The federal government will designate 20 communities around the country for special funding. So far, communities in Southwest Virginia are the only ones interested but there’s disagreement over who should lead the proposal and what it should be.
Behind closed doors in Blacksburg on Wednesday, U.S. Sen. Mark Warner, D-Virginia, delivered a strong and clear message to a group of economic development leaders from across Southwest and Southside.
Immediately after that, in an interview with me — which he sought — Warner delivered the same strong and clear message, although I suspect I may have gotten a milder version than what he said in private.
That message was this: This side of the state would be better off if it united around a single proposal for a regional technology hub — and if that proposal were focused on a clear theme, not a grab-bag of ideas.
Before I go further, I should explain for those of you just joining us what this regional technology hub is all about. In last year’s CHIPS and Science Act — which Warner sponsored along with Sen. John Cornyn, R-Texas — Congress approved $280 billion of funding designed to boost domestic technology in the face of competition from China. The centerpiece of the bill, as the name implies, was aimed at boosting U.S.-made production of microchips, aka semiconductors. Included in the bill, though, was authorization for the Commerce Department to designate 20 or more “regional technology hubs,” which the federal government would shower with money. The goal is to “spread the digital wealth” so that the nation’s technology sector is not so concentrated in a small handful of mostly coastal cities — 73% of the nation’s tech jobs are in just five places, or four if you consider adjacent San Jose and San Francisco all part of the same larger metroplex. The others are Washington, Boston and New York. Furthermore, there’s no sign that the free market will change that on its own: Bloomberg says nearly 70% of the nation’s investment capital goes to just five places, all on the coasts: San Francisco, New York, Boston, San Jose and Los Angeles, in that order.
That’s what the regional tech hub concept is designed to change. The act spelled out certain rules: The bill calls for at least three hubs in each of the six Economic Development Administration zones; that means three between Virginia and Maine. The act also goes on to say that “no fewer than one-third” of these hubs should “significantly benefit a small or rural community.” The definition of “small or rural community” is “a noncore area, a micropolitan area, or a small metropolitan statistical area with a population of not more than 250,000.” That rules out the Roanoke (314,496) and Lynchburg (262,258) metro areas but rules in the New River Valley (165,293) and virtually all of Southwest and Southside. There are some other rules, but those are the big ones that matter for the moment.
Since then, I’ve written multiple columns looking at our likely competition and making the case that a bid from somewhere in the western third of the state would likely have a good shot at winning. I’m obviously not the only one thinking this way. Virginia Tech has been looking at putting together a bid on behalf of a region whose geography has yet to be determined. So has the InvestSWVA economic development group in far Southwest Virginia. A group in Pulaski County has been pitching that community, and there are others who are interested, even if things may not have reached a formal proposal stage yet. (For one thing, the Commerce Department hasn’t opened the bidding process yet; it’s still writing the rules that will govern the competition.)
On Wednesday, Warner gathered about two dozen leaders from Lynchburg to the Lenowisco Planning District in Southwest Virginia together at the Virginia Tech Corporate Research Center and delivered what was, by all accounts, a blunt message: Don’t compete with one another. Participants I talked to described Warner’s remarks as “direct” and “crystal clear.” Warner himself described the meeting as “a frank and candid exchange,” which is usually a polite way of describing a no-holds-barred discussion.
Before the meeting, Warner’s office asked if I’d like to talk with the senator one-on-one afterwards. Naturally, I said yes. I’ve been around politics long enough to understand the things that sometimes aren’t said; I assume Warner wanted to make sure his message was heard beyond the people in that room. His message to me was sure clear.
“Since the CHIPS bill was my idea with John Cornyn, I want to make sure we come out a winner on this, come hell or high water,” he told me.
He expressed disappointment that Virginia wasn’t better positioned to take advantage of the semiconductor company announcements that have come about as a result of the bill. In October, Micron Technologies announced it would build a $20 billion chip factory outside Syracuse, New York. In December, TSMC announced plans to expand its chip plant in Arizona, raising the investment from $12 billion to $40 billion. Since then, two other companies have announced separate plants in Kansas, and Texas Instruments has announced an $11 billion plant in Utah.
“I’m really disappointed,” he said. “We in Virginia just weren’t ready.” On the other hand, he points out, Virginia hasn’t shelled out the kind of incentives that some of these companies got. New York promised $5.5 billion in tax credits to Micron if it located in the state. Virginia didn’t go that high even for Amazon; the Old Dominion’s incentive package there was $750 million. “We’re not used to having multibillion-dollar incentive packages,” Warner said. “Because I didn’t feel Virginia was fully ready for the CHIPS bill when it came out, I’m a bit obsessed about making sure we get a tech hub.”
He said the main interest in such a hub — perhaps the only formal interest — has come from the western side of the state. “I’ve not been contacted about some other active proposal,” he said. That doesn’t surprise him, he said, since the intent of the bill is to direct tech investment to less prosperous regions. “I think there would be appropriate howls of protest if Northern Virginia got a tech hub or Cambridge [Massachusetts] got a tech hub or Palo Alto [California] got a tech hub,” he said.
That’s why he wants to make sure whatever bid comes out of this side of the state is as strong as it can be — and he had some thoughts on how it should be structured. For the meeting Wednesday, “we had people from the coalfields, people from Lynchburg, Danville,” plus representatives from Virginia Tech and the Roanoke and New River valleys, he said. “My belief is if you wind up with four, five, six proposals, that’s fine, I can be supportive, but if we wind up with one proposal, we can be much more engaged.”
That’s what Warner told me in public. What he said in private was apparently more direct. “Mark was pretty clear: If the hub is located in Blacksburg, he’s not sure it’s going to win because Blacksburg doesn’t need more economic support, so he wonders if it should go further south,” said Pulaski County entrepreneur Steve Critchfield, who was part of the meeting.
Warner didn’t say that directly to me but he did strongly intimate that, as an author of the bill, his intent was for tech hubs to benefit less affluent regions. “I think there will be a desire coming out [of the Commerce Department] to really jump start or benefit less prosperous communities,” Warner said. He didn’t say it because he didn’t have to but in the context of the western part of Virginia, Montgomery County looks pretty affluent. The Census Bureau lists the county’s median household income as $60,666. In Dickenson County, it’s $33,905. If the Commerce Department is looking at an application and benefiting “less prosperous communities” is the goal, which looks better on the application?
The problem is there is no consensus on which specific localities should be pitched for a tech hub, or what the tech involved should be, or who should do the pitching. I was told the number of ideas floated was “too many to text.” InvestSWVA is pushing an energy initiative through its DELTA Lab project to create research parks for energy companies on old mine sites. Critchfield and others have been pushing Pulaski as a center for controlled environment agriculture — i.e., indoor agriculture. Lynchburg, home to several nuclear companies, naturally has an interest in that. Virginia Tech pitched a transportation-focused proposal as part of the separate competition for Build Back Better grants last year — and lost. Tech representatives spent part of the meeting Wednesday pitching transportation again. However, by multiple accounts, Warner told the group that he didn’t think that was likely to be a winning entry for a tech hub, either. “He was very clear that some of the things we talked about were not the intent of Congress,” Critchfield said.
So what is? Will Payne, who leads InvestSWVA, is convinced that far Southwest Virginia is the best place for a tech hub, on the theory that the strongest bid is one that focuses on a region’s unique assets — and an energy-focused proposal out of coal country would do that. Others worry that any energy bid out of Virginia would get beaten out by an energy-related bid by West Virginia, which has been far more coal-dependent.
Payne did seem to suggest a possible coalition with the ag tech proposal coming out of Pulaski. Critchfield is the president of the Pulaski-based MOVA Technologies, a climate tech company whose technology is aimed at capturing contaminants in the air that can be recycled and sold for other uses. MOVA has historically been described in terms of carbon capture — a technology that has fascinated the coal business — but he’s also now partnered with an indoor ag startup in Pulaski that will use the same technology to help grow crops indoors. Payne is wonders if that might be a good mix — “energy and agriculture are an intriguing option.” That indoor ag company is Vegg, led by Cody Journell and Luke Allison. Their unique angle: They’re looking at using abandoned schools as growhouses because gyms and auditoriums are the right height, their brick structure means they’re usually well-insulated, and historic tax credits help lower the cost to make the project affordable. My unsolicited advice: Coal country has a lot of former schools. Indeed, in 2018, then-state Sen. Ben Chafin, R-Russell County, and then-Del. (now Sen.) Todd Pillion, R-Washington County, sponsored a bill that allows localities to designate abandoned schools as special low-tax zones to encourage their conversion into economic development projects. If the idea that Vegg is promoting works, Southwest Virginia could offer a lot of sites for expansion.
Warner didn’t express an interest in any specific proposal but instead pushed the group to coalesce around one.
“He made that pretty clear to the powers that be,” Critchfield said.
“He came in that role of dealmaker,” Payne said. “Here are your parameters — you go figure it out.”
What Warner told me: “I’m going to make sure we have our best chance possible to get a tech hub,” he said. “I think those chances go up if we can bring all the power of the delegation to bear on a well-thought-through proposal.”
So who should lead this? And which localities should, in effect, step back? These are touchy questions that have no answers yet. “It was a spirited conversation,” Warner said. “I think a lot of honest things were said that needed to be said.” That’s definitely polite language.
“All cards were on the table for everybody in the room,” Payne said.
From where I sit (outside that room), the challenge is getting all these communities to work together when some of them don’t have any real history of doing so — and when everyone thinks they have the most logical proposal.
There are also conflicting views about the role that Virginia Tech should play; Tech has been doing most of the work to put together a proposal on that transportation initiative that Warner wasn’t keen on but there was a lot of sentiment in the room that Tech should step back and let others put together a proposal that doesn’t focus on the New River Valley.
“Does Tech lead? Does the private sector lead and Tech support?” Critchfield asked. “That needs to be figured out.” Tech is certainly accustomed to leading; it led that Build Back Better proposal, for instance. However, Invest SWVA’s DELTA Lab proposal has gone forward without any university involvement. The bill, though, indicates a preference for communities that partner with a research university. Reading between the lines, Warner seemed to suggest a compromise: “I think the value add that Virginia Tech can bring in a proposal presentation is large but that doesn’t mean it has to be on the university focus,” he said. Here’s how I translate that: Maybe Tech shouldn’t be the lead dog on this. Still, who has the convening power to get everyone on board? And, once again, what should that proposal be? Warner cautions about trying to put everything in a proposal just to please everyone. “I’m thinking of a relatively discrete area with a discrete focus,” he said. “It needs to be around a core idea.”
Whatever the final proposal is, Warner emphasized that the purpose of the tech hub initiative is to create jobs, so any bid has to be focused on job creation, not simply research. “This is clearly about economic development,” he said. In the context of the meeting, that seemed a clear message to academics at Virginia Tech that a proposal focused on research whose potential commercialization is years away won’t fly.
Warner also cautioned that time is tight. Sometime this summer, the Commerce Department will announce the rules and open bidding. Summer will be here before we know it; will all these disparate regions be able to work out their differences and agree on a plan by then? Since there were strong feelings among some that Virginia Tech shouldn’t lead the proposal, who should then? “It’s not forever before they need to decide whether there’s a consensus behind a single proposal,” Warner said.
The clock is ticking.
As originally posted in Cardinal News