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Roanoke's Reinvention: How a Small City Shifted Its Economy

Carilion Clinic's Roanoke Memorial Hospital in Roanoke
The expansion of Carilion Clinic's Roanoke Memorial Hospital is part of the hospital system's billion-dollar investment in the region. (All photos by David Kidd for Governing)

Roanoke lost the headquarters of two Fortune 500 companies. It created a promising future by retooling itself for biotech.

Editor's Note: This article appears in Governing's Spring 2024 magazine. You can subscribe here.

It’s always cool when scientists are playing with skulls. They keep a supply of plastic skulls on hand at a laboratory in Roanoke, Va., where researchers are working on a project to address a flaw with brain shunts, thin plastic tubes that neurosurgeons implant to remove excess fluid. They come equipped with what’s basically an on/off switch, but doctors don’t necessarily know when to flip it. Inside the darkness of the skull, there’s no way to measure flow through the shunt, so it’s impossible to tell if it’s working properly unless it fails. By that time, the patient may have suffered brain damage.

The researchers in Roanoke have been working on a device to capture and send measurements, sending out alerts when there are problems. Even if they work through the technical difficulties, it will take years to get the product approved and out to market, but it has obvious life-saving potential. The initial concept of doing something about brain shunts came from clinicians who were tired of flying blind and seeing patients suffer. The lab is run by Carilion Clinic, a sizable health-care system based in Roanoke. The brain shunt device is among dozens of research projects that have been suggested by doctors and nurses since its innovation department started up a few years ago. “They are seeing things up front that aren’t working properly,” says Aileen Helsel, Carilion’s director of innovation. “They really are the best people to come up with the solutions, because they’ll know exactly what they need from a new product.”

It makes sense for innovations to grow out of problems, with line workers knowing they need new tools and wanting help in getting them. It doesn’t usually happen that way, however. The labs that do the research and the hospital systems that treat patients are usually entirely separate worlds. In Roanoke, that’s starting to change. Roanoke, a city of just under 100,000 people that lies between the Allegheny and Blue Ridge mountains in western Virginia, is turning into an impressive biotech hub, with top researchers, health providers and academic institutions all working together.

It’s fitting that Helsel’s lab is housed in a former trolley barn. Roanoke is a relatively young city for the South, built up in the late 1800s by what was then the Norfolk and Western Railway. Later known as Norfolk Southern, it had its headquarters in Roanoke and built steam locomotives there, providing 5,000 local jobs at its peak. About a decade ago, however, the railroad shifted hundreds of workers to Atlanta and put its former downtown headquarters building up for sale. Three years later, Advance Auto Parts moved its headquarters from Roanoke to Raleigh, N.C. For any city to lose two Fortune 500 companies within a few years would represent a major setback. For a small city like Roanoke, it could have been a body blow. “Roanoke’s challenge was that it saw itself as a railroad town,” says Chris Morrill, a former city manager. “What do you do when you’re a railroad town and the railroad’s gone?”

As it turned out, Roanoke was lucky. It already had the idea in place of turning to biotech in a big way. And it happened to have local leaders who were able to make it happen. “We’re the largest employer in Virginia, west of Richmond,” says Nancy Howell Agee, Carilion Clinic’s CEO. “My jobs are in a health system, but my job is also economic development.”

Back in 2010, Carilion Clinic joined with Virginia Tech to open a biomedical research institute. It got kick-started in a serious way in 2018, when it received a $50 million grant from the local Fralin family and its trust. Over the last five years, the institute’s federal research funding has nearly doubled, to $220 million, with the number of clinical trials at Carilion more than quintupling. The work at the institute — formally known as the Fralin Biomedical Research Institute at VTC — is underwritten with state funding. Researchers who develop intellectual property through Virginia Tech are encouraged to launch spinoff companies, which leave when they’re ready to make their products commercial. That’s just starting to happen, with the institute throwing off several startups already.

Some of them may wind up in a building downtown that’s currently undergoing a gut rehab. When it opens next year, it will contain wet and dry labs, education and training spaces, and a business incubator. City officials are hoping it will lure major pharmaceutical companies to town. Already, Johnson & Johnson has devoted funding to various projects in Roanoke. The expectation is that over time the biotech cluster will “jump the bridge” along Jefferson Street that separates Carilion Clinic and the Fralin Institute from downtown, creating a mile-long innovation corridor and fulfilling Morrill’s vision of Roanoke’s transformation “from train town to brain town.”

Dr. Michael Friedlander, head of Roanoke's Fralin Institute
Michael Friedlander started as the Fralin Institute's only employee. Now, he oversees more than 500.

Anticipating Strong Growth

The biotech industry nationwide is projected to continue growing by double digits into the 2030s. Roanoke is well-positioned not only to build up local institutions but benefit from spillover effects due to crowding in larger markets elsewhere in Virginia and Maryland. Back in the 1960s, when the University of Alabama got seriously into biotech, its facilities occupied about four square blocks in Birmingham. Now, they cover more than 100 square blocks. No one anticipates that level of expansion in Roanoke, but the sector is certainly poised to grow more than, say, railroads.

When cities lose a major employer, whether it’s a corporate headquarters or a manufacturing plant, they often try to re-create what they’ve just lost. To borrow the language of grief, they may spend years or decades in the bargaining phase, handing out tax breaks and other incentives to try to convince newcomers to re-create what the departed company did. Generally, such efforts are doomed to failure. There are reasons why the company folded or packed up to begin with.

Roanoke managed to skip almost immediately to the acceptance phase. Given the steady erosion of local Norfolk Southern jobs over the years, its ultimate departure felt like an inevitability. It’s not that civic leaders said “good riddance,” but by the time Norfolk Southern left, Roanoke was ready to move on, too. By then, the city’s economic development strategy had shifted, in large part, to biotech. “Science is stronger now than it has ever been in Roanoke,” says Amy White, dean of STEM at Virginia Western Community College and an area native. “I never dreamed that we would have the facilities and the resources that we have here.”

The current activity is largely due to the ambition and vision of two men. Charles Steger was the president of Virginia Tech and dreamed of building it into a top-tier research university. Virginia Tech is in Blacksburg, about 40 miles southwest of Roanoke, but it had already established a presence in the city by renovating and running the historic Hotel Roanoke over by the train yards. Steger ended up starting a medical school in town. Together with Ed Murphy, Agee’s predecessor as the head of Carilion Clinic, they decided they might as well build a research institute together. “Another community could have said, trains are pulling out or we’re a dying community,” Agee says. “Instead, there was an appreciation that things weren’t going to get better absent some intentional work. As a not-for-profit providing health care, I need the community to really grow because we’re a service organization.”

There had already been attempts in Roanoke to get biotech going. This time, they tried something different. In essence, they put the scientists in charge. They recruited Michael Friedlander, a top-flight researcher from Baylor. At first, he was all on his own, his dog keeping him company as he struggled to log into Virginia Tech’s servers. Pretty quickly, he was able to bring on board colleagues from Houston as well as associates from other stages of his career. Nowadays, Friedlander is able to recruit from all over the world. He did Roanoke proud a couple of years back, for instance, when he nabbed Zhen Yan, a prominent researcher from the University of Virginia.

The way the institute is set up, researchers get back the grant money that’s often drained away at other centers in administrative overhead costs. That’s a big lure by itself. Although they might teach classes, generally all they have to worry about is their lab work. They also have unusual access to interdisciplinary teams that might include an economist, computer scientist, mathematician and experts in other fields, all working out some problem related to health or disease. “I’ve been able to pick the pockets of some of the leading institutions in the country and the world,” Friedlander says. “We offer them equipment and beautiful facilities and a great university, but also the chance to be part of an organization that’s focused on what they do and recognizing and rewarding their research.”

While the institute started with Friedlander as its sole employee, it now has more than 500, with its numbers still growing as it continues to expand into a $90 million facility next door. Friedlander says he still runs into the “where the heck is Roanoke?” problem, but he believes it’s an easy location to sell. Hikers can drive from downtown Roanoke to the trailhead for McAfee Knob, one of the most-photographed spots along the Appalachian Trail, in less than 20 minutes. Or they can hike or kayak right within the city limits.

The Taubman Museum of Art in Roanoke
The Taubman Museum of Art, part of a cluster of museums that have helped revitalize downtowns, overlooks the old passenger rail station.

Reshaping the City

Downtown Roanoke itself offers another example of acceptance and moving on. As in other cities, its glory days as a retail center were never going to come back. Instead, its mix of buildings showcasing various early 20th-century architectural styles have been repurposed for housing. Roanoke took advantage of Virginia’s lucrative historic preservation tax incentives and was an early adopter of the idea of devoting a percent for art tax to support public arts projects. To deal with drainage issues, the city designed a sloped park, which includes a steeply raked amphitheater, rather than building an equivalent 30,000-gallon storage tank that would have been like a concrete sarcophagus downtown. Now there’s a handsome cluster of markets, museums and performing arts centers.

Roanoke engaged in what Morrill calls “rapid incrementalism,” with each step along the way helping to build public trust that the city could get stuff done. “We had the right people in the right place who were looking to be
collaborative,” says Morrill, now the CEO of the Government Finance Officers Association, “and didn’t have a lot to lose.”

One researcher at the Fralin Institute has developed a proprietary molecule that’s able to identify areas of damage in the body and keep them from spreading to healthy tissue. It seems to work well in mice and theoretically could work in humans. If you were having a heart attack, for instance, this molecule might be able to stop the pain and pressure dead in their tracks. The molecule can be delivered via milk, so one day emergency medical technicians might hand you a milkshake to deal with cardiac arrest.

The molecule researcher has already started two private companies, while the institute as a whole has led to the creation of several more. The city is developing its new lab-and-innovation space downtown to convert more breakthroughs from objects of intellectual curiosity into products that do things for people (and generate profits). Roanoke successfully lobbied for nearly $16 million in state funding for the building rehab, while the city’s Economic Development Department has also worked with a number of other entities — including Virginia Tech’s corporate research center, a regional technology council known as Verge, the Roanoke Regional Partnership and Virginia Western Community College — to figure out how to draw companies and talent not only to the new building but the innovation corridor as a whole.

“We’re all contributing to that,” says White, Virginia Western’s dean of STEM, who keeps some of the initial brainstorming ideas for building out the corridor preserved on a whiteboard in her office. “We’re also working very hard not to have redundancy in our ecosystem. If I can help out with something, let’s not make someone else go and do that when I’m already doing it.”

White says she used to be “in a silo, for sure,” but like others attests to the collaborative culture that’s built up among the local groups. Roanoke, in other words, seems to have figured out a problem many cities struggle with — namely, how to get the various pieces of the economic development puzzle to fit together. It’s not always a breeze even to get city and county officials with overlapping responsibilities to work together, let alone involve non-governmental actors. Roanoke has managed to align various agencies at the state and local levels with private and philanthropic institutions and get them working toward a common goal.

It’s already paying off. The average salary at the Fralin Institute is double that of Roanoke as a whole, with top researchers obviously making a good deal more. In addition to the rapid and ongoing expansion of the Fralin Institute, last year the Virginia lawmakers voted to let the medical school double its enrollment. That will make more students happy, since the school’s acceptance rate had been well under 1 percent. A big part of the attraction is that Virginia Tech has one of the few medical schools in the country where research is embedded throughout the entire four years, with students able to work on projects at the Fralin Institute or study at the facility that Helsel runs.

William Lee, a minister in Roanoke
William Lee, a retired minister, worries the biotech boom could leave many residents behind.

Will the Entire Community Benefit?

But not everyone goes to medical school, or possesses the skills or desire to work in biotech. For that reason, some people in Roanoke are concerned that the growth of this cluster will do nothing for most residents but drive up their housing costs. Roanoke already has one of the largest homeless shelters in the state. In decades past, the African American entertainment district and two primarily Black communities adjacent to downtown, Gainsboro and Northeast, were decimated by urban renewal, with 1,600 homes and more than 200 businesses leveled. “The whole city has not benefited with the transformation, especially the Black community and marginalized people,” says William Lee, a retired minister. “We were already a lightyear behind and this just puts us further behind.”

Lee suggests that preparing residents for the new opportunities will be the work of many years. The city is trying to take that long view into account. Members of the Roanoke City Council, attuned to equity issues, have directed economic development officials to worry not only about landing big deals but making sure longtime residents stand to benefit in some way. The city and its biotech partners are working with the public schools to promote STEM education for teachers as well as students. The city also put up a chunk of the funding for Virginia Western to hire a professor for its new associate’s degree in biotechnology, with some low-income students receiving scholarships and stipends through the school’s Fralin Futures program. And Virginia Western has recently made deals with Roanoke College and Radford University for biotech students to transfer seamlessly into their four-year programs. Roanoke College, in turn, has an agreement with Virginia Tech to allow its graduates to get a master’s in engineering in a compressed time frame. In short, students in the region can be professionally trained in five years, receiving three degrees in the process.

Roanoke is small enough that it’s possible to do outreach with groups throughout the community, targeting those who are underrepresented, says Bradley Boettcher, who oversees life sciences and other innovation sectors for Roanoke’s Economic Development Department. “With 25 colleges and universities within 90 minutes of Roanoke, there’s a lot of talent that’s developed and the challenge has always been to keep them here,” Boettcher says. “Now, the idea is to create and generate our own workforce locally.”

Alan Greenblatt is the editor of Governing. He can be found on Twitter at @AlanGreenblatt.
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