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LeClairRyan announces shutdown

The leadership of LeClairRyan has acknowledged that the 31-year-old firm, once the fifth-largest in Virginia, will be shutting down.

“On behalf of my colleagues, we are deeply saddened to make this announcement today,” the firm's former CEO, C. Erik Gustafson, said in a press release. “Through our transition, we will continue to focus first and foremost on the success of our clients, as we always have done. I am thankful to all of the clients who have chosen to work with our team over the last 30 years, and I am grateful for the exceptional lawyers and professionals who continue to work with dedication and determination towards winding down the firm in an orderly fashion.”

The firm's members voted on Wednesday to “commence an orderly wind-down of the firm's business,” according to the release. “The firm, through its dissolution committee, is working in cooperation with its lender to ensure the continuity of client service until such time as the firm ceases to actively practice law and turns its attention to post-practice activities.” 

Co-founder, former CEO and name partner Gary LeClair raised eyebrows in late July when it was announced that he and two other LeClairRyan partners, David Lay and Andrew White, had joined the corporate law section at Williams Mullen, Virginia’s third-largest law firm. The day before the Williams Mullen announcement, news broke that 15 LeClairRyan aviation attorneys had deserted the firm for Philadelphia-based Fox Rothschild LLP. The exodus continued Tuesday with the announcement that LeClairRyan attorneys Jim Guy, Garland Carr and Cathy Zhang also have joined Williams Mullen.

During the last few years, LeClairRyan has seen a steady decline in gross revenues, sinking from $163 million in 2015 to $122.5 million last year. Its staffing has decreased from a peak of more than 350 attorneys in 2015 to around 190 attorneys this year. LeClairRyan has 21 offices nationwide, stretching from Los Angeles to New York.

In recent weeks, the embattled firm has also faced legal actions, including a federal gender discrimination lawsuit filed last week in the Eastern District of Virginia, alleging that LeClairRyan’s female employees have systematically been paid less than their male counterparts. In early July, the landlord of the firm’s now-closed Williamsburg office sued LeClairRyan in James City County Circuit Court, seeking $374,000 in unpaid rent.

In June, the firm moved for a dismissal in a $150 million malpractice lawsuit filed against LeClairRyan by Tonya Mallory, the founder and former CEO of Health Diagnostic Laboratory (HDL).  A decision in that case is still pending. Mallory’s lawsuit blames LeClairRyan’s legal advice on the “catastrophic results” that led to the closure of her once-highly successful company.

LeClairRyan previously paid a $20.375 million settlement to HDL’s bankruptcy estate in a similar dispute over legal services it provided to HDL. The medical-testing corporation went into bankruptcy following a federal investigation into its business practices, which included reimbursing physician’s offices for processing and handling blood samples.

LeClairRyan moving towards shutdown

Updated Aug. 5

A wind-down committee has been formed to oversee the dissolution of Richmond-based LeClairRyan PLLC, the state’s fifth-largest law firm and one of the nation's top-200 highest-grossing firms, according to The American Lawyer.

Co-founder, former CEO and name partner Gary LeClair raised eyebrows in late July when it was announced that he and two other LeClairRyan partners, David Lay and Andrew White, had joined the corporate law section at Williams Mullen, Virginia’s third-largest law firm. The day before the Williams Mullen announcement, news broke that 15 LeClairRyan aviation attorneys had deserted the firm for Philadelphia-based Fox Rothschild LLP. The exodus continued Tuesday with the announcement that LeClairRyan attorneys Jim Guy, Garland Carr and Cathy Zhang also have joined Williams Mullen.

LeClairRyan CEO C. Erik Gustafson made no comment about the firm’s status to The American Lawyer, but the firm’s president, Elizabeth Acee, released a statement last week that the firm was “considering options” for the future.

Elizabeth Acee

Attorneys and staff members have been told to seek other jobs, according to American Lawyer, and some support staffers were laid off. Others told the legal magazine that partners who have quit the firm have not received compensation for capital contributions.

During the last few years, LeClairRyan has seen a steady decline in gross revenues, sinking from $163 million in 2015 to $122.5 million last year. Its staffing has decreased from a peak of more than 350 attorneys in 2015 to around 190 attorneys this year. LeClairRyan has 21 offices nationwide, stretching from Los Angeles to New York.

In recent weeks, the embattled firm has also faced legal actions, including a federal gender discrimination lawsuit filed last week in the Eastern District of Virginia, alleging that LeClairRyan’s female employees have systematically been paid less than their male counterparts. In early July, the landlord of the firm’s now-closed Williamsburg office sued LeClairRyan in James City County Circuit Court, seeking $374,000 in unpaid rent.

In June, the firm moved for a dismissal in a $150 million malpractice lawsuit filed against LeClairRyan by Tonya Mallory, the founder and former CEO of Health Diagnostic Laboratory (HDL).  A decision in that case is still pending. Mallory’s lawsuit blames LeClairRyan’s legal advice on the “catastrophic results” that led to the closure of her once-highly successful company.

LeClairRyan previously paid a $20.375 million settlement to HDL’s bankruptcy estate in a similar dispute over legal services it provided to HDL. The medical-testing corporation went into bankruptcy following a federal investigation into its business practices, which included reimbursing physician’s offices for processing and handling blood samples.

Back to the future?

A surprising coalition of strange political bedfellows has united behind deregulating Virginia’s power utilities and opening the energy market to competition.

But there’s just one hitch: Virginia tried deregulation 20 years ago and it didn’t work, says the commonwealth’s largest electric provider, Dominion Energy.

Katharine Bond, Dominion’s senior director for public policy, describes deregulation as an abject failure not only in Virginia but also in other states. Dominion customers, she says, already “enjoy low, stable prices from energy generated by a rapidly growing portfolio of renewable energy.”

In May, a group of nine politically and ideologically divergent organizations — ranging from highly conservative to very liberal — announced their formation of the Virginia Energy Reform Coalition (VERC). They intend to lobby the General Assembly to end the monopoly on Virginia electrical production held by Dominion and Appalachian Power. Instead, VERC wants to give residential and commercial energy customers a choice of electrical providers, which the coalition contends would result in lower rates.

Dominion and Appalachian, however, say that contention isn’t supported by the facts in other states where customers have encountered higher rates and undependable power service after deregulation.

Opposites attract
VERC’s May news conference saw Ken Cuccinelli, a conservative former Virginia attorney general, joined by representatives of liberal groups such as Appalachian Voices and the Virginia Poverty Law Center.

“In this day and age, when there seem to be more and tougher obstacles to working across party and ideological lines, I’m proud to stand here today with a politically eclectic group that is committed to modernizing Virginia’s electricity markets,” Cuccinelli said, speaking for coalition member FreedomWorks, a Washington, D.C.-based advocacy group. (Cuccinelli has since left FreedomWorks to become acting director of U.S. Citizenship and Immigration Services in the Trump administration.)

On the opposite side of the coalition’s spectrum is Clean Virginia, a nonprofit devoted to reforming Virginia’s state government and energy sector. Toward that end, Clean Virginia endorses legislative candidates based on criteria including whether they accept donations from “regulated monopoly utilities” such as Dominion Energy or Appalachian Power.

Clean Virginia was founded and is funded by Michael Bills, a Charlottesville multimillionaire who is the founder and chief investment officer of Bluestem Asset Management LLC. A political activist, Bills donated more than $820,000 to Virginia Democratic candidates during the past two years — topping Dominion’s $582,313 in political donations to both parties during the same period, according to the Virginia Public Access Project. 

The Washington Post has quoted Dominion spokesman David Botkins as calling Clean Virginia “a dark-money, radical-left advocacy organization.” But Brennan Gilmore, the Clean Virginia organization’s executive director, says its “sole interest is the public good.”

How to achieve public good in the electric sector is a question that VERC wants to see legislators consider during the 2020 General Assembly session.

The big ‘if’
Quentin Kidd, dean of the College of Social Sciences at Christopher Newport University, says deregulation could gain traction again in the General Assembly — but that depends on the November election, in which every legislative seat will be on the ballot.

“I could put together a scenario where a deregulation bill could get through a Democratically controlled General Assembly,” Kidd says. Nonetheless, that also would require support from “free-market Republican progressives who might need to craft a market argument,” he adds, providing an apt description of some VERC members.

“The big ‘if’ is what the governor would do,” Kidd says. Gov. Ralph Northam hasn’t signaled any support for deregulation, the political analyst says, and Northam’s critics describe him as a Dominion supporter.

Even if the General Assembly moves toward deregulation, it would be a long process, Kidd says, and “would become an issue for the next governor’s race [in 2021].”

Déjà vu all over again
Virginia’s been here before.

In 1999, the General Assembly voted for deregulation and capped the rates that Dominion could charge customers. The state’s intention was to lower consumer electric bills by introducing competition among retail power resellers.

Largely because Dominion’s rates already were at or below the national average, however, very few real competitors emerged in Virginia, says State Corporation Commission (SCC) spokesman Kenneth J. Schrad.

The SCC’s research showed that customers wouldn’t jump to a different power seller unless rates were 10% to 20% less, he says. And no one could offer a competing rate that low.

“They couldn’t make a margin on it because they couldn’t beat out the incumbent utility’s price,” says Schrad. “I’d be surprised if anybody signed up more than 100 people. We just never saw any robust competitive activity.”

Richard Hirsh, a professor of technology history at Virginia Tech, says that, after deregulation resulted in virtually no competition in Southwest Virginia, folks joked that “you can have Appalachian Power or you can have Duracell. That’s the choice.” 

The General Assembly finally ditched deregulation in 2007.

In recent years, Dominion’s critics say, Virginia legislators have allowed the company to have too big a role in crafting energy regulations, largely removing the SCC’s oversight of electric rates and of how much Dominion and Appalachian can reinvest profits and expand.

VERC contends deregulation failed in Virginia because competitors faced a far-from-even playing field.

“Deregulation hasn’t worked where state policies allow monopolies to continue to control the market,” says Travis Kavulla, director of energy for the conservative think-tank R Street Institute, a VERC member based in Washington, D.C.

Dominion, however, argues that in addition to failing in Virginia, deregulation also has been a bust in other states, leading to higher rates and poor service while leaving consumers vulnerable to deceptive and fraudulent “bait-and-switch” tactics by some small energy providers.

Rayhan Daudani, the utility’s media relations manager, points to California, where deregulation brought about “cataclysmic blackouts;” Texas, which had to import some power from Mexico after experiencing rolling blackouts and brownouts; Massachusetts, where households ended up paying “$34 million more per year for electricity from competitive suppliers;” and New York, where “overpayments by low-income customers prompted regulators to prohibit competitive suppliers from selling electricity to those customers.”

In fact, deregulation may have contributed to the massive 2003 Northeast blackout, says Hirsh, the Virginia Tech professor. Overgrown trees hitting power lines were one of several causes of the blackout. Ohio-based FirstEnergy Corp. had cut its maintenance programs to slash costs and remain competitive in its market. Regulated utilities don’t have to worry about that, Hirsh says, because oversight commissions take necessary maintenance into account when calculating rates.

Rates in deregulated states are 37% higher for residential customers and 78% higher for industrial customers, says Appalachian Power spokesman John Shepelwich, citing a recent report from Edison Electric Institute, the trade association for investor-owned electric utilities.

Additionally, state officials in Illinois, Maryland and Massachusetts have warned consumers of predatory practices by some small energy retailers. These companies lured customers with “teaser rates” before raising prices significantly higher than they would have paid staying with the larger state utility.

Pros and cons
Even third-party experts can’t agree on whether deregulation is good for the energy market.

Katie Bays is the co-founder of Washington, D.C.-based Sandhill Strategy, a research and corporate consulting firm that monitors energy issues. In general, she says, well-run deregulation programs have shown themselves to be “very efficient ways to increase competition and lower the cost of delivery.” Competition can also result in creating innovative new service models, she says.

As for customers in some states paying higher prices, Bays adds, those states likely sought to deregulate because rates were higher in their regulated market already.

In general, Bays says, well-run deregulation programs have shown themselves to be “very efficient ways to increase competition and to lower the cost of delivery.”

Paul Griffin disagrees. He is executive director of Reston-based Energy Fairness, a nonprofit, energy-policy advocacy group. “The record is clear,” he says. “Electricity deregulation not only raises electric rates and threatens power supply reliability, but also exposes consumers to deceptive, predatory sales and marketing practices.” 

Deregulation, says Virginia Tech’s Hirsh, is attractive to consumers because competition is generally viewed as beneficial, resulting in lower prices and innovation. But with the residential power sector, he says, it hasn’t been terribly successful, evidenced by California, Virginia and several other states repealing, suspending or delaying deregulation efforts.

With Dominion’s power rates still below the national average, Hirsh isn’t sure the outcome of deregulation in Virginia would be any different today than it was in the early 2000s.

Not easy being green
Another VERC issue is increasing renewable energy sources. It’s a big reason that organizations such as the Piedmont Environmental Council, Appalachian Voices, Earth Stewardship Alliance and Clean Virginia joined the coalition.

Dominion says it has shown its commitment to expanding renewables by investing $2.5 billion from 2015 to 2023 and launching nearly a dozen energy-efficiency programs.

During the past four years, the company has increased its number of solar-generation projects from four sites with a total of 5,200 panels to 33 sites with a total of 3.5 million panels.

Collectively these projects have the capacity to generate 884 megawatts or enough power for 221,000 homes — more than the total number of Dominion customers in Virginia Beach.

Dominion also began construction in July on its $1.1 billion offshore wind project off the Virginia Beach coast, the first to be allowed in federal waters. It’s expected to be operational next year.

With the General Assembly’s encouragement, Dominion plans to increase its power generation from wind and solar to 3,000 megawatts by 2022, enough energy to power 750,000 homes, or almost 30% of Dominion’s 2.6 million customer accounts in Virginia.

VERC, however, says that’s not enough. It maintains that insufficient oversight allows Dominion to channel resources into projects that benefit itself and its shareholders rather than its consumers. Critics point to the controversial Atlantic Coast Pipeline as an example. The project currently is halted amid court challenges.

“Our goal is to produce energy where there is a demand,” says Dan Holmes, director of state policy for the Piedmont Environmental Council. “We don’t want to rely on an extension-cord network,” referring to the Virginia utilities’ present system of transmitting electricity via power lines or pipelines from distant generation sources.

Greener power sources also appear more able to gain traction in open-competition markets, VERC members say. In Texas, which deregulated 17 years ago, the use of renewable energy per capita is now higher than in California, says VERC member Adrian Moore, vice president for policy at the libertarian Reason Foundation.

A common purpose
While acknowledging their differences, VERC members say they would rather talk about the common mission that brings them together.

“We live in an America where it is assumed that one cannot have commonality with those who disagree,” says Lynn Taylor, president of the Virginia Institute for Public Policy.
Adds Holmes: “I don’t think political party plays a role in this conversation.”

One thing that unites all the coalition members, however, is their criticism of the influence that Dominion, the commonwealth’s largest corporate political donor, wields over state government.

And although the coalition members maintain that deregulation is not really a political or partisan issue, they know its fate will be decided in the state legislature. And so that’s where they’re putting their focus.

“Right now, we are … talking to folks about what we want to do,” says Moore of the Reason Foundation.

This article has been updated from the version that appeared in the August issue of Virginia Business.

HQ2 propels Virginia back to No. 1

Following Virginia’s coup of conquering the rest of the nation to snag Amazon’s $5 billion East Coast headquarters, it shouldn’t come as a huge shock that the commonwealth has regained its prestigious No. 1 ranking on CNBC’s annual America’s Top States for Business report.

Citing Amazon HQ2 as the deciding factor in the Old Dominion’s favor, CNBC also noted that Virginia “has the nation’s best workforce, including the fourth-highest concentration of science, technology, [engineering] and math (STEM) workers. Strong school test scores, small class sizes and a wealth of colleges and universities make Virginia’s education system the best in the nation. And with Virginia Tech announcing plans to build a new campus adjacent to Amazon’s HQ2 focused on innovation, things could get even better.”

Clearly Virginia hasn’t put all of its eggs in one basket, even if one of those baskets is the size of the old-school, brick-and-mortar shopping malls that a certain online retailing colossus is swiftly putting out to pasture.  

Amazon HQ2 will create 25,000 jobs and fill some 6 million square feet of office space in Arlington and Alexandria over the next decade, but HQ2 alone doesn’t account for the commonwealth retaking the crown in CNBC’s Top States study after eight long years.

It was the result of a concerted, deliberate effort.

“I am proud to bring the title of America’s Top State for Business back to Virginia,” Gov. Ralph Northam said in a July statement announcing the win. “One of my primary goals has been to make Virginia the No. 1 place to do business, and to do it in a way that benefits all Virginians and every region of the commonwealth. This recognition underscores our work to build an inclusive and diversified economy, invest in our workforce and create quality jobs.”

The undertaking, however, dates back to 2016, when Northam was still lieutenant governor and Virginia’s ranking was tanking.

Virginia and Texas are both tied as the Top States report’s all-time winners, notching four first-place wins each since CNBC began ranking the states in 2007. CNBC bases its decisions on 60 metrics in 10 categories, including workforce, economy and cost of doing business.

During the report’s first four years, Texas and Virginia jockeyed back and forth between the top two spots, with Virginia frequently earning praise for its business-friendly regulatory climate, as well as its abundance of federal contractors and military installations. But 2011 saw the beginning of a steady slide for Virginia’s ranking on the report, with the commonwealth sinking to No. 13 in 2016. CNBC singled out factors such as the high cost of doing business and living here, as well as federal budget cut impacts and “infrastructure — specifically the state’s perpetually clogged highways.”

In direct response, the Virginia Economic Development Partnership and the Virginia Chamber of Commerce commissioned a 2016 study from Virginia Tech’s Pamplin College of Business intended to take a deeper dive into how Virginia measured up to other states so we could shore up our weaknesses. Pamplin suggested expanding workforce-training  pro­­­grams, broadband access and economic develop-ment marketing.

At the time, we quoted Virginia Chamber President and CEO Barry DuVal as saying that the study wasn’t about “chasing the rankings. We are allowing the rankings to identify any deficiencies and then working to improve those deficiencies.”

With all due respect to our friends at the chamber, the Pamplin study was absolutely about restoring Virginia’s place in the rankings. It’s good to be the king, after all. But No. 13? Not so much.

When Stephen Moret took over leadership of the Virginia Economic Development Partnership in January 2017, he placed a data-driven emphasis on raising Virginia’s ranking.

In his first major interview with Virginia Business, Moret said, “It’s not like [rankings] drive everything, but they do have an impact on the perception of states. … We found that if you peel back the layers you can see that there are policy changes that you can make to improve the position.”

And perhaps, Moret suggested, after years of reaping rock-star business rankings, “maybe there was a little bit of complacency” in Virginia.

That’s certainly no longer the case.

But we do have nagging issues to contend with — such as headache-inducing traffic snarls that are more often than not still the rule on I-95, the Beltway and the Hampton Roads Bridge Tunnels. And then there are the transportation foul-ups associated with this summer’s Blue Line and Yellow Line Metro station shutdowns in Northern Virginia, which have garnered commuter enmity.

There’s also Virginia’s chronic struggle to ensure that rural and remote areas of the commonwealth enjoy the same pace of job creation and prosperity as the state’s so-called “Golden Crescent” running through Northern Virginia, Richmond and Hampton Roads.

But with 60% of recently surveyed U.S. economic forecasters warning that a recession could hit by the end of 2020, state leaders will also have to consider whether even HQ2, touted as the largest economic development project in U.S. history, is enough to keep Virginia’s economy pumping through tough times — not to mention maintaining our ranking as the nation’s top state for business.

New President and CEO tapped at Richmond International Airport

The Capital Region Airport Commission announced Tuesday that it has tapped Perry J. Miller as the new president and CEO of Richmond International Aiport.

Miller, who starts work on Aug. 19, comes from Jackson, Mississippi, where he has served as interim CEO of the Jackson Municipal Airport Authority since March. With more than 25 years of experience in management for the Houston Airport System, Miller is the former manager of the Ellington and William P. Hobby airports and also worked as interim manager of the George Bush Intercontinental Airport. He holds a master's degree in transportation planning and management from Texas Southern University and is on the board of directors for the American Association of Airport Executives. He was selected through a national search conducted by Chicago-based Aviation Career Services.

“On behalf of the board of commissioners, I am pleased to introduce Perry Miller as our new CEO,” said the commission's chair, Patricia O'Bannon, in a statement released by the airport Tuesday. “He brings extensive airport management expertise to RIC, which he has gained during a lifelong career where he has excelled in a wide range of airport management positions.”

Miller succeeds Jon Mathiasen, who is retiring after leading Richmond's airport since 2000.

The airport handles more than four million passengers per year and generates $2.1 billion in annual economic activity for the Richmond region.

Photo courtesy Richmond International Airport

 

Three decades of storytelling

I’m going to let you in on a not-so-well-kept secret: Many of us journalists aren’t the best at math.

Don’t get me wrong: We love the concepts behind math and science as well as trumpeting the accomplishments of STEM professionals, but the majority of media folks I’ve known find math to be an alien language. We’re much more comfortable within the confines of history and literature.

I struggled mightily with algebra in middle school and high school. However, when I look back on my achievements from college, I’m just as proud of the fact that I earned A’s in physics and statistics as I am of my early journalistic deeds.

Despite all the effort I expended into attaining those little academic miracles, I do remember thinking to myself at the time, “When am I ever going to use statistics in real life?”

Fast-forward six months.

In fall 1992, after writing freelance articles and interning on the state desk at the Richmond Times-Dispatch, I began a yearlong internship as a staff writer for the RTD’s business section.

My first assignment? An article heavy on statistics and number-crunching. Many more followed.

The young editor who assigned that story to me was Robert Powell, one of the finest and brightest media professionals with whom I’ve had the privilege of working.

Twenty-seven years later (yes I actually checked this on a calculator), Robert is retiring as editor of Virginia Business and with his endorsement, I’m taking over as his successor. Fortunately, he’s staying on for a while in a part-time advisory capacity during the transition so I can benefit from his invaluable institutional memory and expertise.

During his almost 15-year tenure at the helm of Virginia Business, Robert built the magazine into a must-read state publication for executives, decision-makers and anyone who needs intelligence about Virginia’s business trends and trendsetters.

As I inherit editorial leadership here, I know that I must be not just a good steward for this publication but also a lodestar for carrying it into our exponentially changing world of the 2020s and beyond.

A key part of this strategy for me will be expanding Virginia Business’ digital presence and original reporting. However, cyberspace is only a medium for communication. What should be paramount is telling good stories and accurately and knowledgably reflecting the entire community we cover, keeping in mind the importance of geographic, sector, racial and gender diversity.

My nearly 30-year career in journalism and communications has been varied and interesting, including freelancing as a regular monthly contributing writer to Virginia Business for the past 13 years. Starting out in daily newspapers, I later wrote for Style Weekly magazine and was the founding editor of Richmond.com (now the Richmond Times-Dispatch’s website) before serving five years as executive editor of Richmond magazine. As a reporter and editor, I have covered everything from political campaigns to a wildcat labor strike to Virginia’s execution of a Mexican citizen convicted of a murder-for-hire.

My first book, a true-crime biography of the 1950s pin-up queen Bettie Page, was adapted into the 2005 HBO film “The Notorious Bettie Page.” More recently, I produced and hosted the 2018 podcast “Southern Nightmare” (and penned its eponymous companion book). It focuses on Virginia’s South Side Strangler serial killer case, which marked the first time in U.S. history a murderer was convicted on the basis of DNA evidence.

The common thread in all of my journalistic efforts has been my desire as a storyteller to create compelling content that engages my audience.

Business is how the majority of us spend eight to 12 hours (or more) of our weekdays and often our weekends. It occupies much of our brainpower and it’s the vehicle for achieving our dreams and financial security. It’s nothing less than the lifeblood of our society.

Yet due to shrinking local newsrooms — and, frankly, sometimes lack of interest — business coverage is frequently relegated to lesser positions of importance or even limited to wire copy reports of national news.

Virginia Business is the only publication that takes a statewide approach to the commonwealth’s business news. That grants us a far-reaching perspective and awareness that provides a great benefit to our readers, whether they know us from our print magazine, email newsletters, web coverage, sponsored events or all of the above.

As I grow into the role of leading Virginia Business, I look forward to meeting more of you, our readers and business leaders, particularly at our Meet the Editors events, the next of which will be held in Danville on Sept. 24.  If you can’t meet us at one of these regular statewide networking opportunities, please feel free to get in touch with me in the meantime at [email protected].

I’m eager to hear — and tell — your stories.

Trade war wounds

In nearly 40 years of farming, Mecklenburg County soybean farmer John Wesley Boyd Jr. has seen commodity prices go up and down, but the recent impact on his business from the ongoing U.S. trade conflict with China has been “devastating,” he says.

“We’re in trouble. … The prices have dropped dramatically and we don’t see any end in sight,” says Boyd, who is also the founder and president of the nonprofit National Black Farmers Association. “It’s planting season, and President Trump announced  … some additional tariffs, and we haven’t gotten over the effects of the first ones, you know? … I think a lot of farmers are going to be on the auction block.”

The price of soybeans, which peaked in 2012 at $17.58 per bushel, plummeted to below $8 a bushel in May for the first time since December 2008.

Soybean prices have been sharply declining since early 2018 when the Trump administration initiated a series of tariffs targeting China, Mexico, Canada and the European Union. China and the other nations responded in kind with a host of retaliatory tariffs. President Trump relaxed tariffs on Canada and Mexico this year but the U.S.-China trade war escalated, as the U.S. increased tariffs on Chinese imports from 10% to 25% and announced plans to expand tariffs to all $540 billion of imported goods from China. In response, the Chinese government instituted a raft of further tariffs on American products.

Wall Street has responded to the prolonged conflict with selloffs and significant drops to the Dow, Nasdaq and S&P 500. And in May, the world’s biggest retailer, Walmart, announced that it expected the tariffs would result in sharp price increases for its retail customers.
Port, farm effects

In Virginia, the fallout from the trade war with China has affected a variety of industries, from soybean and tobacco farmers to beverage distributors, breweries, auto manufacturers, lumber producers and commercial builders.

“China is an important trading partner for Virginia,” says Barry DuVal, president and CEO of the Virginia Chamber of Commerce. “Obviously we are concerned about the impact on Virginia business and therefore on Virginia employers and consumers.”

China is the Port of Virginia’s largest trading partner, representing 16.2% of the port’s overall volume. Last year, Virginians imported more goods from China than from any other nation, accounting for 26% of total imports.

Port spokesman Joe Harris says it estimates that up to nearly 5% of its overall cargo traffic could potentially be affected by the tariffs. Nonetheless, it is difficult to predict what form that impact could take, he says. In order to hedge any potential damage, the port is seeking to diversify its cargo mix through strategies such as marketing itself as a loading and logistics center for the offshore wind energy industry and developing its military cargo business.

Virginia’s agribusiness exports to China “decreased dramatically” from 2017 to 2018, falling from $691 million to $235 million “largely as a result of trade tensions and initial retaliatory tariffs imposed a year ago,” says Jewel H. Bronaugh, commissioner of the Virginia Department of Agriculture and Consumer Services.

China went from buying $21 million in soybeans from Virginia in the third quarter of 2017 to no purchases at all during the same time last year. Similarly, China, which has been a major purchaser of Virginia tobacco, “did not extend contracts to U.S. growers for the 2019 season due to the Chinese tariffs on U.S. tobacco,” Bronaugh says.

“This year with tobacco, you don’t have to worry about getting a lower price [from China]. You’re not going to grow it because the market’s not there. It’s gone,” says Tony Banks, senior assistant director for the Virginia Farm Bureau Federation’s Agriculture Development and Innovation Department.

Chinese tobacco-leaf buyers have migrated to Brazil and Zimbabwe, says Mecklenburg County tobacco farmer Jay Jennings, who is president of the Virginia Tobacco Growers Association. Because of the U.S.-Chinese trade conflict and other factors such as declining tobacco use and competition from electronic vaping devices, tobacco production and prices are down significantly this year, he says, and leaf purchasers are sitting on unsold inventory.
Many Virginia soybean and tobacco farmers are diversifying into new crops, such as industrial hemp, Boyd and Jennings say.

Changing status
The trade conflict has also complicated matters for American companies with significant business interests in China.

A Japanese-owned subsidiary of Toshiba Mitsubishi Electric Industrial Systems Corp., Roanoke-based TMEIC Corp. is an engineering and manufacturing company that produces industrial drive systems motors, automation control systems and photovoltaic converter systems for solar-power applications. Its major automation control systems customers include the Port of Virginia and Yangshan Deep Water Port in Shanghai.

Last year, TMEIC applied for a waiver when the Trump administration instituted 10% tariffs on critical components it imported from its parent company’s factories in China. That waiver was rejected because the parent company had an additional source for the components at its factories in Japan and India, so TMEIC shifted the purchase of those items to India.

Nonetheless, Michael Cooper, TMEIC’s marketing director, says that the company has been told that a 25% tariff likely will be applied to a variety of other necessary manufacturing components and devices that the company purchases from third-party vendors in China.

“Our margins are tight to begin with. We’re in a very competitive environment,” says Cooper. The tariffs “will have a direct negative impact on our manufacturing costs and result in either passing on cost increases to our customers and/or reduced margins on our finished products.”

An additional problem and “unintended consequence” of the conflict, says Cooper, who speaks Mandarin and has been doing business in China for decades, is that being an American company is now a negative in China, unlike in the past, when that status had cachet there.

Right issue, wrong tactics?
Despite the past regard that Chinese businesses held for American enterprise, China has long engaged in unfair trading practices, from turning a blind eye to rampant intellectual property theft to flooding the global market with cheap, state-subsidized steel and aluminum to undercut American metals manufacturers, say Virginia U.S. Sens. Tim Kaine and Mark Warner.

Kaine and Warner agree that the United States needs to get tougher on unfair China trade practices. Nonetheless, they disagree with the Trump administration’s approach to the problem, which alienates U.S. allies.

For starters, pulling out of the Trans-Pacific Partnership trade agreement earlier this year “strengthened China’s hand,” Kaine says, because China didn’t want the United States to have a preferential trade relationship with TPP nations such as Japan.

Furthermore, the senators say, even though the Trump administration lifted its 14-month-long tariffs on steel and aluminum imports from Canada and Mexico in May, the president’s America-first rhetoric and policies have antagonized longtime allies, and that also aids China.

“Their willingness to partner with us against China is dramatically reduced because the president picked a fight with our allies,” Kaine says.

“For a guy who’s supposed to be such a great negotiator, it would not be the negotiating style that I’ve used or I think most successful businesspeople have used,” Warner says.

He adds that the U.S. now faces more difficulty getting Canada and Mexico to stand with it on legitimate concerns, such as the Trump administration’s recent decision to block foreign telecommunications and technology transactions that could pose a threat to national security. Analysts say the move was prompted by fears that equipment from Chinese telecom manufacturers such as Huawei would enable the Chinese government to spy on America’s next-generation 5G wireless communications networks.

DuVal, the Virginia Chamber president, commends the Trump administration for “recognizing the bad behavior of China.” But DuVal also says that the president’s strategy, negotiating directly with China while announcing trade policies via Twitter, represent a drastic departure from traditional trade tactics, in which diplomats quietly hammered out agreements behind the scenes.

“Because it’s a top-down process, the business community doesn’t have the certainty that [it] likes to have and therefore can plan on. … And therefore you see the volatility, for example, in the stock market,” says DuVal. “It’s still a period of uncertainty … [but] we’re not suggesting it’s the wrong approach.”

‘No winners’
And going into summer, there was no sign of when the trade conflict would abate or what the long-term impact could be.

“There’s no winners in a trade war,” says Paul Grossman, vice president of International Trade for the Virginia Economic Development Partnership. “It has a very disruptive effect on business.”

Grossman warns that, regardless of when the conflict de-escalates, American industries face a “long-term hangover effect” from the trade war.  U.S. industries will have lost significant market share because Chinese industries are finding other, less expensive alternatives to American goods in response to the tariffs.

“If we cannot quickly resolve the situation of escalating tariffs, China will continue to replace Virginia imports with products from other countries that can enter at a lower tariff rate. This will negate years of business negotiations and relationship building with importers in China,” says Bronaugh, the state agriculture commissioner. “Chinese customers are adapting to the new reality of essentially not being able to purchase from the U.S. and are forging relationships with other producers.”

In their strategic considerations, the Chinese take a much longer-term view than Americans, says TMEIC’s Cooper. If the U.S. government negotiates from a standpoint of believing “that the Chinese are going to cave on anything that they consider to be of consequence … [then the trade conflict] will never end,” Cooper says. “My anticipation is that there are going to be some wounds that have been opened in this fight that are not going to close. And the long-term or even medium-term ramifications for U.S. companies is not good.”

‘Cyber moon shot’ ready for launch

By some estimates, cybercrimes are projected to cost businesses worldwide $6 trillion annually by 2021 — and it’s not unusual for a ransomware or malware attack to cost a single business millions.

With cybersecurity threats to our ever-expanding digital world growing by the day, industries and universities are struggling to meet the demand for skilled tech workers. In Virginia alone, state officials say there are 33,000 unfilled cybersecurity jobs.

Enter Virginia’s ambitious, $25 million-plus Commonwealth Cyber Initiative (CCI), which aims to close that gap by creating a highly skilled workforce while also encouraging the development of lucrative technologies and making Virginia a global leader in cybersecurity.

Established by the Virginia General Assembly last year, CCI is led by Virginia Tech, which is creating a CCI “hub” for cybersecurity innovation. The hub oversees the initiative and four regional cybersecurity centers — or “nodes” — in Central Virginia, Northern Virginia, Southeast Virginia and Southwest Virginia.

Expected to be approved in June, the regional nodes will usher in a wave of university-business collaborations in Virginia involving partnerships with corporations such as Amazon, Dominion Energy and Micron Technology.

Deeming it a “cyber moon shot,” Del. Chris Jones (R- Suffolk), chair of the Virginia House Appropriations Committee, proposed the Commonwealth Cyber Initiative to Virginia Tech President Timothy Sands early last year.

Tech picked up the gauntlet and in December delivered a CCI blueprint envisioning the hub-and-node system that would train a new generation of tech workers and encourage research and entrepreneurial partnerships among Virginia universities, nonprofits and industry.

“Through smart investment and effective collaboration, CCI will build capabilities and programs that will make Virginia a leader in cybersecurity, attracting talent, industry and partners from across the nation and around the world,” Sands said in a university news release.

The initiative will “leverage the supporting infrastructure and the externally funded research of the universities to really enhance the commercial viability of new technologies,” says Theresa Mayer, Virginia Tech’s vice president of research and innovation, who chaired the CCI blueprint strategic planning committee.

CCI also dovetails with Virginia’s Tech-Talent Pipeline Initiative to train and recruit a diverse workforce to meet the state’s demand for skilled technology workers. The pipeline initiative was a major component of the state’s successful pitch to land Amazon’s second headquarters (HQ2), which will be hiring 25,000 workers at its Arlington campus during the next decade.

As much as the CCI blueprint was shaped by Amazon’s hiring needs, the plan also was informed by the many anticipated technological advances on the near horizon, including the growth of the Internet of Things; 5G and 6G wireless connectivity; and the proliferation of artificial intelligence and driverless vehicles.

The increased complexity of cybersecurity challenges posed by tomorrow’s technologies makes it critical that Virginia’s students and its workforce are prepared, Mayer says.

The General Assembly dedicated $25 million to CCI through June 2020 to create the blueprint and establish the hub and its regional nodes. And this year the state legislature allocated ongoing funding of $20 million per year to CCI. More than 50 stakeholder organizations participated in the blueprint creation, including public universities, the Virginia Community College System and Virginia-based Fortune 500 corporations Northrop Grumman and Dominion Energy.

In April, Virginia Tech, George Mason University, Old Dominion University and Virginia Commonwealth University each submitted node proposals to the Virginia Research Investment Committee (VRIC), which is expected to approve the establishment of the regional centers at its June 11 meeting. (Created by the General Assembly in 2016, VRIC oversees efforts to position Virginia as a national leader in science and technology research, development and commercialization projects from Virginia’s higher education institutions.)

As for the hub that will oversee the entire CCI network, it will be based in Northern Virginia in the Virginia Tech Research Center – Arlington. Virginia Tech has launched a national search for the hub’s executive director and expects the position will be filled by fall.

After the four regional nodes come online this summer, each will develop its own three-year strategic plan. And the hub leadership will provide guidance to focus the nodes on similar goals so that they “are synergistic with one another and really help the network form in a coherent way,” says Charles Clancy, the hub’s interim executive director, who also is the director of Virginia Tech’s Hume Center for National Security and Technology.

The CCI network will work to attract more high-profile technology companies to locate in Virginia by nurturing a cooperative university-business ecosystem with “a culture of entrepreneurship and technology commercialization,” Clancy says.

“We want to have the ability to have a student who has an innovative idea at a university in Hampton Roads be able to get access to mentorship and free accelerator programs and connected with seed-stage investors that may happen to be up in Northern Virginia,” he says. “The [CCI] network is looking to both invest in and foster [the existing technology] ecosystem in Northern Virginia and connect that ecosystem statewide.”

And the proposed regional nodes have already begun forging partnerships that will formalize cross-pollination of research and the development of marketable technologies among universities and with industry, Clancy says, with the goal of adding more partners in the future.

Here’s a look at where the nodes stand:

Central Virginia
Led by Virginia Commonwealth University, the Central Virginia node is negotiating to name an interim executive director and plans to launch a national search for the node’s permanent director. The node will be housed in VCU’s planned Digital Economy Building, which will be constructed in 2023 or 2024, says Barbara Boyan, dean of the VCU College of Engineering.

The node’s business partners are a who’s who of some of the state’s biggest corporate citizens, including Amazon, Bank of America, Booz Allen Hamilton, Capital One, CoStar, Dominion Energy, Fannie Mae, IBM, Leidos, Micron Technology, The MITRE Corp., Northrop Grumman, SRC Inc. and WillowTree Inc. 

Other partners include the Commonwealth Center for Advanced Manufacturing (CCAM), the Greater Washington Partnership and NASA.

VCU also will work closely with the University of Virginia on the node, harnessing resources such as VCU’s Cybersecurity Center and Center for Analytics and Smart Technologies as well as U.Va.’s Cyber Innovation and Society Group and Cyber Physical Systems Link Lab. The fact that both universities have major medical schools will also drive a focus on health-care cybersecurity.

Other academic partners in the node include Longwood University, Virginia State University and Virginia Union University, as well as regional community colleges.

As part of the initiative, VCU plans to double its student body in the College of Engineering. The Digital Economy Building will include suites of computer science studios, designed in cooperation with industry to reflect real-world workspaces. It will also be built to accommodate future 6G wireless telecommunications needs.

“This is a new industrial revolution happening and … it’s centrally located in Virginia,” Boyan says.

Northern Virginia
Apropos of its high-tech goals, the CCI Northern Virginia node will operate as a “distributed node” or virtual entity, says Deborah Crawford, vice president for research at George Mason University.

Its education partners include five universities (George Washington University, Marymount University, James Madison University, University of Mary Washington and Shenandoah University), 10 Northern Virginia public school systems and three community colleges.

Industry partners are led by Amazon, Booz Allen Hamilton, CACI International Inc., The MITRE Corp. and SAIC Inc.

“What we’ve learned so far is that there is a heck of a lot going on,” Crawford says. “It would be fair to say that each of us who have attended these meetings have learned something new … about a capability that exists in our region that we weren’t aware of.”

Southeast Virginia
Dubbed the Coastal Center for Cyber Innovation, the CCI Southeast node will be housed in Old Dominion University’s Virginia Modeling, Analysis & Simulation Center as well as its Center for Cybersecurity Education and Research.

The Southeast node will have a particular focus on security issues surrounding maritime transportation as well as other emerging technologies, including artificial intelligence, says ODU Vice Provost for Academic Affairs Brian Payne.

In addition to ODU, the nodes’ educational partners will include the College of William & Mary, Norfolk State University and Christopher Newport University.

Its business partners are cybersecurity and information technology firms: Cybrex LLC; G2 Ops Inc., MI Technical Solutions; Peregrine Technical Solutions; RFK Solutionz; and SimIS Inc.

Additional partners include the Regent University Institute for Cybersecurity, Virginia Space Grant Consortium and Virginia Cyber Alliance.

Southwest Virginia
In addition to leading the CCI hub, Virginia Tech also spearheads the CCI Southwest regional node. 

Its other higher education partners will include Liberty University, Radford University and the University of Virginia’s College at Wise as well as local community colleges.

Corporate partners in the Southwest node include autonomous vehicles company Torc Robotics (recently acquired by Daimler AG) and block.one LLC, a blockchain software solutions developer.

“As technologies evolve,” says Virginia Tech’s Mayer, “it’s very important that the Commonwealth Cyber Initiative is able to evolve with that and always be tapping into the leading and potentially disruptive companies.”

‘Life has changed’

In 1999, newly married and in their early 20s, Laurie Klingel and her husband, Jeff, moved to the Eastern Shore waterfront town of Cape Charles. Just starting out in a landscaping and nursery business, the young couple’s money went a long way in the faded former railroad town with a large stock of Victorian homes waiting to be fixed up.

Houses “were bone cheap and beautiful,” Klingel recalls, but “there wasn’t a lot going on in Cape Charles. It was a ghost town. … I remember my husband and I were like, ‘Who are we going to be friends with? What’s around here?’”

Now, she says, “Life has changed a lot, that’s for sure. Cape Charles has changed immensely.”

During the past decade, Cape Charles has gone from a ghost town to a trendy summer vacation destination featured multiple times on HGTV’s “Beachfront Bargain Hunt.” It’s particularly popular with Richmond-area millennials, who have snapped up and restored many of the town’s stately old homes to serve as beach houses and vacation rentals. And Cape Charles has been discovered by Northern Virginia and Hampton Roads residents as well.

“Anybody who knows it loves it, so you have a lot of people talking about it,” says Will Correll, owner of Richmond-based Buskey Cider. After hearing his customers jokingly referring to Cape Charles as “Church Hill East” (after the historic Richmond neighborhood), Correll checked it out for himself. Almost immediately, he decided to build a second location there. Buskey opened its Cape Charles tasting room in April 2018. It joins the Cape Charles Brewing Co. and the Cape Charles Distillery, which also opened in the beach town during the past two years.

“That’s the trifecta for hipsters: a cidery, a brewery and a distillery. You know something’s up-and-coming when that happens,” says Richmond-area resident  Sherry Petersik. Best-selling authors and podcasters who run the influential blog Young House Love, Petersik and her husband, John, purchased and renovated two 100-plus-year-old homes in Cape Charles after first visiting in 2013. One is their vacation home, and the other, a duplex, is rented to vacationers via Airbnb.

“We took a day trip out here, and we were like: ‘Why isn’t everyone talking about this?’” she says. Cape Charles is home to the Eastern Shore’s only public beach, which is family-friendly, gentle and shallow, not unlike Maui’s Baby Beach. Even though there’s no lifeguard, “you can stand up, and it’s only up to your knees or to your waist,” Petersik says. “A child would really have to try to be in trouble.

There’s not a high tide; there’s not a strong force of undertow.”

At the time the Petersiks first visited, about 60% of Cape Charles homes were highly affordable, vacant fixer-uppers. (One of Petersik’s friends bought a house there on a credit card.) “It’s like a Norman Rockwell painting,” she says of Cape Charles, which is listed in the National Register of Historic Places. “It’s so charming.”

‘Success breeds success’
These days some of the 500-plus Sears Catalog Homes and Victorians in the town’s seven-square-block historic district can fetch more than $700,000.

The official population of Cape Charles is 1,009, but during the summer months it can swell to as much as 5,000 with the arrival of tourists.

Remarkably, the recent growth of Cape Charles wasn’t the result of a master plan. The turnaround largely was the result of entrepreneurial restaurateurs and retailers who transformed the town one business at a time, says Town Manager Larry DiRe. “Success breeds success,” he says.

In the early 20th century, Cape Charles was a thriving resort and port town, thanks to railroad shipping. But when a ferry moved south in the 1950s and the Chesapeake Bay Bridge-Tunnel was constructed in the 1960s, the cargo and tourism traffic upon which the town depended disappeared. Cape Charles fell into decades of hard times, its economy mostly driven by fishing and crabbing.

In the early 2000s, Virginia Beach developer Richard “Dickie” Foster began developing Bay Creek, a planned community that bookends the town to the north and south. Bay Creek includes upscale homes and town houses, a 2-mile-long private beach, a marina, and Arnold Palmer and Jack Nicklaus signature golf courses.

By 2012, new small businesses began cropping up, such as The Shanty, a waterfront seafood restaurant/bar, and the Bay Haven Inn bed and breakfast.

Since then, dozens of shops, restaurants and small businesses have popped up in town, from golf-cart rentals (the local conveyance of choice) to Deadrise Pies pizzeria to the Chuckletown Productions gift shop. The store, owned by Laurie Klingel and Charlene Dix, sells Cape Charles-inspired items.

14 new shops in a year  
Last year alone saw 14 retailers set up shop in town (most located along the town’s main street, Mason Avenue) and 116 new business permits (mostly vacation rental homes). Gov. Ralph Northam toured the town last summer, performing a ceremonial ribbon cutting for new retailers and taking in a golf cart parade.

In addition to attracting new retailers, Cape Charles is home to two companies, WineRx and Barrier Islands Salt Co., whose products are sold in stores across the nation. WineRx makes Drop It, a product designed to reduce headache-causing tannins in wine, and Barrier Islands Salt  produces sea salt.

Danny Meyer, president of Richmond-based Dallan Construction, is developing a $2 million mixed-use retail and residential project in the former Parsons Building on Mason Avenue, slated to open next year.

“The majority of people are happy to see the town booming again,” says Mayor William Smith “Smitty” Dize Jr. Nonetheless, he adds, “I think for me, I’d like to see gradual growth,” though he acknowledges that may be difficult to manage with the genie out of the bottle.

The local labor and housing markets also face challenges brought by the town’s revitalization. 

There’s increasingly heated competition for workers during the main tourist season but not as much demand for employees in the off-season.

Buskey Cider solved this by hiring teachers who work full time at the cidery during the summer and part time in the winter. Jon Dempster, who owns The Shanty and Deadrise Pies, has to lay off 45 employees every year during January and February when, he quips, “tumbleweeds would be lonely.”

Job training and housing
Dize would like to see a new, year-round employer come into the area, perhaps in manufacturing, to replace jobs lost when Bayshore Concrete closed a plant in the area last year.

Local workers also need jobs training, he says. Toward that end, a local nonprofit has acquired the Cape Charles Rosenwald School, a segregation-era African African elementary school later used as a seafood processing plant. The nonprofit plans to turn the building into a workforce development center, providing skills training for the maritime and hospitality industries, among others, DiRe says.

Affordable housing is also a problem. Dempster and DiRe say gentrification and the booming vacation-home market have pushed many of the locals into surrounding Northampton County.

Regardless of how these problems are solved, the town’s leaders want to make sure that Cape Charles retains its retro, small-town ambience while continuing to attract tourists and businesses.

“We don’t want to overdo it or change the charm that we have,” says town Councilwoman Tammy Holloway, who owns the Bay Haven Inn and is president of Cape Charles Main Street Inc., the town’s business association. “We know we need tourism to thrive. We know it is our economy. That’s the reality.”

Redevelopment renaissance

Cape Charles is far from the only Virginia locality experiencing a recent renaissance from tourism and the redevelopment of historic properties.

Danville, a city hit hard in the early 2000s by the loss of its textile industry, is rebounding with a host of new restaurants, breweries, entertainment venues and loft apartments in repurposed warehouses and historic buildings in its downtown River District.

One indication of the city’s revival is a Roanoke development team’s plan to redevelop two River District buildings into a boutique hotel.

“This is the first hotel that is being developed in the River District,” says Linwood Wright, a former Danville mayor who is a city economic development consultant. “We are certainly excited that we will get a boutique hotel in the district where people can stay and enjoy the amenities of the district and conduct business in Danville at the same time.”

Meanwhile, on the Virginia-Tennessee line, Bristol late last year saw the opening of The Bristol Hotel, the result of a $20 million renovation of the 1920s-era Executive Plaza office building.

With 65 rooms and suites, the boutique hotel features street-level dining, a 3,800-square-foot ballroom and a rooftop bar with panoramic views of nearby mountains. The hotel is near the Birthplace of Country Music Museum and music venue, which opened in 2014 in a 24,000-square-foot redeveloped warehouse.

The museum commemorates the 1927 Bristol Sessions, at which a number of performers, including the country music pioneers Jimmie Rodgers and the Carter Family, were recorded by Victor Talking Machine Co. producer Ralph Peer.

Michael Tall, president and chief operating officer of Charlestowne Hotels, which manages and operates The Bristol Hotel, said in a news release: “The revitalization of Executive Plaza into The Bristol Hotel serves as a catalyst for the growth of Bristol, Virginia, while preserving the influential nature of the city’s historic legacy. We aim to develop a top-tier boutique hotel and unique brand that is authentic to the city’s roots while elevating the dining, social gathering and beverage experience, attracting both visitors and the local community.”

Additionally, Hotel Weyanoke has been a big draw in Farmville. The property opened in 1925 as a hotel and later served other purposes. It reopened as a 70-room hotel last year after going through an extensive renovation and expansion.