Congressman Boucher's Failed Call Center Legacy
by Lewis Loflin
Update May 2016: The Pioneer Center mentioned below has failed to lure any real business and today serves as rental office space to existing government agencies and non-profits.
Scott County got another call center. See More Replacement Call Center Jobs for Scott County Virginia - Ultimately
Update 2015: Congressman Rick Boucher lost re-election in 2010 but his legacy of failure still haunts up today. The promise of high tech good paying jobs never materialized. Taxpayer subsidized low-wage call centers have mostly failed and $120 million in socialized broadband has also failed to turn the job situation around.
Senator Mark Warners "in sourcing" nonsense has also failed. The 1000 new high-tech promised Northrop Grumman and AMS-CGI in Russell County as I predicted was hype. Even research by the Bristol Herald Courier on the impact of Northrop Grumman and AMS-CGI reveals little proof of economic benefit to the community and little evidence of job creation exists - the numbers suppressed by the State even for it's multi-billion dollar outsourcing partners.
In fact several call centers that existed before have left the area chasing government incentives. Below stands as testimony to Mr. Boucher's failed legacy.
August 5, 2010: Call centers in Southwest Virginia have done nothing to reduce poverty in the region or provide real jobs or stable employment for our citizens. Mr. Boucher constantly refers to these low-end unskilled jobs as "technology based" when they require no real skills or training and have very low pay scales. There's nothing "technology" about them.
Even worse with the help of heavy taxpayer subsidies these companies can outbid other actual private sector firms with below market labor rates. This allows major corporations to fire and displace their workers outsourcing their jobs to taxpayer subsidized firms in poverty wage rural America. This is part of a process former Virginia Governor now Senator Mark Warner calls "in sourcing." See Northrop Grumman and AMS-CGI: More jobs or more hype?
Now Mr. Boucher is touting 100 new telephone jobs for Direct TV for the region. The only problem is it isn't Direct TV that's hiring and "call center" has sunk to new lows. Here we will look at the history of call centers in Lee and Scott Counties Virginia.
Let's first look at the history of call centers in the region and the ill-effects of this industry in the region and the nation. Let me quote a study by Design Nine, Inc. for the Lenowisco Planning District Commission in March 2005. To quote page 10 on their concern over education in the region,
The region is doing slightly better than state and national averages for high school graduates. However, the area lags both college categories, with a notable lack of college graduates (including advanced degrees), which is probably related to the lack of appropriate jobs in the region.
The lower figure for "Some college" (includes no degree and two year degree) is a potential danger signal. As manufacturing jobs are moving offshore, the new jobs being created generally require some college education and a higher degree of technical skill than the jobs being replaced.
The region has been replacing traditional manufacturing jobs with call center jobs, which provide limited advancement and work opportunities. Call centers represent the factory floor of the Knowledge Economy; they are an important part of a diversified economic development strategy, but the region must be careful not to rely too heavily on them, as the work is easily moved to other regions and/or other countries.
By September 26, 2005 Congressman Rick Boucher announced from Duffield, Virginia:
I am pleased to announce the arrival of at least 75 jobs and a capital investment of more than $1.5 million for Scott County's economy. Today's announcement represents another success for my Showcasing Southwest Virginia program.
Call Evolution Company, operating as a member of the Results Network of Dania Beach, Florida, will establish at the Pioneer Center in Duffield a 72 seat call center for the provision of telephone based customer service. The center will employ 75 to 125 individuals as customer service representatives and administrative staff...
And of special interest, we were pleased to observe that Results prefers to operate small call centers in rural low cost areas of the nation. The company's needs and Southwest Virginia's assets are a perfect match...
Today's announcement marks our second success in bringing a Results affiliated company to Southwest Virginia. On May 9th of his year, I was joined by officials from Lee County and from The Results Companies in announcing that KCG Call Centers would open a new center in Pennington Gap. On August 2nd, we cut the ribbon, celebrating the opening of that center, which has already hired 35 individuals and will double that number shortly.
Today we welcome Brad Grubb, the President of a second Results Network Company by the name of Call Evolution. My office arranged visits for Brad to several of our communities, including Scott County, and after extensive discussions with officials in Scott County, Brad decided to open a call center in the Pioneer Center, Scott County's small business incubator.
His decision to locate at the Pioneer Center provides a double benefit. Call Evolution will serve as an anchor tenant of the incubator, not only providing jobs for the citizens of the area at the call center, but also supporting the operating costs of the small business incubator...
The Pioneer Center Small Business Incubator wasn't supposed to used as free/discount office space for existing companies. Mr. Boucher was behind several of these including the one in Abingdon, Virginia to help small business startups get a start. Yet that multi-million tax dollar experiment failed, so they gave away the useless infrastructure to call centers and non-profits. Note that Scott and Lee Counties are in the Lenowisco planning district. The Pioneer Center is still empty. Link www.pcbo.org. Another incubator was built in a defunct hotel in Norton, VA.
In other reports they sunk an additional $120,000 to fix up the facility for Results. Results also got a hefty tax credit for hiring people at the facility. According to the Scott County IDA they paid $9 an hour and hired 130 people. There is no proof of the number of people hired or anything else, so I'll take their word for it. The only problem was by late 2008 Results suddenly went away.
Boucher Announces Approval of Federal Benefits for Dislocated Results Duffield Employees (January 21, 2010)
Washington, D.C. -- U.S. Representative Rick Boucher announced today that the workers who have lost their jobs as a result of the layoffs at Results in Duffield will be eligible to receive federal Trade Readjustment Assistance...
KCG Call Centers
Update: KCG failed. It is reported that in 2013 that "the IDA (Lee County) should complete the purchase of the remaining KCG Call Center equipment within the next few weeks, for $1.00." No surprise to me.
Note to the reader: KCG as illustrated here is merely an example of the (in my opinion) questionable process of taxpayer subsidized call centers. KCS and its owners are completely honorable people and to the best of my knowledge nothing illegal has occurred. The question is the roll of government in promoting what seems to be crony capitalism that socializes cost while privatizing profits. The other issue is government sanctioned undermining of the private sector labor market. What used to be KCS is (seems to be) now Kavanaugh Call Center Group. I've contacted the Lee County Virginia IDA for clarification.
KCG Call Centers are another example of government stupidity passing as economic development. This following amazing statement really must be considered. This is an extract of the minutes of the Southwest Economic Development Committee, July 27, 2006. Besides huge subsidies to the University of Virginia in Wise to provide training for call center employees, a Mr. Tim Long of the Lee County IDA says:
We've got a little call center in Lee County, Virginia, called KCG Call Center in the Town of Pennington Gap, Virginia. Right now they're in a little mini-mall, which is basically a private structure. They've just landed a contract with a satellite radio that has just come on board. They're currently working with 65 people, and KCG is willing to sign a five-year lease. It pays $8.50 an hour and benefits.
They also have to have a 40-space training center, and that's what we're trying to do. We've got a building there, Patriot Center in Pennington Gap, and that's what we're trying to renovate. The IDA has already got some other projects approved. This additional money we will receive from the Tobacco Commission will finish up this building, and hopefully we'll have at least 200 jobs by the end of 2007...
The good thing about this is this will apply to the average guy off the street, and the average person who doesn't have an education, just to get on the phone and talk to people. That sort of thing is very important for us. In Southwest Virginia we have some people that can't do certain skills, and technical skills are not really necessary for these jobs, so that's something else we look at.
Read the full transcript (PDF file)
I contacted Mr. Long of the Lee County IDA and he clarified some of these issues. To quote his response August 2010:
KCG Call Center- KCG is currently working 218 full time employees. The IDA had a vacant 40,000 square foot in Pennington Gap, the IDA renovated this 40,000 square foot building where KCG is currently paying their monthly payments to the IDA. When KCG was at the mini mall they had 80 full time employees. Because the IDA took part in renovating this existing 40,000 square foot building, 138 new jobs were created. KCG has separated from Results, who by the way left KCG and went to Duffield and in turn left Duffield.
The purpose of renovating this building was to allow the average person off the street the opportunity to better themselves by being trained in a new field of expertise. If you apply to KCG and do not have the skill to be employed, KCG received training dollars from the state that would help these people be trained to work at a technology based call center. This training would not only help them get a job but also help them in getting jobs in the future. The IDA wants to put people to work. I do think that Call Centers is a technology job.
Yes, It is very difficult to try and create jobs for a rural community and without the assistance from the Tobacco Commission and VCEDA it would be very difficult to attract any new jobs into our county.
IDA Data Center- In the past few months, the IDA has been asked about Data Center possibilities. Congressman Boucher has been interested in bringing a Data Center Prospect into Southwest Virginia for some time. Being in a Rural Community sometimes it is hard to meet the criteria that the Data Center is requesting. The property that we are preparing to place this Data Center Pad is in Pennington Gap, and the reason we are placing it there is the redundant power which is necessary for a data center prospect.
The power that a data center needs is only a short distance away. The property is owned by the IDA and the IDA wants to have a pad ready site to be able to support a Data Center Prospect. Right now, the IDA has no pad ready to meet the criteria for a Data Center Project and we are trying to every possible way to meet the criteria and be prepared for a Data Center prospect. Being prepared is key from landing a prospect or losing a prospect. By having this pad available, it makes Lee County more enticing for future prospects.
Special thanks to Mr. Long for his input and his efforts to better the citizens of Lee County, Virginia. There was no mention of pay scales, but I already know what that is.
Let's put his in perspective; minimum wage in 1974 was $2 an hour, adjusted for inflation is almost $9 an hour today. In Lee County 20% of the families live below the poverty level while one-third of the Population of the Lenowisco District is employed by the government in some form. (Page 15 of the Broadband Study above.) Private sector, but government subsidized call centers in general maintain this cruel disparity in living standards.
Let's look at what Mr. Long is talking about. Some low-wage company like KCS starts out on private property. There they pay the market rate for rent or have to buy the building. The private property owner pays local property taxes. The fiber optic lines are already there and they have to pay for those to a private sector telecom company.
Then here comes the government and gives them a free or discounted building that is often publicly owned on paper and gives them free/discounted fiber optic lines. Money is taken out of local property tax coffers, business is lost by a private sector telecom provider, KCS still pays $8.50 an hour, and then undercuts a legitimate private-sector company for outsourcing contracts costing other American citizens their jobs.
In addition Congressman Boucher and the Tobacco Commission have diverted tens of millions of public dollars to string fiber optic across the region since 2007. The results were we got $8.50 an hour call center jobs in 2005, we still get that same $8.50 per hour job today, the very kind their own study warned against. For example a certain company started out in a closed grocery store in Saltville, Virginia, moved to another taxpayer subsidized small business incubator I won't name, and is advertising $8.50 an hour in May 2010.
Update: in 2012 US Solutions dumped Abingdon and Bristol to cross State Street to Bristol Tennessee to collect millions in incentives. Sprint also dumped Bristol Virginia for a Sullivan County Tennessee incentive package including a free building.
Even the State of Virginia is getting into the act. They located a call center in Buchanan County for the employment commission, then fired and dislocated other workers and payed for it with economic development money claiming "new jobs" were created. The same dirty deal occurred in Russell County when they awarded a multi-billion state outsourcing contract to Grumman and their partner AMS-CGI. Their mostly call center jobs pay $9, displaced other Virginia workers across the state, and still get millions in additional taxpayer subsidies to boot. All part of Mr. Warners "in sourcing" nonsense.
One of their arguments is this allows American business to keep jobs here instead of these jobs going to India or the Philippines. Southwest Virginia is merely a stopping point on the way to third-world countries while it becomes third-world. That is what happened to Results, Travelocity, Sykes, etc. Below are some additional extracts from Mr. Boucher's happy announcement for KCS.
KCG Call Center Ribbon Cutting Ceremony (August 2, 2005) This stands as a historical record.
Pennington Gap, Virginia: I take great pleasure this afternoon in participating with Lee County and KCG Call Center officials in the ribbon cutting ceremony for the new KCG Customer Service Center in Pennington Gap. Today's activities mark another major success for our Showcasing Southwest Virginia program, for Lee County and for Virginia's Ninth Congressional District.
The new customer service facility which celebrates is grand opening today will provide telephone based customer service here in the West Gate MiniMall in Pennington Gap and will be operated by KCG Call Centers, LLC.
As a formal member of The Results Network, the new KCG Call Center will host not only call center seats for its own clients, but also seats for clients furnished by the Results Companies. The agents in the center will handle inbound customer service calls, blended with customer retention and sales calls to existing clients.
48 customer service and management positions have already been filled at the facility, and 20 of those new employees began accepting calls at the new facility last month. The remaining 28 are now completing their training and will begin work in a matter of days. KCG plans to hire a total of 225 employees for the 136 seat call center..
This outstanding success which we are celebrating today rapidly emerged from discussions which began in January of this year between my office and The Results Companies. Learning of its need to find a site quickly for a new customer service center, I immediately arranged a tour of Southwest Virginia for executives from Results that spanned 3 days and a large part of my Congressional District. Encouraged by what he had seen, the President of Results returned to the region in early April for a second tour, which I also arranged. (Results dumped Duffield while this Paul Kavanaugh took over KCG with it seems generious taxpayer help.)
Paul Kavanaugh, President of KCG Call Centers, also took part in this second tour of our region. Paul was immediately impressed with the qualities and advantages that Southwest Virginia had to offer to his business. Within days of the April visit, Paul informed us that he had an immediate need for a new call center, that he was highly impressed with our region and that he had decided to move forward with a call center in Pennington Gap. (Wait a minute, Mr. Long of the Lee County IDA said the workforce was unskilled. Is that the "qualities Mr. Boucher refers to?)
Following the announcement in May of this year, construction began immediately to prepare the facility for KCG. The company took possession of the center last month and is moving rapidly towards full operation. The call center currently accepts calls between the hours of Noon and 9 P.M. each day. Once additional hiring and training classes take place, the facility will expand its operation schedule to three full shifts and will be providing service to its customers around the clock. KCG hopes to begin a 24-hour schedule by mid-September and to complete hiring before the end of the year. (Note this was before they began to install all the free taxpayer broadband.)
I would like to take the opportunity of these remarks to recognize those who have been essential to the success which we are celebrating today.
Tim Long, Director of the Lee County Industrial Development Authority, has provided excellent assistance to KCG as the company has worked to get the new facility up and running. I thank him for his outstanding efforts.
I also want to recognize Benny Sergent and Darrell Crusenberry, the owners of the building which houses the new call center, for their hard work in quickly preparing the facility for KCG. (Why are taxpayers fixing up a private building?)
I also want to thank the VEC and Mountain Empire Community College for the assistance they have provided to KCG as the company continues to hire and train its new workers. (At $8.50 an hour. Who in the heck would work for $8.50 an hour with an associates degree?)
More Corporate Welfare in October 2009
Lee County IDA
Data Center Site Prep (#1904)
$344,700 requested Virginia Tobacco Commission
Funds are requested for site preparation activities to prepare a developable site in the Patriot Center complex in Pennington Gap. The result of this project will be a 5 acre site, expandable to 10 acres, that will support the potential location of a data center operation. The VEDP has identified the Patriot Center sites as an appropriate location for such an operation based on the availability and proximity of the necessary redundant electric power, redundant broadband infrastructure, and the appropriate water and sewer capacity. Funds are requested to demolish an existing building, grade a building pad and pave a parking area.
The project is supported by VEDP staff as having better site attributes for a data center than does the County's Constitution Oaks Technology Park, which would require an expensive electrical infrastructure project to be built in order to be a competitive site with redundant electric providers. The request is a cost-effective strategy to have a ready-to-go site adjacent to the successful Kavanaugh Consulting Group call center operation.
Total project cost is $383,000. Other funds include: $38,300 Lee County IDA for site prep and related expenses (committed).
To quote Lenowisco Broadband Study Warned against Call Centers (PDF file):
- Wise Virginia Call Center Won't Hire 500 New Workers
- Tobacco Commission Sykes Fiasco Reveals Government Waste
"The region has been replacing traditional (better paying) manufacturing jobs with (low paying subsidized) call center jobs, which provide limited advancement and work opportunities. Call centers represent the factory floor of the Knowledge Economy; they are an important part of a diversified economic development strategy, but the region must be careful not to rely too heavily on them, as the work is easily moved to other regions and/or other countries."
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