The Beauty in Virginia

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Check out the incredible landscape and wildlife photos in the Piedmont Environmental Council’s 7th annual photo contest! The photo above shows the Shenandoah River in Clarke County. What a beautiful state we share!

Is Northern Virginia Turning the Corner?

Monthly changes in professional and business services employment and federal employment in Northern Virginia, June 2011 to June 2016. Despite decline in federal spending, the all-important Professional & Business Services sector is performing handsomely.

Monthly changes in professional and business services employment and federal employment in Northern Virginia, June 2011 to June 2016. Despite a decline in federal employment and procurement, NoVa’s Professional & Business Services sector is performing handsomely. Source: “2016 State of the Commonwealth Report.”

As Northern Virginia goes, so goes Virginia. The wealthy Virginia suburbs of Washington, D.C., account for 45% of the state’s economic output. If NoVa is in a slump, as it has been the past few years, a peppy performance in Richmond, Hampton Roads or elsewhere won’t do much to counteract it.

The sequestration-driven decline in federal government employment and a cutback in procurement contracts hit Northern Virginia hard over the decade. But James V. Koch, an Old Dominion University economics professor and author of the “2016 State of the Commonwealth Report,” sees hints of a turnaround. Major NoVa employers, once tethered to the federal government, have been diversifying their business base by making inroads into the private sector.

What’s his evidence?

Federal spending in the Washington metropolitan economy has declined over the decade. “Between mid-2011 and 2014, federal employment each month was consistently lower than the comparable month in the previous year,” writes Koch, in the report, which was sponsored by the Virginia Chamber Foundation. “This had, and still has significant consequences for the region because annual average wages per federal employee approximate $100,000.” Moreover, federal procurement spending in the Washington region declined dramatically, from a peak of $82.5 billion in 2010 to $71 billion in 2015.

The good news:

Since the middle of 2014 … a new pattern has emerged. The professional and business services sector has begun to grow even though federal employment and procurement remain relatively flat. While it is a bit early to declare that this signals the emergence of a new economic model for Northern Virginia, clearly this is a potentially significant change. It appears that professional and business services companies in Northern Virginia may be diversifying their markets and becoming less reliant on federal spending. If so, it bodes well for the region.

The professional & business services sector contributed roughly one-third of the 35,400 net new jobs created in Northern Virginia between June 2015 and June 2016, Koch notes.

It will not be easy for NoVa’s tech companies to shift from a business-to-government model to a business-to-business model, says Koch, but he sees the region’s expertise in cyber-security as an obvious way to make inroads with private-sector clients. He also sees potential in the biotechnology sector. However, for NoVa’s economy to take off, other industries will have to make the switch as well, and it is less clear what they might be.

“Northern Virginia has the assets to turn the corner and become a more business-oriented, globally competitive region,” he says. “But will it happen? Stay tuned.”

Dominion Breaks Ground on Greensville Plant

Construction at the Greensville County power station is well advanced. The gas-fired facility is expected to commence operations in 2018. Photo credit: Richmond Times-Dispatch

Construction at the Greensville County Power Station is well advanced. The gas-fired facility is expected to commence operations in 2018. Photo credit: Richmond Times-Dispatch

Construction has been underway at Dominion Virginia Power’s $1.3 billion Greensville County Power Station for several months now, but the company held its official ground-breaking ceremony yesterday. The event gave Dominion an opportunity to extol the virtues of the plant to its corporate family and friends. Among the key points noted by Robert Zullo with the Richmond Times-Dispatch:

The 1,600-megawatt power plan will be the largest gas-fired combined-cycle facility in North America. Construction will employ 1,000, and when that work is done, the station will employ 40 “good-paying jobs” permanently. Employing the latest gas-burning technology, Greensville will work under the strictest air pollution limits of any combined-cycle facility anywhere.

Dominion and local officials describe the plant as an economic development boon to one of Virginia’s poorest counties. Expansion of the Transco pipeline and construction of the proposed Atlantic Coast Pipeline, both of which will serve the plant, will boost supplies of natural gas to the area, putting Greensville County in the running for energy-intensive industry it could not compete for before. Furthermore, the plant will generate about $8.2 million in tax revenue, a huge sum for a county whose 2017 General Fund budget is $16.6 million.

The power company estimates that power station will save $2.1 billion over its multi-decade lifetime compared to the cost of alternative sources of electricity.

While natural gas might be the lowest cost source of electricity right now, Dominion critics question whether it will continue to be in the decades ahead as solar energy becomes increasingly cost competitive. Rather than build massive, billion-dollar power plants that could become obsolete in a decade, they say the utility should strive to maintain its flexibility in its electric-generation fleet so it can take advantage of more cost-effective technologies when they emerge.

The Cosmetology Licensing Rip-Off

Cosmetology licensing laws protect vested interests, create economic barriers for minorities and the poor

Cosmetology licensing: Does it really take 1,500 hours to learn how to braid hair? Image credit: College of Beauty and Barber Culture Facebook page.

William E. Grobes IV has pleaded guilty to charges of committing wire fraud and money laundering in the operation of the College of Beauty and Barber Culture in Chesapeake. The case against him, according to WAVY-TV:

Grobes represented to the [Veterans Administration] that CBBC provided full-time schooling to hundreds of veteran students beginning in October 2011. In reality, prosecutors say the school was a sham. Most vets enrolled in CBBC courses received few, if any, hours of instruction. There were apparently no tests, exams or practical exercises given at the school. Instead, students were directed to sign in and out of the school each day so that Grobes could report to the VA that they were enrolled and attending. In exchange, CBBC received GI Bill tuition payments for each veteran from the VA.

Google “cosmetology school fraud,” and you will see that owners of cosmetology and beauty schools are running rackets across the country. In Grobes’ case, he was ripping off the VA. In many other cases, cosmetology schools charge outrageous tuitions, which students finance through government-backed debt. When the VA isn’t getting sheared, the federal student loan program is taking a haircut.

Would-be barbers, hairdressers, hair braiders, hair waxers, beauticians and tattoo artists cannot simply go into business for themselves. They must acquire a license. (Here in Virginia, some professions are accessible through apprenticeships, but these take twice as many hours.) Here are the requirements for Virginia:

license_requirements

Irate customers aren’t demanding these licensing requirements as a form of consumer protection. The impetus comes from practitioners who benefit by restricting access to their fields and limiting competition. And any effort to roll back the cosmetology licensing law, I would wager, would be bitterly opposed by schools that make money from teaching these skills.

If you’re looking for an anti-poverty, job-creation program that doesn’t requires spending a lot of public money, try reforming the cosmetology license law.

Tesla Scores Big Victory in Virginia

Tesla Model X

Tesla Model X — pedal to the metal in Virginia.

First Uber, then Air BnB, now Tesla. Free markets in Virginia’s “new economy” are making steady ground.

Uber and Lyft, the revolutionary ride-hailing companies, overcame the taxicab industry two years ago to win the right to compete in the Virginia transportation marketplace. Last year, the General Assembly legalized Air BnB, an online marketplace for short-term rentals of private rooms and homes, after creating a mechanism for homeowners to pay occupancy taxes on the same basis as hotels.

Then yesterday, the Department of Motor Vehicles handed Tesla Motors, a manufacturer of electric vehicles, a major regulatory victory by ruling that the company could open a company-owned store in Henrico County. State law prohibits an auto manufacturer from owning dealerships, unless it can be demonstrated that no independent dealer is available to sell its cars “in a matter consistent with the public interest.”

DMV Commissioner Richard D. Holcomb accepted the California company’s argument that no independent dealer in the Richmond area could profitably operate under its retail business model. Wrote Holcomb in his ruling:

Tesla’s business model differs from traditional car dealerships in many ways; but specifically, Tesla sells its vehicles at uniform prices whether a customer purchases through [its] website or at a Tesla store. Tesla could not or would not offer “dealer discounts” or “wholesale pricing” on new cars to a prospective dealership. VADA’s own experts agreed that it would be very hard or impossible for a dealership to be profitable unless Tesla offered their cars at wholesale prices. Although many of the dealers testified that they could eventually make a profit with a Tesla dealership, they admitted that it would not be from new car sales. Those dealers indicated they could make a profit through other departments; and those areas, like sales of parts and used cars or profits on service and financing mark-ups, run counter to the Tesla business model.

That doesn’t come close to describing all the innovations the company would bring to Virginia. Founder Elon Musk’s grand plan is to integrate electric vehicles, home solar power, and battery storage to move the country toward a environmentally sustainable energy economy. (See my post outlining that vision.)

The Virginia Automobile Dealers Association (VADA) has vowed to fight Holcomb’s ruling, either through the courts or in the General Assembly, so Tesla’s victory may be temporary.

From my perspective, VADA offers one legitimate argument: The EV manufacturer should be required to abide by the same consumer-protection measures that automobile dealers do. The company says that its practices are effectively equivalent to those of the auto dealers, but it is not bound to them by law.

Just as Uber and Lyft were required to adopt certain consumer-protection measures so they would not enjoy an unfair advantage over taxis, it is reasonable for Tesla to accept consumer-protection measures to compete on a level playing field with automobile dealers. Tesla and other manufacturers — China-based automaker Geely also plans to sell cars in the U.S. through a direct-consumer model, according to the Richmond Times-Dispatch — should compete on their ability to provide a better value proposition to consumers such as better pricing, a better service model, and superior customer relations. I expect the details will be worked out in the 2017 legislative session.

Measuring and Evaluating Energy Efficiency

Are air duct inspections a cost-effective energy efficiency measure? How do we even know?

Are air duct inspections a cost-effective energy efficiency measure? How do we even know?

Virginia’s investor-owned gas and electric utilities administer 38 programs between them that are designed to increase energy efficiency or shift consumption away from periods of peak demand. The question periodically arises: Are these programs worthwhile? Do they save rate payers money?

Those are questions that most Virginians can readily understand. But getting answers isn’t so easy.

The answers depend on how one goes about evaluating, measuring and verifying the programs (a set of issues referred to in the biz as EM&V). How does one calculate the “Levelized Cost of Saved Energy” (the present value per kilowatt-hour of an energy-efficiency program over its economic life)? How does one construct the Total Resource Cost Test (an indicator of total program costs, including those of ratepayers and utilities)? What is the methodology behind the Ratepayer Impact Measure Test (known as the RIM test, which ascertains the impact of energy-efficiency measures on gas and electric rates)?

For the layman, these arcane issues “surpasseth all understanding,” to borrow a phrase from Philippians. But Virginians can take some comfort in the fact that the SCC is on top of the job. Earlier this year, the commission held a hearing attended by 20 interested persons and entities (whose comments were supplemented by 23 written submissions) to discuss how the energy-efficiency programs should be evaluated.

After deliberating on these matters of great complexity and subtlety, the SCC issued a report today finding that the system can be fine-tuned. Accordingly the commission has directed its staff to draft proposed rules to be considered in a future proceeding.

Wrote the commissioners:

The goal of the proposed Rules is to achieve, to the extent, possible, reliable and consistent estimation of energy savings and related impacts at a reasonable and appropriate cost; to provide guidance to utilities in planning and offering energy efficiency programs, and to provide a transparent basis for assessing cost-effectiveness of proposed programs.

One issue I found interesting (mainly because I found it comprehensible, unlike much of the report) is how to estimate kilowatt-hours of electricity saved. Most approaches rely upon Technical Resource Manuals (TRMs) that provide “deemed values,” or industry assumptions derived from professional judgment and engineering calculations — not from direct measurement. The problem is that industry averages may not apply to Virginia. Opines the SCC: “These estimates can introduce considerable inaccuracy into estimates of  energy savings.”

Therefore, the commission declared that estimates of kilowatt or kilowatt-hour savings “should be, where possible, based upon Virginia-specific data so as to reflect as closely as possible the actual savings achieved.”

The hoped-for benefit: If your utility offers an air duct-testing program, an appliance-recycling program, or rebates on Wi-Fi programmable thermostats, the SCC has thoroughly vetted them as cost-effective.

Alexandria’s Capital Spending Problem

Alexandria faces 10-year capital spending tab of up to $500 million more than budgeted.

Alexandria City Hall — city faces 10-year capital spending tab of up to $500 million more than budgeted.

Alexandria City Manager Mark Jinks is right: It’s probably a good idea to put on hold the $1.4 million design work for a proposed $20 million expansion on the Chinquapin Recreation Center pool, as well as series of $25,000 “way-finding” signs. The city has massive capital spending commitments that are not so discretionary.

As reported by the Washington Post, Jinks has tallied up some major expenditures for the city of 150,000.

  • The city’s share of the escalating cost of the Washington-area Metro heavy rail and bus system will increase $90 million over the next 10 years.
  • Repairs to schools will cost $200 million, while repairs to other city facilities could add $80-$239 million over the $85 million already budgeted.
  • Storm and sanitary sewer projects will cost $150-$200 million, although the state may cover some of that expense. Households will be dunned an additional $120 to $180 per year to cover the cost.

Of course, none of these capital expenditures cover the cost of unfunded pension liabilities faced by the state and every Virginia locality — a shortfall that could well come due within the next ten years.

Questions: Alexandria is said to be one of the few counties in the country that maintains a 10-year capital improvement budget. Are other Northern Virginia localities taking their long-term Metro exposure into account? Are other Virginia localities planning for the long-term cost of facilities maintenance and storm-water improvements? Do governing bodies appreciate that when they build expensive new facilities that they are incurring maintenance/repair obligations down the road? Just asking.

No Simple Answers about Illegal Voting

Illegal voting does occur in Virginia. But it's not clear how much.

Yes, Virginia, illegal voting by non-citizens does occur here. The practice may be widespread…. or not. We don’t know for sure. Photo credit: Virginian-Pilot.

President-elect Donald Trump blasted out another of his notorious tweets three days ago, claiming that he would have won a majority of votes in the 2016 election were it not for “serious voter fraud” in Virginia and other states. “Why isn’t the media reporting on this?” he asked. “Serious bias – big problem!”

National TV networks and other prestigious media outlets counter-attacked, describing the tweets as “baseless” and backed by “zero evidence.” NPR traced his “unfounded claim” to the conspiracy-minded Info Wars website and radio show, which used “flawed evidence” in reporting that three million people voted illegally. The sum total of the reporting has been to imply that not only is Trump’s claim without merit but that voting fraud occurs on such an insignificant scale as to be electorally meaningless.

Trump’s insistence that he would have won the popular vote had two million people not voted illegally is a huuuge stretch. However, the national media has not distinguished itself in debunking the charge. Pillars of the news establishment have abandoned any pretense of objectivity. Indeed, their unhinged reaction lends credence to Trump’s charge that they are guilty of serious bias.

The fact is, there is credible evidence that illegal voting does occur on a fairly large scale. Media pundits quoting other media pundits in an endless loop does not constitute proof otherwise.

The first body of evidence comes from Jesse T. Richman, Gulshan A. Chattha and David C. Earnest, professors at Old Dominion University and George Mason University. Writing in a 2014 edition of Electoral Studies, they drew upon data from an internet-based survey compiled as part of the 2008 and 2010 Cooperative Congressional Election Studies. The survey sample was robust:  32,800 in 2008 and 54,00 in 2010. Unlike other voter surveys, this study did not filter out the responses of non-citizens.

Extrapolating from the survey results, the authors concluded that “the proportion of non-citizens who voted in 2008 was less than fifteen percent, but significantly greater than zero.” In 2010, “more than three percent of non-citizens reported voting.”

Given statistical margins of error and other uncertainties, there is no way to quantify an exact number of non-citizen voters. The authors give a range of between 33,000 nationally on the low end and 2.8 million on the high end. (I’m not certain where Trump got his data, but he might well have seized upon the authors’ high-end estimate. Using that number without stating the caveats and qualifiers might justly be characterized as reckless. But it is not “baseless.”)

Despite the uncertainties, Richman, Chattha and Earnest said that non-citizen votes could have influenced some electoral outcomes in 2008. For instance, presidential election results in North Carolina were so close that a mere 5.1% turnout of non-citizens could have given Barack Obama his 14,177-vote margin of victory. By contrast, Obama’s margin in Virginia was so wide that it would have required 85% of non-citizens voting — an improbably large percentage — to have handed him a victory.

A second body of evidence comes from a 2016 study by the Public Interest Legal Foundation. PILF documented — as in, it provided documentary evidence, not statistical inference — of 1,046 non-citizens registered to vote in Virginia who were subsequently removed from the voter rolls. The authors also documented that these non-citizens accounted for nearly 200 ballots cast.

The numbers sound negligible but they were based on responses from eight jurisdictions accounting for only 16% of the state’s population. Extrapolating statewide, the number of ballots cast could well have exceeded 1,200 and the number of improper registrations 6,000. Extrapolating nationally, we could be talking 50,000 votes and 240,000 registrations.

Admittedly, there are dangers in extrapolating those numbers. We don’t know how representative those eight Virginia jurisdictions are of national patterns. On the other hand, one can argue that these numbers under-represent the extent of illegal voting because they reflect only non-citizens who were identified and removed from voter rolls. The figures do not include non-citizens whose illegal registrations were never caught.

All studies of electoral fraud are based on imperfect data and assumptions that can be challenged. There is a fuzzy halo of uncertainty around any estimate. But it is patently wrong to say that there is “zero evidence” that wide-scale illegal voting is occurring.

Tweeting claims casually scooped up from the Internet does not project the gravitas we expect of our president-elect. But shrill denunciations emanating from national news organizations are no more credible. The truth is, illegal voting does occur but it’s impossible to pinpoint exactly how much. Unless Trump and the media do better, the public will learn to trust neither.

Update: Turns out that Jesse Richman has opined on this very question. His verdict: There is no way that non-citizen votes could account for Clinton’s winning margin in the popular vote. But his commentary suggests that he believes voting by non-citizens still occurs.

New VEDP Chief Brings Workforce Training Credibility

Steven Moret, Louisiana's economic development and workforce training guru

Steven Moret married economic development and workforce training in Louisiana. Photo credit: The Advocate

Steven Moret, an economic development executive from Louisiana, has been selected to run the Virginia Economic Development Partnership (VEDP) on the strength of his track record of attracting private investment to Louisiana by building one of the most respected workforce training programs in the country.

The VEDP board approved the hire in a special meeting yesterday against the backdrop of a devastating report by the Joint Legislative Audit and Review Commission (JLARC), which charged that VEDP suffered from “systemic deficiencies” in administration and management.

Moret, selected from among six finalists after a nationwide search, will receive a base salary of 340,000 with benefits and, he would be eligible for an annual incentive bonus up to 15% tied to performance. He has strong family connections to Virginia. His mother lives in Richmond, and his in-laws are planning to move to the city.

Among all of Virginia’s economic development programs, VEDP is the most important. VEDP itself administers a $27 million budget, and it is influential in dispensing tens of millions of dollars more in incentives through the Commonwealth’s Opportunity Fund.

In an interview with Virginia Business, VEDP Chairman Dan Clemente explained the board’s rationale behind the pick:

Clemente said that hiring a new, highly qualified leader will help shepherd through changes resulting from JLARC’s review. Saying that he had consulted with legislative leaders before calling Monday’s meeting, Clemente noted that Moret was hired to head up Louisiana’s economic development efforts in 2009 under conditions similar to those facing VEDP today. “He came in and straightened that out and brought in billions in new capital investment, “ Clemente said.

What really impressed him, Clemente added, is that Moret traveled to Georgia to study its workforce development initiative, developing a similar model in Louisiana called FastStart. “He hired the No. 2 guy in Georgia and brought him to Louisiana to make the program work,” Clemente said. “He’s good at executing ideas.”

Clemente said Moret —who was not present at Monday’s meeting — has read JLARC’s 132-page report. “He looked at it and said, ‘Dan, this is all administrative. I can take care of it. ’” Clemente said Moret wanted to come to Virginia because “ ‘your location draws Fortune 500 companies, and that creates a lot of opportunities for me.’ ”

Bacon’s bottom line: Moret seems like a promising choice for the job, and it will be interesting to see where he takes VEDP. An experienced executive should be able to address the managerial issues raised by JLARC. Of greater import will be his ability to connect corporate recruitment with workforce development.

The number one driver behind corporate investment today is gaining access to a skilled workforce. As we have blogged on Bacon’s Rebellion repeatedly, tens of thousands of jobs across the state are going unfilled because of the inability of existing employers to find employees with the necessary qualifications. Needless to say, staffing is an issue to out-of-state company considering an investment in Virginia as well. The skills gap tells us that a massive disconnect has developed between the workforce, employers and the educational/ training institutions that impart needed skills.

Since 1965, the Virginia Jobs Investment Program (VJIP) has provided training to companies creating new jobs. That program has undergone considerable bureaucratic turmoil over the past 20 years, shuffling in whole or in part between the old Department of Economic Development, the Department of Business Assistance, the Department of Small Business and Supplier Diversity, and then back to VEDP, according to a 2014 VEDP presentation.

Between 2010 and 2014, the program shrank from 16 operational and support personnel to six. In other words, while Louisiana was building a best-in-class workforce development initiative, it appears that Virginia was decimating its own program.

From a philosophical perspective, investment incentives such as special subsidies and tax breaks smack of corporate welfare. The beneficiaries are corporations, often highly profitable ones. There is no moral justification for such transfer payments, only the practical justification of bribing an out-of-state company to locate in Virginia. By contrast, workforce training benefits both the corporation and the employees benefiting from the training. While some such skills imparted in highly tailored training programs may be company-specific, employees often acquire skills they can apply elsewhere. Viewed another way, workforce training is an investment in Virginians, not out-of-state corporations with no demonstrated long-term commitment to the state.

Given a choice between bribing companies with subsidies and tax breaks or subsidizing their workforce training, I would choose training in a heartbeat. Indeed, if one of Mr. Moret’s priorities is to recreate his Louisiana workforce-training success here in Virginia, I would suggest that the General Assembly could provide him with all the money he needs from the Commonwealth’s Opportunity Fund.

New Solar Farm in the Works

SunPower Corp., a California-based solar energy company, plans to request a special use permit from James City County for a solar farm up to 35 megawatts in Norge near Williamsburg, reports the Williamsburg-Yorktown Daily. The project, which would be built on a 223-acre site, is in the early permitting stage. SunPower is in active discussions with potential buyers of the power.