Tag Archives: Rural development

Conservation Vs. Solar in Powhatan County

Posted on March 14, 2019 by | 16 comments

Conservation easements don’t just block projects like pipelines, highways and electric transmission lines. As demonstrated in Powhatan County Monday, they can block solar farms as well.

Faced with skepticism from the Powhatan County Board of Supervisors, Cartersville Solar LLC has withdrawn a proposal to build a solar farm on a 3,000-acre tract of property, reports the Richmond Times-Dispatch.

The proposal had encountered opposition from Powhatan residents. Citizens commenting at public hearings cited negative ecological impact on protected wetlands — the only remaining wildlife corridor connecting the James and Appomattox rivers — and on rare and endangered species.

Cartersville Solar had acquired 2,998 acres near the intersection of Cartersville and Duke roads for the purpose of building a solar farm. (The RTD article does not say how much power it would generate.) In November, the Powhatan County Planning Commission voted to recommend denial of the project on the grounds that the proposed use is not consistent with the 2010 Long-Range Comprehensive Plan. Part of the project would fall into an area designed Priority Conservation Area and Protected Land. Continue reading →

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Posted in Agriculture & forestry, Energy, Environment

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Virginia Needs to Up its Game When Talking about “Rural” Development

Posted on October 23, 2018 by | 15 comments

Governor Northam delivers conventional wisdom to rural economic development conference.

Despite the creation of 4,500 jobs in the “rural” portions of Virginia since he took office in January, Governor Ralph Northam told the Virginia Rural Summit yesterday that Virginia needs to do more to stimulate employment in rural areas.

Sounding familiar themes, Northam stressed STEM education, broadband access, and transportation. Twenty-first century jobs such as cyber-security and artificial intelligence require STEM education, the governor said, but young people don’t necessarily need to complete four-year college degrees. For some high-paying jobs, community college and certification programs may suffice. Rural Virginia also needs broadband access — within ten years, he said, as reported by the News Virginian. He also touted a recently unveiled, $2 billion plan to upgrade Interstate 81.

This is a familiar grab-bag of remedies, and it reflects the safe conventional wisdom on how to approach “rural” economic development. While improved broadband access indisputably would help “rural” economic competitiveness, it’s not clear at all that educating youth for “21st century jobs” or reducing congestion on I-81 will accomplish anything useful for “rural” communities. Northam’s address — like most of the discussion we hear — overlooks some unpleasant realities.

Let’s start by identifying what former blog contributor EM Risse refers to as a “core confusing word.” Near the top of the list of most obfuscating words used by planners and politicians is “rural.” It is impossible to have a rational discussion about “rural” development until we understand what we mean by “rural.”

As commonly used by the Governor and others, “rural” refers to most of Virginia outside of the three main Metropolitan Statistical Areas — Washington/Northern Virginia, Richmond, and Hampton Roads. Depending on context, it may or may not include smaller MSAs such as Roanoke, Charlottesville, Lynchburg, Winchester, Staunton/Waynesboro, Danville, Bristol, Blacksburg/Christiansburg, and Harrisonburg. The term probably includes small mill towns such as, say, Galax, Halifax, Pulaski, Rocky Mount, and the former coal camps of Virginia’s “rural” coal-producing counties. However, the only areas we can be absolutely certain the term “rural” encompasses are the vast tracts of sparsely populated farms and woodlands outside the MSAs.

The economic assets and challenges faced by smaller MSAs, mill towns, and farmland/woodlands are very different. Likewise, the realistic expectations we can set vary widely depending upon a community’s particular assets and liabilities. Some key points:

The agglomeration force. The “agglomeration” force in a predominantly knowledge-based economy is incredibly powerful. Knowledge-intensive companies, which include almost all technology companies, gravitate toward urban areas with large, deep labor pools. As is vividly on display in Amazon’s selection process for its massive second headquarters, technology employers also seek urban areas with the kind of amenities — primarily walkable urbanism — that will enable them to recruit from outside the region and then to retain their employees.

We can educate rural, small-town, and small-metro employees to participate in 21st-century knowledge-economy jobs, but they will find few employment opportunities outside the large MSAs. They will migrate to the large MSAs because that’s where the job opportunities are. Investing in educating “rural” young people for “21st century jobs,” whether in an expensive four-year college setting or a community-college setting, effectively subsidizes workforce development for the big, wealthy MSAs. If Virginia wants to create “rural” jobs, it needs to invest in occupations in which rural places and mill towns have a competitive advantage — which is not cyber-security and artificial intelligence.

Light manufacturing. Small-town Virginia continues to enjoy a competitive advantage in attracting light manufacturing, which requires cheap land, low taxes, and a supply of unskilled and semi-skilled labor. The problem is that manufacturing operations are subject to automation, which means that the yield in jobs from landing new manufacturing investment is smaller than in the past. As manufacturing gets more automated, we can expect fewer jobs but higher-skilled workforce needs from new projects. Manufacturing may be an area where an investment in community-college degrees and certifications may pay off — if the training is done in concert with the manufacturing companies to ensure that workers are learning relevant skills. How many manufacturing plants will need employees with certifications in cyber-security and AI, I have no idea. I’m guessing a few, but not many.

Transportation. The congestion on I-81 has virtually nothing to do with “rural” economic vitality. The highway links a string of small MSAs (Winchester, Harrisonburg, Staunton, Roanoke, Salem, Christiansburg, Bristol) and small towns. Just as big MSAs like Washington, Richmond and Hampton Roads have co-opted the Interstate highway system for local traffic, so have the small cities and towns along I-81.

I haven’t seen the plan for upgrading I-81, which has been described as involving widening and other improvements to be financed with some combination of gas tax, sales tax or tolls. But I feel confident about saying one thing: The improvements will be focused on increasing the capacity of the Interstate highway itself. It will not entail any changes to land use patterns or nearby non-Interstate transportation investments. Localities will continue to allow the clustering of development near I-81 intersections in a land-use pattern I call “rural sprawl.” Thus, they will perpetuate the use of the Interstate as a local transportation artery and accelerate the need for more improvements a couple of decades from now.

Rural/mill town/small MSA Virginia has two sustainable competitive economic advantages. One is a lower cost of living, which makes it potentially attractive to retirees who want to stretch fixed incomes. The other is raw physical beauty and access to recreational activities such as hiking, biking, canoeing, kayaking, sailing, ATV trails, and the like. Some communities also can build upon their local historical and cultural heritage. These assets can support retirement- and tourism-related industries. Whether such industries can support existing populations with decently paid jobs is problematic. Many rural/small town communities will have to learn how to deal gracefully with population decline.

Which brings me to a final point: How to deal gracefully with population decline. How do small and sparsely populated localities maintain a tolerable level of services and amenities when the population and tax base is shrinking? Not by subsidizing rural sprawl that drives up the cost of building and maintaining infrastructure. No one in Virginia is talking about this at all. But maybe, instead of squandering scarce resources on pipe dreams, “rural” Virginians and their political champions in Richmond should be giving this question more thought.

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Posted in Economic development

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The Logic Behind Northam’s Plan for Spending the Tax-Reform Windfall

News - Posted on August 28, 2018 by | 15 comments

Finance Secretary Aubrey Layne

The starting point for understanding the Northam administration’s logic behind divvying up the tax windfall from federal income tax reform is the conviction that Virginia cannot count on the personal and corporate tax cuts lasting more than a few years. Democrats may regain power in Washington, D.C., and reverse the tax cuts, or at the very least block any attempt to extend the personal income tax breaks beyond the five years provided in the legislation.

While the tax reforms might survive, explained state Secretary of Finance Aubrey Layne in an hour-long interview with Bacon’s Rebellion Tuesday, political volatility in the nation’s capital makes it unwise to count on an ongoing boost to state revenue, which is estimated to amount to $532 million in fiscal 2019 and $444 million in 2020. It would be irresponsible to expand ongoing state expenditures in the hope that the revenue gusher will continue. Prudence dictates that Virginia allocate the funds to non-recurring programs and capital projects.

There are many possible uses of the money, Layne conceded. Some say give the money back to taxpayers. Some say dedicate the money to school improvements. Governor Ralph Northam prefers initiatives that would benefit mainly rural Virginia: Earned Income Tax Credits for lower-income wage earners and non-recurring investments in broadband, workforce development, and affordable healthcare.

The controversy swirling around the impact of federal tax reform on Virginia finances has created considerable confusion, Layne said. One sticking point is the issue of “conformity” with the federal tax code. When Congress enacted new tax policies in the past, Virginia traditionally has enacted the changes needed to make the state tax code align with the federal code. Congress’ new tax code will require 20 or more significant changes in the Virginia code. Failure to conform is not an option, he said. It would throw state tax collections into confusion at enormous expense to tax payers.

If Virginia conforms and makes no adjustment to tax rates, brackets or deductions, as he expects, the Commonwealth should see a spike in revenue. There has been some controversy over the effect on taxpayers – the impact will vary widely from household to household — but there is no question that, absent any action to return money to taxpayers, the state treasury will be a big beneficiary.

Then comes the question of what to do with that money. Virginia may not spend any revenue from tax year 2018. The tax year is advanced and the state is still awaiting guidance on the details. “There’s a lot we still don’t know,” said Layne. There will be no time to update tax preparers much less modify tax-calculation software such as Quicken. Returning money to taxpayers that year might make sense, although, he added, he’s not advocating such an action.

The 2019 tax year is a different matter. He expects the General Assembly to bring the tax code into conformity in the 2019 session, eliminating the uncertainty, and the Commonwealth will be in a position to start spending money.

Northam wants use the money to help working families in rural Virginian, said Layne. The governor proposes to do that by dedicating about half the windfall to increasing the Earned Income Tax Credit (EITC), a tax refund that would eliminate state income taxes for many lower-income households. The money would flow to lower-income Virginians across the state, but the beneficiaries would be concentrated in rural localities, especially in Southside and Southwest Virginia.

The governor wants to use the other half to fund economic development programs for rural Virginians. A top priority would be to accelerate the deployment of broadband Internet in low-density areas where Internet Service Providers cannot profitably invest. The state needs about $1 billion to make broadband ubiquitous, said Layne. Perhaps the windfall could use public dollars to seed public-private partnerships that could leverage private investment.

Northam also has talked about using the money to underwrite programs for workforce development and education — although Layne conceded that the welter of state workforce training programs is redundant, inefficient and needs fixing — and to improve rural access to healthcare. The priorities are conceptual in nature, and no specific proposals have been advanced. He readily agreed that the state might consider other alternatives such as raising money for Interstate 81 improvements, upgrading the Central State mental health facility, or paying down the pension liability. Northam would consider an alternative to the beefed-up EITC if it would benefit rural Virginia, he added.

Whichever priorities lawmakers approve, said Layne, they should be one-off projects. “I don’t know how we could go to the [bond] rating agencies and use this money for ongoing expenses.”

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Posted in Budgets, Economic development, News, Taxes

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Stay Put, Young Man, Stay Put

Posted on August 17, 2018 by | 29 comments

Source: Commonwealth Institute for Fiscal Analysis

The Commonwealth Institute for Fiscal Analysis has published a useful reminder of how job and wage growth has bifurcated in Virginia — jobs and wages have increased smartly in Virginia’s major metro areas since the recession but have lagged markedly in non-metro Virginia.

The trends, which reflect the larger urban-rural divide nationally cannot be reversed, notes CI, but they can be ameliorated. “State lawmakers have some specific options on the table that could offer an economic development boost to rural Virginia.”

What do all of those options entail? Tax breaks and rural subsidies targeted to helping lower- and middle-income households. Expanding Medicaid. Eliminating the work requirement for receiving Medicaid. A bigger state Earned Income Tax Credit (EITC). State investment in roads, bridges, and broadband. CI doesn’t advocate showing infrastructure money indiscriminately on localities — investments should be “placed based” reflecting the needs of local communities — but the approach is all about subsidies and wealth transfers.

Virginia already has an entity — the Virginia Tobacco Region Revitalization Commission — that has been helicoptering money all over Southside and Southwestern Virginia for a couple of decades now with little discernible effect. The Institute doesn’t articulate what criteria should be applied for dispensing the cash any differently. 

What CI does says forthrightly is that “asking rural Virginians to move to jobs isn’t a solution.” 

Why not?

Americans throughout their history have been moving to areas of greater opportunity. As Horace Greeley famously proclaimed in the 19th century, “Go west, young man.” In the early 20th century thousands of farmers and immigrants migrated to the Central Appalachian coalfields, and when the coal industry withered, they moved on. African-American sharecroppers migrated from Southern rural areas to greater opportunity in the urbanizing North. In the 1930s, Okies choking on the Dust Bowl moved to California. And so it has gone. But for some reason, CI has ruled out moving from rural areas whose mill-town manufacturing economies have been devastated by globalism and automation.”

I have penned innumerable posts on this blog suggesting strategies on how rural Virginia communities can revitalize themselves by selling access to mountains and the Chesapeake Bay, and investing in the kind of amenities that will attract retirees, nature lovers, resort-goers and small entrepreneurs. Are the Virginia mountains any less picturesque than North Carolina’s? Is Virginia’s portion of the Bay any less beautiful than Maryland’s? Why can’t we replicate the economic  success of western N.C. and Maryland’s Eastern Shore?

But even if Abingdon could become another Blowing Rock and Deltaville another St. Michael’s, there is a limit to how many jobs a tourism/resort/retiree economy can support. If our goal is helping people rather than helping regions, then we should encourage people to move to where the jobs are. The single biggest barrier to moving isn’t the lack of Medicaid or insufficient EITC, it’s the lack of affordable housing in Virginia’s major metros.

If we want to build a society around redistribution and the amelioration of poverty, fine, go with the Commonwealth Institute plan. If we want to build a society around jobs, opportunity, and upward mobility then our focus should be on mobility and affordable housing.

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Posted in Economic development, Poverty & income gap

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Virginia’s Competitive Advantage in Green Power

Posted on June 28, 2018 by | 5 comments

Solar power is looking better and better by comparison to wind power, and that’s a good thing for Virginia.

In Germany, a global pioneer of wind power, hundreds of wind turbines are experiencing metal fatigue and other issues as they pass their 20- to 25-year design lives — and they are literally falling apart. Turbines are falling to the ground. Blades are snapping off and flying hundreds of feet. Razor-sharp glass fiber splinters have been documented to have flown 800 meters away. So far, no one has been hurt, but one expert speaks of a “ticking time bomb.” (Die Welt has the story here.)

Problems with an energy-production source often don’t become evident for decades. That certainly was the case with coal and oil. Now, a couple of decades after the widespread deployment of wind turbines, we’re learning about a downside of wind. Compared to Deepwater Horizon-scale oil spills and mountaintop-removal coal mining, flying turbine debris may be small potatoes. But as we think about our energy future, the comparison isn’t between wind and coal or oil — no one is building new coal or oil plants — it’s between wind and solar. The great virtue of solar panels is that they just sit there… except when hurricanes tear them off their mountings. But, then, high winds are a problem for wind turbines, too.

Assuming we can design and test turbines to withstand hurricane-force winds, there will be a place for wind in Virginia’s long-term energy future. Wind turbines work at night, which solar panels do not, so they can partially offset the daily drop-off in solar production. Furthermore, if Virginia taps large-scale wind resources, most turbines will be located offshore. Flying turbine blades are less of a problem when people are 20 miles away. But solar power poses none of these issues, and solar is being rolled out on a large scale today. Right now.

The biggest barrier to solar power in Virginia isn’t technology, it isn’t grid reliability (not at this stage of development) and it isn’t obstruction in Richmond. State law now proclaims large volumes of renewable energy to be in the public interest, and Virginia’s largest utility, Dominion Energy Virginia, is forecasting the deployment of more than 5,000 megawatts of solar in its service territory alone. The biggest barrier is local zoning codes, as we are reminded by a story today in The News Virginian.

The Augusta County Board of Supervisors adopted an ordinance yesterday by a narrow 4-3 vote that allows for the leasing of county land for solar energy use. However, critics said the requirement for a 1,000-foot setback from other residences will discourage solar development. The ordinance also does not allow for solar projects on land zoned industrial.

Roger Willetts, who owns the 44 acres in Stuarts Draft, said his property is taxed $6,000 a year by the county. But he said if a solar farm is allowed, he could generate $60,000 in revenue a year. “I think it is an appropriate use. It won’t employ anybody and it won’t have any bathrooms,” Willett told supervisors.

But under the ordinance approved Wednesday, Willetts’ property would be excluded because solar energy on industrial land is not allowed.

Augusta County, situated in a once-beautiful stretch of the Shenandoah Valley, is not a “rural” county with pristine viewsheds of farms and forests. It is characterized by what I call “rural sprawl” — scattered, low-density residential, commercial and industrial development smeared across the countryside. The viewsheds are despoiled already. Sad to say, solar farms aren’t any uglier than what’s already there.

Everywhere a developer proposes to build a solar farm — arguably the most benign form of energy production known to man — the NIMBYs come out and call for restrictions. NIMBYs don’t want gas pipelines. They don’t want electric transmission lines. They don’t want wind turbines. They don’t even want solar farms.

Ironically, solar power could be a boon to the sluggish economies of Virginia’s non-metropolitan cities and counties. Not only do Virginia’s electric utilities envision more solar, the potential exists for Virginia, long a net importer of energy from other states, to export solar power. Virginia is the southern-most state (excluding the northeast corner of North Carolina) in the PJM electric transmission region. For both political and business reasons, there is an insatiable demand for more renewable power within that 13-state region, which stretches from Virginia north to New Jersey and Illinois. Much of that demand comes from Virginia itself, the nation’s leading location for data centers, because West Coast cloud providers insist upon renewable energy sources. PJM creates a  wholesale market for that region, which makes it easier for energy producers located within it to sell into the wholesale market than it is for energy producers on the outside.

While wind-swept Midwestern states in the PJM region are better situated for wind, Virginia is the best situated for solar. As the southern-most state, the Old Dominion has greater solar energy potential — more sunny days and a latitude closer to the equator — than its northern neighbors. As seen in the table above, Virginia has the highest percentage of sun — defined as the percentage of time between sunrise and sunset that sunshine reaches the ground — as well as the largest number of annual hours of sunlight of any PJM state.

Local government officials in Virginia should think of solar power as an economic development tool. Solar farms provide a royalty-income stream to landowners, and they augment the local tax base. While they create few long-term jobs, they do deliver a burst of short-term construction work. As utilities invest in grid modernization, Virginia can provide solar energy for its own needs — up to 30% of the electricity supply, some say, without diminishing grid reliability — and it can export green power to states to the north. This looks like a once-in-a-generation economic opportunity for rural Virginia. Let’s not blow it!

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Posted in Economic development, Energy, Environment

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Virginia’s Housing Shortfall

Posted on April 17, 2018 by | 14 comments

Underproduction as a % of 2015 housing stock.

Between 2000 and 2015, 23 states fell 7.3 million units short of meeting the housing needs of their growing populations — equivalent to about 7.3% of the housing stock of the United States, according to a new study, “Housing Underproduction in the U.S.,” published by the Up for Growth Coalition.

Although not the worst offender, Virginia was one of the states notable for housing underproduction, falling short of demand by 131,000 units over the 15-year period.

Restrictive zoning and development policies in Virginia and elsewhere have created an imbalance in supply and demand imbalance that has dire economic consequences. States the report:

As people migrate toward cities in search of jobs, education and economic opportunities, the demand for housing in our most populous and economically productive regions has far outstripped the production of new housing units. Due to dramatic shifts in generational preferences and household demographic trends, migration to cities over the past decade are at the highest level since World War II, while housing production has fallen to historic lows. This imbalance has led to rapidly rising housing prices, economic displacement of lower income families and communities of color, and increases in homelessness.

Long-term Bacon’s Rebellion readers familiar our Smart-Growth-for-Conservatives critique of Virginia land use and development policies will be right at home with this study. The report blames “restrictive local development and land use policies that reflect opposition to high-density, multi-family urban growth in favor of low-density, single-family, suburban sprawl.” Offending policies include:

  • Zoning restrictions, which create a shortage of zoned, high-density sites;
  • Escalating and misaligned fee structures, such as impact and linkage fees;
  • Poorly calibrated inclusionary housing requirements; and
  • Lengthy review processes that invite gaming and abuse by growth opponents that can delay projects, create unpredictability, reduce incentives to invest and increase the per-unit cost of development.

Not only do dysfunctional housing markets produce fewer units than would be supported by demand, according to the report, they produce units in the wrong locations. The market for housing in walkable, high-density, high-value urban areas is significantly under-served, while housing continues to be built in lower-density suburban communities with a backlog of land zoned for residential.

Average change in home prices by county, 2000-2016.

The study advocates a loosening of anti-development restrictions to encourage  a “smart growth” model of growth that promotes high-density residential development in major transportation corridors. Benefits will include increasing the housing supply, exploiting existing infrastructure, and increasing tax yields to local governments. Four broad tools would achieve these aims:

  • By-right approval. Establish “by right” high-density residential development in a half-mile radius around a transit station (roughly 5 percent of a metropolitan region’s land area).
  • Impact fee recalibration. Recalibrate impact fees to reflect actual costs of infrastructure service for high-density development.
  • Property tax abatement. Use property tax abatement as a gap financing tool to enable denser and more affordable housing production.
  • Value capture. Establish mechanisms to capture value created through up-zones and tax abatement investments to be used as dedicated funding for a range of housing programs.

Clearly, Virginia has a lot of work to do. We’re not as bad as the West Coast, the Northeast, or even our neighbor to the north, Maryland, but we’re the worst state in the Southeast (excepting Florida). The cost of housing is harming our economic competitiveness and hindering our ability to adapt to economic circumstances.

One of the ways to address rural poverty in Virginia, for instance, would be to encourage unemployed or under-employed workers in small towns and countryside to migrate to metropolitan areas offering better employment opportunities. When local governments in metro areas restrict housing development, they block this migration. Lower-income Americans literally can’t afford to make the move. The result is the worst of both worlds: sub-par employment opportunities in rural areas combined with job shortages in the major metros.

The higher cost of housing also helps explain another phenomenon — the shift of Virginia in recent years from a state from a people-importing state into a people-exporting state.

Finally, as the report alludes to, high housing costs disproportionately impact the poor and minorities. High housing costs, not racism, keep minorities trapped in public housing projects and slums. High housing costs block them from becoming homeowners, building home equity, and accumulating wealth, thus perpetuating income inequality.

Where is the General Assembly on the housing issue? Where was the McAuliffe administration? Where is the Northam administration? AWOL, all of them.

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Posted in Housing, Labor & workforce, Land use & development

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Yet Another Path to Rural Broadband: Other Peoples’ Money

Posted on March 16, 2018 by | 4 comments

The Pamunkey Indian Tribe… soon delivering broadband Internet from a wireless tower near you.

Speaking of bringing broadband Internet to rural Virginia (see previous post)… PamunkeyNet, a business entity of the Pamunkey Indian Tribe, has received approval from the GO Virginia State Board to develop a plan to bring broadband to Gloucester, Mathews, Middlesex and other rural counties along the Chesapeake Bay.

The newly awarded federal designation of the Pumunkeys as an officially recognized Indian tribe is key to the venture. According to a GO-Virginia document, the project would unfold over three years. GO-Virginia, a state-funded economic development initiative, would provide backing for two years. The Pamunkey-owned project would:

  • Create a network of existing and new wireless towers throughout the Middle Peninsula and George Washington region that will have a high-performance backbone between towers and local access radios on each tower to provide affordable business, residential, and institutional broadband Internet service, and will provide Gigbit fiber services on the Pamunkey reservation.
  • Create a fiber-based Technology Corridor on Route 33 between Rappahannock Community College, the planned Telework Center, and the Middle Peninsula Regional Airport.
  • Design for linkage with Hampton Roads, specifically for VIMS and Rappahannock Community College, and anticipate the benefits of linkages to the south with transoceanic destinations from the MAREA landing point, as well as to the north at Ashburn.

Key to making this happen is Pamunkey access to federal funds — “the sole federally designated tribe in Virginia and a conduit to currently untapped federal resources.”

The project also would involve the Middle Peninsula Planning District Commission, the Rappahannock and Germanna community colleges, ten localities, and two electric co-ops.

Bacon’s bottom line: I’ve just finished reading Nassim Nicholas Taleb’s brilliant and confounding new book, “Skin in the Game: Hidden Asymmetries in Daily Life.” Taleb doesn’t have much use for movers, shakers, and pundits (which would include people like me) who don’t have “skin in the game,” that is, people who, if their analysis proves unfounded, walk away unscathed. One commonly encountered group of skinless gamers is people who play with taxpayers’ money.

If you had to make a prediction, which would you pick to have a greater chance of economic success (that is, recovering the funds invested): Gary Wood’s plan (described in the previous post) for the Central Virginia Electric Cooperative to deliver broadband to its 36,000 customers, or the Pamunkey plan to deliver broadband to a geographic area of comparable size?

I would lay my money on Wood. In a word, Wood has put his ass on the line, and he reports directly to a board of directors, whose members represent the interests of the customer-members of the co-op. If the venture fails, co-op members will take a bath, board members will catch endless flack from their friends and neighbors, and Wood’s career likely will be ruined. I would feel even better if he had some of his own money at stake, but there is a clear line of accountability, and the people involved have a lot to gain or lose. Without knowing Wood personally, I feel reasonably assured that he will do everything within his power to make the project a success.

Conversely, it doesn’t appear that anybody has skin in the game in the Pamunkey deal. There is no indication that the Pamunkeys are putting up any of their own money or that they’ll suffer any loss if the project bombs. Basically, a bunch of bureaucrats are playing with other peoples’ money, and if the project fizzles, there is no discernible impact on any of the participating organizations. Furthermore, participation is so broad and so diffused, there won’t be anyone to hold accountable. The Pamunkeys might tap enough state, federal, and local money to get the broadband service built. But would the project be economical, in the sense of earning back its cost of capital? Who cares? It’s other peoples’ money.

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Posted in Economic development, Telecommunications

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Another Path to Rural Broadband: Electric Co-ops

Posted on March 16, 2018 by | 10 comments

Service territories of Virginia electric utilities. The CVEC territory is shown in bright blue in the center of the state. (Click for larger image.)

The Central Virginia Electric Cooperative has been delivering electricity to the inhabitants of 14 Central Virginia localities for 80 years. Now it’s planning to provide high-bandwidth Internet connections. The company has announced a plan to invest $11o million to connect all 36,000 co-op members.

Co-op members will be able to purchase 100 megabits per second (mbps) access for $49.99 a month or 1 gigabit per second (gbps) for $79.99 a month, reports the Fluvanna Review.

Keeping the pricing reasonable was important to CVEC President Gary Wood. “I didn’t want this to become a premium service or a luxury service,” he says. Continues the Rivanna Review:

Wood said the project is anticipated to lose money for the first seven years and reach the break-even point in about 11. He admits that “give me $100 million and in seven years, I’ll start bringing you your profits,” hasn’t been the easiest argument to sell, but he believes it can be done with a combination of  loans, grants, state and federal funding and tax rebates.

CVEC is also asking for financial support from each of the counties in its service area.

For a for-profit business, eleven years would be a slow payback. But for an electric co-op, owned by its customers, that might seem like a reasonable proposition.

One objection, I would expect, would revolve around opportunity cost. By taking on a financial obligation of this size, the co-op might be limiting its ability to pursue other projects such as, say, grid modernization or solar energy. Another objection would be risk. What if rural residents aren’t willing to pay $50 to $80 per month for broadband access? Could disappointing revenues put the co-op in financial jeopardy?

But let’s face it, no one else is likely to want to deliver broadband to the rural residents of Central Virginia. This seems like a project that is custom-made for CVEC, and it could provide a model for other co-ops, who cover roughly a third of the geographic expanse of the state.

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Posted in Economic development, Telecommunications

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Tax Credits for Virginia Coal Mining?

Posted on March 1, 2018 by | 3 comments

Underground coal mining is a capital-intensive business. Do state tax credits really make a difference?

The House of Delegates has passed a bill sponsored by Del. Terry Kilgore, R-Scott, in the House and Sen. Ben Chafin, R-Russell, that would provide state tax credits for the production of metallurgical coal.

The legislation, which would offer $200,000 in tax credits next year and about $500,000 the year after, is more modest than previous efforts, which would have cost the state some $7.3 million in coal tax credits. But former Governor Terry McAuliffe vetoed those bills, and Kilgore is hoping that the scaled-back version will pass muster with Governor Ralph Northam.

“At some point and time, you’ve got to figure out how to move forward, and this is how we move forward this year,” Kilgore said, as reported by the Roanoke Times. Reinstating the credits would help protect the remaining coal jobs in Southwest Virginia’s struggling coalfields region, he added. 

Bacon’s bottom line: Coal production and coal employment have plummeted in Southwest Virginia over the past three decades, and the mountainous region has not found an industry to replace it. I’m not persuaded, however, that $200,000 or even $500,000 a year will make much difference. Virginia has been mining coal for more than a century, and the most accessible coal seams are played out. The remaining coal lies in seams that are either very thin and expensive to mine or deep underground and expensive to mine.

The state is blessed by one thing, however: the high quality of the coal. Virginia coal tends to have the characteristics that make it appropriate for conversion into coke, which is used in making steel. Metallurgical coal, which is currently enjoying an export boom, accounts for 60% to 70% of the coal coming from Southwest Virginia. Deep underground mines cost tens of millions of dollars to develop, and the big coal companies don’t make that kind of commitment unless they have long-term contracts that lock in the price. Compared to the cost of developing a new mine or keeping an existing one open, a half million dollar tax credit sounds like a drop in the bucket. I would like to see the evidence that the tax credit will encourage additional production.

Rather than doubling down on an inevitably declining coal industry — when the coal is gone, it’s gone and nothing can bring it back — I would urge Southwest Virginia’s legislators to consider applying their energy and creativity to diversifying the economy.

I know of two technologies being developed at Virginia Tech that could bring economic benefits to the region. One is a laser sensor that can be deployed in underground mines to detect methane, carbon monoxide, and carbon dioxide for the purpose of averting explosions like the one that killed 29 miners at the Upper Big Branch mine in West Virginia in 2010. That technology, if deployed, could create a significant business opportunity for a Southwest Virginia engineering firm.

Another technology would process gob piles — the mountains of waste resulting from the separation of coal from mineral rock. Gob piles contain considerable coal fines. Another Virginia Tech technology would capture those fines along with other potentially valuable minerals. That innovation holds out the potential for extracting wealth from the massive gob piles dotting the coalfields in Virginia, the Appalachian coalfields, and even the rest of the world.

Then there’s the idea of rebuilding the regional economy in part around outdoor tourism. A half million dollars a year arguably would do a lot more to jump-start positive change in that direction than it would to rejuvenate coal mining. The Bacon family is planning a vacation this fall to New England, and I’m especially looking forward to seeing if the small mountain towns of the People’s Republic of Vermont are bucking the trend of rural decline. I would be delighted if Mr. Kilgore and Mr. Chafin should decide to join us in looking for alternate models of economic development!

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Posted in Economic development, Energy, General Assembly, Taxes

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Can We Afford to Let Rural Hospitals Die?

Posted on January 27, 2018 by | 21 comments

Pioneer Community Hospital in Patrick county before it closed.

By Beth O’Connor

In the January 24th edition of Bacon’s Rebellion, author James A. Bacon poses the question; “Are Broke Rural Hospitals Worth Saving?” He acknowledges that many of Virginia’s rural hospitals are in trouble, but wonders if it makes financial sense to let them die.

The problem with his question is that he is only considering the issue in terms of healthcare dollars and outcomes. The reality is that a small rural hospital means much more to the local community and taxpayers than just a place to go when you have a heart attack.

The National Rural Health Association (NRHA) has published extensive information regarding the distress of rural hospitals and the importance of those facilities to small towns across the country. Since 2010, seventy-nine rural hospitals have closed. 673 additional facilities are vulnerable and could close, representing more than one-third of rural hospitals in the U.S. The rate of closures in rural areas is five times higher in 2016 compared to rates in 2010.

NRHA notes that losing access to healthcare is only one of the negative outcomes.  When a rural hospital closes, the rural economy suffers:

  • In rural America, the hospital is often one of the largest employers in the community. Healthcare in rural areas can represent up to 20 percent of the community’s employment and income.
  • The average critical access hospital — the hospital in Patrick County alluded to in Mr. Bacon’s column was a CAH facility — creates 170 jobs and generates $7.1 million in salaries, wages, and benefits annually.
  • The recession in rural America continues, with 90 percent of all job growth since 2008 occurring in metropolitan areas. If a hospital closes in a rural community, health providers relocate, and the town withers.
  • If a rural provider is forced to close, the community erodes.

That’s right, if a hospital dies the whole town dies. Patrick’s closure is recent, but a quick look at Lee County predicts the future for Patrick. Lee Regional Medical Center closed in 2013; it supported 190 full time equivalent positions.  These were not low-paying, entry-level jobs; these were doctors, nurses, anesthesiologists, therapists. The hospital had been the fourth largest employer in the county; it pumped $11.5 million in labor costs into the local economy every year.

Once those jobs left, other jobs followed. Local clinics as well as ancillary services such as food service and cleaning services struggle without a hospital serving as an anchor. After the hospital closed, the community’s only day care center closed too. Virginia’s elected officials have spent untold hours trying to lure businesses to the Commonwealth, but a town without a stable healthcare system will not land the next business enterprise.

Additionally, when a rural hospital closes the taxpayer suffers:

  • Rural hospitals provide cost-effective primary care. It is 2.5 percent less expensive to provide identical Medicare services in a rural setting than in an urban or suburban setting. The focus on primary care, as opposed to specialty care, saves Medicare $1.5 billion/year. Quality performance measurements in rural areas are on par with if not superior to urban facilities.
  • Critical Access Hospitals represent nearly 30 percent of acute care hospitals but receive less than 5 percent of total Federal Medicare payments.

A ‘bigger is better’ mindset suggests that sending patients to Martinsville or Roanoke would be more efficient and have better outcomes, but the data suggests otherwise.  The healthcare analytics group iVantage has documented that hospitals in rural areas have significantly higher ratings on Hospital Consumer Assessment of Healthcare Providers than those located in urban areas.  This includes:

  • Lower risk-adjusted rates of potential safety-related events.
  • Significantly lower adverse event rates than urban counterparts.
  • Significantly lower rates of post-op hip fracture, hemorrhage, & hematoma.

Mr. Bacon refers to Medicaid expansion as “blunderbuss legislation.” I call it a lifeline. Since 2010, seventy-nine hospitals in rural America have closed. Two-thirds of those were in states that have refused to expand Medicaid, including two in Virginia.

By not expanding Medicaid, Virginia loses $142 million in federal funding every month. Since 2014, the Commonwealth has forfeited over $10 billion in federal funds — our own tax dollars that should have been used to help uninsured adults, hospitals, and businesses.

Others may be content to allow their tax dollars to go to Washington, D.C. and stay there.  I am not.  Virginia taxes should be spent on Virginia people and Virginia healthcare providers.

Because the question is not, “Are Broke Rural Hospitals Worth Saving?”, the question is, “Can We Afford to Let Rural Hospitals Die?”

Beth O’Connor is executive director of the Virginia Rural Health Association.

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Posted in Economic development, Health Care

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Living with Slow Internet in a Broadband World

Posted on November 13, 2017 by | 7 comments

Ashley Fisher (left) and Vickie Barker run an independent insurance company in Halifax County. Their slow Internet connection, which frequently goes out, hampers customer service. (Photo credit: Roanoke Times)

If you don’t live in a small town or rural community, you probably don’t have a clue how difficult it is to participate in the 21st-century economy. But a Roanoke Times article paints a vivid picture of life in South Boston and Halifax County in Virginia’s Southside region.

Television producer Kevin Peade started his business when everything was on film and a remote location was not a handicap. But the rest of the world has moved to digital, and local broadband connections are so slow during the day, when others are online, that he literally works at night.

Brenda Short got rid of her computer years ago because there wasn’t any point in keeping it around anymore. If she absolutely, positively needs to access the Internet, she drives six miles to her office to get a connection.

A local church canceled its internet service when a pastor left, only to find out it couldn’t get back online later because the network was so overloaded that it wasn’t taking new customers.

Roanoke Times reporter Jacob Demmit compiles other examples of how a small town struggles when the rest of the world does business with a faster, high-broadband metabolism.

There’s a local DMV Select office that struggles with a connection so slow that it often can’t process credit cards. A farmer said he tried satellite internet for a while but ultimately decided he was paying too much for a connection that was hardly usable. One Halifax County resident runs an entire lumber business, including billing for international orders, from his cellphone.

Nationally, only four percent of urban dwellers lack access to a 25 Mbps connection, according to 2016 data from the FCC, the Roanoke Times says. In rural America, the number is 20 percent. But in the Halifax County community of Nathalie (population 183) it’s closer to half. Laying fiber optic cable doesn’t make economic sense in sparsely populated areas. But the improving economics of wireless provides reason for hope.

The county has engaged SCS Technologies, a local Internet Service Provider, to cobble together a network using the small amount of fiber in the ground with a series of antennas mounted on cell towers, water towers, church steeples and anything else tall enough to see above the trees. SCS plans to offer 10 MBS (megabytes per second) service – about five times the speed most people are getting — for $35 a month. Halifax County is contributing $103,000 for phase one of the project.

Meanwhile, Microsoft has selected Halifax County as the proving ground for a service built upon the unused frequencies between television channels known as TV white spaces. One white-spaces tower could in theory cover a 10-mile radius with up to 400 MPS connections. The technology giant, which is partnering with Salem-based B2X Online to provide the local service, hopes to connect 1,000 homes in Halifax and neighboring Charlotte counties by early next year. Microsoft’s goal is to reach 2 million people across the country by 2022, beginning with 12 test sites like Halifax.

Bacon’s bottom line: It’s hard to imagine rural communities pulling themselves out of their economic doldrums if they lack the high-speed broadband connections to communicate with the rest of the business world. It is tempting for local boards of supervisors to consider subsidizing broadband service under the theory that, like electricity, telephone, water and sewer, broadband is indispensable for modern life. On the other hand, new technologies and business models are emerging that could render any existing rural-broadband solution obsolete.

Should the  Halifax Board spend thousands of dollar subsidizing a broadband service that is marginally superior to copper-line connections when Microsoft might introduce a vastly superior service that could roll out county-wide within a couple of years? Tough question.

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Posted in Telecommunications

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Building an Economy on Outdoor Tourism

Posted on September 12, 2017 by | 2 comments

Horseback riding in Southwest Virginia. Photo credit: Rewire.

As Southwest Virginia struggles to adapt to the decline of the century-old coal industry, the region is taking a radical approach to economic development, reports Rewire. Writes the online Maryland publication: “Historically, natural resources in Appalachia have been mined, but southwest Virginia is trying to re-envision the hills, woods, and mountains of the state for outdoor tourism—and in the process, hold onto its younger residents.”

What is outdoor tourism? It covers the kind of activities one normally associates with the outdoors — hiking, biking, camping, fishing, kayaking, rock-climbing, horseback riding, and the like. But it also includes cultural assets such as the Crooked Road music trail and the Round the Mountain craft network.

No roller coasters or waterslide parks for Southwest Virginia. “We promote, preserve, and protect what’s unique to this region, so we haven’t invested in things that can be found in a variety of other locations,” says Jenna Wagner, marketing director of Friends of SWVA. “The Crooked Road, for example, is based on music that is specific to this region. We’re working to maintain that quality of [resources that are] really unique to the region that you can’t experience anywhere else.”

The initiative is yielding results — not transformative results, but perhaps something to build upon. Peter Hackbert, director of entrepreneurship for the public good at Berea College, has studied towns in Southwest Virginia such as Abingdon and Damascus (close to the coalfields but not in them). He interviewed 60 international travelers to the region from as far as Europe and Australia. “We saw people coming from out of state, enjoying themselves, and spending money.”

And the region seems to be doing a better job of hanging onto educated young people. According to the Friends of SWVA: “[T]he proportion of the SWVA population comprised of those 25-34 with a bachelor’s degree or higher was at 2.3% in 2000 and had increased to 3.04% by 2015. There is also a strong positive correlation between in the increase in travel expenditures and the rise in the young, educated population.”

Bacon’s bottom line: You can only make so much money and employ so many people off of bikers, back-backers and bluegrass concerts. The idea is to create amenities that people who live in Southwest Virginia can enjoy. Organizing fiddler concerts and developing access points along the Clinch River creates pride in community and provides recreational options that didn’t exist before. If such activities also help keep young people from moving out, that’s a big bonus. If out-of-town people decide to settle there, all the better. When the coal is all mined out, you build on what you’ve got — and Southwest Virginia has a distinctive, under-appreciated culture and a fantastic outdoors.

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Posted in Economic development

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What the Looming Higher-Ed Shakeout Means for Small College Towns

Posted on September 1, 2017 by | 8 comments

Sweet Briar College, affectionately known in my college days as “Sweets”

Two years after alumni rallied to save Sweet Briar College, raised millions of dollars and installed a new president, the small, liberal arts college north of Lynchburg still is in peril. The college admitted only 81 freshmen into its fall class — well below the 200 officials previously had estimated the institution needed to remain financially viable.

President Meredith Woo said spending came in significantly under budget last year, and the college can afford smaller class sizes. But the college is surviving on donor dollars, reports the Wall Street Journal.

Perhaps Sweet Briar will be able to reinvent itself as a smaller, niche institution. While few have come as close to the edge of disaster as Sweet Briar, dozens of other small liberal arts colleges are facing similar dilemmas.

According to the Journal, more than one-third of colleges with fewer than 3,000 full-time students had operating deficits in fiscal 2016, up from 20% in fiscal 2013. Likewise, finance chiefs of private, nonprofit colleges are increasingly pessimistic — only 51% indicated in a poll that their institutions will be financially or sustainable over the next five years, down from 65% the previous year.

Restructuring is rampant. Aquinas College in Nashville, Tenn., is dropping business and nursing programs, and eliminating residential living, to focus on training Catholic school teachers. Margrove College in Detroit is discontinuing undergraduate programs to concentrate on its graduate students. Wheelock University  in Boston has put its president’s house and a residence hall up for sale and has entered merger talks with Boston University.

Virginia has two dozen small, private, non-profit colleges, many located in small cities and towns. In many cases, they form the backbone of the local economy. As if rural/small town Virginia didn’t have enough other economic worries, non-metro Virginia could be experiencing the erosion of one of the few economic pillars it has left.

A handful of these institutions look rock solid — Washington & Lee University, the University of Richmond, and Liberty University have large and growing endowments, and have no trouble recruiting students. I don’t know enough about the others to draw any conclusions about their fiscal health, but it would behoove those interested in the well being of their communities to take a close look and make sure their local college isn’t about to become the next St. Paul’s College (now defunct) or Sweet Briar.

For readers’ edification, here are the private, non-profit schools in Virginia:

Appalachian School of Law — Grundy
Averett University — Danville
Bluefield College — Bluefield
Bridgewater College — Bridgewater
Christendom College — Front Royal
Eastern Mennonite University — Harrisonburg
Emory and Henry College — Damascus
Ferrum College — Ferrum
Hampden-Sydney College — Farmville
Hampton University — Hampton
Hollins University — Roanoke
Liberty University — Lynchburg
Lynchburg College — Lynchburg
Mary Baldwin University — Staunton
Marymount University — Arlington
Randolph-Macon College — Ashland
Randolph College — Lynchburg
Regent University — Virginia Beach
Roanoke College — Salem
Shenandoah University — Winchester
Sweet Briar College — Amherst
Union Presbyterian Seminary — Richmond
University of Richmond — Richmond
Virginia Union University — Richmond
Virginia Wesleyan University — Virginia Beach
Washington & Lee University — Lexington

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Posted in Economic development, Education (higher ed)

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Illuminating Rural Poverty in Virginia

Posted on August 9, 2017 by | 2 comments

Last week Augie Wallmeyer delivered a speech to the Virginia Historical Society on the “Extremes of Virginia.” If you haven’t read his book by the same title, listen to his speech. (Clicking on the image takes you to the Virginia Historical Society Facebook page, where the speech can be viewed.)

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Posted in Economic development

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A Town that Refuses to Die

Posted on August 8, 2017 by | 2 comments

The past twenty years have been unkind to Halifax County. The Southside Virginia locality has seen wave after wave of plant and business closures — some caused by the restructuring of the tobacco industry, others from globalization and the offshoring of traditional manufacturing industries. The dislocations have been so traumatic that Bloomberg writer Craig Torres used Halifax and the town of South Boston as a mini case study of the downside of the nation’s free trade orthodoxy.

Reflecting a common view, the Heritage Foundation wrote in 2000 that free trade would create “prosperity that benefits every citizen.” While it still is possible to argue that free trade has benefited Americans overall, the impact has been uneven. And hundreds of small-town communities across America like Halifax County were the losers. No wonder, suggests Torres, that Halifax County swung toward avowed protectionist Donald Trump.

Torres spends much of the article describing how economists have begun questioning free trade dogma. He also recounts how the Halifax-South Boston community has undertaken the hard work of reinventing itself, a process that, he says, “might be working.” The jobs gap has closed. Halifax now has 5.1% unemployment, down from nearly 13% — only a tad higher than the nationwide rate of 4.3%. (Torres doesn’t discuss how many people are under-employed or dropped out of the workforce.)

The Southern Virginia Higher Education Center provides a variety of degrees and certifications in partnership with Virginia colleges and universities.

Look at the chart above, taken from the Bloomberg article. The post-NAFTA era of the mid-1990s was devastating to employment in Halifax County. While the U.S. economy as a whole prospered during the Internet boom, unemployment in Halifax shot up to 14%. The county managed to recover to national unemployment levels but got hammered again when the 2001 recession overlapped with China’s entry into the World Trade Organization. But the delta this time between Halifax and U.S. unemployment was somewhat smaller than it had been five years previously. Halifax got slammed in the 2008 recession as well, but the unemployment delta shrank yet again. Today the employment gap has almost disappeared.

Is Halifax County the story of a mill town that has successfully reinvented itself? Writes Bloomberg:

Some manufacturers are still around, from sports-car maker TMI AutoTech Inc. to Swiss industrial giant ABB Ltd. Both received incentives after expanding investment and adding jobs, the county industrial development authority said. The companies’ long-term plans for the region might hinge on whether the local workforce has the right skills; so South Boston and the county turned two former tobacco warehouses into a higher education center, offering college courses and vocational training, from nursing to welding to IT. Technicians trained there are getting hired at Microsoft Corp.’s data center in a neighboring county.

Torres explores what the Halifax example portends for the free trade debate. But the story has implications for a parallel discussion here in Virginia — can Virginia’s mill towns be saved? Or is money spent on economic-development efforts throwing money down the drain?

The evidence of Halifax County is admittedly anecdotal, but it is encouraging. The old economy is gone. It’s hard to imagine that there is anything left for globalization to destroy. Halifax has undergone an economic transition more wrenching than anything that inhabitants of Virginia’s major metro areas could imagine. But the community has adapted. In my humble appraisal, the agglomeration economics of the Knowledge Economy still favor the nation’s big metros and work against communities like Halifax over the long run. But it’s too soon to write off Virginia’s mill towns.

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Posted in Economic development, Education (higher ed)

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