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Land rush

The sweet spot. That’s what Northern Virginia has become for a number of colleges and universities that train executives seeking to improve their companies.

Executive education in its many incarnations flourished in the executive-rich corridors of Northern Virginia well before Seattle-based Amazon decided last November to establish a second headquarters in Arlington — energizing a region already in hyperdrive.

Executive education programs in the region first served government agencies, then government contractors and later larger companies. At least that’s how George Mason University Associate Dean Roy Hinton, who has headed executive education programs for 14 years on GMU’s Fairfax campus, remembers the situation.

So, what’s he seeing now?

“We’re observing this trend of multinational and large corporations expanding in this region, and that’s of keen interest to us,” Hinton says.

Perhaps, “keen” is an understatement, considering the recent land rush among state schools to increase their stakes in the D.C. metro area.

Maury Peiperl, dean of GMU’s School of Business, says the federal government side of the regional economy has been reasonably constant.

“Whereas the business part is growing substantially, I think of Amazon as sort of a turning point, a tipping point if you will, of the process that’s been going on for a while,” he says.

Peiperl, who has taught executive education in Europe, now is seeing a trend toward executive-education programs that are not only more focused and shorter, but also often include credentialing in a number of areas.

“You may have an MBA or whatever. But it’s not such a bad thing to have a certificate in data analytics or in government accounting,” Peiperl says.

Darden’s growing presence
One of the kingpins of business education, the Darden School of Business at the University of Virginia in Char­­­­­­­­lot­­­­­tesville, has been steadily increasing its presence in Northern Virginia. Darden’s executive education programs are ranked consistently among the best in the world.

“D.C. has always been a rich space for us. Now, with our physical facility there, things are changing in a significant way,” says Larry Murphy, president of Darden Executive Education and Lifelong Learning.

The Darden facility is the Sands Family Grounds, a 40,000-square-foot space on the top two floors of a 31-story office building in Arlington’s Rosslyn area.

When the Sands facility was established in September 2017, Dean Scott Beardsley said it would “pave the way for Darden to gain a foothold in the D.C. area” that would enable it to accelerate its impact.

Murphy says customized executive-education programs, where Darden faculty contract with companies to provide specific courses based on their needs, have benefited from the school’s new digs in Rosslyn.

“We’ve been able to engage with some companies that see the location of the program in Rosslyn as a significant advantage for them — because many of their employees are located there,” he says.

Company executives also are drawn to the Northern Virginia venue because it provides access to trade or government officials.

“We’re already experiencing an uptick in our interest in the sessions we’re having with clients for doing work in Rosslyn and the Northern Virginia area, because of those dynamics,” Murphy says.

Tech’s 50th year
From its home campus in Blacksburg, Virginia Tech has had a significant presence in Northern Virginia for decades.

This year the university will celebrate its 50th year of offering graduate degrees in the region.

In the years to come, it plans to open a $1 billion Innovation Campus in Northern Virginia to expand the commonwealth’s  pool of technological talent.

But the university also has a stake in executive education in the area.

“Continuing and professional education has been operating in the National Capital region for over 10 years,” says Patty Tatro.

The associate director of Virginia Tech Continuing and Professional Education in the region, Tatro says a recently completed survey revealed a skills gap in the Northern Virginia workforce.

“We’re working to close that skills gap by creating noncredit short courses to up-skill employees in the region,” she says.

Kevin Carlson, associate dean for research and faculty affairs in the Pamplin College of Business at Virginia Tech, says it’s using a focused approach in Northern Virginia.

“We’re not trying to be all things to all people but trying to look for those opportunities in the marketplace where Virginia Tech’s capabilities and our faculty expertise really line up with very specific and important needs in the marketplace,” Carlson says.

This year, for example, the Pamplin College began a series of professional education programs in cybersecurity, integrated security and entrepreneurship at Tech’s facilities in Arlington.

All of the programs are customized for partners in the region.

In the past, Tatro says, project management was an important professional education program offered in Northern Virginia by Virginia Tech.

But surveys and experience suggested that other courses better aligned the university’s expertise with companies’ needs.

“We’re stepping into spaces as the problems emerge, so as we identify those spaces where organizations have a problem, we’re building agile programming into those spaces,” Carlson says.

Certificate programs
The College of William & Mary in Williamsburg also has offered executive education and other professional programs in the Northern Virginia/Metro D.C. area.

“In the past, we’ve done supply-chain programs [and] cybersecurity programs, and we decided to do a certificate program there,” says Rhonda Barton.

She is executive director of new business development and client relations at William & Mary’s Center for Corporate Education in Williamsburg.

Recently, W&M offered an open-enrollment certificate program in business excellence in Fairfax.

The program highlights five key areas: effective communication; accounting for managers; business analytics; business strategy; and executive leadership.

Barton says the college has the ability to provide a mix of programs “depending on the needs of the area, and the feedback we receive,” and to shift its offerings from one area of Northern Virginia to another. 

The enrollment struggle

Keeping food pantries stocked at its three campuses is one of the ways J. Sargeant Reynolds Community College helps its students stay in the classroom.

And retention of students has become an imperative.

The Richmond-based school has experienced one of the steepest drops in enrollment among the state’s 23 community colleges, which as a group has seen a huge decline in students during this decade.

In the 2011-2012 academic year, for example, Reynolds had a headcount of 13,267 students.

By the start of the current academic year, enrollment had plummeted 34 percent, to 8,737 students, according to figures published by the State Council of Higher Education for Virginia (SCHEV).

Besides looking for ways to increase enrollment, community colleges like Reynolds are exploring all options to retain current students.

Only about 20 percent of full-time students at Reynolds complete an associate degree within three years, according to its president, Paula Pando.

Nationally, she says, academic failure is not the primary reason community college students drop out. “It’s food; it’s housing; it’s trauma; it’s transportation,” she says.

And that’s where the food pantries come in. More than a dozen of the system’s other colleges also have programs to help students who may not have enough to eat. The pantries are supported by private foundations.

“Part of the enrollment issues facing community colleges across the country [is], yes, there are declining birth rates; yes, there are fewer high school students, and we’re going to see fewer and fewer. But that completion piece, students returning, that is where I believe we’re going to start turning the tide,” Pando says.

Falling college-age population
Across the commonwealth, community colleges are launching initiatives to reverse declining enrollment, a problem exacerbated by a looming drop in the college-age population.

The high-water mark for the community college system was the 2011-12 academic year, when its combined headcount was 197,226, according to SCHEV.

At the start of the current academic year, 2018-19, Virginia’s community colleges had an overall headcount of 161,587.  That is a drop of more than 18 percent.

And the worse may be yet to come because the U.S. birthrate plummeted after the Great Recession of 2007-09.

“Beginning in 2026, we will see a decline in traditional college-age student population that is more dramatic than we’ve ever seen before,” Glenn DuBois, the chancellor of the community college system, said at the beginning of this academic year.

In 2026, the country’s college-age population is expected to drop 15 percent over five years, according to research by Nathan Grawe, an economist at Carleton College in Minnesota.

That means Virginia’s community colleges need to bolster their enrollment of older students, says Jeffrey Kraus, assistant chancellor for strategic communications for the community college system. “For every student graduating from high school this June, we have 13 Virginians between the ages of 25 and 44 who have no postsecondary credential. The point is: We have Virginians around who could really benefit from what we’re offering,” Kraus says.

Enrolling older students, Kraus suggests, could be decisive in helping Virginia’s community colleges fight enrollment declines.

To increase enrollment, the community college system has prioritized three strategies:

  • creating a statewide marketing campaign,
  • improving affordability and access,
  • and strengthening advising and student support to improve completion rates.

Another obstacle facing community colleges is Virginia’s strong economy. Historically, community college enrollment declines when the economy is doing well and soars during recessions.

“When the economy is bad, and unemployment rates go up over 4 percent or so, more people will go to community colleges to get that credential they need or a course … that hopefully will give them an edge in finding a job or finding a better job,” says Tod Massa, policy analytics director of the community college system.

In January, the statewide unemployment rate was 2.8 percent, down 0.5 percentage point from a year ago.

Credential completion
One of the bright spots for community colleges has been FastForward — a program designed to help Virginians earn credentials for high-demand occupations.

Under FastForward, students enroll in short-term training and pay one-third of the tuition. The remaining two-thirds are paid by the state.

Students who do not complete the program and earn certification will be required to pay the second third of the tuition cost, and the college will have to pay the final third.

Since FastForward was initiated and funded by the legislature in 2017, J. Sargeant Reynolds has awarded more than 2,000 credentials, Pando says.

Workforce credentials earned by FastForward students are technically noncredit. So, they do not count toward the credit enrollment numbers that community colleges report to the state.

Ninety percent of the J. Sargeant Reynolds students holding credentials for high-demand occupations were employed within the first year of completing the FastForward program — with many receiving 30 to 50 percent increases in their wages, Pando says.

Moreover, community college officials have said that more than half of those who have earned workforce credentials through the FastForward program have returned to college for additional training, raising the potential that they could become full-time students.

This year’s General Assembly appropriated an additional $4 million for the grants supporting the FastForward program, raising the biennial total from $9.5 million to $13.5 million.

Kraus says a major effort in its six-year strategic plan, Complete 2021, is “to triple the number of credentials we put into the economy.”

Free tuition? 
Some community colleges are turning to philanthropic sources to add students to their rolls.

An example is Patrick Henry Community College near Martinsville. The college’s full-time equivalent enrollment (FTE), those students taking at least 15 credit hours, jumped 8.1 percent this year to 1,669 after seven years of declining enrollment.

The enrollment surge at Patrick Henry was fueled by a free community college education program (called SEED) for local residents. SEED is funded by a three-year, $3.1 million grant from the Harvest Foundation, a nonprofit organization whose mission is to build economic prosperity in the community.

“Our SEED funding with Harvest requires students to take a minimum of 15 credits per semester” in order to take advantage of the program, says Greg Hodges, Patrick Henry’s vice president for academic and student success.

“So, Harvest’s SEED program has allowed PHCC to stop the enrollment decline [a 40 percent loss in seven years], and more students are now taking more credits. Our local data shows that our growth is tied directly to SEED.” 

Kraus says other community colleges have similar programs.

For example, Virginia Western Community College in Roanoke has a public-private partnership called the Community College Access Program (CCAP). The program covers tuition for three years at Virginia Western for current-year high school students who do not have sufficient financial aid to pay the full costs. CCAP supports as many qualified students as possible, based on student need and funds available for each locality.

“CCAP has been instrumental in helping Virginia Western keep its enrollment among recent high school graduates steady,” says Josh Meyer, the college’s director of marketing and strategic communications. ”Over the past five years, CCAP has enrolled 42 percent of our recent high school graduates starting at the college each fall.”

Last year the Virginia Western Educational Foundation, which oversees the CCAP program, launched the CCAP2 campaign — its second fundraising campaign to benefit CCAP. The campaign’s goal is to raise $6.5 million by 2021, Meyer says.

“Colleges are becoming increasingly dependent on philanthropic organizations, whether they are investing money for textbooks or supplies, uniforms or fees, or, in the case of the Harvest Foundation, tuition,” says Hodges of Patrick Henry.

Changing of the guard

The departure of two longtime economic development leaders marks a changing of the guard in the Richmond area.

Barry Matherly, CEO of the Greater Richmond Partnership (GRP), left at the end of December to head a similar economic development group for 11 southeastern Michigan counties.

Also, Gary McLaren, executive director of the Henrico County Economic Development Authority, announced in November that he would retire early this year from the post he has held for nearly a decade.

During his three years as CEO of GRP, Matherly helped recruit businesses creating nearly 11,000 jobs and generating $643 million in wages. GRP markets Richmond and Chesterfield, Hanover and Henrico counties to business prospects.

Under Matherly, the Richmond region aggressively sought foreign investment. At any given time, about 70 percent of the companies looking at the region are based outside the U.S., Matherly says. About 200 international businesses already have a presence in the area.

Jennifer Wakefield, the partnership’s senior vice president of marketing, is GRP’s interim leader. She says the region is primed for additional “middle-office,” or division headquarters, jobs.

She cites a recent study by Wadley Donovan Gutshaw Consulting comparing the Richmond area with Charlotte, N.C.; Nashville, Tenn.; Columbus, Ohio; Jacksonville, Fla.; and other cities. “We were best positioned for middle-office jobs along the East Coast,” Wakefield says.

McLaren’s tenure as Henrico’s economic development director was marked by a steady rise in the county’s fortunes. In 2017, Facebook announced plans to build a $750 million data center in Henrico’s White Oak Technology Park, along with an additional $250 million investment to build solar facilities to help reduce the impact of the facility’s power usage.

Less than a year later, Facebook said it planned to spend an additional $750 million to expand the data center. The investments will make Facebook the largest taxpayer in Henrico, county officials say. Facebook anticipates that the first phase of its data center will begin operations this year.

“I got to Henrico in 2009 at the height of the recession,” McLaren recalls. “Henrico had just lost 4,000 jobs.”

Today, the county has the second-highest number of jobs of any locality in Virginia, real estate assessments that have grown for six consecutive years and the top ranking in the state in terms of sales-per-capita of the top 10 taxable sales producing Virginia localities in 2017, officials have said.

In Chesterfield County, economic development director Garrett Hart reported strong results last year. The county saw $100 million in capital investment, 353 new jobs and 1.16 million square feet of new building space.

Chesterfield continues to add jobs and new businesses resulting in the largest employment and number of new businesses in the county’s history in 2018, Hart says.

Lynchburg area
In the Lynchburg area, Liberty University’s continued growth is a big part of the region’s economic picture.

In October the university, which has more than 15,000 students in Lynchburg and more than 85,000 online, said it was creating a technology park behind its Center for Energy Research & Education in Bedford County and would establish its School of Engineering on its main campus in Lynchburg.

“What’s really fantastic is that Liberty University has become a research and development university,” says Megan Lucas, CEO and chief economic development officer for the Lynchburg Regional Business Alliance. 

Liberty and other colleges and universities in the region increasingly contribute to a talent pipeline that is critical in attracting companies to the area, Lucas says.

Charlottesville area
In the Charlottesville area, represented by the Central Virginia Partnership for Economic Development, President Helen Cauthen boasts that the region now has three Tier 4 sites ready for development. It previously had none.

Tier 4, according to the Virginia Economic Development Partnership, indicates that a site has been certified as “infrastructure ready.”  In layman’s terms, that means that a site has been graded and utilities such as water and sewer are in place or soon will be. “Shovel ready” is the Tier 5 level in which all permits are in place.

One of the area’s success stories last year was the growth of WillowTree, a mobile applications developer, whose relocation from downtown Charlottesville to the old Woolen Mills factory in Albemarle County is expected to create 200 jobs. Currently the company has about 320 employees.

“We were looking for a more central campuslike experience and Woolen Mills, with wonderful assistance from the county and the state, has become that project for us,” says Tobias Dengel, WillowTree’s CEO.

Central Virginia’s recent deals

Company Location #Jobs
Facebook Henrico County 200
WillowTree Albemarle County 200
Dominion Outsourcing Henrico County 190
TemperPack Henrico County 141
Ocean Network Express Richmond 129
Convergys Corp. Lynchburg 100
Paymerang Chesterfield County 100
Classic Granite & Marble Powhatan County 100
West Creek Financial Inc. Henrico County 100

Sources: Virginia Economic Development Partnership, Greater Richmond Partnership, Lynchburg Business Alliance

Recording a save

Editor's note: After this story was published, the Richmond Tines-Dispatch reported on March 8 that the Bear Island newsprint mill has again being idled. White Birch Paper had planned to operate the plant for two years before Cascades Inc., a packaging and tissue products company, took over and converted the facility to make recycled paper products. White Birch said the plant's transition to Cascades will still take place.

In April 2017, Linwood Thomas reported to his new job as Hanover County’s economic development director.

Within a month, one of the county’s largest taxpayers — the Bear Island paper mill — announced it was being idled. 

During the same month, Thomas’ wife had their first child.

“It was a very challenging but blessed year,” the 39-year-old Thomas says.

For Hanover, loss of the plant would jeopardize 165 jobs and about a million dollars in annual tax receipts.

“All of a sudden, it was all hands are on deck to fill a facility that very shortly will be vacant, understanding that it could take years to fill it,” Thomas says.

The plant’s owner, Connecticut-based White Birch Paper Co., cited “difficult market pricing, challenging cost fundamentals and declining demand” for newsprint as reasons for closing the facility.

Thomas reached out to site consultants to see whether another company might be interested in the property.

Meanwhile, Danny Holly, a vice president with the commercial real estate firm JLL, had seen a notice about Bear Island being idled. The next morning, he called White Birch officials to see whether they had found someone to market the property. In the ensuing discussions, JLL was hired for the job.

Holly says White Birch was looking for a buyer with a local and national presence. The company didn’t want to sell the plant to a competitor.

“They wanted a lot of information,” Holly says. “We acted more like a business adviser. Clearly, the best-use value was as a paper facility. The last thing you want to do is sell the raw land and salvage” the plant.

Subsequently, JLL began vetting offers, evaluating which ones had the highest probability of success and the best fit for all concerned.

Quebec-based Cascades emerged as the leading suitor. The largest recycled paper collector in Canada, Cascades is a leader in green packaging and paper tissues manufacturing.

At about this point, the Bear Island story took an improbable turn.

Cascades wanted to purchase the plant and revamp it to produce linerboard, which is used in corrugated containers, boxes and related products.

But the project would require reconfiguring the plant’s newsprint paper machine. That raised the possibility that the facility would stand vacant, with substantial job losses, as the revamped machine was readied.

While purchase negotiations were underway, the newsprint market improved. White Birch decided it could operate the plant profitably as a newsprint mill for 27 months under a contract with Cascades.

“A plant that is running is better than a plant that is closed,” Holly says.

Cascades’ interest in the property triggered a burst of activity in Hanover’s economic development office. Thomas worked with state and county officials to prepare an incentive package for the Canadian company, which was being pursued by other states.

Virginia offered a $1.95 million grant through its Commonwealth’s Opportunity Fund. Cascades also is eligible to receive sales and use tax exemptions on manufacturing equipment, plus funding and services to support the company’s employee training activities through the Virginia Jobs Investment Program.

Under the performance agreement with Cascades, the money would be disbursed as the company meets certain investment and employment goals.

They include 140 jobs at the plant paying an average of $75,551 a year — Hanover’s average annual wage is $42,824 — and a Cascades investment of at least $275 million.

On July 26, Cascades announced that it would buy the Bear Island plant for $34.2 million, while investing $275 million to $300 million to upgrade its equipment.

“This project is directly in line with the goals of our strategic plan which include, among other things, to invest in our core sectors of packaging and tissues through modernization, and expand our geographical footprint,” Cascades CEO Mario Plourde said when announcing the deal.

New operations are expected to come online in 2021.

Cascades’ investment makes it one of the state’s biggest industrial projects in 2018, Thomas says.

“I will say it’s the biggest project Hanover has ever seen,” he adds.

A talent tug of war?

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The big prize. The opportunity of a lifetime. The largest single roll of the dice in U.S. economic development history.

All the superlatives were trotted out as Seattle-based tech giant Amazon pondered where to put its second headquarters (HQ2).

In the end, Arlington County in technology-rich Northern Virginia and the Long Island City neighborhood of Queens in New York City, divided the spoils. Amazon says the 25,000 or so jobs it will create in each location will pay an average of $150,000 a year.

The ripple effect of Amazon’s presence in Virginia will amount to $14.2 billion and more than 59,000 jobs over a dozen years, according to a study for the Virginia Chamber of Commerce conducted by Richmond-based Chmura Economics & Analytics.

In competing for HQ2, Virginia rightly decided that monetary incentives were not the most important issue for Amazon. What really mattered was Northern Virginia’s pipeline of technology talent and major educational investments to train more workers.

But questions persist about the effect Amazon’s arrival will have on existing employers. These companies wonder whether the pipeline will be big enough to satisfy everyone’s needs.

Some of those companies are among the Best Places to Work in Virginia. Since  2011, Virginia Business and Pennsylvania-based Best Companies Group have collaborated to identify top workplaces in the commonwealth.

One hundred companies in three employment categories were chosen for the Best Places list. (See a photo gallery of winners from this year's awards luncheon.)

At least 30 of the 100 companies on the 2019 list of the Best Places to Work are involved in technology or government contracting, and about 50 are based in Northern Virginia.

Already recognized as being highly desirable workplaces, what will these companies do to continue to attract the workers they need?

        MEET THE 2019 BEST PLACES TO WORK IN VIRGINIA 

Fierce competition
Officials from Best Places companies acknowledge that the competition for talent in Northern Virginia could become fierce when Amazon begins to staff its National Landing headquarters, which will include parts of Arlington and Alexandria.

“From a corporate talent standpoint, I’m terrified,” says Lisa Rosenthal, CEO of Mayvin, an Annandale-based federal contractor that serves national-security agencies. “For companies who do any kind of government contracting, it’s going to suck our labor pool completely dry.”

Rosenthal says Amazon’s arrival likely will mean her woman-owned company won’t bid on contracts in the metro D.C. region. “We can’t compete with their salaries,” Rosenthal says of Amazon. “I’m a cool company for the Department of Defense, but I’m not a cool company when I’m competing with Amazon.”

Rosenthal believes that HQ2 will initiate a cultural shift that will remake the region and change its identity. “It will make the business of D.C. no longer government. The business of D.C. will be Amazon,” she asserts.

Rosenthal acknowledges that Amazon could greatly expand what she calls Northern Virginia’s “innovative gene pool.” The problem: “We’re not going to be able to afford guys,” she says.

For Rosenthal, the one bright spot is that the value of the condo she owns in Arlington already is soaring because of Amazon’s announcement. She hopes that when she finally decides to put the condo on the market, the price it commands will be over the top. “Maybe I’ll be able to retire on my condo,” she says with a laugh.

‘Good problem to have’
John Braun agrees that Amazon will be a formidable competitor for talent. “That’s always a concern, but it’s a good problem to have,” says the president of Dynamis, a Fairfax-based company providing a broad range of services and support to government clients.

Braun says companies already facing challenges may be more vulnerable when competing with Amazon than firms that have grown, even in difficult times. 

He is impressed with the state’s education investment proposals, which are designed to ensure that a large number of qualified workers will be available not only to Amazon but to others.

His company is continually investing in its employees’ education and training, whether they want to get a master’s degree, a doctorate or a certification in a critical area. “To be successful in the long run, you have to spend money,” Braun says.

If his company gets in a bind in trying to keep a particularly talented employee, he says, “we would offer additional benefits,” on top of what he believes is already an attractive compensation package.

Braun’s final thought on why HQ2 is a positive development: “Business begets business.”

An economic boost
Jeanette Chapman, deputy director of the Stephen S. Fuller Institute for Research on the Washington Region’s Economic Future at George Mason University, sees both sides of Amazon’s possible effects on the Northern Virginia talent pool.

On one hand, she says, concerns about Amazon’s soaking up the talent “are valid, but hard to quantify.”

On the other hand, “the countervailing point is that Amazon will be a big enough name to attract a significant workforce on its own,” Chapman says.

“One thing Amazon could actually do is create a new reason to attract and retain young workers. Amazon would be a draw in that respect. We seem to have difficulty retaining the younger talent. It seems to be a little more acute in the past few years than it has in prior decades,” she adds.

Analysis by the Fuller Institute found that the number of 25- to 34-year-olds living in Northern Virginia fell in 2015 and 2016, despite growth in that population group nationally.

Northern Virginia also has lost federal jobs in recent years as a result of a drawdown of troops in Iraq and Afghanistan, budget cuts and other factors.

In 2010, the Fuller Institute says, 39.8 percent of the Washington region’s economy was generated by the federal government. By 2017, that figure had fallen to 31.2 percent. The decrease accompanied an overall decline in regional economic activity, even though the number of private-sector jobs increased.

The jobs created by Amazon — and firms that may cluster around HQ2 — could underpin and sustain the region’s economic recovery, Chapman believes.

Investments in education
Another big factor in the regional economy’s future will be additional investment in education: more than $1 billion during the next 20 years. The goal is to produce an additional 25,000 to 35,000 bachelor’s and master’s degree graduates in computer science and related fields. 

Major players in this ramp-up will be Virginia Tech, which will receive $250 million from the state that will be matched by funds from the university, and George Mason University, which is getting $125 million in state funds with a university match.

At GMU, the money will be used to expand the university’s Arlington campus while emphasizing research and graduate education in technology.
Virginia Tech, whose main campus is in Blacksburg, plans to create a 15-acre, $1 billion Innovation Campus within two miles of Amazon HQ2.

Brandy Salmon, Tech’s chief operating officer for the Innovation Campus, is bullish about the university’s role in filling Virginia’s tech talent pipeline.

“The Virginia Tech Innovation Campus is an ideal solution — right university, right programs, right time and right location to transform and sustain Northern Virginia and the entire region as a leading magnet for tech talent and innovation — with room to grow, adapt and evolve as technology and the market changes,” Salmon says in an email.

“At scale, we will enroll 750 master’s degree candidates and train hundreds of doctoral students and postdoctoral fellows,” she says.

The buildout for the Innovation Campus is expected to take 10 to 15 years.

Besides new students in Northern Virginia, the university expects to add 2,000 undergraduate students who will study software engineering and computer science at the Blacksburg campus.

Meanwhile, Deborah Crawford, GMU’s vice president for research, says the university is committed to doubling the number of undergraduates in its computer science, cybersecurity and related fields to 10,000 students by 2024, adding that the state will help it increase its number of master’s degree students in those fields.

“Families in the commonwealth understand that the job opportunities in these fields are plentiful,” Crawford says, adding that Virginia alone has about 35,000 unfilled jobs in the tech sector.

In the end, Crawford is confident that Virginia’s efforts to create a pipeline of technical talent will be successful.

Changing image
Bobbie Kilberg, president and CEO of the Northern Virginia Technology Council, says her members continually struggle to acquire and retain talent.

Initially, Amazon will make the labor market more competitive than ever, she says. “But in the long term, it will be a magnet for talent that will benefit everybody.”
She adds that Amazon’s HQ2 announcement already has benefited the region.

“We have tried for as many as 20 years to define this region as a global technology center full of innovation and entrepreneurship,” but only a few people were listening, Kilberg says.

Now that identity is an accepted fact. “In terms of branding, it’s fabulous,” she says.

Coping with costs

Well before their oldest child could walk or talk, David and Macy Allen began planning for her college education. 

The couple, Henrico County residents who work in information technology, began saving when their daughter, now 10, was 6 months old. They met with a financial adviser to choose a college-savings plan. Today, they are saving for her 6-year-old brother’s education as well.

Despite the early start, the cost of college seems insurmountable.

“The way people are trying to figure out how much money they’ll need for their kids is to figure out the current cost of college and how much it’s been growing and project that out. But the cost has been growing so fast that if you project that out, you’re not going to be able to pay for your kids’ college,” says David Allen.

The Allens are among millions of Americans saving for their children through the Virginia College Savings Plan, known as Virginia529. Named after the section authorizing them under the U.S. Internal Revenue Code, 529 plans are tax-advantaged savings programs used to finance the cost of higher education.

Virginia529 is the largest 529 program in the country, with 21 percent share of the national market. The program had assets of  $69.1 billion on March 31.

Virginia529 plans can provide big breaks for taxpayers. Virginians can receive a state income tax deduction on contributions to 529 accounts — up to $4,000 per account per year — and their earnings also grow free from federal taxes. Earnings, in fact, are never taxed if used for qualified higher-education expenses.

Despite Virginia529’s overall success, Virginia legislators are considering ways to make one of its plans, the prepaid plan, more affordable and flexible.

The affordability of college has become a national issue in recent years, as student debt has risen. In the 2016-17 academic year, for example, average student debt in Virginia was  $29,974, according to the State Council of Higher Education for Virginia (SCHEV).

Meanwhile, college costs show no indication of leveling off. Total charges — the average sum of tuition, all mandatory fees and room and board — will be $24,003 for the 2018-19 academic year, a 63 percent increase from 2008-09, SCHEV says in its most recent tuition report.

Virginia529’s prepaid plan, Prepaid529, is perhaps the most innovative in its portfolio, but it is also the smallest. The prepaid plan has only 63,858 accounts, a small number compared with Virginia529’s CollegeAmerica plan, which has 2.3 million accounts.

The idea behind Prepaid529 is that participants can purchase the cost of a future college education at today’s tuition levels. But as tuition has spiked, the cost of the prepaid plan has become too high for most parents.

For example, during the 2017-18 enrollment period, parents of a newborn could pay $70,600 to cover four years of college tuition and mandatory fees. If a parent pays monthly, fees are added. That means a parent would pay $545 a month until the child goes to college (a total of $118,265).

Because of rising contract costs, the number of Prepaid529 accounts declined 11 percent from fiscal year 2009 to fiscal year 2018, according to a recent oversight report by the Joint Legislative Audit & Review Commission (JLARC), the Virginia General Assembly’s oversight agency.

During the past decade, the cost of a Prepaid529 contract covering eight semesters at a four-year college or university rose from $44,060 in 2008-09 to $67,880 in 2017-18, primarily because of the rising tuition. As a result, consumers shifted to more affordable plans, JLARC says.

Tinkering with the ‘pricing reserve’
Possible changes to Prepaid529 have been outlined by JLARC, Virginia529 and by two Republican members of the Virginia House of Delegates.

JLARC raised the possibility of reducing the “pricing reserve” in Prepaid­529. The reserve is an amount paid above the Prepaid529 tuition contract as a hedge against a potential financial risk to the fund from events such as a dramatic stock market correction.

JLARC has made the case for reducing the pricing reserve from 10 percent to possibly 7 percent, but the agency didn’t make that change a recommendation.

Instead, it says Virginia529’s board should consider guidelines that would reduce the pricing reserve in conjunction with the Prepaid529’s funding status.

JLARC noted that Prepaid529 had funding representing 138 percent of its payment commitments as of June 30, 2017. That is the highest in the prepaid program’s 21-year history.

A larger cut in the pricing reserve is proposed in legislation introduced by Delegates Steven Landes of Augusta County and Tim Hugo of Fairfax County.

In a recent opinion piece in the Richmond Times-Dispatch, Landes proposed lowering the price reserve from 10 percent to 5 percent. That move, he says, would reduce the cost of an eight-semester prepaid contract by $3,000.

Mary Morris, Virginia529’s executive director, says the delegates’ proposal was a surprise. “I don’t think that’s the right percentage,” she says of Landes’ 5 percent recommendation.

Reacting to suggestions that the prepaid fund balance may be higher than needed, Morris says, “In actuarial terms, if you’re funded 100 percent, it means you only have a 50-50 chance of meeting your long-term obligations.”

She adds that the Virginia529 board has a fiduciary responsibility to ensure the long-term solvency of the prepaid plan, recalling the stock market dropped 35 percent during the last recession.

By the time the 2019-20 enrollment period opens for Prepaid529, she believes the Virginia529 board will have a policy that says, “at a certain funding status, we’ll take a look at adjusting our pricing reserve.”

In response to concerns about the current model, Virginia529 also is proposing a payout plan for the Prepaid529 plan called WAT (Weighted Average Tuition).

Today, Prepaid529 pays tuition costs and mandatory fees for those attending state public institutions of higher education (and an adjusted benefit to those attending out-of-state or private institutions).

Under the WAT program, the payout would be the same for all students, whether they attend in-state, out-of-state public or private institutions.

Students attending more expensive schools would have to make up the difference between the WAT payout and their actual cost of tuition and fees.

On the other hand, students attending less expensive schools might have money left over, which they could use for other expenses, such as books.

“What you give up is the certainty that we’ll cover tuition and fees at the most expensive state schools … but what you gain is you’re paid the same thing no matter where your child goes … to a private school or to a school out of state,” Morris says.

Legislation to enact the WAT model did not pass in the last General Assembly session. Some legislators expressed concern about a shift away from paying the full cost of tuition and fees at state institutions.

JLARC says the WAT model would have several advantages over the current model including the “potential for reduced contract pricing and more flexible payment terms.”

At the request of the General Assembly, JLARC is reviewing the WAT model to determine how it might affect payouts, contract costs, plan sustainability and other issues. JLARC  is to report on its findings at its November meeting.

CollegeAmerica plan
Virginia529’s most popular education savings plan is CollegeAmerica, which has $62 billion in assets. But there are only about 200,000 Virginia families among its 2.3 million account holders. Morris says CollegeAmerica always was positioned as a national program.

CollegeAmerica is the product of partnership between Virginia 529 and Capital Group, a private mutual fund company.

Private financial advisers sell the accounts, which are invested in various mutual funds through American Funds. Account holders work with advisers to determine how their money is invested.

Besides CollegeAmerica and its prepaid plans, Virginia529 also offers another fairly popular college-saving plan: Invest529, with more than 272,000 accounts.

Invest529 allows account holders to save at their own pace through options ranging from bank savings accounts to a portfolio of investments.

Proposed changes at Virginia529 reflect ongoing changes throughout the 529 industry.

For example, Morningstar has reported that the 529 industry has initiated changes to reduce expenses, as well as to improve the asset-allocation approach in aged-based portfolios “to smooth out the transition from stocks to bonds as the beneficiary ages.”

Virginia529 plans certainly aren’t the only way to save for college, but par­­­­­­­­­­­­­­­­­ents should start early and have a defined strategy, financial advisers say.

The CEO pay ratio

Publicly traded companies have begun disclosing a ratio that compares the compensation of their chief executive officers with the median pay of their workers.

The CEO pay ratio, required for the first time this year by the Securities and Exchange Commission, is intended to put the compensation of top executives under closer scrutiny. Nonetheless, the jury is still out on how helpful these figures are.

“Generally, people don’t really know what to make of it so far,” says Charlie Pontrelli, senior project manager at Equilar, a Redwood City, Calif.-based executive compensation firm. “The calculation is different between companies. A lack of comparability between one another doesn’t make [the ratio] super useful.”

Equilar prepared a survey of 2017 CEO compensation for Virginia Business looking at 47 Virginia-based publicly traded companies with annual revenues of more than $1 billion.

The firm examined proxy statements to analyze executives’ total compensation, including salary, cash bonus, stock and option awards, long-term cash and other compensation. 

Equilar’s CEO total compensation numbers often differ from the amounts reported in company proxy statements because the firm excludes changes in pension plan value and above-market earnings on deferred compensation.

Average total compensation in 2017 for CEOs in Equilar’s survey was $7.3 million, down from $7.8 million the previous year.

Virginia executives, on average, did not fare as well in 2017 as those surveyed nationwide by Equilar in its June study of CEO Pay Trends. The median total reported compensation for 500 chief executive officers was $11.9 million in 2017, a 3.5 percent increase from 2016.

Michael Lawrie, the chairman, president and CEO of DXC Technology, a Tysons-based IT services company, leads the Virginia CEO pay list with total compensation of $32.2 million in 2017. His pay package represented a 72 percent increase over his 2016 compensation of $18.7 million.

Lawrie’s company was formed last year in the merger of Computer Sciences Corp. (CSC) and the Enterprise Services business of Hewlett Packard Enterprise. Lawrie was chairman, president and CEO of CSC. Total shareholder revenue (TSR) at the combined company jumped 49 percent year over year.

The ratio of Lawrie’s pay to company employees’ median salary is 806 to 1. Nonetheless, the highest CEO pay ratio on the Equilar list, 2,429 to 1, was reported by Universal Corp., a 100-year-old Richmond-based tobacco merchant with operations in 26 countries. The company buys, processes and sells tobacco for customers such as Richmond-based Altria Group.

Equilar values the 2017 total compensation of Universal CEO George C. Freeman at $3.5 million, the 35th highest on its Virginia list.

In explaining the high CEO pay ratio in its proxy statement, Universal points out that 94 percent of its 21,150 employees are located outside the U.S., many in countries where salaries are significantly lower than the average pay in the U.S. Unskilled, seasonal employees make up 64 percent of the company’s global workforce.

Universal CEO pay ratio is based on a median employee compensation of $1,528,  the amount paid to an unskilled, seasonal tobacco worker in the Philippines. The company said SEC rules did not permit it to annualize seasonal pay.

When CEO compensation is compared with the annual median pay of Universal’s U.S. employees, the ratio falls to 206 to 1, the proxy statement said.

Low ratio at Freddie Mac
The lowest pay ratio among  Virginia CEOs was found at McLean-based Federal Home Loan Mortgage Corp., known as Freddie Mac. CEO Donald H. Layton earned $651,000 while the median pay of Freddie Mac’s employees was $123,027, a ratio of 5 to 1. Layton ranked 46th in total compensation on the Virginia list.

CEO pay ratios for seven of 47 Virginia companies were not available when Equilar conducted its survey. The disclosure rule affects a company’s first fiscal year beginning on or after Jan. 1, 2017. One of the seven companies began its latest fiscal year before that date, and the other six had fiscal years that ended in June or September.

While the CEO pay ratio rule did not take effect until this year, it originated in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Many companies had been bracing for its enactment for the past eight years.

Tony Meyer of Meridan Compensation Partners LLC of Lake Forest, Ill., said earlier this year that the mandated CEO pay ratio was “driving increased external scrutiny of pay programs and communications to both internal and external audiences.”

In a recent email, however, Meyer indicated the effect of disclosing the pay ratio was still unclear. “We have not received information about how the inaugural CEO Pay Ratio disclosure has been received by companies and employees,” he said. “It has been our observation, though, that internal and external reactions have been far more muted than many anticipated.  Most institutional investors are not that interested in these ratios.”

Meridian provides executive compensation and consulting governance services for publicly traded and privately held companies.

Equity awards and bonuses
Equity awards and bonuses continued to be the main component of a majority of chief executives’ compensation on the Equilar Virginia CEO pay list.

In 2017, the equity awards averaged $4.4 million, eclipsing the average of salary and bonuses, which averaged $2.6 million. CEO salaries alone averaged $973,069.

Kenneth Asbury, president and CEO of CACI International, an Arlington-based professional services and information technology company, received the biggest percentage jump in total compensation. It rose to $5.8 million in 2017, a 171 percent increase from his 2016 compensation of $2.2 million. CACI acquired the National Security Solutions unit of L-3 Communications in early 2016.

Two women were among the top-paid chief executives in Virginia in 2017.

One is Phebe N. Novakovic, chairman and CEO of General Dynamics, a Falls Church-based aerospace and defense company.

She was the second-highest-paid CEO on the Equilar list, at $21.2 million, virtually the same amount as the previous year.

But Novakovic received the largest bonus in 2017 among the CEOs, $5.3 million, a 3 percent increase above her bonus of a year before.

The other female in the male-dominated CEO ranks was Lynn A. Dugle of Engility Holdings, a Chantilly-based engineering and logistics services company. Dugle earned $3.9 million in total compensation. She became CEO in March 2016. (In September, Reston-based SAIC announced it is buying Engility in a stock deal worth $2.5 billion.)

The largest percentage bonus increase year over year — 259 percent — went to James A. Squires, CEO of Norfolk-based transportation company Norfolk Southern.

Squires’ bonus was $2.6 million, compared with $724,950 from a year ago. His combined bonus and salary also saw the biggest percentage increase in that category, 122 percent.
His total compensation, $10.2 million, was fueled largely by an equity award worth $6.5 million.

Salary goes toward fund
The biggest percentage drop in base salary involved C. Michael Petters, president and CEO of Huntington Ingalls Industries of Newport News, America’s largest military shipbuilding company.

Petters’ salary dropped from $328,847 in 2016 to $1 in 2017. During 2016, he asked the HII board of directors to reduce his base salary, previously $950,000 a year, to $1. The rest of the money was given to a fund offering educational grants to the children of company employees.

Petters’ total compensation dropped 7 percent from 2016 to 2017, from $6.2 million to $5.8 million.

The largest dollar drop in total compensation was that of John J. Haley, CEO of Willis Towers Watson, a multinational risk management, insurance brokerage and advisory company based in Arlington.

Haley’s total compensation declined $24 million, or 86 percent, plummeting from $28.1 million in 2016 to $3.9 million in 2017. Haley was the head of Arlington-based Towers Watson & Co., which merged with London-based Willis Group in 2016.

Virginia CEO pay report

An architect of a rebuilt city

“Over the past 20 years, VCU’s capital projects have sustained neighborhoods during economically difficult times. Between 1996 and 2013 — beginning near the peak of a violent crime epidemic and extending through the nadir of Richmond’s population loss and the Great Recession — VCU invested more than $1.6 billion in its Monroe Park and MCV campuses.”
— Draft of Virginia Commonwealth University’s new strategic plan, “Quest 2025: Together We Transform”

In 1968, Richmond Professional Institute merged with the Medical College of Virginia, forming the state’s first truly urban university.

This year is the 50th anniversary of that unlikely merger. RPI was known largely for its quirky art school, while MCV was a sober bedrock of the state’s medical heritage.

It took years to make the marriage work, but it has. In the process, VCU — with a total enrollment of more than 31,000 students — has changed the face of Richmond, especially since the 1990s when the university’s building efforts began in earnest.

Brian White, a real estate developer with the local firm Historic Housing, remembers his hometown before VCU began an almost block-by-block reinvention of its campus in central Richmond.

“I grew up in Richmond and graduated from [high school] in the late ‘80s when Richmond was just a mess,” White says.

He recalls venturing onto a block of West Grace Street next to the VCU campus that then featured an X-rated theater and a biker bar. “I was mugged on Grace Street when I was 15,” White says.
Now, West Grace is one of VCU’s success stories, with dormitories, a campus theater and eateries. The street has become a symbol of the construction campaign at VCU begun by Eugene P. Trani, who became the university’s president in 1990.

‘Trani Town’
Trani almost immediately began pushing through a remake not only of Grace Street, but also the West Broad Street area paralleling the VCU campus.

One VCU official recalled finding bullet casings, drug paraphernalia and other detritus on a preliminary walk-through of the area.

Some in the media began calling Broad Street’s remake “Trani Town.”

The West Broad Street initiative signaled that, amid a tide of homicides — peaking at 161 in 1994 during a crack cocaine epidemic — and a cratering of Richmond’s central business district, VCU was placing a bet on better times.

Replacing old buildings and filling vacant spaces, VCU largely used proceeds from general obligation bonds to build a 114,000-square-foot School of the Arts building, which was dedicated in 1999. The school has since become a flagship for VCU’s ambitions. In the latest U.S. News & World Report rankings, VCU tied UCLA for the top spot for graduate fine-arts programs at U.S. public universities. The two public schools ranked second overall behind Yale.

The arts school was part of a VCU initiative along a six-block corridor of West Broad Street. The corridor also includes the Stuart C. Siegel Center (the consistently sold-out arena for VCU’s men’s basketball team), a sports medicine building, a 396-bed dormitory and the university bookstore.

VCU has become the city’s largest developer, and its expansion continues unabated.

In October, VCU President Michael Rao told Richmond’s Forum Club that since 2009, when he succeeded Trani, the university has had construction projects totaling 5 million square feet worth $2.1 billion.

“The university has an obligation to participate in the solution of urban problems,” Rao said. “We’re very proudly a public university, and our public university was built to be a public good for Richmond and beyond.”

Over the years, VCU’s expansion efforts occasionally have encountered opposition from its neighbors. 

Perhaps the best-known example occurred nearly 30 years ago when the university was planning to expand into the historic Oregon Hill area.

University Architect Mary Cox recalls that, when Oregon Hill residents learned of those plans in 1989, the disclosure set off a furor.

When Trani became president the following year,  he established community advisory boards and began developing relationships with the neighborhoods surrounding the university, Cox says

“One of the first bold gestures of the 1996 master plan was to move VCU north toward Broad Street,” Cox adds.

Another prickly problem came as the VCU Health System’s expansion began encroaching on the Museum of the Confederacy and the adjacent White House of the Confederacy, a 200-year-old structure where Confederate President Jefferson Davis lived during the Civil War.

Last year, the Heath System purchased the museum building for $6.25 million, as the museum consolidated its holdings with those of the American Civil War Museum. 
The White House of the Confederacy was not affected by the purchase.

ICA and other projects
VCU’s golden anniversary has unleashed a new series of projects. Its capital projects spree began in April with the opening of the Institute for Contemporary Art (ICA) — the biggest funded project in the university’s history.

The $41 million structure, designed by renowned architect Steven Holl, was named one of the most highly anticipated buildings of the year by Architectural Digest.

In the spring and early summer, VCU and its health system began other projects, including:

  • A $93 million engineering research building on its Monroe Park campus;
  • A 16-story, $349 million tower for outpatient services on VCU’s medical campus, the largest capital construction project in the history of VCU Health; and
  • A $95 million rehabilitation hospital in Goochland County in a joint venture with Sheltering Arms.

In August, the university opened the doors on a $96 million residence hall that will house 1,518 students on 12 floors. Texas-based American Campus Communities — in a public-private partnership with VCU — designed and built the residence hall and will run it under a 50-year operating agreement.

The university says that the partnership will allow the university to preserve VCU’s debt capacity for other projects.

“If we can get a private developer to come in and operate it … then, that’s debt capacity that we can use for other things,” says Dave Goodwin, director of financial services for the university’s division of facilities management.

As of late July, VCU’s outstanding debt was about $450 million. A March 2017 credit report from Moody’s Investors Service, a credit rating agency, concluded that VCU’s debt was “manageable” and gave the school a favorable credit rating, Aa2.(The university is constantly repaying debt as well as borrowing, so its debt numbers are in constant flux.)

Rebound since 2000
VCU’s building boom has helped Richmond regain its momentum after the city’s population fell from 250,000 in 1970 to 197,000 in 2000, a 21 percent decline.

By 2017, Richmond’s population had rebounded to an estimated 227,000, with a median age of 33 — a reflection of the torrent of millennials who have swept into the city in recent years.

Growth on the university’s downtown Medical College of Virginia campus and the creation of the nearby Virginia Bio-Technology Research Park also have helped stabilize downtown after the loss of many businesses in the 1990s, including two major department stores, Thalhimers and Miller & Rhoads.

“VCU has gone from a commuter to a residential college. That’s been huge for the university and for the urban core,” says Lucy Meade, marketing and development director for Venture Richmond, a city promotional group.

Meade says that VCU students, along with empty nesters and working-age millennials, helped fuel a surge in downtown’s population.

That change, in turn, she says, has made the city an attractive place for companies, especially those searching for millennial talent.

Time magazine reported last year that Richmond ranked second in the nation in terms of millennial move-ins during 2010-15. The number of millennials in the city grew 14.9 percent, or by 5,176 people, during that time. The Urban Land Institute, which developed the study, defined millennials as people between the ages of 25 and 34.

Architect Robert Mills, a pioneer in the use of historic tax credits, says VCU was an early advocate of rehabilitating existing buildings. “At the time, this philosophy was operating in unchartered waters,” he says.

Today, Mills says, developers cannot rehabilitate enough downtown buildings to accommodate the demand of people wanting to live in the city. The stock of viable, historic structures for rehabilitation is running short.

“We are facing a new situation in downtown that I never thought would happen in my lifetime — the development of new, contextual infill structures on the empty lots between the rehabilitated historic buildings to meet the demand for downtown housing,” Mills says.

“Weaving contextual infill development within the framework of the existing structures is creating a new, unexpectedly dynamic community in downtown Richmond. VCU is at the forefront of this new wave,” he says.

Trying to fit in
VCU has made a determined effort to house more students on campus. About 83 percent of its freshmen live in VCU housing, and more than 6,600 students reside on campus overall.

In addition, private developers have built apartment complexes nearby because of increased demand for housing that the university has been unable to meet.

Architect Sanford Bond, co-founder and principal of the Richmond firm 3north, says VCU has made enormous progress over the years in the design of its buildings.

“In the ’60s and ’70s there are some unfortunate buildings from an architectural point of view that VCU built. I think now they’re much more sensitive to what they’re building to the urban environment, and I think they’re trying to fit in better,” he says.

Cox, the university architect,  says that because VCU is an urban university in an old city, its two campuses encompass a variety of architectural styles. They range from restored Victorian-era homes to the cutting-edge edifices.

“We will never have a cohesive architectural language like you would find at Virginia Tech or the University of Richmond … and part of the reason for that is, a lot of our buildings we inherit,” Cox says.

“We choose not to take land by eminent domain. We don’t really know where we will be as our footprint grows. We tend to purchase land as it becomes available, and we get what we get.”

Cox says the university once acquired a grocery store and remade it into classroom space. “You would never know,” she says.

Executives with many talents

Editor’s note: Virginia Business annually recognizes financial leaders in large and small nonprofits as well as small and large private companies and publicly traded corporations. This year’s Virginia CFO Awards were presented at The Jefferson Hotel in Richmond on June 20. (Profiles of the five winners can be found on Pages 79-87.)

Shrewd, strategic, innovative — but also good with numbers and multitasking.

Labeling them “number crunchers” doesn’t do justice to modern chief financial officers who often are called upon to help define the culture of an organization or juggle a variety of business models and improvise when the outcomes aren’t what they expected.

And, no longer do you find talented CFOs solely in C-suites.

Interviews with Virginia CFO Award nominees reveal that nonprofit organizations are dipping into the same talent pool as large private companies and publicly traded corporations.

Sometimes an experienced CFO can make all the difference.

Case in point: Larry Paxton, CFO of the Charlottesville-based Jefferson Area Board for Aging (JABA), adopted new accounting software soon after he joined the agency in 2015, giving leaders a broader view of its financial picture.

He found that “we’d been losing $400,000 like clockwork, and investments were covering the loss.”

Soon after he filed his report, his CEO cut the agency’s budget by 13 percent, and managers tightened spending. The financial results changed from a deficit of  $606,000 in fiscal year 2015 to a surplus of $557,000 by FY 2017, creating stability for the agency.

“Given the financial information in a meaningful context, the CEO and the program managers made the right decisions,” Paxton says.

Before he joined JABA, Paxton’s career included 20 years as a private industry CFO and a consultant. He reached retirement age but decided he didn’t want to stop working.

After leaving the for-profit world, the University of Virginia  graduate decided to move back to Charlottesville to work for JABA, whose mission is serving a growing population of seniors.

“We touch about 14,000 people a year in one form or the other,” Paxton says of his employer, which has annual revenue of about $5 million.

Serving the disabled
Julee Fletcher, senior vice president and chief financial officer of the Greater Richmond ARC, is another transplant from the for-profit to the nonprofit world.

She formerly worked for what is now the accounting firm of Pricewaterhouse‑ Coopers as well as three major banking groups. Now she uses her expertise to help an agency dedicated to empowering people who have disabilities.

That mission includes serving people ranging from babies with developmental issues to senior adults with memory impairment.

ARC’s programs have different revenue streams, a situation that results in the CFO juggling a lot of balls in the air.

The agency has about 400 employees — about half of whom are disabled — and a long string of workforce initiatives with federal and state agencies as well as private companies.

Fletcher’s job is to help assure that all of ARC’s moving parts work together smoothly with good financial outcomes.

“This nonprofit is a unique nonprofit,” Fletcher says. “It’s an entrepreneurial culture.

“Our staff and senior leadership are not satisfied with the status quo,” she adds. “We’re constantly looking for creative solutions.”

ARC serves about 1,300 people a year, but it has a waiting list of more than 2,000 who need services.

To help pay for its programs and provide paychecks to its workforce, ARC handles jobs for a wide range of clients.

To get a feel for the agency’s range of work, here’s a list from a recent report:

ARC daily cleans over a million square feet of office and warehouse space and manages more than 600 acres of landscaped grounds at facilities across Virginia.

  • It assembled, packed and shipped more than 619,304 home-alarm sensors for a Northern Virginia home-security system manufacturer in 2016.
  • It also assembled, packed and shipped more than  89,000 bundles of Fatwood, Plow & Hearth’s all-natural fire starter, to customers nationwide.
  • It manages and runs a welcome center and a 24/7 emergency dispatch operation at one of the largest military bases in Virginia.
  • It annually scans and digitizes more than a million documents and images for a variety of customers.

ARC’s current stream of revenue totals $16.7 million, Fletcher says.

“The business community is generally very surprised at what we do. We have a complicated brand, but it’s our brand,” she says.

Fletcher says moving from the for-profit world to a nonprofit agency has been one of the joys of her life. She can see how a successfully managed strategic plan can improve the lives of children, the aged, the disabled, and their families and caretakers.

“I feel like I hit the jackpot when I switched careers,” she says.

Helping seniors 
In far Southwest Virginia, the Appalachian Agency for Senior Citizens also has benefited from a career-switching financial officer who has brought industry-grade expertise to the nonprofit agency.

Brian Beck, who worked with Louisville Gas and Electric and later for Sunoco, found a new calling “about the time of the recession when things went south,” he says.

During Beck’s 7½-year tenure with the senior citizens’ agency, staffing has risen by 33 percent, with 50 percent growth in full-time positions.

Revenue, meanwhile has increased more than 75 percent, from around $7 million to $12.5 million.

“On our end of the state, we’ve become a large employer. We employ over 200 people, and we’d like to be able to do even more for our seniors,” he says.

Beck paints a picture of an economically challenged part of Virginia where the overall population of the four-county service area — Buchanan, Dickenson, Russell and Tazewell counties — is decreasing every year but the number of seniors is increasing.

Driving growth at the agency is a specialized rural outreach effort that operates as a program of all-inclusive care for the elderly (PACE).

PACE is a long-term care alternative for people who need help taking care of themselves at home.

The program provides health-care and social services for older adults who need nursing-home services but want to continue living in their homes and communities.

“It replaces Medicare and Medicaid. They fund our programs, and then we are responsible to provide anything that Medicaid and Medicare would,” Beck says.

Such a program, he adds, fits in a rural area because there is not a lot of competition in providing services to seniors.

Beck says that, because the program operates as an insurance pool, the Appalachian Agency for Senior Citizens has had to grow the pool to reduce the risk. “The larger the pool, the smaller your risk,” he says.

The agency pays for all medications for its senior clients, as well as all surgeries. It employs a clinical staff but also has a license to employ community-based medical personnel as well.

To transport its clients to medical appointments, the agency operates a transit system funded through the Virginia Department of Rail and Public Transportation.

The nonprofit also operates an intergenerational daycare center where seniors and children come together for meals, activities and interaction.

In recent years, the program has developed senior housing, which is in short supply in a rural area. “We are a life-cycle operation, and we’ve created a culture that is entrepreneurial,” Beck says.

One goal is to develop a business model that allows the agency to be less dependent on state and federal support.

“We think that for the foreseeable future, this is a growth industry,” Beck says, noting that the pool of eligible seniors is rising fast.

Diverse programs
St. Joseph’s Villa in Richmond serves more than 3,000 children and families each year with programs that address mental illness, homelessness, autism and other issues.

Suzanne Hinton, CPA, who once was an auditor for a major accounting firm (her clients included St. Joseph’s Villa), has developed a clear vision of her purpose since she joined the nonprofit as CFO in 2016.

“My role is a change manager,” she says. “The CFO here has to be flexible. We are at the mercy of government funding: Medicaid, local school systems and states, and federal grants. We have to be able to move on a dime.”

Hinton does not know what the expansion of Medicaid in Virginia will mean for St. Joseph’s Villa nor does she yet know what effect federal tax cuts will have.

But she hopes that they will not result in less charitable giving, a concern voiced by other nonprofit  organizations.

St. Joseph’s Villa, with about 280 employees, has 20 programs, each of which requires a different operating strategy because the revenue streams can vary, Hinton says.

It’s a complex model, and Hinton admits it took her awhile to get her arms around it.

She says St. Joseph’s budget has grown from $14 million in fiscal 2016 to about $18 million today.

“It’s almost a 30 percent jump. We’re growing exponentially,” Hinton says.

And, she says, the most important result of a bigger budget is more children can be served.

“Everybody here embodies service in transforming the lives of children,” Hinton says. “They provide the inspiration for me to do what I do.”

2018 Virginia CFO Awards: List of Nominees

2018 Virginia CFO Award winner profiles by Joan Tupponce

LARGE NONPROFIT ORGANIZATIONS: Michel Bilé, CPA, Hampton Roads Community Health Center, Portsmouth
SMALL NONPROFIT ORGANIZATIONS: Andrew Haugh, CPA, Housing Opportunities Made Equal of Virginia Inc., Richmond
LARGE PRIVATE COMPANIES: Peter Whitfield, American Systems Corp., Chantilly
SMALL PRIVATE COMPANIES: Amy Martin, American Cyber Inc., Chantilly
PUBLIC COMPANIES: Glenn Nunziata, Smithfield Foods Inc., Smithfield

Sunny days ahead for solar?

The development of solar energy in Virginia has switched into high gear. 

Driving the growth is a huge appetite for solar-generated electricity from the nation’s biggest technology companies — Amazon, Microsoft, Google and Facebook. They are setting up shop in Virginia and insisting on renewable energy to power their facilities.  

A recent court ruling giving companies more choices in terms of solar providers also promises to expand the market.

Virginia currently ranks 17th nationally for installed solar capacity with 631.3 megawatts, according to the the Solar Energy Industries Association (SEIA).

That’s a big jump from the 49 megawatts of installed solar capacity reported by the SEIA in a September 2016 report, when Virginia ranked 29th nationally.

Morgan Lyons, SEIA’s communications manager, described Virginia as a “fast-growing market” that added 381.3 megawatts of solar capacity last year, more than half of which is currently installed in the state.

Daisy Pridgen, a spokeswoman for Dominion Energy, says the  demand  is coming from “not only certain high-tech companies, but also from institutes of higher education, the Commonwealth of Virginia and others (including residential customers).” 

For their part, technology companies are populating Virginia with energy-hungry data centers.

Ashburn’s “Data Center Alley,” for example, now has the largest concentration of data centers in the world, with more than 70 percent of the world’s internet traffic passing through Loudoun County’s digital infrastructure. 

In late 2017, Google announced it would build two more data centers in Loudoun, after purchasing 148 acres of land for $70 million.

Also driving solar energy growth is a steep drop in price. According to one industry source, the cost to develop a kilowatt of solar power has fallen from $96 in 1970 to 40 cents this year.

So, it’s no wonder that Virginia entities — from the governor’s office to the state’s largest utilities to private companies — are  scrambling to corral solar, on a commercial and residential scale.

A tipping point
Kenneth Jurman, renewable energy program manager at the Virginia Department of Mines, Minerals and Energy (DMME), notes a tipping point that helped ignite the current wave of solar development.

For a number of years, he says, the largest solar facility in Virginia was a 2.1-megawatt array at Naval Station Norfolk built in 2012.

Then, in 2015, Amazon Web Services sent a shock wave through Virginia’s Eastern Shore with a proposal to build an 80-megawatt, 1,000-acre solar farm in Accomack County. Amazon Web Services has its Eastern corporate campus in Fairfax County. Its parent company, Amazon.com, also has data centers and warehouses in Virginia.

The Accomack project was subsequently acquired by Dominion Energy from the original developer, Community Energy Inc.

“The prices on solar have come down so much, it was only a matter of time before they became competitive,” Jurman says.

A spokesman for the Virginia Department of Environmental Quality (DEQ) says there are 59 notices of intent awaiting action that represent about 2,646 megawatts of solar.

Going forward, John Warren, DMME’s director, expects the state to focus on programs that penetrate more under-served markets. “There is little customer choice, and there is significant growth opportunity in the small-customer market areas. I would expect to see support for this reflected in future state budget processes,” Warren told Virginia Business in an email.
In the meantime, large projects are grabbing headlines. Salt Lake City-based sPower is the developer behind a proposed 500-megawatt solar installation in rural Spotsylvania County.

Most of the power, 315 megawatts, would be purchased by Microsoft, the Redmond, Wash.-based software giant. Microsoft says it would be the largest corporate purchase of solar power in the U.S. If the project receives the necessary approvals for construction, it will put Virginia on the solar map.

Community solar
Ivy Main, renewable energy chair for the Virginia Chapter of the Sierra Club, says, “Virginia leaders have woken up to the new reality of solar as not just a clean, renewable resource, but also a low-cost one that offers a big opportunity for jobs and economic development — and a great way to attract tech companies to the state.

“Unfortunately,” Main adds, the [General Assembly] hasn’t addressed the other half of the solar pie — solar in Virginia communities.

“Rooftops, parking lots, airports, closed landfills, and other spaces could be doing double duty generating electricity and saving money for customers and local governments, but for the numerous barriers to customer-owned solar that the utilities managed to enshrine in Virginia law as a way to protect their monopoly.”

Main cites these examples:

  • Owners of multifamily housing can’t put solar arrays on their roofs and sell the output to tenants.
  • A customer can’t put solar arrays on one building on a property and use it on another if it is separately metered.

This year’s General Assembly passed an extensive overhaul of the state’s utility regulations, which took effect on July 1. The Grid Transformation and Security Act calls for 5,000 new megawatts of solar and wind energy, including 500 MW for  small, community solar projects, of one megawatt or less, says Pridgen of Dominion. In that smaller group, 50MW will come from rooftop panels.

Dominion also has an application pending before the State Corporation Commission for a community solar program that would allow more residential and business customers, who may not wish to invest in solar panels,  to choose solar without having to install it on their rooftops. Instead, they could have a portion of their energy needs met by community-based solar facilities on the Dominion Energy grid.

Dominion — now one of the top seven utilities nationwide in solar-generating capacity — has been developing its resources. In 2015, the energy giant had just over 1 megawatt of operational solar power. Today, it has 745 megawatts in operation, under construction or announced, the utility says.

Those projects include construction of 300 megawatts of solar facilities to support Facebook’s eighth data center in the U.S., to be located in Henrico County. Henrico officials expect the facility to become the county’s biggest taxpayer.

Facebook’s direct investment would be $750 million, but that number will total about $1 billion by the time the multiphase project is completed next year. That amount includes hundreds of millions of dollars spent creating solar-energy facilities across the commonwealth under an arrangement with Dominion to power the data center with 100 percent renewable energy.

Dominion’s push
Dominion is at the beginning of what it says is a major solar expansion. The utility predicted it would expand what it called its “solar fleet” by 4,720 megawatts of capacity during the next 15 years, according to the integrated resource plan (IRP) recently filed with the State Corporation Commission. That’s enough to power 1.18 million homes.

That solar expansion represents an increase of nearly 50 percent above 3,200 megawatts in solar capacity that Dominion forecast in 2017.

The Virginia Supreme Court threw some cold water on Dominion’s solar ambitions in March when it ruled that big electricity users could purchase 100 percent renewable energy from sources other than Dominion without restrictions.

Dominion argued that large customers that purchased renewable power from other sources would need to give it five years’ notice if they returned to the utility. Dominion said that much time was needed to plan future generation needs. The court, however, ruled that the five-year provision does not apply.

The Virginia Supreme Court’s decision “made clear that Dominion couldn’t control or impede the renewable energy industry, which is adding jobs faster than almost any other industry in the nation. If customers want clean energy, they have a right to get it, regardless of what the utilities say,“ Will Cleveland, an attorney for the Southern Environmental Law Center, said in a news release, responding to the court’s decision.

One thing is certain: There is room for a lot more solar expansion in Virginia. Neighboring states, such as North Carolina, are way ahead of the Old Dominion. The Tar Heel state ranked second in the nation in terms of installed solar capacity last year, with 4,411 megawatts, according to SEIA. That means 4.6 percent of North Carolina’s electricity is powered by solar.

Currently, less than half of one percent of Virginia’s electricity comes from solar, according to SEIA.

Landowners in every part of the state also are being pulled into expansion of solar in Virginia.

Dominion says that, generally speaking, ground-mounted solar  arrays use about 8 acres of land for every megawatt produced.

Solar farm leases
Historic Newcastle Farm in Hanover County is expected to become the site of one of the largest solar farms in the Richmond area.

North Carolina-based Sun­Energy1 has received approval to build a 20-megawatt solar project on 184 acres of the farm’s more than 500 acres under a 30-year leasing arrangement.

Henry Broaddus, vice president for strategic initiatives and public affairs at the College of William & Mary, owns the property with his mother.

Broaddus won’t discuss his financial arrangements with SunEnergy1, but he points to a recent article about solar farm leases in Fortune magazine. It reports that landowners hosting solar farms received $300 to $700 an acre per year, based on data from the North Carolina Sustainable Energy Association.

Broaddus, who received many inquiries about leasing his property, describes the dynamic between solar developers and landowners as a “Wild-West scenario” in which there could be multiple bidders and lots of negotiations.

For him and his mother, Broaddus says, the solar farm lease is a rare convergence of interests: “economic development, land preservation and clean energy.”