• Has Gene Trani Stayed On Too Long?

    Someone has to ask the question: Has Eugene Trani stayed on too long as president of Virginia Commonwealth University?

    I have enormous respect for Trani, who has done an extraordinary job building VCU as an institution and will no doubt go down in Richmond history as one of its great, visionary leaders. He has transformed VCU from a third-tier, little respected “State U” into an up-and-comer with nationally recognized programs. By emphasizing interdisciplinary programs between schools and departments that traditionally stay pigeon-holed, he has made VCU a genuinely exciting place to study and conduct research.

    The VCU president has always had his critics. Some said he was too authoritarian, or that he emphasized bricks and mortar over program development. But there was no arguing with his ability to raise money from the community or squeeze more funds out of a parsimonious General Assembly.

    Now those accomplishments are beginning to fray. The simultaneous eruption of the Rodney Monroe and Philip Morris controversies (see “Scandal Reaches Critical Mass at VCU”) raise the possibility that systemic problems might plague VCU’s administration.

    Frankly, I have to wonder if Trani’s heart is still in the job. Trani, who turns 69 in November, originally planned to retire from the VCU presidency a few years ago, but the board of trustees apparently could not imagine a VCU without him and begged him to stay another five years. (I draw from memory — I cannot find any reference to the contract renewal on the VCU website. If someone can find it, please let me know.)

    While he agreed to stay on, Trani maintained other interests. For example, he serves on three outside boards: LandAmerica Financial, a Fortune 500 title insurance company; Universal Corp., a tobacco trading company; and the SunTrust Central Virginia Bank. Directors at the first two companies (and perhaps the third) are highly compensated and entail significant commitments.

    Meanwhile, Trani continues to pursue his academic interests. A historian, he has managed to juggle his administrative duties with scholarly research and writing. His official VCU biography lists an impressive number of columns, scholarly articles and even books written during his tenure as president. In 2005, he spent the summer in Oxford, England, working on a soon-to-be-published book, “Distorted Mirrors: American Images of Russia and China, 1891 โ€“ 1991,” and he was intending to spend this summer at Harvard.

    Whether this workload — enough to keep two or three normal people busy — affected Trani’s health is a matter of conjecture. But there is no getting around the fact that he was admitted for emergency surgery two weeks ago for a quintuple bypass surgery. A VCU press release stated that he would spend six to eight weeks at home recuperating.

    I’ve met Trani a couple of times, including once a few years ago when I interviewed him for an in-house VCU publication. He spoke enthusiastically about his research into early U.S.-Soviet relations — he was particularly interested in the U.S. expeditionary force dispatched to Archangel in 1919, as I recall. Trani also displayed a voracious appetite for information. One thing that struck me: He made a practice of Googling “Virginia Commonwealth University” every morning to see what people were saying about the institution.

    Gene Trani is a remarkable man. But it’s a legitimate question to ask: Has he taken on too much? Given his multiple pursuits and responsibilities, not to mention his ill health, can he possibly stay on top of the pressing issues that consume Virginia’s largest university? Who’s calling the shots in his absence? Is the eruption of simultaneous scandals a coincidence, or a sign of a deeper malaise at VCU? I don’t know the answer. But let us hope the Board of Visitors is asking that question.


  • Scandal Reaches Critical Mass at VCU

    It looks like Peter beat me to the punch on the latest developments at Virginia Commonwealth University (see “A Tale of Two Outrages.”) Rather than repeat the points he made, I want to amplify his comments about the “neo-Stalinist” atmosphere at VCU. I wouldn’t choose that particular, highly loaded adjective to describe the Trani administration — nobody’s been hauled off in the middle of the night and executed — but there is big, festering problem that must be dealt with.

    By way of background: I criticized Style Weekly magazine last month in R’Biz for publishing an article that gave breathless credence to fears expressed anonymously by VCU faculty members and researchers that the administration would retaliate if they openly expressed their objections to the controversial contracts with Philip Morris USA. Style noted that “senior people” at VCU had left because of the Philip Morris controversy but did not identify them. The weekly failed to present any other evidence that the dissidents’ fears were grounded in previous VCU actions.

    Well, I owe Style an apology. Peter’s subsequent reporting turned up the fact that one senior person (not “people”) at VCU — former vice president of research Marsha Torr — did depart in a controversy over Philip Morris a few years ago. And today we read in the Times-Dispatch that VCU officials made “improper threats” in an unrelated investigation into a degree improperly given then-Richmond police chief Rodney D. Monroe.

    The controversy over Monroe’s degree erupted into a full-fledged uproar when two prominent VCU faculty members resigned their senior administrative positions in protest earlier this week. Robert D. Holsworth, a noted Virginia political commentator, stepped down as dean of the College of Humanities and Sciences, and Michael D. Pratt resigned as interim director of the school of government and public affairs. As Karin Kapsidelis reports for the T-D, the VCU board will take up allegations contained in letters written by two of the four senior officials — presumably Holsworth and Pratt — that “some improper interviewing” took place during the Monroe-degree investigation.

    Kapsedelis quotes Dan Ream, president of the faculty senate, as saying that there were “improper threats made to potential tenure. … You don’t threaten tenure.”

    Well, if VCU officials can threaten tenured professors, non-tenured professors and research staff cannot be blamed for being skittish about expressing their concerns publicly about the Philip Morris contracts. Add to this latest development the fact that the task force assigned to study the university’s research contracts and recommend new guidelines is chaired by Francis Macrina, the vp of research whose underlings negotiated the contracts, and there is every reason for outsiders to wonder about the integrity of the process.

    VCU is the state’s largest, fastest-growing university, and it’s a pillar of the Richmond economy. VCU is an engine of economic development, critical to the growth of the life sciences sector in the region. Anyone who wants to build a more prosperous, livable and sustainable Richmond region needs to take an interest in what happens at VCU.

    As Peter rightly asks in the context of this dual controversy, if William & Mary alumni were outraged by the culture-war antics (my word, not his) of President Gene R. Nichol, where are Richmond’s community leaders and VCU alumni? Why aren’t they expressing outrage — or at least concern — about events at VCU that go to the heart of academic and research integrity? It’s a fair question.


  • A Tale of Two Outrages

    The drumbeat of bad news continues at Virginia Commonwealth University. The latest is that four top officials have resigned as part of the controversy over former Richmond Police Chief Rodney D. Monroeโ€™s improperly awarded VCU undergraduate degree.

    According to news accounts, one of the reasons for one of the resignations was that when VCU officials investigated the Monroe degree, threats may have been made that tenured professors might lose their tenure.

    Wow, thatโ€™s pretty strong stuff that stabs at the heart of academic freedom.

    But I can believe it. When I spoke with dozens folks in the VCU community for my reporting on another scandal, the erroneously secretive research contracts VCU entered into with Philip Morris USA, I constantly heard of the neo-Stalinist atmosphere at VCU. Faculty were afraid their e-mails were monitored and used their cell phones, instead of university lines, to communicate. After all the contracts that VCUโ€™s vice president for research now says are flawed stipulated that any discussion or inquiry of the two research deals had to be reported to Philip Morris (Big Brother) immediately.

    So, I keep asking myself, whereโ€™s the outrage? At least the outrage on my outrage-meter that goes as high as that involving Gene R. Nichol, the former president of another state school, William & Mary, who ran afoul of Virginiaโ€™s right wing thought police and was hounded out of office.

    Nichol was a highly regarded legal scholar who had taught at law schools in Colorado and North Carolina. He also was a liberal and an activist with the American Civil Liberties Union. Nichol did a lot of good at W&M by upgrading the schoolโ€™s financial aid program to reach more minority and poor students and had to deal with demands by the NCAA that W&M drop the feathers from its logo because they might offend Native Americans.

    Then, Nichol really stepped in it by having a cross removed from W&Mโ€™s chapel with orders to display it when Christian-related activities were taking place in the structure. That set off howls of rage from the โ€œChristiansโ€ in Virginiaโ€™s right wing community even though there are Jews, Muslims, Buddhists, etc., who attend the state-funded school and might find the implied religious bias of the crucifix offensive. (And please, dear readers donโ€™t come after me for not understanding your version of โ€œChristianity.โ€ I am a former altar boy who had it all drilled into him by the Jesuits and whose greatly-respected uncle was a Catholic priest who spent his life working with the poor.)

    The cross thing really brought out the yahoos. One was Jim McGlothlin, an alumnus who made his zillions ripping coal out of the ground. Miffed at Nichol, he withdrew a $12 million donation.

    Now back in my day, my school would have told McGlothlin where to stick it. But not W&M. They whimpered and scampered and howled. The right wing thought police went on alert and the ouster began. It wasnโ€™t helped when Nichol, correctly pointing to academic freedom, did not force out a sex worker exhibit at the school. After all, this isnโ€™t Liberty University or even Georgetown where one might not expect such as show.

    It was enough, however, to do Nichol, in. He resigned and left, leaving W&M for the worse.

    Move on over to VCU. Now there you have a far more serious situation where academic freedom seems to be getting trampled again and again. Rules were bent to allow Police Chief Monroe to win a degree in ways not permitted to your ordinary 21-year-old. But then, Monroe was tight with Richmond Mayor Doug Wilder and, by extension, with VCU President Eugene Trani. Ditto tobacco research. After weeks of dodging the issue, abetted by Richmondโ€™s local rag of a newspaper, Traniโ€™s junta finally admitted that the secrecy aspects the tobacco contracts were wrong.

    What about this reign of fear that wafts over VCUโ€™s two campuses? Thereโ€™s an awful lot of smoke. And this is serious stuff, not some parlor debate about a crucifix in a public school. But then, Nichol had โ€œliberalโ€ tendencies and he had to be targeted and smeared and ousted as if it were the days of Joe McCarthy in the 1950s.

    Peter Galuszka


  • Virginia’s Vulnerability to Gas Price Hikes

    Oil prices have backed off from their recent highs, and I would not be surprised to see the price tumble back to $100 per barrel, maybe even lower, as speculators flee the oil futures market. But let no one be deceived: A new, higher plateau has been established for the price of oil. Demand continues to grow in developing countries, and cheap-to-access oil is being steadily replaced by expensive-to-access oil. I’m not one of those who frets that the world will “run out of” oil any time soon. But I can plainly see that petroleum will only get more expensive.

    Unfortunately, I see little evidence that Virginia’s politicians peer past the short-term pain at the gas pump experienced by their constituents who — because the politicians insulated them from economic reality in the past — have failed to adapt to higher energy prices and, consequently, are paying a bigger price for their energy vulnerability than they would have otherwise.

    As much as public policy has failed us here in Virginia, we have have plenty of company. A recent report by the National Resources Defense Council finds that Virginia is somewhat less vulnerable to rising oil and gasoline prices than other states. In other words, many states do worse.

    โ€œFighting Oil Addiction: Ranking Statesโ€™ Oil Vulnerability and Solutions for Changeโ€ ranks the states on the percentage of income spend on gasoline. Mississippi is the most vulnerable: Residents spend 8 percent of their income on gasoline. Connecticut, where residents spend a little more than 3 percent, is the least vulnerable.

    Virginia is in the middle of the pack, rated 30th least vulnerable: 5.13 percent of our income goes to gasoline. We rank better than the national median not because we are especially conservation minded, however. Because we have higher-than-average incomes, our gasoline expenditures constitute a smaller percentage.

    Stewart Schwartz, director of the Coalition for Smarter Growth, piggybacks on the NRDC press release with this quote:

    The economic security of Virginia families and our Commonwealth will depend on greater energy efficiency in our buildings and communities. Since buildings and transportation constitute 75% of our energy use, green, efficient buildings in walkable, transit-oriented neighborhoods will be the best way for Virginia to be more energy efficient and help families save money. More than ever, smarter growth for Virginia is an economic imperative.

    There should be vigorous debate on how we achieve “smart growth.” Should we rely upon market mechanisms, subsidies for mass transit, top-down land-use changes, or some mix of each? As readers of Bacon’s Rebellion know, I favor market solutions to the greatest extent possible. The NRDC praises states that support biofuels, state-sponsored R&D, mass transit and other forms of government activism.

    Whichever approach you prefer, we’d be fools to do do nothing — perhaps in the blithe expectation that some miraculous technology will rescue us. Vehicles with superior gas mileage are surely coming. But we’ve been waiting for the miraculous technology rescue since the 1973 Arab oil embargo, and it still hasn’t arrived yet. Our energy economy is so complex, and the turnover of capital stock is so slow, that the miracle technologies will take many years, perhaps decades, to work their magic. Until then, Virginians will pay at the pump and suffer eroding standards of living.


  • Construction Begins on Beltway HOT Lanes, Questions Linger

    Fluor Corporation and Transurban (USA) Inc. formally broke ground on the Capital Beltway HOT lane yesterday. Patrick Flaherty, head of Fluorโ€™s infrastructure business, touted the project as a model for similar partnerships nationally. A press release from the P.R. firm for the project reminds readers of the benefits of the public-private partnership:

    • Fourteen miles of HOT lanes – two new lanes in each direction – from the Springfield Interchange to just north of the Dulles Toll Road;
    • Replacement of more than $250 million of aging infrastructure, including more than 50 bridges and overpasses;
    • Upgrades to 11 key interchanges, including improved connections at I-66 and three new access points into the Tysons Corner area;
    • Construction of more than 70,000 linear feet (13 miles) of new sound walls to replace current 30,000 feet of protection.

    The ground-breaking appears to be stimulating closer public scrutiny than the project ever received when it was still being negotiated. Bacon’s Rebellion raised questions two weeks ago about covenants that would restrict the Virginia Department of Transportation from making improvements that might siphon toll payers away from the Beltway. (See “The Capital Beltway HOT Lane Deal: Did the Kaniacs Give Away the Store?“)

    Then on Sunday, Eric Weiss with the Washington Post wrote an article focusing on financial penalties that would kick in if the percentage of carpoolers exceeded 24 percent of the traffic on the HOT lanes — a provision that could cost the Commonwealth $1 million a year.

    Barbara Reese, deputy transportation secretary and a key negotiator on the deal, said the subsidy would kick in when the HOT lanes are at maximum capacity for more than 30 minutes. At that point, the state is liable for every 15 minutes that the HOT lanes are at maximum capacity for that day. Wrote Weiss: “She said the estimated $1 million-a-year liability exposure to the state seemed reasonable to state officials. She acknowledged, however, that the spike in carpooling and transit use could increase the state’s liability, but officials said they could not estimate by how much.”

    Here are the higher-level questions: What performance standards are built into the contract? What levels of service must be maintained? Will the HOT lanes be optimized for providing mobility for the maximum number of people — or for generating the most toll revenue?

    The project very well could become a model for the rest of the country, as Flaherty suggests. But we won’t know if it’s a model to be emulated or one to be avoided until we have more transparency regarding the deal that the state cut with the private operators.

    I’m a big proponent of the private sector playing a larger role in building Virginia’s transportation infrastructure. But there is no inherent reason that VDOT couldn’t build the HOT lanes and administer them to optimize the public benefit. Indeed, the public may reject future public-private partnerships if fears persist that the deals are negotiated for the benefit of the private operators and/or the political class rather than for the benefit of the taxpayers and the public. The full contract needs to be made public.


  • Appalachia, Pharmacists and Economic Development

    As a follow-up to my pessimistic report on the economic future of Southside and Southwest Virginia, I thought it worthwhile to add a codicil on the University of Appalachia College of Pharmacy, located in Buchanan County, which appears to be a very productive deployment of the region’s scarce community development resources.

    According to Frank Kilgore, an occasional contributor to the Bacon’s Rebellion e-zine, 67 students graduated with pharmacy degrees this May. Two months after graduation, 97 percent of them had found employment — 79 percent of whom had taken jobs in Appalachia serving rural populations in Virginia, West Virginia, Kentucky, Tennessee and West Virginia.

    The pharmacy college contributes to regional economic development in two ways: (1) it provides a supply of pharmacists willing to practice their profession in central Appalachia, a region that is otherwise under-served by pharmacists, and (2) it keeps the economic activity of providing the educational services in the region. Were it not for the college, would-be pharmacists would have to earn their degrees in Richmond, Chapel Hill or wherever, exporting hefty sums on tuition, room and board to those communities.

    This strikes me as a highly productive use of local resources, generating a high return on investment both socially and financially. The College of Pharmacy could well serve as a template for other professional schools that fill the void in professions which many poor and isolated communities find themselves unable to fill. (For the record, I am less sanguine about the law school in Grundy. Locals insist the region needs more lawyers. I’m dubious.)


  • My Lunch With Big Oil

    Things are going very, very, very well for my secret source, Mr. Big Oil. At our liquid lunch recently, he explained to me how offshore drilling in Virginia is a side show at best.

    No one knows how much oil is really out there. Existing estimates show that if all the oil off the East Coast were tapped, it would last the U.S. maybe six months.

    What will Virginia really get out of it? Who knows, despite the pandering of prominent state Republicans and President Bush’s call to end a drilling moratorium that has lasted nearly three decades.

    Mr. Big Oil points out that Virginia will actually get little from any projects because of the way royalties and littoral boundaries are set up. One wonders anyway why there hasn’t been a significant oil project in the state since the 1950s. And if anything actually goes today, it won’t start operations until maybe 2020. Who knows what the energy demand picture will look like then?

    The point, Mr. Big Oil says, is to get something, anything, off the East Coast to drive a spike through the heart of the moratorium so Big Oil can concentrate where they really want — namely Alaska, California and the Gulf of Mexico. For the real skinny, read my column in Bacon’s Rebellion.

    Peter Galuszka


  • Economic Development Triage

    Some truths are just too hard for politicians to speak: There are some things that constituents refuse to hear. That’s why we have blogs.

    One of those truths here in Virginia is that Southside and Southwest Virginia are experiencing an irreversible decline that cannot be halted as long as current economic trends and development policies hold. This is not a reflection upon the earnestness, work ethic or moral worthiness of the people of those regions. It’s just the way it is.

    I developed that theme in two recent blog posts, which I’ve knitted together in a single piece, “No Salvaging the Mill Towns“.) If you haven’t read the blog posts yet, skip them and read the column. If you have read the blog posts, you might revisit the column anyway: It states the case more lucidly.

    The occasion for these observations is a report by a blue-ribbon panel that has surveyed the handicraft of the Virginia Tobacco Indemnification and Community Revitalization Commission after 10 years and $400 million parceled out over 900 projects smeared across the region. The panel recommends adopting an “investor” approach to disseminating funds rather than a grants approach, in which funds are doled out to every town, city and county throughout the region. Likewise, the study group recommended making fewer micro grants under $100,000 and concentrating on projects that offer potential to transform the two regions.

    As Heinz Guderian, the theoretician behind the Wehrmacht’s WWII blitzkrieg tactics, famously said (in German, of course), “Kick ’em, don’t splatter ’em.” In other words, if you want to achieve a breakthrough, concentrate your resources.

    Fortunately, community leaders in Southwest Virginia are getting the picture. One reader has sent me a widely circulated letter written by Barnie Day, a Patrick County community banker, board member of the Tobacco Commission and former General Assembly delegate (and former Bacon’s Rebellion columnist) who, by speaking the hard truth, no doubt has transformed himself into political paraiah.

    “We have fertilized and watered the seeds of our own failure,” Day wrote, “with how we have chosen to structure and govern ourselves, with how we have chosen to allocate — in basically a ‘might is right’ fashion — the spoils of this endeavor. … Not only has [this approach] pitted region against region and local government against local government, but in many cases it has fostered spending for spending’s sake — spending without impact — spending sometimes based on little more than availability of funding.”

    As Day admits, he argued for and — “God forbid” — actually received funding for a “covered bridge festival.” The Tobacco Commission has lavished hundreds of millions of dollars on sewer lines, shell buildings, community centers, institutes, partnerships and initiatives of all sorts. “But what nags at me is this question: “Will any of them make a 100-year difference?”

    In my column, I argue that the problem runs even deeper. The dispersed, low-density settlement patterns of Southside and Southwest Virginia — small towns, tens of thousands of homestead scattered along country roads — are not sustainable (a) in an age of energy scarcity that drives up the cost of gasoline and (b) in a Knowledge Economy in which the “clustering force” rewards companies for locating near large pools of skilled labor.

    If there’s any hope for the region, it’s in conducting economic-development triage and concentrating resources into a handful of urban areas — Danville, Bristol, perhaps Martinsville — that are large enough to compete for human capital. Such a policy would be political suicidal for any community leader to advocate. But the hell of it is, the strategy of spreading around the tobacco booty to placate local politicos is doomed to failure. Southside and SW Virginia get only one chance at this: They have to do it right.


  • Torches Held High and Pitchforks Stabbing the Sky

    It’s summer, the air is sweltering and tempers are flaring. A most propitious moment for the latest edition of Bacon’s Rebellion… the July 21, 2008, edition. (Never miss an issue, have the e-zine mailed directly to your in-box. Sign up for a free subscription.)

    Here are this week’s manifestos:

    No Salvaging the Mill Towns
    Ten years and $400 million has failed to transform the economies of Southside and Southwest Virginia. Until leaders confront dispersed human settlement patterns, they will never address root causes.
    by James A. Bacon

    Thank You, Joe
    Former state Senator Joe Gartlan left his fingerprints all over the Code of Virginia and boosted the future of the Commonwealth.
    by Doug Koelemay

    Rocky Mountain Low
    A WaPo story highlights the threat of converting Montana wilderness into masses of McLodges. But there’s more to the story: Developers are destroying the land they exploit and, with rising energy prices, are creating the ghost (non) towns of tomorrow.
    by EM Risse

    Democrats for (School) Choice
    Putting the interest of the nation’s children ahead of those of the teachers unions, an increasing number of Dems are supporting school choice.
    by Chris Braunlich

    Summer Sweats
    Tim Kaine looks like a long shot to get the VP nod from Barack Obama. But it’s fun thinking about the what-ifs back in the Old Dominion if the governor were drafted into national politics.
    by Norman Leahy

    My Lunch with Big Oil
    Mr. Big Oil spilled the beans: Offshore oil drilling means bupkis for Virginia. He ginned up the flap here in the Old Dominion to win support for opening up California, Alaska and the Gulf where the big barrels are.
    by Peter Galuszka

    How Tim Kaine Lost his Mojo
    Tim Kaine campaigned as a liberal who would oppose tax increases. He has governed as a moderate who has advocated tax increases. Many Virginians feel betrayed.
    by Frank Kilgore

    Nice & Curious Questions
    The Developer’s Daughter: Road Names in Virginia
    by Edwin S. Clay III and Patricia Bangs


  • Virginia’s Civil Rights Monument

    I know it has been mentioned, but don’t know of a separate post here for Virginia’s Civil Rights monument.

    I look forward to seeing it when I am Richmond.

    This $2.6 million memorial is worth every penny. It’s exactly what the Commonwealth should do to elevate and perpetuate the best of our civilization. From one generation to the next.

    I’d love to know what was it in the education, experience, family or faith of Barbara Jones that lead her – at age 16 – to lead the walkout at Moton High School in 1951. How remarkable a young woman.

    What a proud legacy for all Virginians.


  • “Rural” Economic Development in the Era of Energy Scarcity

    As noted in the previous post, the Tobacco Indemnification and Community Revitalization Commission has spent more than $400 million over the past decade — and has the capacity to spend $60 million annually for many years to come — in promoting economic development in the tobacco-growing regions of Southside and Southwest Virginia.

    The original hope of those who set up the fund was to find a way to “transform” the economy of Virginia’s poorest regions, to pole vault the hamlets and mill towns into the Knowledge Economy Ireland style. Towards that end, the Commission has invested heavily in making high-speed Internet access more accessible and on a slew of educational initiatives. But the Commission also has spread around a lot of money on local, patronage-like projects as well as incentives to entice traditional manufacturing investment. A decade later, the region has diversified its economic base to some degree, but still remains highly dependent upon light manufacturing and resource extraction.

    It is politically suicidal for the leaders of Southside and Southwest Virginia to ask the question that must be asked, so I will ask it: Are the economies of Southside and Southwest Virginia even salvageable? Has the the Commission squandered hundreds of millions of dollars keeping the region hooked on its old economic model? Would it make any difference even if the Commission changed its strategic emphasis, as a recent report suggests, to education?

    Here’s the problem: The United States’ competitive advantage in the global economy resides in knowledge-intensive industries that leverage productivity and innovation. To compete, businesses need employees with high levels of skills and education. To recruit a workforce, successful businesses must locate in proximity to large labor pools — i.e., large metropolitan areas. (The only partial exception to this rule is that some corporations are willing to locate near university towns that provide access to unique knowledge sets.)

    Not only are businesses biased towards locating in large metro areas, but many cutting-edge businesses locate in particular metropolitan areas where they can join industry clusters in which highly industry-specific industry knowledge can be shared.

    Not only do Virginia mill towns — like all mill towns across the United States — lack the size to create knowledge-intensive labor pools… Not only do they lack the business clusters that support industry-specific innovation, for the most part they lack the amenities required to recruit, retain and remunerate highly educated employees. As Richard Florida observes, the creative class is heading where the wealth-generating opportunities are — and they’re not in tiny mill towns.

    The Tobacco commission simply has not come to grips with this problem. But even if it did, even if the commission followed the advice of its blue ribbon study panel and invested more heavily in education, it wouldn’t make much difference. The vast majority of newly educated residents of Southside and Southwest simply would emigrate to metro regions where they could utilize their skills and make more money.

    I would add one additional perspective that the Tobacco Commission has steadfastly refused to consider: the critical importance of human settlement patterns. Virginia’s mill towns support a highly dispersed population — living in small towns, strung along country roads, in remote cul de sacs — that entail long commutes to manufacturing facilities located in industrial parks with highway access. That pattern was affordable when energy was cheap. But that low-density pattern is crippling to local living standards in an era of expensive energy. To my knowledge, the commission has given no thought whatsoever to encouraging more compact, less dispersed settlement forms.

    Furthermore, the low-density pattern of 50-acre farmettes, a few head of cattle and a small patch of tobacco, which factory workers supplemented their wages with farm income, has no allure to the creative class. (Urban refugees who dabble in farming seem inclined toward horses and vineyards.) To have any prayer of attracting/retaining an educated population, the Commission must pay more attention to creating the kinds of communities where educated people want to live.

    Politically, the Tobacco commissioners can never throw up their hands and say, “We give up. All is lost.” But they should heed the advice of their blue ribbon commission to stop frittering resources on tiny patronage projects that support a few jobs temporarily but fail to achieve lasting transformation. The regions’ only hope is to concentrate resources in creating economically viable magnets within the region. It is possible — not likely, but possible — that cities and towns like Danville, Martinsville and Bristol/Abingdon have sufficient size with sufficiently large labor pools of skilled, educated labor that they could be attractive to businesses seeking respite from the high costs and dysfunctional human settlement patterns of the large metro regions.

    The strategy of supporting “urban” economic activity (primarily manufacturing) in dispersed, low-density human settlement patterns across thousands of square miles becomes less and less viable with every increase in the price of gasoline and the steady migration of the creative class to large metropolitan areas. Until the Tobacco commission abandons that delusion, its cause is futile, and its leaders peddle false hope to the people they serve.


  • Salvaging Southside and SW Virginia

    Nearly a decade has passed since the passage of the Master Settlement Agreement which divvied up more than $200 billion in cigarette company proceeds between the 50 states. Virginia chose to dedicate more than half of its share — some $770 million so far — to the tobacco-growing regions of Southside and Southwest Virginia whose inhabitants were most hurt economically by the decline of the tobacco cultivation.

    A big chunk of those funds were paid directly to owners of tobacco allotments, but $432 million has been funneled into development and revitalization projects for the economically lagging regions. The commission still has a $1 billion endowment capable of passing out $60 million a year or more, more or less forever. A decade later, the questions arise: Has the money been well spent and how can the funds be better spent in the future?

    John Reid Blackwell raises that question in the Times-Dispatch today, drawing heavily upon a report recently issued by a blue ribbon panel tasked with reviewing the “structure and operations” of the Tobacco Indemnification and Community Revitalization Commission, the group that has dispensed the tobacco allotment funds. The commission has spent millions following the conventional economic development play book: upgrading the region’s telecommunications infrastructure, attracting and retaining manufacturing jobs, building educational capacity and supporting entrepreneurial initiatives.

    Viewed within the narrow parameters assigned to it, the panel made some sound observations and recommendations.

    Given the existing state of the Southside and Southwest economies, it is fair to ask whether the expenditure of over $400 million by the TICR since the year 2000 on โ€œregional transformationโ€ projects has had the desired transformative effect on the regions. …

    Despite this spending, population in the region continues to decline, wage rates still lag behind the rest of the state, there is persistent high unemployment and poor educational attainment is still endemic.

    The panel suggests, among other things, tweaking administration of its tobacco-funded endowment, routinely updating the commission’s strategic plan and streamlining the governing organization. Some some proposals go deeper and may well encounter some resistance.

    The panel recommends adopting an “investor” approach to disseminating funds rather than a grants approach, in which funds are parceled out to every town, city and county throughout the region as commissioners respond to “grass roots initiatives.” A foundation/endowment approach would view its spending plans as “investments” that continue to pay off well into the future. Along the same lines, it should fund fewer micro grants under $100,000 and more investments that offer the potential to “transform” the region. The panel also calls for collecting data and measuring outcomes.

    Finally, and most importantly, the panel recommends investing more strategically in education. “The [panel] believes that education from preschool to high school and beyond high school is the future of Southside and Southwest Virginia. No miles of highways constructed, no tens of thousands of feet of water or sewer lines laid, nor any number of industrial park buildings erected can change this.”

    Good recommendations all. The report provides excellent advice for ensuring that the tobacco endowment money is better spent. But the panel did not ask the really big question, which was outside the scope of its study mandate: Are the Southside and Southwest Virginia economies even salvageable in the Knowledge Economy. Is the Tobacco Commission fighting an unwinnable battle? Is the Tobacco Commission, in effect, spending hundreds of millions of dollars rearranging the deck chairs on the Titanic? I’ll tackle that issue in the next post.


  • Virginia and the Coal Boom

    It’s nice to know that, as soaring energy prices reallocate wealth globally, not all of the redirected flow of wealth ends up in the hands of Saudi princes and Houston wildcatters. While we Virginians are paying at the pump and paying at the electric meter, at least a few amongst us — owners of and workers in Virginia’s coal mining companies — are seeing some benefit.

    The biggest business news story in Virginia of the past week, largely ignored outside of Southwest Virginia, was the decision by the board of Alpha Natural Resources to accept an offer by Cleveland Cliffs Inc., to buy the Abingdon-based coal mining company for $10 billion in cash and stock. If the merger goes through, it will create a natural resources giant with assets in iron and coal in North America, South America and Australia.

    Alpha Natural Resources didn’t even exist 10 years ago. Michael Quillen, a life-long veteran of Virginia’s coal mining industry, built the company in the early 2000s by assembling cast-off coal properties that no one else wanted. As he told me when I interviewed him for VA Newswire back in 2004, there was no better time to buy than when everyone else wanted out. He foresaw the inevitable increase in electric consumption, especially in China, and had faith that the market would turn.

    And turn it has. Coal prices have shot through the roof. Profitable back in 2004, Alpha Natural Resource is super-profitable now, and it’s investing heavily in expansion. The company’s shares, which sold for $20 in 2005 are now going for $95, as investors anticipate the likely closing of the Cleveland Cliffs deal.

    Of course, only a sliver of that $10 billion will trickle down to the inhabitants of SW Virginia. The big beneficiaries are investment firms in New England and, surprisingly enough, Bank of America, which own most of the stock. CEO Quillen, who owns 370,000 shares (according to the March 2008 proxy) won’t do too shabbily. The deal should make his cut worth about $35 million.

    Yeah, I remember Quillen when he was just a working stiff… Well, maybe not a working stiff, but just the number two guy for a midsized coal company, Paramont Coal, a non-union outfit that kept running during the UMW strikes of the early 1980s. I was a reporter for the Roanoke Times, and Quillen hauled me around from one of Paramont’s operations to another in his 4-wheel drive, weaving past placard-waving picket lines and watching out for jackrocks (mean, spiky things made of nails and shaped like toy jacks that picketers threw in the road to give coal trucks flat tires.) Maybe it’s just my imagination more than 20 years later, but I’ll swear he kept a shotgun in the back rack.

    Other big winners here in Virginia include:

    • Massey Energy, a publicly traded company headquartered in Richmond.
    • James River Coal, another publicly traded company headquartered in Richmond.
    • Norfolk Southern, which with CSX enjoys a duopoly in hauling coal, extracts an outsized share of price fetched by coal on the global market
    • The coal-loading piers in Hampton Roads, which are handling booming exports.

    I haven’t kept track of him for the past few years, but another beneficiary should be E. Morgan Massey, the former Massey Energy CEO who retired then pioneered U.S. investment in Chinese and Venezuelan coal mines. I’m not sure if he spends much time in Richmond anymore. He’s got nice spreads down in Florida and the Bahamas.

    AMVEST Corporation, based in Charlottesville, could be another. Founder Carl Smith (for whom I worked briefly some two decades ago) created a highly profitable enterprise based on coal mining in Virginia and West Virginia. Carl, for whom the University of Virginia football stadium is named, died a few years ago, and AMVEST was sold last year to Consol Energy of Pittsburgh. The administrative offices in Charlottesville might have moved as well — I haven’t kept track.

    Sad to say, the people who actually live in the coalfields aren’t seeing much of this vast wealth creation. They’re better off to be sure. After years of contraction, the coal industry is back in job-creation mode, and wages and benefits are stronger. But the region doesn’t seem to be spitting out a new generation of home-grown entrepreneurs like the industry did back in the 1970s coal boom. Coal mining is a big corporate game now, requiring lots of capital and big engineering staffs to sort through all the environmental and safety regulations. There isn’t any room anymore for the plucky guy with a bulldozer, a backhoe and a plot of land like there was 30 years ago.

    Back in the ’70s and ’80s, Virginia’s bootstrap coal barons made quite an impression down in the lowlands. They donated huge sums of money to state gubernatorial candidates. Every candidate had to travel down to Bristol and kiss the ring of Jim McGlothlin, founder of the United Coal Co. Since then, McGlothlin sold United Coal and invested his money in natural gas and golf courses, among other things. Although he remains involved with William & Mary, where he went to law school, he keeps a very low profile in Virginia these days.

    While the distribution of coal wealth was always unequal, at least the “coal barons” kept the politicians in Richmond focused on the needs of the coalfields back then. There’s really no one around to stand up for the region today.


  • Kermit the Frog Notwithstanding, It Is Easy Being Green

    Many people have the wrong idea about โ€œgreenโ€ houses. They think of Mongolian-style yurts, or solar-mounted rooftops, or kitchen counters made of recycled glass. But going green rarely entails anything that exotic or expensive, says Karl Bren, executive director Earthcraft Virginia. โ€œItโ€™s just a matter of paying an attention to the details. Like making sure the [HVAC] ductwork isnโ€™t leaking.โ€

    Green building doesnโ€™t have to be expensive, stressed Bren and two other panelists at a Wednesday panel discussion hosted by the Richmond branch of the Urban Land Institute. Anecdotal evidence backed up by formal studies generally conclude that erecting commercial and residential buildings according to green standards costs only 1 percent to 3 percent more than conventional building. Those costs can be recouped many times over in the form of lower energy bills, lower water bills, lower maintenance and improved health.

    An up-front expenditure of an additional $3 to $5 per square foot can yield $50 to $60 in savings over a 20-year period, said Sandra Leibowitz Earley, a principal with Sustainable Design Consulting. The more effort a developer makes early in the project on setting goals and assembling an integrated design team, she added, the more favorable the economics look.

    While green, or sustainable, building consumes more up-front resources in design costs, it can shave expenses by reducing the size of HVAC systems, and it reaps big savings in lower utility bills. By better controlling moisture and mildew, green buildings also reduce the incidence of asthma โ€“ now the leading cause of admittance into emergency rooms, Bren said.

    Whether your goal is energy independence from foreign despots or reduction of the carbon dioxide emissions implicated in global warming, switching to green building standards must be a central element of national energy policy. According to Earley, buildings account for 37 percent of all U.S. energy use, 12 percent of water consumption, 40 percent of non-industrial waste and 35 percent of CO2 emissions. As an aside, buildings also are far more polluted (in ways that effect humans) than the outdoors.

    The Richmond region is five to seven years behind more progressive regions of the country in embracing green building techniques, the panelists said, but the message is catching on.

    Brenโ€™s not-for-profit enterprise provides a certification process, similar to LEED (Leadership in Energy and Environmental Design), for residential housing. Earleyโ€™s Richmond-based company provides sustainable design services to builders and developers โ€“ mainly in the Washington area but in the Richmond region as well.

    The third panelist, Lynn J. Rogien, is the green project manager for W.M. Jordan, one of the regionโ€™s largest construction companies. When viewed on a life-cycle basis, green commercial buildings offer superior rates of return for investors, he said. While up-front design costs and construction costs are marginally higher, he said, utilities are significantly lower. So are O&M (operations and maintenance costs). And hereโ€™s the kicker: Developers can charge higher lease rates.

    โ€œThe market demand is changing,โ€ Rogien said. โ€œDevelopers have discovered that they can make a higher return on investment when they make a green, or high-performance, building. Our country is in a paradigm shift. Weโ€™re changing the way we do business construction.โ€

    (Cross-posted from R’Biz.)


  • Kaine Pushes State Telework Policy

    A journey of a thousand miles starts with a single step. Gov. Timothy M. Kaine’s action yesterday in expanding the state’s telework policy to the 120 employees working in the Governor’s office and cabinet is no more than a single step. But it pushes the Commonwealth of Virginia along on a very important journey.

    “Rising fuel prices, the escalating cost of commuting to work, worsening traffic congestion and reduced air quality compel a change in the business culture of state agencies,” Kaine said in a press release. “Telework reduces energy consumption, both in the amount of gasoline used for daily commuting and in office building energy costs. This policy provides a timely opportunity to create a culture of conservation within the state workforce, which can serve as an example for Virginia businesses in the private sector.”

    Well, technically, Kaine’s announcement wasn’t the first step. But the governor’s announcement serves as a prod to the private sector to make similar accommodations.

    According to the press release, more than four dozen employees of the Cabinet and Governor’s Office had already started teleworking or utilizing alternative schedules for part of their work week. Nearly 23,000 state employees have been ascertained to be eligible for telework, based on the nature of their work — and 5,000 are actually engaged in it. The Department of Taxation alone has 591 teleworking employees.

    Another 24,000 state employees are eligible to work alternate schedules such as 10-hour, four-day work weeks — and 14,000 do.

    Meanwhile, Kaine is asking state agencies to work with their employees to encourage use of alternate transportation. A recent survey indicated 16,218 of Virginia’s approximately 95,000 state employees use some form of alternate transportation โ€“ public transportation, van pools, car pools, even bicycles โ€“ to commute to work.

    These are all positive developments. Kaine should be commended, and the Commonwealth should serve as an inspiration to others who have yet to embrace the possibilities created by laptops, cell phones, PDAs and the like.