginia Department of Taxation

The Port of Virginia

Virginia Department of Transportation

Virginia Community College System Virginia Department of Agriculture and Consumer Services

GO Virginia

Virginia Department of Rail and Public Transit

State Council of Higher Education for Virginia

Virginia Chamber of Commerce, as well as many local and regional chambers of commerce

Virginia Agribusiness Council

Virginia Economic Developers Association

Virginia Association of Counties

Virginia Farm Bureau

Virginia Business Council Virginia Business Higher Education Council Virginia Cable Telecommunications Association, Manufacturers Association, Virginia Maritime Association, Virginia Realtors Association, and many other trade associations

Virginia Tobacco Region Revitalization Commission Virginia Tourism Corporation

Virginia Department of Environmental Quality

Virginia Municipal League Virginia Planning District Commissions Virginia Rural Center

220

Virginia’s Technology Councils

64

220

Roanoke Region New River Valley

460

23

58

Southwest Virginia

19

220

19

81

221

I81-I77 Crossroads 77 58

88

460


E C O N O M I C D E V E LO P M E N T PA RT N E R S I N V I R G I N I A

Northern Shenandoah Valley

7

Washington, D.C.

66 81

Northern Virginia

211 33

17

Shenandoah Valley

250

Greater Fredericksburg

Central Virginia

301

95 81

Northern Neck

33

64

29

17

15

360

Eastern Shore

Middle Peninsula 13

Greater Richmond Lynchburg Region

60 288

360

64

295

Greater Williamsburg

460

Virginia’s Gateway Region

460

29

501

South Central 360 Virginia

Southern Virginia

85

58

17

460

95

Hampton Roads

168

501

89


*by 2023

90

Profile for vedpvirginia

Virginia Economic Review: Third Quarter 2019  

The current issue of Virginia Economic Review explores the various dimensions of America’s rural growth challenge and features thought leade...

Virginia Economic Review: Third Quarter 2019  

The current issue of Virginia Economic Review explores the various dimensions of America’s rural growth challenge and features thought leade...