Category Archives: Economic development

Awkward Questions for Roanoke’s Health Sciences Campus

The Virginia Tech Carilion health sciences campus is emerging as the new economic growth engine for Roanoke. The impact of the campus on the state’s economy will grow from $214 million today to $465.2 million within eight years, according to a study issued by the University of Virginia’s Weldon Cooper Center for Public Service.

The addition of a second building at the research institute will create 828 new jobs and generate $150 million in additional spending by 2026, reports the Roanoke Times. The figures measure only direct impact, not the effect of undergraduate students studying there or spin-off development in the surrounding area.

“I think that as a region we need to think big because this is an opportunity that comes our way once a century,” said Heywood Fralin, chairman of the VTC Academic Health Center Steering Committee. The last time anything this big happened in Roanoke was when the Norfolk & Western Railway moved its headquarters in 1882 to the area then known as Big Lick.

The Roanoke Times provides the history of the initiative:

Tech and Carilion formed a partnership a decade ago to build a medical school and research institute on the Riverside campus. The research institute is at capacity, and a new building is underway that will double its size and expand its reach in advancing medical discoveries through trials and to market. Tech intends to offer more undergraduate programs in Roanoke centered around its school of neuroscience, and the Virginia-Maryland College of Veterinary Medicine will move its cancer treatment center to Roanoke. Four companies have been spun off from research since 2010. At that pace, the economist expects 10 more companies will form by 2025.

Here’s the catch:

“Clearly, the more financial support we can give to this effort the better it will be,” Fralin said. “There is an enormous list of things that are needed. To date, the commonwealth of Virginia has funded the buildings. I don’t think it’s reasonable to assume that every building going forward will be built by the commonwealth.”

Bacon’s bottom line: Before I launch into a contrarian mode of thought, let me make it crystal clear that Roanoke desperately needs a new pillar to its economy. Its old industrial-era economy has been hollowed out. The region needs to look to a knowledge-economy model of development rather than vainly try to rehabilitate the old manufacturing model. The research-center initiative brings together two of western Virginia’s key players, Virginia Tech and the Carilion health system, who have the financial clout and know-how to make things happen.

But I do find myself compelled to ask, who’s paying for all this?

Clearly, the Commonwealth of Virginia will be paying for the buildings — through state-backed bond issues, I presume. That’s fine, the state pays for higher-ed buildings across the state, and it’s only fair that Roanoke get its piece of the action.

But who’s paying for all the faculty, researchers, graduate students, and support staff? Hopefully, some of the money will come from federal and private-sector research contracts. Great! But how much? How much is coming from Virginia Tech and how much from Carilion? Digging deeper, where does Virginia Tech get its money, and where does Carilion get its money? To what extent, if any, are these new programs being subsidized by undergraduate tuition payments? To what extent, if any, are they being underwritten by higher-than-needed profits generated by the “nonprofit” Carilion health system?

Another way of asking the question: To what extent are Virginia Tech students paying higher tuition and Carilion patients paying higher medical bills in order to build the campus? To what extent is wealth being extracted from taxpayers, students, patients, and even local philanthropists to fund this research complex? Perhaps most critically of all, to what extent will the health science campus require ongoing subsidies forever?

The buildings, contracts and jobs being created are highly visible, and their economic impact is easy to measure. The funding sources are highly dispersed and largely invisible. Their economic impact is impossible to measure. Does the health science campus represent the optimal investment of society’s resources? Who knows? Nobody is even asking the question.

I’ll Take Apple over Amazon Any Old Day

Amazon.com Inc. isn’t the only West Coast technology giant shopping for a new community to build a large corporate campus. Apple Inc. is looking to make a big investment as well, although it hasn’t drawn nearly much attention to itself. As with the Amazon project, Northern Virginia appears to be in the running.

From a trophy hunting view, Amazon would be the big prize — $5 billion in investment plus 50,000 new employees. The Seattle company has narrowed the list of candidates to 20 localities, and only one can win. But Apple would make a nice consolation prize. Its history of expansion in Austin, Texas, suggests that a new corporate campus could well entail an investment of $1 billion or more and the hiring of 1,000 or more employees.

If Apple wants an East Coast location, North Carolina might have an edge in the fact that CEO Tim Cook graduated from Duke University’s business school and COO Jeff Williams grew up in Raleigh. Last week, reports the Wall Street Journal, North Carolina legislators changed the state’s incentives package targeting technology companies that pledge to invest at least $1 billion in the state and create at least 3,000 jobs. Could Apple be heading to the Research Triangle?

Definitely a possibility, but the company also is eyeing Northern Virginia. Apple representatives have spoken to Virginia officials about options near Washington, D.C., the Washington Post has reported. Says the Wall Street Journal: “Northern Virginia could be attractive to both Apple and Amazon given its deep pool of talent, strong fiber network, and proximity to political leaders, location experts said.”

Bacon’s bottom line: So far, there is no indication in published reports that Apple is seeking tax breaks and subsidies on the same massive scale that Amazon is. Assuming that incentives are not a decisive consideration in Amazon’s location decision — an assumption that needs to be confirmed — Apple would constitute a far more preferable corporate citizen. The Amazon project looks too big to digest comfortably: The company’s expectation of giant subsidies will strain the ability of state and local governments to build the infrastructure needed to accommodate the resulting surge in development. Apple’s campus, though large by any other standard and a plum in any metro’s cap, would be more modest in size and far less disruptive.

Grant Process Tightens at VEDP

Not His Best Day

Tomorrow Governor Ralph Northam travels to the coalfields for what is billed as a major economic development announcement, and steps have been taken so that four years from now he won’t cringe when shown the old photos.

For the past year the Virginia Economic Development Partnership (VEDP) has been doing additional due diligence on companies receiving discretionary incentives, and if there is a high enough level of perceived risk the incentives are paid only after performance.

The tighter policy was described by President and CEO Stephen Moret in a response to my earlier post about detailed performance measures on Virginia’s various incentive programs.  “With this new approach in place, Virginia may not win some projects that we previously would have won, but neither will we place taxpayer dollars at undue risk,” Moret wrote.

The agency and its practices were the subject of a scathing review by the Joint Legislative Audit and Review Commission after the embarrassing failure to launch of a major Chinese-owned project near Appomattox, announced with great fanfare by Governor Terrence McAuliffe.  The firm in that case had received $1.4 million from the state in advance, and two years later a newspaper reporter found obvious signs that should have warned the state it was possible fraud.   Apparently the same pitch was rejected by North Carolina.

Then Moret came in from Louisiana and the General Assembly weighed in with 2017 legislation.  Now Moret reports all applications are vetted by a Project Review and Credit Committee (PRACC).  Prior to the revelations there was no VEDP person assigned full time to administering incentive programs and now there are four – with the potential for more and the inclusion of somebody with commercial credit experience.  Somebody is held to account for each project’s compliance.  

 

“During my first year at VEDP (2017), I asked PRACC to begin producing both company risk ratings and incentive risk ratings for every project, as well as to shift substantially all incentive payments associated with moderate- or high-risk companies to occur after the Commonwealth has received at least as much new state tax revenue as the amount of a given incentive,” he wrote in providing details.  He stressed he is fully on board with the new system.

The early tax money from these projects often comes to the locality, which imposes property taxes on any new building, equipment or business personal property as soon as they enter service.

The state tax revenue tracked is basically two sources slower to kick in, the same two sources that Secretary Aubrey Layne recently complained are too dominant in the state budget – personal income taxes and sales tax.  So for the state to have received an amount equal to the grant, the company has to be well underway in meeting its hiring goals.  The state does add in a multiplier on the assumption that the new employees are spending money generating indirect taxes.  And the state does recognize the substantial sales and use taxes paid on construction materials and other assets.

“Sometimes this means an incentive will be provided only after a project is fully completed; other times it means that incentives are provided in tranches as milestones are achieved. Notably, for low-risk companies (e.g., a large, well-capitalized Fortune 500 firm), we typically propose to provide incentive funds early in the development of a project, as otherwise the impact of the proposed incentive on the company’s decision process would be substantially diluted by the company’s net present value discount rate that often is in the range of 8-10%.”

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It Works for Georgia, Why Not for Virginia?

North Carolina has Asheville… but Virginia has Abingdon.

When former New Yorker Marty Stefanelli and his wife moved from West Palm Beach, Fla. to Blue Ridge, Ga., they went from paying about $20,000 a year in real estate taxes to $3,000. The couple still maintains a residence in New York, where they pay about $30,000 a year in taxes, but Stefanelli plans to make Georgia their main residence within a few years. “I bought a pickup to fit in,” he quips.

Southern Appalachia is emerging as a growing retirement destination for northern transplants who find Florida too expensive, reports the Wall Street Journal today. The so-called “halfbacks,” who move to Florida and then halfway back north cite lower cost housing, lower taxes and lower cost of living.

Net migration to retirement destination Appalachian counties in Georgia, North Carolina and Tennessee has risen steadily from about 10,000 in 2011 to more than 46,000 in 2017, according to census data.

The trend appears to be gaining momentum as local developers and real estate agents build housing product geared to the halfback market, and as local businesses provide products and services suitable for more affluent retirees. The newcomers are generating new tax revenue, creating new business opportunities and supporting more jobs for locals. The response is not universally positive. Some locals complain that the immigrants are driving up the price of housing and bringing in their brusque, big-city mannerisms. But overall the impact seems mostly beneficial.

Bacon’s bottom line: Apparently, this mini-migration to Appalachia hasn’t reached Virginia. But there is no reason Southwest Virginia shouldn’t be able to cash in. The terrain is just as beautiful as it is in North Carolina, the property and taxes are just as inexpensive, and there are urban areas like Roanoke and Bristol-Kingsport where retirees can avail themselves of comprehensive medical care. Aside from supporting new jobs, affluent retirees would bolster the tax base of hard-pressed local governments and support quality-of-life amenities that the communities could not otherwise afford.

This is not traditional economic development, but traditional economic development doesn’t seem to be working very well. Someone should research this market to ascertain what it takes to lure some of these halfbacks to Virginia.

Va Beach Snags Third Trans-Atlantic Cable

Route of proposed South Atlantic Express International data cable. Image credit: Virginian-Pilot

South Atlantic Express International Ltd. plans to build a high-speed data cable to connect South Africa with Virginia Beach. The third trans-Atlantic cable terminating in Hampton Road, it would provide yet another stimulus to Virginia’s burgeoning data center industry.

As a bonus, ACA International will relocate its headquarters from Northern Virginia to Virginia Beach. The project could bring 200 high-tech jobs to the city, including software engineers, data analysts, and cyber-security professionals, according to the cable company’s local partner, ACA International. Reports the Virginian-Pilot:

The announcement of a third cable comes on the heels of the completion of Marea – Microsoft and Facebook’s first subsea cable connecting Virginia Beach to Spain. Marea’s transmissions are “more than 16 million times faster than the average home internet connection, with the capability to stream 71 million high-definition videos simultaneously,” according to Microsoft.

A second cable, Brusa, is under construction, and will connect Virginia Beach to South America.

This is great news for Hampton Roads, which desperately needs to diversify its economy away the defense industry. I’m certainly no expert on the data center industry, but a third trans-Atlantic connection, which will also create high-speed data links to Nigeria and Brazil, could help other Virginia localities in their competition to lure new data centers. Virginia has one of the densest clusters in the country of high-capacity cable, but until recently it has not had direct connections overseas.

Let’s say I was a cloud provider wanting to serve the market in Brazil, Nigeria or South Africa. Would I rather locate my data center in Capetown, Lagos, Forteleza… or Virginia Beach, where (a) IT skills are abundant, (b) I could plug into one of the the premier land-line fiber-optic cable networks in the world, (c) there is a reliable, competitively priced and increasingly green source of electricity, and (d) the business climate is favorable and the political system stable?

Sounds like a no-brainer to me. Hopefully, Virginia Beach will see many more data centers coming its way.

(Hat tip: Paul Yoon)

Development Grants Performance Data

About ten days ago during a discussion of Virginia economic development programs I posted a link to the annual report of the Virginia Economic Development Partnership, but I knew there was a something out there with even more detailed performance data.

In response to a legislative mandate pushed by a former legislator, Jimmie Massie of Henrico, VEDP has also been publishing this more detailed annual report with performance data on each of the various programs, including programs in other departments.  It’s called the HB1191 Report after Massie’s bill.  The November 2017 version is far more detailed than the three previous ones, which you can find here.

Pages 10-11, for example, summarize the Commonwealth’s Development Opportunity Fund (previously the Governor’s Opportunity Fund.)  The 139 projects over five years were approved for $87.5 million in grants but received only $60 million.  Of the promised 22,000 new jobs, only 4,000 had appeared by the end of the reporting period.  But the jobs and capital investment pledged during the first year, 2013, apparently were in place by 2017.

Projects play out over a long period of time, and a grant that is authorized might not be paid in full or paid when planned.   Having seen the process from the inside myself, that is to be expected.  Big investments and plant expansions will take time and the ramp-up may be slower than hoped.  One project I worked on didn’t happen at all, and incentive cash had to be repaid (this was in the years before this report – don’t go hunting for it).

But often the grants come only after performance.  The Enterprise Zone programs (pages 25-28) provide benefits after the capital investments are made and the jobs created, and the results there rival the better known Opportunity Fund:  hundreds of companies added more than 7,000 jobs and $1.2 billion in capital improvements, satisfied requirements to maintain existing jobs, and received in total about $65 million in direct cash benefits.

There are reports on 18 different programs and the final pages include long lists of individual company awards under each of them, from some of the state’s biggest names to new firms setting up shop inside enterprise zones.

In a letter at the very end of the 142-page document, the director of the Joint Legislative Audit and Review Commission provides both some praise and some criticism of the report.  He notes the improvement over previous iterations, but asks for additional calculations on rates of return and economic impact.  There are still too many blanks on some programs, and it’s not always clear why.

Each of the programs has its own active constituency that will charge Capitol Hill to defend them, but none should be immune from regular scrutiny.  For example, if there hasn’t been a grant under the Major Eligible Employer (MEE) program since 2006 (page 16), why is it still on the books?

Virginia, Maryland and D.C. Collaborating on Amazon Pitch

Metro Washington: multiple government jurisdictions, one economic organism

As much as Maryland Governor Larry Hogan wants Amazon.com to locate its HQ2 in Montgomery County, he’d be delighted if the tech giant picked anywhere in the Washington metropolitan area. Accordingly. Maryland, D.C., and Virginia are working to pitch Greater Washington to Amazon as a unified region, he said Wednesday.

Hogan’s remarks, reports the Washington Business Journal, follow disclosures that officials from multiple Greater Washington jurisdictions have been discussing regional issues relating to the project, which could bring $5 billion in investment and more than 5,000 jobs to the region.

“Now, we all had our individual bids, and we’re still hoping,” said the Republican Maryland governor. “We think that Maryland had made a very, very attractive offer, one of the best in the country, and we’d love to have them here, but if that was the decision that Amazon made, to bring it to the Washington area and share, mix jurisdictions, we certainly would be supportive of that as well.”

If I were Amazon, one of my biggest concerns about locating in the Washington metropolitan is the division of government between two states and the district — an arrangement that has proven dysfunctional for regional organizations such as the Metropolitan Washington Area Transit Authority (which operates the Metro) and the Washington Metropolitan Airports Authority. I would be greatly heartened to see any sign that the states were willing to work collaboratively.

I think the Washington metro has a serious shot at bagging the Amazon HQ2. It only makes sense for the jurisdictions to collaborate because the impact would be so huge that, no matter which specific location Amazon selected, there would be big spillover effects everywhere.

I remain highly ambivalent about the desirability of winning the Amazon project, given that (a) in a labor market experiencing labor shortages, newly created jobs can be filled only by people coming from outside the region, which would mean (b) state and local governments would have to absorb big new costs for schools, services, and transportation, (c) Amazon would be extracting such huge subsidies and tax concessions that it won’t help pay for much of that growth, and (d) non-Amazon taxpayers would get hosed.

However, Amazon would help diversify a regional economy that is dangerously dependent upon federal expenditures, would turbocharge the regional tech economy, and would give Washington huge bragging rights for winning more tech companies and corporate headquarters. In the balance, I share Hogan’s view that HQ2 would be a good thing for the Washington region whichever jurisdiction it chooses.

Virginia Small Business Rating: Fair to Middling

Ranking out of top 177 metros. For an explanation of metrics, see Reward Expert’s methodology here.

Yesterday I opined on the critical importance of tax rates in influencing the flow of corporate and human capital between the states (“Supply Siders Like Virginia’s Economic Outlook“). But I made the point that taxes are hardly the only factor driving economic growth. Another important variable is entrepreneurial vitality — the ability of states and metros to grow their own businesses. Strong entrepreneurial ecosystems have kept states like California and New York in the game despite atrocious tax policies that push businesses and high-income households out of their states.

Now comes a new of “Best and Worst Places to Start a Small Business,” published by Reward Expert, a company that creates reward packages for credit cards. Researchers used a bundle of 30 metrics including office space, demographics and diversity, education, income, transit, housing costs, and venture capital activity, among others for 177 metropolitan areas with populations greater than 250,000.

Under this methodology, the Denver, Colo., and Boston, Mass., metros scored No. 1 and No. 2, while Charleston, S.C., and the Tallahassee, Fla., regions scored the worst.

And Virginia metros? Overall, they put in a fair-to-middling performance. The Washington and Richmond metros ranked 21st and 22nd respectively, both respectable scores but not enough to blow anyone’s socks off. Roanoke was a pleasant surprise at 29th. Lynchburg scored in the top half. Virginia Beach-Norfolk was the only laggard, falling into the bottom half — but nowhere near the bottom.

Metropolitan rankings have become a dime a dozen now, and I haven’t analyzed Reward Expert’s methodology to see if it is better or worse than the others. (I do question how valuable the five-year startup survival rate is as a metric, for instance, for it seems to vary within such a narrow range. And Washington’s low score for educational attainment looks plain wrong.) Just consider the report as one more colorful fragment in the kaleidoscope of data we scrutinize to track our performance.

Combine this report on small business prospects with the “Rich States, Poor States,” which focuses more on factors influencing corporate investment and human capital flows between states, and the outlook is cautiously positive for Virginia. By no means can we consider ourselves an economic development powerhouse, as we were during the glory days of the 1980s and 1990s. And we’re still too dependent upon the vagaries of federal government spending. But our economic fundamentals look better that those of most states.

Update: WalletHub has come out with its own ranking of best cities for business startups. Bottom line: Virginia sucks. Out of 180 cities:

Richmond — 79th
Virginia Beach — 131st
Norfolk — 150th
Newport News — 160th
Chesapeake — 170th

Important difference between the two rankings: Reward Experts looks at Virginia metropolitan regions, WalletHub looks at Virginia “cities.”

Supply Siders Like Virginia’s Economic Outlook

Virginia economic performance over the past 10 years: fair-to-middling.

Virginia’s economic performance has been mediocre over the past 10 years compared to that of other states, finds the 2018 edition of “Rich States, Poor States,” but the Commonwealth’s public policy mix gives it an economic outlook rank of 10th best in the nation.

The “Rich States, Poor States” economic competitiveness rating reflects the analytical viewpoint of supply-side economists Stephen Moore and Arthur B. Laffer and gives heavy weight to tax burden, public indebtedness, size of state bureaucracy, and traditional business-climate factors such as right-to-work and average workers’ compensation costs.

Many other factors influence a state’s prospects for economic growth, such as industry mix, education and skill levels of the workforce, entrepreneurial vitality, cost of living (particularly housing), and the quality of government services. Even so, the attributes identified by “Rich States, Poor States,” now in its eleventh year of publication, clearly have considerable value in explaining differential rates of population and economic growth.

Laffer and Moore elaborated upon the importance of tax burden in a Wall Street Journal column today, in which they made the case that the capping of State and Local Tax (SALT) deductions will accelerate the movement of businesses and people — especially wealthy people — from high-tax blue states to low-tax red states. States with the highest, most progressive tax tax burden like California and New York, they predicted, will be the biggest losers. Conversely, low-tax states will be the biggest winners.

About 90% of taxpayers are unaffected by the change. But high earners in places with hefty income taxes—not just California and New York, but also Minnesota and New Jersey—will bear more of the true cost of their state government. Also in big trouble are Connecticut and Illinois, where the overall state and local tax burden (especially property taxes) is so onerous that high-income residents will feel the burn now that they can’t deduct these costs on their federal returns. On the other side are nine states—including Florida, Nevada, Texas and Washington—that impose no tax at all on earned income.

Laffer and Moore did not discuss Virginia specifically, but according to the “Rich State, Poor State” methodology, the Old Dominion has a favorable tax and business climate. Hence, all other things being equal, economic performance should fare better looking forward than it did over the past 10 years when budget sequestration and defense spending caps squeezed the Northern Virginia and Hampton Roads economies.

I would caution against making any judgments regarding short-term performance based on these numbers. Federal spending is the No. 1 economic driver in Virginia, and the state’s fortunes rise and fall to a considerable degree depending upon the vagaries of federal budget policies. Right now, Uncle Sam is in spendthrift mode, so that augurs well for us. But, as I frequently warn, what can’t go on forever… won’t. At some point, the federal spending spigot will close.

Rather, tax and business climate factors make a difference over long periods of time. They facilitate a steady drip… drip… drip… in the migration of corporate and human capital from state to state, metro to metro. A perfect example is the recently announced relocation of Gerber Products Company of its U.S. headquarters from New Jersey to Arlington. The company will invest $5 million and create 150 jobs. By itself, that one move is not terribly significant given the huge scale of the Northern Virginia economy. But if the corporate migration from New Jersey and New York to Northern Virginia is entirely one way — and it is — small investments add up over a long period of time.

Leveraging Offshore Gas Drilling to Build Offshore Wind

Can allowing this…

The Trump administration is opening up the East Coast of the United States to oil and gas drilling, but it’s not clear how much enthusiasm there is. A recent sale of drilling rights in the Gulf of Mexico has attracted only “moderate” interest, reports the Financial Times, an indication that the oil & gas industry is more focused on expanding production in the country’s vast shale basins.

… help us get to this?

Last year the Department of the Interior cut the royalty rate it had been charged on production from leases in shallow water (less than 200 meters deep) from 18.75% to 12.5% in the hope of stimulating greater interest. But drillers submitted bids for only 148 of 14,000 tracts offered.

If the Trump administration can’t gin up much excitement in the Gulf of Mexico, where a mature oil & gas exploration and drilling infrastructure exists, it’s unlikely to do any better in the southern Atlantic states where no such infrastructure is to be found. Also discouraging interest is the reality than any effort to start drilling would ignite a firestorm of opposition. Why bother when shale can be fracked elsewhere with minimal fuss and muss?

But that’s today. Who can say what economic conditions and public opinion will look like in three or four years? What if public opinion could be swayed to look upon offshore drilling as a pathway to developing a viable offshore wind industry?

Environmental groups and Virginia Beach civic interests oppose offshore drilling, raising the specter of another Deepwater Horizon disaster — even though (a) any drilling off the Virginia coast would be in shallow water, while Deepwater Horizon occurred in… you guessed it… deep water, and (b) most, if not all, of the drilling would be for natural gas. I’ve never heard of a natural gas spill, and neither have you.

Indeed, the Commonwealth’s official energy policy supports offshore oil and gas drilling, with the caveat that no drilling occur within 50 miles of the shore. A 2005 study by the Virginia Secretary of Commerce and Trade found that natural gas exploration was safe, although if oil is discovered that the Commonwealth must “carefully consider the risk of spills.”

Is it not possible to work out a compromise that could allow drilling to move forward when market conditions permit while providing tough environmental safeguards? Here’s how we can do it.

First, let’s just take oil drilling off the table. Let’s make it official Virginia policy to permit no oil drilling because we want zero risk of oil spills. Drilling and production should be limited to natural gas only. (Do some wells produce both oil and gas? Can the gas in such wells be extracted while the oil is kept in the ground? I concede that some technical questions may need to be answered.) The vast majority of the energy wealth off the Atlantic coast is natural gas, so imposing an anti-oil restriction should not cripple the economics of offshore energy production.

Second, Virginia should get the first-mover advantage of establishing an East Coast offshore drilling industry. As the largest metropolitan area on the Atlantic coast between Miami/Fort Lauderdale and New York — and one with a large ship repair industry, at that — Hampton Roads would be the logical location for offshore companies to set up and do business. Thus, Virginia could get a significant economic-development bonus from the opening up of offshore drilling.

Third, an offshore drilling industry was the precursor in Europe to developing an offshore wind industry, and it could be the precursor in Virginia, too. The two sectors share many skills, competencies, services and specialized equipment. If Hampton Roads can develop an offshore drilling industry, it can lower the costs and risks of getting offshore wind companies to locate here. The lack of an existing industry is perhaps the biggest barrier to developing Virginia’s offshore wind resources — a desiderata of environmentalists and economic developers alike.

The immediate hold-up to large-scale development of wind resources is the need to test the performance of wind turbines in the Atlantic Ocean, which has different seabed conditions and is subject to hurricanes. That won’t happen until the State Corporation Commission approves Dominion Energy’s proposed VOWTAP project, two costly test turbines that could never be justified on the basis of their electricity production alone.

But if the SCC approved VOWTAP, and if the turbines proved their efficacy in Virginia offshore conditions, and if a gas drilling business ecosystem had a toehold in Virginia, then the chances would improve immeasurably to persuade European wind companies to invest in Virginia for the purposes of building and maintaining a fleet of offshore wind turbines at an economical price. Virginia then could become the hub of offshore wind production for much of the entire Atlantic coast.

If we play our cards right, it should be possible to fulfill former Governor Bob McDonnell’s dream of making Hampton Roads the energy capital of the East Coast while not only protecting the environment but improving it.