New York State In-depth

Blacksburg, Charlottesville & Lynchburg could be potential tech hubs

Three cities in Virginia – Blacksburg, Charlottesville and Lynchburg – would make good candidates for one of the 20 “regional technology hubs” that the federal government will designate for a share of $10 billion in research dollars.

That’s the conclusion of two separate reports that attempt to analyze which communities would be the best recipients for all this federal largesse. Now for the tricky part: Not all three will be chosen. There’s no guarantee that any of them will be, although these reports give encouragement that at least one of them will be.

So, the immediate question: What are these communities doing to put themselves in the running?

Before we address that, though, let’s back up and explain just what all this is about.

The big-picture concern is that the nation’s technology sector is too concentrated in just a handful of places. Nearly 70% of the nation’s venture capital goes to just five cities, according to Pitchbook: San Francisco, New York, Boston, San Jose and Los Angeles, in that order. The top 10 soak up 81.2% of the venture capital. Framed another way: If you consider San Francisco and San Jose to be essentially the same metro area, then more than 36% of the nation’s venture capital goes to just that one place. Is it healthy to have the nation’s heartland hollowed out economically while a few cities on the coasts prosper more wildly than anyone can ever have imagined?

That basic question has animated a lot of policy discussions over the past decade on both left and right. For some, the answer has been to try to rebuild the nation’s manufacturing sector. For others, it’s been to “spread the digital wealth” by promoting a more widely distributed technology sector. These two things are not necessarily mutually exclusive, of course, and the difference between what is manufacturing and what is technology is increasingly hard to define. (This was a topic that the congressman from Silicon Valley – Rep. Ro Khanna, D-California – addressed when he spoke in Blacksburg last June as part of the Cardinal News Speaker Series.)

One idea that has captivated those on the left has been to direct federal research dollars to places other than “the usual suspects.” More specifically, to have the federal government designate some cities as regional technology hubs where funding would be focused as a way to build up more tech capitals across the country. During the 2020 Democratic presidential primaries, the candidates vied with one another over just how many technology hubs they would create. (Pete Buttigieg proposed 1,000.) I doubt any of those proposals swayed primary voters, but it shows why you should pay attention to details because those policy ideas surfaced last year – and became law as part of the CHIPS and Science Act that Congress passed and President Joe Biden signed into law.

The headline item out of that was legislation to promote more domestic production of microchips, but down in the bill was a provision to authorize up to $10 billion for “at least 20 technology hubs” around the country. The language further specified how these hubs should be distributed – at least three in each Economic Development Administration’s six regions, which means at least two regions might get more. 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. (Bristol’s in a tricky situation; it’s counted as part of the larger Bristol-Kingsport-Johnson City MSA, which has a population of 308,661.) 

I ran some rough calculations last fall and concluded that the New River Valley stood a pretty good chance of being picked. I made my layman’s analysis through a political lens: We’re in an EDA region that runs from Virginia to Maine. If this region gets only three hubs, politics will probably dictate they be spread out – one in New England, one in the New York-New Jersey-Pennsylvania area, and one in Maryland-Virginia-West Virginia. That narrows the competition. Since the goal here is to spread the technology sector around, it seems safe to say that Northern Virgina won’t get picked – they’re one of the “haves.” On the other hand, the goal here isn’t to create a technology hub from scratch; it’s intended to build on what’s already there, which is why the legislation talks up leveraging institutions of higher education, especially those dealing with so-called STEM fields – science, technology, engineering and mathematics. That sure sounds like Virginia Tech to me.

The bill also says the secretary of commerce should “encourage proposals” from places “whose economy significantly relies on or has recently relied on coal, oil or natural gas production or development.” That’s definitely Southwest Virginia. And while Virginia Tech isn’t in coal country, it doesn’t take too much imagination to picture a proposal that, while centered in Blacksburg, makes some provision for coal country.

Anyway, those were my back-of-the-envelope political calculations. Now come two different groups who have done actual data-crunching and come to more scientific conclusions. Let’s take a look.

The first of those is the Center for American Progress, a left-of-center think tank in Washington. It has run the math and has come up with 30 proposed regional tech hubs – five in each EDA zone. You’ll notice that the legislation calls for “at least 20” so there’s no reason why “at least 20” can’t really mean 30 – except that does spread the money a little thinner. (Hold that thought.) These rankings are much like when computer programs are used to rank college football teams – the output depends a lot on the input. How much weight do you give to wins over creampuff teams and how much weight do you give to a close loss against a tough opponent? Same here. The CAP formula is based on education and skills (40%), housing (30%) and lifestyle (30%), and each of those categories has its own formula. For instance, half the education score is based on educational attainment in the region, a quarter on the number of patents already being generated. Half the lifestyle percentage is based on commuting time (the quicker the better). For the full formula you can see the CAP site.

For those who just want to know the final score, here it is: In our particular zone, the CAP formula recommended Blacksburg and Charlottesville plus Albany, New York, and Erie and Pittsburgh, Pennsylvania.

There’s no commentary offered, so we don’t know how these communities ranked. I’ll just say that politically I don’t think this list will fly. Senate Majority Leader Chuck Schumer, D-New York, who was one of the prime movers behind this part of the legislation, has repeatedly talked up how he believes Buffalo would be a good pick – and Buffalo isn’t on this list. We can talk impartial selection all we want but I’ve taken it as a given that Buffalo will get picked. I also find it hard to believe, politically, that two college towns in the same state – Blacksburg and Charlottesville – would get designated. It would be a glorious thing if they were, but, again, I’m looking at this politically. And while CAP proposes five cities per zone, what if the secretary of commerce decides to take the “at least 20” directive as “exactly 20” and picks three cities per zone, with two wild cards? If this were the list of five she’d be choosing from, I suspect at least one of those Virginia cities would have to go.

In any case, here’s some further validation that Blacksburg would be a strong contender for one of these hubs. I don’t know who is the person to take the lead on this – Virginia Tech? the Onward New River Valley economic development group? – but it sure seems like somebody should. The formal application process hasn’t opened yet, but we’d want to be ready.

A more surprising result comes from the Economic Innovation Group, a bipartisan Washington-based think tank. It put together its own formula that aimed to find “the sweet spot” between “already high-performing superstar metropolitan areas that are decidedly not the intended recipients of these federal investments” and “remote and chronically struggling locales where hubs would have to be built largely from scratch.” It put a lot of emphasis on the number of STEM graduates in a region plus, like CAP, the number of patent-holders. It also worked in some economic factors such as “economic complexity” and “agglomeration adjacency,” the latter being an economist’s way of saying that the formula rewards standalone metro areas and those with a low cost of living. If that’s the kind of thing you groove on, knock yourself out reading the whole set of factors.

It also came up with five cities per EDA zone – do these think tanks know something the rest of us don’t? Curiously there’s very little overlap with the CAP list. In our zone, there’s only one duplicate city – Pittsburgh. Nationally, there are only five other duplicate cites: Boise, Idaho; Fayetteville, Arkansas; Lincoln, Nebraska; Madison, Wisconsin; and Oklahoma City. 

The fact that two groups could come up with two such different lists tells me that a lot of the competition here is going to be wide open. What you want to know, though, is how EIG ranked our zone so here it is, working our way north to south: Providence, Rhode Island; Springfield, Massachusetts; Buffalo; Pittsburgh; and … Lynchburg.

I’ll confess that surprises me. Blacksburg and Charlottesville made perfectly good sense on the CAP list – both college towns that are home to major research universities. Lynchburg is also a college town, it just isn’t always viewed that way. Fun fact: Between Liberty University, Randolph College and the University of Lynchburg, the Hill City has almost as many full-time college students on campus (15,226) as Charlottesville does (16,238). None of those Lynchburg schools are viewed as major research universities, and yet, here is Lynchburg beating out Blacksburg and Charlottesville (and lots of other places) in these rankings.

Politically speaking, the EIG list makes more sense to me because it includes Buffalo. There’s also more geographical diversity, which I suspect will be important.

Lynchburg has taken some hits lately – a report by the Commerce Department’s Bureau of Economic Analysis found that the Lynchburg metro has recovered from the pandemic slower than any other in Virginia, a report by Old Dominion University showed how its gross domestic product has shrunk over the past decade, a state report found the Lynchburg market too small to support a coveted inland port. This EIG report ought to be a big morale boost, and, ideally, the impetus for putting together a proposal.

Big picture-wise: Here are two different studies, using two different methodologies, that, yes, came up with different results, but this is also akin to the Sherlock Holmes story about the dog that didn’t bark. Neither study recommended a place in the urban crescent. Both recommended places near the Blue Ridge.

Now, a question: Each of these communities could go it alone and view the others as potential rivals. What, though, if they combined forces? I have no idea how that would work on the actual application, but consider this: Both Blacksburg and Lynchburg are part of the same GO Virginia region. That could provide some rationale for them to join together – an alliance of the state’s biggest public research university and its biggest private university. This should merit some discussion, at the very least. With the exception of GO Virginia, there’s no real history of the Blacksburg-to-Lynchburg region working together (Roanoke and Blacksburg are joined on lots of things), but there’s a first time for everything. Might this be it?

Now for the kicker, actually two of them. While the enabling legislation authorized $10 billion for these hubs, it didn’t actually appropriate that money. The federal spending bill passed in late December did, however, include $500 million for the hubs, which Schumer called “the first major down payment” toward their creation. “This means real dollars to create the Silicon Valleys, the Silicon Forests, the Silicon Heartlands and Prairies of tomorrow,” he said.

And now this: None of Virginia’s Republican representatives voted for the original legislation or the spending plan that includes money to get them started. Yet the three cities recommended in these two studies are all in Republican districts – one represented by Morgan Griffith, two represented by Bob Good. How strongly will they help push for one of their communities to get picked for something they voted against?

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