Northam’s Affordable, Not-So-Ambitious Plan for Reviving Rural Virginia

Ralph Northam, Democratic Party candidate for governor, grew up on the Eastern Shore, so it’s not surprising that he has given considerable thought to the challenges of economic development in Virginia’s small towns and rural communities. Earlier this week, he unveiled his plan for economic growth in rural Virginia.

If you’re looking for a “Marshall Plan” to reinvigorate rural Virginia, this is not it. The plan is not ambitious, and there may not be enough in it to get rural Virginians especially excited about Northam’s candidacy. But it has this virtue: Proposals don’t require spending vast sums of money, so they are at least feasible from a budgetary perspective. This is a plan that Northam, if elected, has a realistic chance of implementing.

Personally, I distrust “Marshall Plan” approaches to chronic social and economic challenges. Instead, in our fiscally constrained era, I’m a fan of low-cost, low-risk initiatives that will likely yield a positive return on investment. In that spirit, I’ll start by illuminated the most promising ideas in the Northam plan and work my way down the list.

Virginia’s Rapid Readiness Program. Northam proposes a “rapid readiness program” similar to successful workforce training programs in Georgia and Louisiana. “We could get this program started here in Virginia with a ten million dollar investment, with funding tied to business participants, number of projects delivered, and individuals successful trained,” states his plan.

Assuming that Northam is drawing upon the thinking of Virginia Economic Development Partnership CEO Stephen Moret, who set up the Louisiana program, the program would function as a extension of Virginia’s economic development effort by offering a workforce-training solution as an incentive for corporations to invest in Virginia. The program would differ from existing educational/training offerings by creating a team capable of providing customized training within a time frame required by corporations to get their operations up and running.

While the rapid readiness program would be applied across the state, rural areas arguably would benefit the most because such training applies most frequently to light manufacturing projects that typically locate in smaller communities.

I’m not sure $10 million is sufficient to fund this program properly. Regardless, there is a readily available pot of money — Northam and Moret no doubt would disagree with me about this — and that is the Commonwealth Opportunity Fund, which the state dips into to provide “incentives” for economic development projects. But as Moret himself said in a presentation to the State Council of Higher Education for Virginia two days ago, workforce is one of the top three factors (and often the No. 1 factor) that corporations consider when deciding where to locate. Incentives are a secondary factor. Shifting money from incentives to workforce training looks like a no-brainer to me.

Expanding renewable energy. Expanding solar generation is viable rural economic development strategy. Solar farms may create few permanent jobs, but they do increase the tax base, and they often pay streams of royalties to landowners (depending on how particular deals are structured).

“In my home county of Accomack on the Eastern Shore,” says Northam, “the commonwealth’s largest solar farm is in the process of being built, which will ultimately power several data centers owned by Amazon.”

Northam says he is committed to working with Virginia’s electric utilities and the General Assembly to “remove barriers that stand in the way of developing and expanding clean energy efforts.” Note the phrase “remove barriers.” Northam is not asking for new subsidies or tax breaks. Solar doesn’t need subsidies; market forces increasingly favor solar. Rather, Northam wants to remove obstacles that inhibit businesses, entrepreneurs and homeowners from building rooftop solar and solar farms.

Utility-scale solar like the Amazon Web Services farms in Accomack need little help — Dominion Energy and Appalachian Power have ample incentive to deploy solar on a large scale. The barriers exist at two levels: local zoning codes and state regulatory policy. Local governments need to make their zoning codes more solar friendly. Meanwhile, state lawmakers need to craft “net metering” legislation that balances the interests of independent solar producers with those of electric utilities who maintain the electric power grid that everyone depends upon.

Broadband for all. Most people would accept the proposition that broadband Internet service is critical infrastructure for economic development today. The problem is that sparsely populated rural areas are not attractive markets to Virginia’s big broadband providers.

Northam points to a pilot project in Southside Virginia in which Virginia’s Tobacco Commission, Microsoft, and the Mid-Atlantic Broadband Company utilize unused portions of the television broadcast spectrum to push out high-quality wireless broadband. So far, more than 100 households have been connected, and the number could reach 1,000 by year’s end.

“Under this innovative public-private program, Virginia’s share of the cost is $500,000, leverage private investment for a total investment of $1 million,” states the Northam plan. “This commonwealth should look to replicate this successful program across rural Virginia.”

How so? He would pull together disparate broadband initiatives across the commonwealth under the direction of a cabinet official “who will be responsible for getting more people connected.” Northam also advocates legislation similar to that adopted in Minnesota that creates a clear set of metrics, including upload and download speeds, to evaluate broadband access. Whatever else you say about these proposals, it doesn’t sound like they will break the bank.

Expanding the University of Virginia-Wise. Northam proposes increasing the educational offerings of the University of Virginia-Wise to encompass high-need, high-growth disciplines such as cybersecurity, unmanned aerial systems, energy, and computer engineering and programs. Expanding UVa-Wise would cost about $15 million initially, Northam says, with a possibility of scaling up funding over time.

We have a unique opportunity … to transform UVA-Wise into an international destination for students and researchers. This will have a tremendous effect on the regional economy because when you can attract students and top talent from around the world for research and development, grants will follow. And with grants and applied research, business opportunities will soon follow. And structured correctly, these businesses will not only start up in Southwest Virginia, but they will remain and grow.

The idea of creating “innovation districts” around college campuses is a hot one right now, and anyone who has seen the Virginia Tech Corporate Research Center can readily understand the potential for economic development near college campuses. But Tech is the top research university in the state. Whether its success can be replicated on even a modest scale by a tiny, largely unknown newcomer is questionable. Tech has invested hundreds of millions, maybe billions, of dollars, over decades building academic programs, hiring star faculty, recruiting graduate students, and assembling the administrative infrastructure it takes to win research contracts.

Competing for research dollars is tough. Well established institutions such as Old Dominion University and the College of William & Mary have seen their research programs falter in recent years. It is a stretch to suggest that a $15 million investment in Wise would spark the miraculous transformation that Northam describes.

Startup tax plan. To help attract and retain new business in rural and economically depressed regions of Virginia, Northam proposes a “zero BPOL and merchant’s capital tax for new startup and small businesses .. for the first two years. This will drive economic activity and startups to rural areas, and result in no loss in existing revenue to local governments.” Once local businesses take root, they will start paying taxes — a win-win.

It’s good to see a Democratic Party candidate advocating tax cuts! But the proposal lacks crucial detail. BPOL and merchant’s capital taxes are local taxes. How does Northam propose eliminating those taxes for two years? Will the state just command localities to change their ordinances? Will the state reimburse them for lost revenue? Does he have the remotest idea of what the initiative would cost? Finally, while the BPOL and merchant’s capital taxes are near the top of the list of things that small businesses in Virginia hate, is there any body of evidence suggesting that a mere two-year reprieve will stimulate more startups?

There’s more to Northam’s plan, but the other proposals, which address workforce development, are statewide in nature and don’t address peculiarly rural issues. So, I won’t dwell on them here.

Perhaps the best thing that can be said about this plan is that Northam isn’t making extravagant promises that he can’t keep. These narrow-bore proposals won’t exactly spark a rural Renaissance, but for the most part, they seem politically and fiscally feasible.

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13 responses to “Northam’s Affordable, Not-So-Ambitious Plan for Reviving Rural Virginia

  1. This is an important issue and I would hope that community leaders across Virginia from the Eastern Shore to the coal fields would press both candidates for governor for plans.
    Higher education really focused on work related programs can be of help to prepare people to work at home or somewhere else. In the past many talented people have been drawn from rural Virginia to education and never went back. I know of one case of a coal miner who foour children all went to college and majored in a fields where they could get a job. None of the four went back to Grundy to live…there were few if any jobs for college educated people in that community then or now.
    And, it will take aggressive efforts to make my country…Southwests Virginia more economically independent but it can be done.
    I have spent a lot of my life involved in economic development and am anxious to see Virginia come up with a more aggressive approach.
    I would hope to see a series of debates between the two candidates for Governor across SWVa this fall.

  2. re: ” Perhaps the best thing that can be said about this plan is that Northam isn’t making extravagant promises that he can’t keep. These narrow-bore proposals won’t exactly spark a rural Renaissance, but for the most part, they seem politically and fiscally feasible.”

    And I agree.. and would point out that this is essentially McAuliffe’s approach also.

    What this shows is that Northam is well aware of the issue – as well as intelligent enough to know the problem is a tough one and won’t be easily fixed.. and will require longer term , multi-prong.. incremental steps.. as opposed to promises of magical and totally unrealistic things…

    Coal is not coming back. Trains that carry coal are going to shrink dramatically… low-skill human labor for manufacturing is going to be replaced by robotic automation which requires much higher skill workers.

    Health care is a growing field but it does require the govt deal with how it will be paid for… but it will provide jobs in the localities… and others may have to move to more urban areas for jobs but in order to do that – they will need higher quality , more robust education…

    Notice though that Northam is NOT promising govt entitlement programs to “help” the unemployed… etc.. AND he’s similarly not promising “massive tx cuts” as the panacea for Southwest /Rural Va problems..

  3. I’ve heard a lot dumber things for an economic revival program. This deserves some serious discussion.

  4. I get bulk email from various GA reps, and outgoing rep Dave Albo of Springfield gave a synopsis of the recent CNBC business friendliness rating (Va. back to top 10). Albo was saying that’s great, but we still have a problem in that Va. is #35 (among the worst) for high cost of doing business here. Albo suggested this made it hard to start a new business here. I wrote Albo to ask what are some of the factors that cause this?

    • State by state cost of doing business calculations seem pretty bogus to me. How do the costs in Grundy compare with Arlington? I also wonder how much the cost of doing business matters vs the talent pool. SanFrancisco is frighteningly expensive but tech start ups spring up every day in SF.

      Jim Bacon has always been on the right track with this – smart people want to live in nice places. Create nice places (read: walkable, clean, safe, etc) and smart people will show up. Look at Nashville, Austin, etc. They put a lot of effort into creating places people want to live and … smart people are moving there in droves.

  5. Below is one of the dumbest ideas, I’ve come across:

    “Expanding renewable energy. Expanding solar generation is viable rural economic development strategy. Solar farms may create few permanent jobs, but they do increase the tax base, and they often pay streams of royalties to landowners (depending on how particular deals are structured).

    “In my home county of Accomack on the Eastern Shore,” says Northam, “the commonwealth’s largest solar farm is in the process of being built, which will ultimately power several data centers owned by Amazon.”

    Northam says he is committed to working with Virginia’s electric utilities and the General Assembly to “remove barriers that stand in the way of developing and expanding clean energy efforts.” Note the phrase “remove barriers.” Northam is not asking for new subsidies or tax breaks. Solar doesn’t need subsidies; market forces increasingly favor solar. Rather, Northam wants to remove obstacles that inhibit businesses, entrepreneurs and homeowners from building rooftop solar and solar farms.

    Utility-scale solar like the Amazon Web Services farms in Accomack need little help — Dominion Energy and Appalachian Power have ample incentive to deploy solar on a large scale. The barriers exist at two levels: local zoning codes and state regulatory policy. Local governments need to make their zoning codes more solar friendly. Meanwhile, state lawmakers need to craft “net metering” legislation that balances the interests of independent solar producers with those of electric utilities who maintain the electric power grid that everyone depends upon.”

    Imagine VA’s Eastern Shore covered with seas of swirling metal blades and vast deserts of hot radiant metal panels, having been designated as the dumping ground for an environmental Hell.

    This proposal remains me of the refrain “The Romans desolate our lands and call it peace.”

    • “Imagine VA’s Eastern Shore covered with seas of swirling metal blades and vast deserts of hot radiant metal panels, having been designated as the dumping ground for an environmental Hell.” That image resonates — you could inspire a new exhibit at the Hirschorn with it!

  6. Northam is a typical Virginia Democrat. Pander to the “Gimme Dats” to get votes. None of his ideas will make a bit of a difference.

    Ocean City, MD is just over 4 sq mi of land. It has a year round population of about 7,000 people but swells to 340,000 vacationers on summer weekends. It attracts 8 million visitors per year. There’s nowhere on Virginia’s Eastern Shore that could be zoned and developed as a beach vacation town? Really? Remember, we’re talking about 4 sq mi.

    As for southwest Virginia – find me one other similar place in the United States where rural economic development has worked. Please don’t come back with Hilo, Hawaii or any other tropical paradises. Please don’t come back with tiny ski resort towns abutting 11,000 ft tall mountains.

    You want to do something useful in southwest Virginia? Legalize casino gambling in that part of the state. It costs nothing and would bring people and jobs.

    • I once read somewhere Virginia is 49th least likely state to approve gambling after Utah, or something like that.

    • “You want to do something useful in southwest Virginia? Legalize casino gambling in that part of the state. It costs nothing and would bring people and jobs.” Helluva good idea.

      • yup.. and include legalized POT!!! Helluva good idea

        ” smart people want to live in nice places. Create nice places (read: walkable, clean, safe, etc) and smart people will show up. Look at Nashville, Austin, etc. They put a lot of effort into creating places people want to live and … smart people are moving there in droves.”

        and there you have the essential difference between the two spheres of thought as to what the govt role should be or not!

  7. Pingback: Should We Subsidize Rural Economies? - Randle Report

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