Virginia Tech OK’s Intelligent Infrastructure Initiative

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The Virginia Tech Board of Visitors voted Monday to approve a $78 million plan to make the university a leader in “intelligent infrastructure.” The term encompasses everything from self-driving cars and drones to smart construction and energy systems — areas, in the words of President Tim Sands, that are “related to energy systems for the cities of the future and the way that people move in and around those cities.”

“We set … aggressive philanthropy and industry targets and were able to meet them quickly,” Sands said. “It was ready. … We already had industry and philanthropy champing at the bit.”

Intelligent Infrastructure is a fascinating field of endeavor, and one that is well suited to Virginia Tech’s engineering strengths. Further, the concept, while hardly original to Tech, has yet to become a trendy buzzword that every university in America is chasing, so Tech may have an opportunity to establish a leadership position in the field.

As an economic development initiative that stimulates the growth of R&D and, potentially, the spin-off of new technologies and business enterprises, intelligent infrastructure is an exciting idea. There is a double benefit for Virginia if the initiative helps state and local governments in the Old Dominion devise solutions to chronic problems such as traffic congestion and aging, ill-maintained infrastructure. Strategically, the initiative makes sense.

In other action, the board also approved a 3.5% hike for in-state tuition & fees in the next academic year, bringing the full-year cost to $13,329. That increase exceeds the 2% increase in Virginia’s median household income (2015-2016 numbers) by a hefty margin, but Tech remains a relative bargain compared to other Virginia’s other public, four-year institutions.

Here’s my question: Where does the $75 million come from to finance this significant new initiative? Tech officials say the money comes from corporate sponsorships, philanthropy and other sources but not from tuition & fees. In political terms, Tech is claiming that the project is not being financed on the backs of students and their families.

Here’s what the Roanoke Times has to say:

The … funding will come from non-general funds, which comes from revenue streams other than tuition and mandatory fees.

University officials previously vowed to put about $75 million into the intelligent infrastructure destination area. Millions in private dollars were in the plans since last year, and now Tech has $25 million. The donors include John Lawson, president and CEO of W.M. Jordan Co., and a former board of visitors rector; the charitable foundation controlled by the Hitt family of HITT Contracting Inc., in Washington, D.C.; and two other donors who Virginia Tech declined to name.

A briefing report included in the board briefing materials provides a few more details (my bold face):

At this time, the university is requesting to move forward with a $6 million planning authorization for the $69.5 million of outstanding capital projects and capital lease components. The planning authorization will cover establishing a scope, schedule, delivery method, and complete design documents for each capital component. As with all self-supporting projects, the university has developed a financing plan to provide assurance regarding the financial feasibility of this planning project. The funding plan calls for the use of private gifts, overhead funds, revenues derived from the Dining Services auxiliary, and future external support.

If Tech can make the Smart Infrastructure initiative essentially self-funding, then it would seem to be a win-win all around and a model for Virginia’s other research universities.

Two sets of questions, though. First, how much of the project will be paid through “overhead funds?” What overhead are we talking about? Who’s paying for that overhead now? Does that amount to an indirect subsidy?

Second, how certain are we that “future external support” will materialize, and how contingent is the Intelligent Infrastructure initiative upon obtaining that support? Is there any chance that Tech will spent $70 million+ on the project and the external support might not appear? If so, who gets left holding the bag? In other words, who bears the risk?

Bacon’s Rebellion…. asking the questions no one else will ask.

Update: “Overhead funds” come from sponsored research. “When an outside organization sponsors faculty research (e.g. NIH, General Motors, DOD, etc.) the university collects an overhead fee, in addition to the actual costs associated with the research (such as salaries or equipment costs),” says Larry Hincker, retired associate vice president for university relations. “This is a good example of how sponsored research leverages new activities without using any state funds.”
(This article first ran in Bacon’s Rebellion on April 6, 2017)

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About Jim Bacon

James A. Bacon is the author of “Boomergeddon” and publishes the Bacon’s Rebellion blog at www. Baconsrebellion.com.

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