Category Archives: Regulation

Bob McDonnell’s Big Decision

 smith_mountain_lake2By Peter Galuszka

It was a gubernatorial quandary only Virginia could have .

In the summer of 2011, former Gov. Robert F. McDonnell was ready to take a few days off. He and his family had been going to Smith Mountain Lake, a popular destination near Roanoke with lots of golf courses and seven-figure lakeside homes.

At his corruption trial this week, McDonnell testified that his summer getaway had been bankrolled by Delta Star, a company with a big factory in Lynchburg that makes portable industrial electrical gear. The firm had put him up at one of their lakefront houses for $2,474 in 2010, according the VPAP, which runs a data base about this kind of thing.

Summer 2011 had proved a big problem, however. His wife, Maureen, had become fast friends with Jonnie R. Williams a rich Goochland County businessman. Williams had given Ms. McDonnell a $50,000 check and also paid $15,000 for her daughter’s wedding luncheon that June. She had traveled with Williams helping promote Anatabloc, Williams dietary supplement that has since been pulled off the market by the U.S. Food and Drug Administration.

The problem was — whose million-dollar-plus house would the McDonnells use? Williams very much wanted the McDonnells to stay at his sprawling domicile on the tip of a peninsula. Delta Star wanted the McDonnells to stay at their place.

What to do? They split it. The McDonnells stayed at Williams’ house for a getaway valued at $2,268 value according to VPAP. He also laid on a Ferrari that the governor could enjoy driving on the way home.

Delta Star made sure the family was entertained and fed. They provided the family with their very own boat to cruise the lake and catered meals – a $1,892 value for a long weekend.

Delta Star’s feelings didn’t seem to be hurt since they laid on another entertainment gift worth $10,182 in 2012.

And while we’re talking lakeside homes, guess who else also stayed at Williams’ place? Former Atty. Gen. Kenneth Cuccinelli, that’s who – to the tune of $3,000 in 2011. We haven’t heard much recently from the former firebrand, hard right politician but he is on the witness list.

And so it goes. And, by the way, getting vacation favors is very common. Check out former Gov. Tim Kaine’s expensive sojourn on the turquoise blue waters of the Caribbean Sea.

It’s not the only way Virginia’s extremely lax ethics laws work.

If you use your PAC, you have an automatic teller machine. For instance, Tim Hugo of Fairfax, the third-ranking Republican in Virginia’s House of Delegates, expensed nearly $30,000 for travel and food and $9,400 for his cellphone over an 18-month period. As a spokeswoman for the State Board of Elections told The Washington Post’s Laura Vozzella in 2013, “If they wanted to use the money to send their kids to college, they could probably do that.”

Innovative Virginia

Innovative State, 2014, by Aneesh Chopra; used with permission of the publisher, Grove/Atlantic, Inc.

Innovative State, 2014, by Aneesh Chopra; used with permission of the publisher, Grove/Atlantic, Inc.

In his new book, “Innovative State: How New Technologies Can Transform Government,” Aneesh Chopra makes the case for using technology to transform government in the United States. Weary of the old liberal-conservative debate of more government/less government, Chopra espouses effective government. In this book, he comes across as conservative in his frank acknowledgment that government often falls short in the execution of its goals. But the former Virginia Secretary of Technology and former Chief Technology Office for the Obama administration remains steadfastly liberal in his conviction that government can be a force for good.

While I hew to the view that less is more when it comes to government, I concede that certain core functions in American society are best provided by government. I believe that what government chooses to do, it should do well. And, like Chopra, I believe that technology can play a major role in improving government performance. That’s why I’m excited to make available to readers of Bacon’s Rebellion Chapter 3 of his book, which describes his experience as Secretary of Technology during the Kaine administration. I expect that readers will be impressed by Chopra’s approach as a pragmatic problem solver and encouraged how often, away from the spotlight, Virginia politicians are willing to cooperate on a non-partisan basis to get things done.

After resigning his job as CTO for the federal government (you’ll have to buy the book to find out what he did in that post), Chopra made an unsuccessful bid for the Democratic Party nomination as Lieutenant Governor. But he remains active in Virginia, as co-founder of Hunch Analytics, based in Rosslyn, which applies Big Data and Predictive Analytics to solve problems in education, energy and health care, and working behind the scenes with Governor Terry McAuliffe on workforce development and veterans affairs. I expect we’ll be hearing more from Chopra who, at 42, has a long career ahead of him. — JAB

Chopra

Aneesh Chopra

Chapter 3
The Virginia Model

Back in 1999, the Virginia legislature was seeking to make someone accountable for nurturing entirely new industries throughout the state, while making sure the government’s internal use of information technology was effective and efficient. Virginia became the first state in the nation to create a cabinet position for a Secretary of Technology. Three men would fill that role over the next six years, and their work over that time contributed to Governing magazine’s 2005 selection of Virginia as the “Best Managed State.”

In 2006, Tim Kaine, the successor to outgoing Governor Mark Warner, chose me to the the fourth Secretary of Technology. He had a different spin on the position, one in tune with the times. By 2006, the Internet had transformed the way consumers accessed information and conducted commerce. yet, though it had improved some services such as e-filing tax returns and renewing professional licenses, it had not meaningfully transformed the relationship between citizens and their government. Kaine assigned me to prioritize the improvement of that interface. I realized that one of the most important things government can do is remove restrictions that exist for really no good reason. On a visit to Google, for example, I learned two things: one, most people get to government websites through search engines, not by typing in their URLs, or bookmarking them; and second, government, perhaps unintentionally, made it difficult for search engines to index information that the public had the right to know. Within 90 days, we initiated a no-cost collaboration to simplify and standardize the interface between search engines and government websites, making it easier for the public to find what they need. We formed a coalition of four states, two led by Republican governors (Utah, California) and two by Democratic ones (Arizona, Virginia), whereby Google, Yahoo and Ask.com agreed on a standard sitemap protocol that the states agreed to adopt. Those states then assigned their webmasters to implement the new protocol, a task that took about an hour per site. By the launch in April 2007, Virginia had tagged about 80,000 of our own web pages (URLs) for addition to the participating search engines. In the first year of the initiatives, we observed a 40 percent spike in site visitors, at no cost other than the modest incremental staff effort.

One of the promising aspects of that initiative was its bipartisan backing. Before my term even started, and as it progressed, I made a point to reach out to members of the Republican-led legislature. Through those conversations, I became convinced that many in both parties viewed technology, data, and innovation initiatives from a more pragmatic prism, beyond the usual, inflexible left-right division. That was evident when those Republicans invited me, a Democrat, to partner as a nonvoting participant on the Joint Committee of Technology and Science (JCOTS), which organized small working groups that included members of the executive and legislative branches, as well as concerned citizens. More than a dozen bills endorsed by JCOTS passed through the legislature with overwhelming bipartisan support and were signed into law by Governor Kaine, including Republican-sponsored legislation to expand rural broadband access, adopt health IT standards, and permit school boards to purchase open source education resources.

Democrats, while a minority in the legislature, also attempted to put their signature on the smarter government movement, with the endorsement of the executive branch. Consider the way Business One Stop came together. Governor Kaine, wanting to buoy the state’s reputation as business friendly, sought to offer every Virginia entrepreneur a single destination to complete all the forms required to start a new enterprise — a task that otherwise might involved as many as seven state agencies, such as the State Corporation Commission, the Virginia Department of Taxation, and the Virginia Employment Commission. Governor Kaine, inspired by South Carolina’s presentation at a National Governors Association meeting, gave me the assignment of creating something similar.

Upon digging in, our team estimated that implementing the South Carolina model — which not only improved the user experience but also connected with existing systems within each impacted agency — would require an investment of roughly $7 million. That estimate far exceeded our available funds. So I improvised… Continue reading.

Wild Ride

uber_poolby James A. Bacon

Last week Governor Terry McAuliffe gave the Uber and Lyft ride-sharing services provisional permission to operate in Virginia as long as they comply with minimal standards for hiring drivers. Uber entered the Richmond marketplace around the same time, putting six cars on the road. Rates are competitive with those of local taxicabs but Uber offers the advantage of more timely pick-ups.

While taxicab companies are a political nuisance, using the regulatory apparatus in state after to state to block Uber from the market, the company’s toughest competitor is Lyft, according to a Wall Street Journal piece describing the relationship between the two San Francisco companies as “Tech’s Fiercest Rivalry.” Competition in the business of shared ridership, which includes other start-ups such as Sidecar, is intense. Companies are testing new innovations every day. Some ideas catch on, others fall by the wayside, but the business is evolving rapidly.

The latest permutation, rolled out by the two companies independently on the very same day, is carpooling. Lyft Line and Uber Pool let passengers ride with strangers and split the bill. While the innovation might reduce revenues temporarily, both companies are betting that they can more than offset the loss by growing the size of the shared-rider market.

This is entirely consistent with what I have long predicted: Shared ridership companies will continue to push their innovations “down market” — to less affluent customers — in order to build a larger customer base. Uber started as a company that provided luxury car rides at premium prices. Then it introduced UberX, which provides taxicab-comparable rides. Now it is moving into carpooling. A future next step — and if Uber doesn’t do it, someone else will — will be to introduce a jitney-like van service that provides rides along high-traffic transportation corridors at rates and schedules that are more than competitive with buses.

Hat’s off to the McAuliffe administration for fostering transportation innovation in Virginia rather than stifling it. Stick to your guns. If you think the taxicab companies can raise political hell, just wait until municipal transit companies start complaining that Uber or Uber-like companies are “skimming the cream” of their customer base. This ride ain’t over by a long shot.

State Workers: GiftGate’s Unsung Heroes

mcD.pixBy Peter Galuszka

The McDonnell corruption trial, now going into its third week, is an enormously sad and tawdry affair bringing shame on the defendants and the prosecution’s key witness, businessman Jonnie R. Williams Sr.

Yet there are heroes — state employees. A number of them have testified over the past week that they sensed that something stunk with the way Williams, who has no formal science training, relentlessly pushed his questionable product and maneuvered to get the state’s prestigious universities to put their imprimatur on it so it could move from being a low margin neutraceutical to a real and profitable pharmaceutical.

“Perhaps the only gratifying aspect of the trial last week was the extraordinary professionalism of the Virginia bureaucracy,” Richmond political analyst Bob Holsworth told the Richmond Times-Dispatch.

He’s spot on. One reads so many attacks on government workers among more conservative writers who see public workers as slow-minded except when it comes to tying business up with regulations — the theory goes. Private workers build wealth and create products. Public workers live off the taxpayer’s dime and should be fired in droves, one theory goes.

Not true in the McDonnells’ case. Tae Health and Human Resources Secretary William Hazel. Former Gov. Bob McDonnell pushed him, including with late night-emails, to set up meetings to promote Williams and his Anatabloc product.

Hazel responded with not only brave professionalism but common sense. “I wouldn’t put the stuff in my mouth,” he testified. When Williams gave him samples, he didn’t put it down in his disclosure forms because “I didn’t think it had any value.”

Hazel is a serious doctor of medicine, honed by science and reason. Someone like that just isn’t going to be swayed by a business hustler with a private jet, Ferrari, various vacation homes and a gigantic credit limits on his cards.

Other heroes and heroines appear to be some of McDonnell’s staff such as Sarah Scarbrough, former director of the Executive Mansion, who worried about Maureen McDonnell’s “mental capacity” and campaign manager Phil Cox who was upset when Ms. McDonnell pushed Williams’ little pills on Ann Romney, the wife of the GOP’s 2012 presidential candidate.

Somewhat less impressive are other witnesses from Star Scientific, Williams’ former company. Former Chairman Paul Perito claimed that he had no idea just what Williams had given the McDonnells and how deeply he had gotten into  the muck with them.

Last summer, I was spending a lot of time reporting on Star and admit that I could never figure it out. Williams’ seemed like money-losing huckster — someone so over-the-top that he could be easily seen through. Yet the other officers and directors at Star, like Harvard-trained Perito, seemed solid.

Perito nixed McDonnell’s campaign to become a paid board member of Star (she’s hardly qualified) and he seemed stunned when Williams’ told him in 2013 that he’d been interviewed by the FBI and state police. It raises questions about Perito that he didn’t know of all of this much sooner.

Still, many Virginia workers caught up in this farcical mess deserve credit for sticking to their guns and professionalism. Hats off to them.

Confessions of the Tic-Tac Man

Jonnie WilliamsBy Peter Galuszka

On afternoon last week, I was leaving the seventh floor courtroom at U.S. District Court  after Judge James Spencer called for a break. Jonnie R. Williams Sr., the prosecution’s star witness against former Gov. and Ms. McDonnell, had been on the stand for hours, playing various roles as remorseful solicitor, confident businessman, and obstructionist witness.

It just so happened that Williams and I were going to cross paths in the crowded outchamber of the courtroom. Without missing a beat, Williams stopped walking, made eye contact with me, and graciously held out his arm to signal that I should pass first.

I have no idea if Williams knew who I am, but the summer before, I had tried repeatedly to interview him for a serious of reports I was writing about Star Scientific, the tobacco company turned dietary supplement that is at the core of the trial against the McDonnells in perhaps the most important ever corruption trial in Virginia history.

Williams, 58, had been on the stand for four days, dressed as always in a shiny, expensive suit, his thinning hair coiffed around a high, bulbous forehead.

He has a strange voice, soft and proper, that sounds at times like an elder Marlon Brando or, without the harshness, Strother Martin, the man who played the cruel prison warden in the Paul Newman movie “Cool Hand Luke.” Either way, Williams does have a remarkable presence and he always seems to be selling, selling, selling something — either Anatabloc, his product that he claimed could do anything from cure Alzheimer’s to MS, or simply to promote  his own persona.

Williams, who has extensive immunity from the government, keeps underlining that his deal that could keep him out of jail, which means he must be honest. Honest means making “mea culpas.” They must sound sincere. When he said he pressured Maureen to get Bob to call his aging father on his 80th birthday, he recalled:  “That cost me hundreds of thousands of dollars to be able to do that,” he said. “The McDonnells were not my personal friends. It was good for my company,” noted Williams, who gave them more than $150,000 in gifts, loans, trips and cash.

That’s one version of Jonnie — pensive, regretful, honest. There was another one as well that came out when defense lawyer William Burck asked him to talk about his background in business. It was ego bait that Williams couldn’t resist.

It all came out — the confident kid from Fredericksburg who went to a little known business college in Rhode Island and came home to sell used cars and then took over a faltering eyeglass shop, learning how to pick up on one entrepreneurial idea and spin it into another.

Name dropping is a critical part of the Williams psyche, showing how impressed Williams was that his keen intellect had attracted helpful personalities far beyond his social kin. He keeps mentioning Johns Hopkins University Medical School and the “very bright” Dr. Frank O’Donnell who somehow came down from Baltimore and met Williams when he was working in the optical business. O’Donnell was a big league ophthalmologist, Williams said, and served as his mentor, even when he moved to the Midwest. Dr. O’Donnell came in with one business deal after another. One helped lead him to making machinery to cure near-sightedness, earning him millions and securing his personal finances.

Perking up during testimony, Williams ticked off medical terms as if he were the head of a medical school department. He also had developed a keen sense of what could and could not be said in good company, sort of like a small town boy of modest background who’s being let into the local country club for the first time.

When he took the McDonnells and a few others to La Grotta, an expensive Italian restaurant in downtown meeting after an Anatabloc session, he picked thousands of dollars’ worth of wine and informed the courtroom and jury that it was bad form to let your guests know if it’s $50 a bottle vintage of $500 a bottle. Of course, when he picked out the Louis XIII cognac for his male model friend, the McDonnells and some of their staff at a New York eatery in 2009, he was proud to reveal it cost $5,000.

“I really didn’t like it all that much but some people do,” he said. He also didn’t really like the Ferrari that he made a big effort to drive to Smith Mountain Lake in July 2011 so McDonnell could drive it at Maureen’s request while vacationing for free at Williams waterfront house. Williams says he prefers his Toyota Camry.

This same snobbery constantly extends to the medical and business hot shots who were helping build the idea that Williams’ use of anatabine, a substance found in tobacco, had remarkable curative powers. Jonnie was more than willing to tell you all about it, over and over, in his slow, calm, methodical voice.

Maureen McDonnell, who is being set up as the Fall Girl by her own lawyers, bought into the Williams’ spiel, big time. McDonnell’s professional staff, including Phil Cox and Jasen Eige, testified that they were deeply worried about Williams and kept on telling the governor to limit his engagement.

Smitten by Williams, Maureen kept pushing Jonnie and his miracle supplements, somehow overlooking the fact that there hadn’t been clinical trials on it and that Star Scientific had lost $230 million over the past decade (she still bought stock anyway despite Williams testimony that he told her it was a bad idea).

Rank and file Virginia researchers, whose imprimatur Williams so badly wanted, also were suspicious. When he’d show up pushing pills as samples, they called him the “Tic Tac Man.”

The One Graph that Answers the Central Economic Issues of Our Time

Credit: Brookings Institution

Credit: Brookings Institution, (Click for larger image.)

by James A. Bacon

If you want to understand the intertwined phenomena of lackluster economic growth, persistent unemployment, stagnant wages and the income gap, I present to you the Rosetta Stone, a graph that explains all. It comes from a new paper written by Ian Hathaway and Robert Litan and published by the Brookings Institution: “The Other Aging of America: The Increasing Dominance of Older Firms.” The graph charts the long-term decline in entrepreneurship, as measured by firm formation, in the American economy. Firm formation traditionally has been one of the great strengths of the American economy but as can be seen above, the spread between firm creation and firm death has been narrowing since 1978 when the data series originated. Then in the mid-2000s, the two lines crossed. In the Great Recession and its aftermath, more firms expired than were born.

A decline in business formation is directly responsible for the weakness of the job market. The weakness of the job market is directly responsible for wage stagnation. And wage stagnation, which affects the 99% who depend upon wages/salaries for the livelihood far more than it does the 1% whose income comes from returns on capital, is directly responsible for the increasing income gap.

Credit: Brookings Institution

Credit: Brookings Institution. (Click for larger image.)

What accounts for the decline in entrepreneurship? Hathaway and Litan present data to help understand that question: Older, established companies are becoming more dominant in the economy. That trend can be seen at right. Write the authors:

There is a secular increase in the share of firms aged 16 or more years, while simultaneously there have been steady declines in the share of firms at every other age category during the history of our data,” the authors write. … Perhaps more surprising is the sheer pervasiveness of this trend, which is occurring in every U.S. state and nearly every metropolitan area, across all firm size categories and broad industrial segments; even in high-tech.

This trend, the authors argue, is a worrisome thing. “An economy that is saturated with older firms is one that is likely to be less flexible, and potentially less productive and less innovative than an economy with a higher percentage of new and young firms.”

In searching for  explanations for this trend, Hathaway and Litan explore the possibility that technology-related economies of scale are driving a consolidation. Could the rise of Walmart and other superstores, for instance, account for the demise of mom-and-pop retailers, and could that that trend apply to all industries? Just the opposite, they find: “While economy activity is shifting into mature firms generally, it is the smaller firms where the most growth is occurring.”

The authors are at a loss to explain the trend, which is long-term in nature, transcending business booms and busts. Let me advance a hypothesis. There is a direct correlation between the size and scope of government and the rate of entrepreneurship. The greater the share of national resources controlled, regulated or otherwise captured by government, the lower the rate of new business formation.

In my book “Boomergeddon,” published in 2010, I suggested that the long-term growth prospects for the United States were poor, citing a number of reasons, including greater resource scarcity, loss of  fiscal flexibility due to the massive size of the national debt, and the rise of the rent-seeker economy, the phenomenon in which corporations utilize the coercive power of the state to advance their narrow economic interests at the expense of the public good. As I wrote then:

It is an iron rule of political economy: Dominant industries will utilize their wealth and power to influence the political and regulatory arenas to protect their dominance. They will manipulate the regulatory process to favor themselves over smaller, nimbler competitors. They will see subsidies under the guise of saving jobs or advancing the public interest. They will raise tariffs and other trade barriers to limit competition from overseas. Corporations that maximize profits through rent-seeking are less likely to invest in productivity and innovation, the only true sources of economic progress. By gaining preferential access to capital, they will starve the entrepreneurial sector of the economy — as is occurring in the current business cycle. Rent-seeking companies will be more stable, but they will be less dynamic, economic growth will be slower, the tax base will be smaller, and deficits will be bigger.

The influence of the federal government over the economy has increased without let-up since the mid-1960s. There was a brief roll-back in the early 1980s, coinciding with the Carter-era transportation deregulation and Reagan small-government revolution and with a momentary resurgence in business creation. Then, as the federal government piled layer upon layer of regulation on the economy, the rate of business formation continued to falter, culminating with the Great Recession (not president Obama’s fault) and the imposition of an unprecedented regulatory burden (very much his fault). State and local government power has followed a parallel path in the arena of zoning and land use.

I’m not saying that all regulations are bad. Broadly speaking, environmental regulation is desirable and necessary (although subject to overkill in specific instances). But most regulatory initiatives have imposed huge costs on the economy overall, not only in complying with administrative requirements but in the rent-seeking it inspires. The longer and better established a firm becomes, the less likely it is to be concerned about survival and the more more time and resources it can devote to winning subsidies, tweaking regulations and creating barriers to new firms seeking to enter its industry.

Williams: How to Reach the High and Mighty

Photo by the Richmond Times-Dispatch

Photo by the Richmond Times-Dispatch

By Peter Galuszka

The McDonnell corruption trial has its high and low moments. One theme stands out: the trial is a guidebook of how to gain broach and compromise the power elite of Virginia politicians, in this case the Republicans.

Here are a few takeaways:

  1. Want to break in? Having a private jet is a must, testified former Star Scientific CEO Jonnie R. Williams Sr., also the government’s star witness with immunity from prosecution. By offering the jet to politicians and aides, you a captive audience for the length of the flight. Williams said he got up to six hours of almost undivided attention from Robert McDonnell when he and the former governor were flying in his plane across country from a campaign event with the GOP’s Meg Whitman, then running for governor of California in the Fall of 2010. That’s when they started talking in earnest about promoting Jonnie’s products. Richmond’s odd location is a problem with travel. Having your own plane helps the pooh-bahs bypass “ RIC, IAD, and DCA and fly directly to GOP.”

  2. Republicans like living large. Big names impress. Just after McDonnell won the governorship in 2009, he and his wife meet at the Four Season Hotel in Manhattan. Williams was there with his buddy, high fashion male model Brad Kroenig. During that meeting Ms. McDonnell thought it would be a great idea if she could get an Oscar de la Renta dress for the upcoming inaugural ball. Williams bought drinks, but not any drink. He blew $5,000 on a bottle a Louis XIII cognac. Asked by a defense lawyer why he did so, Williams replied, “I actually don’t care for it all that much but some other seem to.”
  3. Looking for funding under strange circumstances? Somehow Virginia’s Tobacco Indemnification and Community Revitalization Commission always seems to pop up. On his cross-country trip with Williams, McDonnell suggested it as a source of research funding for Williams’ Anatabloc dietary supplement., Williams said. Apparently the plan was to get the University of Virginia to ask for research money, keeping Star and the governor a step or two removed. McDonnell encouraged Williams to contact Jerry Kilgore, a former attorney general and partner at McGuire Woods. Jerry, who later became Williams’ lawyer, has a brother, Terry, who is head of the tobacco commission. In an unrelated matter, the tobacco commission was involved with the sudden and strange resignation this summer of state Sen. Phil Puckett just as a key vote on Medicaid expansion was to happen. The plan was for Puckett to take a top-paying, sinecure-type job at the tobacco commission but it didn’t work out once it was publicized.

As the trial continues, there may be other tips for success. I will pass them along as soon as I can.

RAM, Coal and Massive Hypocrisy

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

By Peter Galuszka

Sure it’s a photo op but more power to him.

Gov. Terry McAuliffe is freshly arrived from the cocktail and canape circuit in Europe on a trade mission and is quickly heading out to the rugged and impoverished coal country of Wise County.

There, he, Attorney General Mark Herring and Health and Human Resources Secretary William A. Hazel will participate in a free clinic to help the mountain poor get free health care. The political opportunity is simple: Many of the 1,000 or more who will be attending the Remote Area Medical clinic are exactly the kind of people getting screwed over by the General Assembly’s failure to expand Medicaid to 400,000 low income Virginians.

RAM makes its Wise run every summer and people line up often in the wee morning hours to get a free medical and dental checkup. For many, it’s the only health care they get all year unless it’s an emergency. Another problem: Distances are great in the remote mountains and hospitals can be an hour away.

Mind you, this is Coal Country, the supposedly rich area upon which Barack Obama is waging war and harming local people by not going along with coal executives’ demands on environmental disasters such as mountaintop removal, keeping deep mine safety standards light and avoiding carbon dioxide rules.

The big question, of course,  is why if the land is so rich in fossil fuel, are the people so poor and in need of free medical care? It’s been this way for 150 years. And now, coal’s demise got underway in Southwest Virginia in 1991 when employment peaked at about 11,000. It is now at 4,000 or less. It’s getting worse, not better.

In June 2011, by coincidence, I happened along a RAM free clinic in Pikesville, Ky., not that far from Wise when I was researching my book, “Thunder on the Mountain: Death at Massey and the Dirty Secrets Behind Big Coal.” My photographer Scott Elmquist and I spotted the clinic at a high school. There must have been hundreds of people there –  some of whom told me they had been waiting since 1:30 a.m. It was about 8:30 a.m.

Attending them were 120 medical and dental personnel from the U.S. Public Health Service. They were dressed in U.S. Navy black, grey and blue colored fatigues. The University of Louisville had sent in about 80 dental chairs.

Poverty in Pike County had been running about 27 percent, despite the much-touted riches of coal. Pike is Kentucky’s biggest coal producer.

One man I spoke with said he had a job as a security guard, but he doesn’t qualify for regular Medicaid and can’t afford a commercial plan. In other words, had I interviewed him more recently and had he been a Virginian, he would have been lost through the cracks of Medicaid expansion. Alas, he’s in luck. In 2013, Kentucky opted for a “marketplace” expansion system where federal funds would be used to help lower income buy health plans through private carriers.

Lucky the man isn’t from here. The marketplace plan is exactly the kind that McAuliffe has proposed and exactly the one that stubborn Republicans such as Bill Howell in the General Assembly are throttling. The feds would pick up the bill for expanding Medicaid to 400,000 needy Virginians, at least initially.

Yet another irony. Expanded medical benefits are available just across an invisible border in two states whose coalfield residents somehow never got the great benefits of King Coal.

Does Virginia Want to Be a Wireless Friendly State?

cell_towerStates and regions that want to stay in the vanguard of economic growth need to expand their broadband infrastructure. Mobile data traffic will increase 13-fold between 2012 and 2017 by some estimates. To accommodate that growth, the wireless industry will have to build new cell towers, distributed antenna systems (DAS) and other infrastructure. However, permitting and regulation is a big problem in many states, according to George state Sen. Judson Hill.

Writes Hill in The Hill:

New tower construction and collocations of antennas on existing sites helps local economies. New towers typically cost between $250,000 and $300,000, and collocations run upward from $25,000. Moreover, new 4G wireless broadband networks support local job growth and improve economic vitality. Economists Robert Shapiro and Kevin Hassett found in their recent study that “every 10 percent increase in the adoption of 3G and 4G wireless technologies could add more than 231,000 new jobs to the U.S. economy in less than a year.”

Unfortunately, differing, cumbersome and unnecessarily complex local government permit processes have impeded investment and construction of new wireless facilities infrastructure in many states. Denials or long delays in approving permits for new cell towers or antenna collocations have been the experience for countless wireless infrastructure providers. Public safety communications challenges and lost economic opportunities, including foregone job creation, are regrettable byproducts of these denials and delays.

Georgia law requires local governments to issue timely permits — within 150 days — and ends the practice of imposing excessive processing fees. He concludes: “States should proactively pursue regulatory and tax reforms to remove roadblocks to wireless infrastructure facility construction. Greater economic and public safety benefits will come to states that best position themselves to enhance their 4G wireless broadband network build-out.

Bacon’s bottom line: How does Virginia stand when it comes to cell tower permitting? Hill suggests that Georgia, Missouri and Washington are the only states that have addressed these issues legislatively so far — but maybe Virginia doesn’t have a problem that needs fixing. Or maybe it does. Does anyone know?

– JAB

Waiting for Uber

Jonathan Trainum. Photo credit: Style Weekly.

Jonathan Trainum. Photo credit: Style Weekly.

by James A. Bacon

The Richmond metropolitan area has a modest but growing taxi fleet. The Henrico County Police Division, which manages the bulk of taxi regulation in the region, issued 834 tax permits last year. Unlike some cities, which restrict the issuance of taxi permits — in New York City, taxi medallions can cost upwards of $1 million — all it takes to operate a taxi in the Richmond region is a background check, an easily obtainable certificate of need and a vehicle that meets code — a process that costs about $40.

Richmond’s taxi business is about as laissez-faire as you can find anywhere in the country. So, it’s not a surprise that the industry has seen the rise of a company like Napoleon Taxi. Starting six years ago as a one-man taxi company, Jonathan Trainum has expanded his enterprise to a 32-car fleet and 90 drivers. As Style Weekly tells the story, he’s investing in technology and he’s bracing to do battle with Silicon Valley ride-sharing company Uber, which has begun sniffing around the Richmond market.

Trainum started his taxicab career working for a Southside taxi company but chafed at the dispatchers’ blatant favoritism toward certain drivers and the reprimands he received for making sure customers made it into their homes after a ride. He also disapproved of the way dispatchers routinely ignored calls from public housing projects. Trainum thought he could do better. Fortunately, local taxi regulations posed few barriers to entry.

The business generates about $2 million a year today. Profit margins are tight but Trainum is investing in technology. Style describes his dispatch center this way:

Seven screens display a map of the city, showing where calls are coming in, and where 32 cabs are at any given moment. The origin and destination of every trip from every caller has been stored to help speed things up.

On Friday, [taxicab driver Tom] Berck never needs to scan the sidewalks hoping to find a fare. Instead, a tablet hooked to his dash has him moving constantly between 7 p.m. and 3 a.m., crossing the city again and again while he accepted fares as far out as Midlothian and as close as the two-minute drive between Mosaic off River Road and the University of Richmond.

Trainum also has been building an Uber-like app that hopes to roll out this fall. He knows Uber is coming, and he’s determined to beat the company at its own game. He hopes the combination of real-time tracking and a willingness to take cash, which Uber doesn’t, will deflect the threat.

“You’re telling people the only way you can get a cab is through a smartphone app with a credit card,” Trainum says. “[Uber's] customers fit that niche. We want to take the technology they’re using [and] open it up where we can provide service for everybody.” Trainum says he’ll make his technology available to any Richmond can company willing to use it.

“The next five years for Napoleon is us trying to counteract complacency in our industry,” Trainum says, “which has been exposed by Uber and Lyft.”

Bacon’s bottom line: This is the way the taxicab industry should work. Low barriers to entry make it easier for hard-chargers like Jonathan Trainum to break into the industry with a better business model. Minimalist regulations also make it difficult for local taxicab companies to block Uber from of the market. The only way to survive is to innovate, and that’s exactly what Trainum is doing. At the end of the day, Richmonders will have a superior taxi (or taxi-like) service than they had before.