Author Archives: James A. Bacon

Obessions of Inequality

Graphic credit: "Geographies of Opportunity"

Graphic credit: “Geographies of Opportunity”

by James A. Bacon

Sarah Burd-Sharps and Kristen Lewis, authors of “Geographies of Opportunity,” provide a state-by-state and congressional district-by-congressional district measurement of “well being” across the United States. Overall, Virginia fares reasonably well in the report, scoring 11th overall. Well being is determined by a set of measures for life expectancy, education and median income. But state averages can mask a lot. Indeed, Virginia stands out for the inequality of income and well being inside its borders.

The premise of the report is that there other ways to measure progress than by the usual metrics of economic growth. The study draws upon the United Nation’s Human Development Index to measure three “fundamental human dimensions” — a long and healthy life, access to knowledge, and a decent standard of living. “There is a broad consensus that these three capabilities are essential building blocks for a life of value, freedom and dignity.”

The Index score for the United States as a whole is 5.06. Connecticut is the best off, with an index of 6.17, and Virginia comes in at 11th at 5.47. Mississippi (no surprise) comes in last at 3.81. (Play with the data here.)

Burd-Sharps and Lewis also break down the numbers by congressional district. Virginia has three of the top 20 districts in the nation ranked by well being — the 8th (Arlington, Alexandria, Fairfax), the 10th (Manassas to Winchester), and the 11th (Reston to Quantico). And it has one of the poorest — the 9th, in the far Southwest.

OK, what does all this tell us? I’m really not sure. Other than obsessing about what we all know to be true — there are huge wealth gaps in the United States — the study doesn’t tell us much. Gee, there’s a link between education level and health? Who would have figured? And there’s a link between income and health, too? Gosh, tell me more.

In a sidebar, the study notes how the ethnically pluralistic residents of the 8th district in the affluent Virginia suburbs of Washington, D.C., live eight years longer than the predominantly white residents living in the isolated mountains of Southwest Virginia. Longevity in affluent U.S. congressional districts exceeds that of Japan. Longevity in the poorest districts, like the 9th, compares to Gaza and the West Bank.

So, what do we do about it? Improving human development outcomes in Appalachia, the authors opine, “requires greater investment in peoples’ capabilities to thrive in the new economy” — specifically, a high-quality pre-school experience.

But elsewhere we read that the higher the proportion of foreign-born residents in a congressional district, the longer the district’s life expectancy. In sunny California, there is a “surprising” 3.2-year life expectancy gap in favor of foreign-born Latinos as compared to their U.S.-born counterparts. Surprising — really? It’s only surprising if you think that the only meaningful determinants of public health are education and income levels, and that culture has nothing to do with it. As it turns out, the longer poor Latinos live in the U.S. and adopt fast food-heavy diets, the greater their risk of obesity-related illnesses.

Now that would have been an interesting angle to pursue. When affluent populations have better health outcomes than poor populations, the assumption is that the difference can be attributed to superior access to health care. Surely some of it is. But how much is due to different diets and lifestyles? Are there strategies that attack health problems more directly than, say, by increasing spending on pre-K?

Another thing that irritated me was the failure to adjust incomes for cost of living. If the purpose is to compare well being, the cost of living is a major consideration. The authors contrast Connecticut and Wyoming, states with similar GDPs per capita, in the $65,000 to $68,000 range. “Does this mean that the people living in these two states enjoy similar levels of health, education and living standards?” the authors ask. “It does not. Connecticut residents, on average, can expect to outlive their western compatriots by nearly two and a half years, are 40 percent more likely to have bachelor’s degrees, and typically earn $6,000 more per year.”

Here’s what the study doesn’t bother to tell you. According to CNN Money’s cost of living calculator, earning $50,ooo in Cheyenne, Wyoming, is the equivalent of earning $64,900 in Hartford or $76,600 in New Haven. Incomes are lower? Yes, but the dollar stretches 30% to 50% further. The question I would ask is this: How is it that the residents of Wyoming, who aren’t nearly as well educated as the residents of Connecticut, manage to earn higher incomes on a cost-of-living-adjusted basis?

As an aside, let’s talk about income disparities within congressional districts. Which state do you think has greater disparities of vast wealth and poverty in close proximity — Wyoming, a state of cowboys and coal miners, of Connecticut, a state of inner-city poor and hedge-fund billionaires?

For a document entitled, “Geographies of Opportunity,” this study has almost nothing to say about the economics of opportunity. It has nothing to say about strategies that poor people can pursue to lift themselves out of poverty or lead healthier lives. All recommendations call for an activist and interventionist government. Promote health by cracking down on smoking. Regulate food advertising. Invest public dollars in recreational facilities and (a remedy I actually agree with) in more walkable neighborhoods. Expand pre-school programs. Keep teens in high school until they graduate. Raise the minimum wage. The list goes on with a host of suggestions that have absolutely nothing to do with the data presented. As for the one sure-fire way to wage raises for the poor — create conditions conducive to economic growth so that companies hire more workers, drive down unemployment and bid up wages — it doesn’t warrant a mention.

The numbers in this study are potentially useful. The analysis and recommendations are not.

Adapting to Climate Change: 11 Proposals

UR_proposals

Working under the direction of University of Richmond professors Peter D. Smallwood and Stephen P. Nash, eleven UR environmental studies majors wrote papers on topics relating to the environment and climate change in Virginia. Each paper defines a problem and lays out a practical solution. All eleven papers are compiled in a document entitled, “Nature Virginia’s Economy, and the Climate Threat.” The papers are of such interest that I re-publish the abstracts below. – JAB

Seed Banks: An Insurance Policy Against Extinction from Climate Change
by Casey Schmidt

Climate change is causing the ranges of native species to shift northward at a pace that outstrips the ability of many plant species to migrate and adapt. … Although assisted migration, the process of relocating individuals or spread of seeds through human intervention, has been used successfully in some cases to preserve species, it comes saddled with potential ecological damage, and legal complications arise when these ranges cross state lines.

These complications threaten Virginia’s biological diversity, especially among rare plants and those plants from habitats affected most by climate change. In order to preserve the genetic diversity of native species before populations become isolated and inbred, this paper proposes that Virginia create a seed bank. Seed banks have been used for a variety of reasons worldwide to preserve the genes of plant species, including the preservation of crop species and for research purposes. … For this proposed seed bank, Virginia would use information collected by the state Natural Heritage Program to identify eligible species that face the greatest threat from climate change in order to preserve biodiversity, establish a genetically diverse sample for research, and potentially reestablish these endangered species in the future.

Branching Out: How Virginia Can Use Trees Strategically to Combat Biodiversity Loss
by Taylor Pfeiffer

Biodiversity loss is a consequence of climate change. As greenhouse gas emissions increase global temperatures, decreases in the abundance and diversity of species has reduced ecosystem resiliency during these changes. … Weakened ecosystems decrease the environment’s capacity to provide humans with services like safe drinking water, fuel, and protection from natural disasters. …

The agricultural industry plays a unique role in this environmental conversation, as farmland both contributes to climate change and is jeopardized by the negative effects created by the issue in a complex reciprocal cycle. This relationship, along with the presence of 8.3 million acres of farmland in Virginia, suggests that agriculture should be incorporated into the state’s climate change adaptation and mitigation strategies. …

Agroforestry, the strategic integration of trees in agriculture to create a sustainable land-use system, has been utilized for environmental benefits in the past. … This paper proposes the creation of a statewide program that requires the use of agroforestry on large farms in order to preserve biodiversity in the wake of climate change. An alternative solution is a certification program for farmers who use agroforestry practices to enhance wildlife habitat. Economic incentives and implementation assistance will encourage participation, while funding for the establishment of this program, creation of publications, and organization of events will be sourced from governmental and private grants.

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How to Reform Virginia’s Conservation Tax Credit

This map, taken from the Virginia Department of Conservation and Recreation website, shows the fragmented distribution of conservation easements on Virginia's upper peninsula.

This map, taken from the Virginia Department of Conservation and Recreation website, shows the fragmented distribution of conservation easements on Virginia’s upper peninsula.

by James A. Bacon

The state of Virginia spends $100 million a year in the form of tax expenditures to place conservation easements on land parcels around the state. Could the state get more for its investment? Amy Murphy, an environmental studies major at the University of Richmond, thinks so. In a paper presented to the  Climate Change and Resiliency Update Commission Tuesday, she recommended three changes t0 make the law more effective, including a restructuring of the tax credit to favor easements that offered greater environmental benefits.

Murphy’s paper on conservation easement reform was one of 11 prepared under the tutelage of biology professor Peter D. Smallwood and journalism professor Stephen D. Nash that were packaged for consideration by the climate change commission. Each paper focused on a practical, small-bore proposal for helping Virginia ecosystems adapt to warming temperatures. While climate change was the unifying theme, it struck me that many of the proposals make sense whether you believe in catastrophic global warming or not.

Murphy’s paper, in particular, addressed concerns that I have long harbored about Virginia’s conservation easement program. On the plus side, the program provides a way to protect Virginia lands from development that is far cheaper than purchasing the land outright. Landowners receive a tax credit worth 40% of the fair market of the value of the land, with deductions up to $100,000 for the year of donation and 10 subsequent years. In effect, taxpayers pay 40 cents on the dollar to protect land from development beyond its current use, typically agriculture or forestry. Not a bad deal.

The problem is that not all land is equally worth conserving. Some lands harbor endangered species and biological diversity; others don’t. Some easements abut other easements, creating larger bodies of protected habitat; others are tiny islands, creating fragments of little ecological value. The state caps the easement credits at $100 million per year but has no system for prioritizing one easement over another.

Murphy proposes creating a statewide plan, to be administered by the Department of Conservation and Natural Resources, to rank and prioritize land based on conservation value. Factors to be considered would include biodiversity, land resilience, land cover, proximity to existing lands and threat of development. Parcels would be scored. Parcels with high scores (of greater conservation value) would receive higher tax credits, while lower-scoring parcels would receive lower credits.

“Ideally, implementing these changes will result in obtaining easements on more land of high ecological importance without altering the total amount of tax credits given annually,” she writes.

A second tweak to the program would address problems created by freezing an easement in judicial stone. Static easements that prescribe specific responsibilities and expectations of future land owners can become outdated over the decades, limiting adaptation to changes in scientific knowledge and climate conditions. Murphy recommends that Virginia require the inclusion of “adaptive management plans” in easement terms. “These plans should require that the landowner manages the land in a manner consistent with preserving the conservation purpose of the easement rather than require specific management techniques.”

Finally, Murphy recommends setting up a system for monitoring easements to ensure that the terms are being adhered to. In Maine, which requires monitoring, 90% of the easements were in compliance — which implies that 10% were not. There is a cost to monitoring, she acknowledges, but the burden “may have a positive influence as [it] may force landowners to limit their holdings so they can provide proper stewardship to them. This may cause a selective pressure away from low value easements.”

Bacon’s bottom line: Virginia’s conservation easement program is a valuable tool for protecting the natural environment. It’s also a great tax break for landowners, some of whom may be motivated to participate for less-than-altruistic motives. Murphy’s recommendations would ensure that this significant state investment yields maximum benefits.

The Tangible Economic Value of Biodiversity

healy_hamilton

Healy Hamilton

by James A. Bacon

From the oceans to the rain forests, from the wetlands to the Virginia Piedmont, wildlife habitats around the world are under tremendous pressure from human activity. One reason that environmentalists get alarmed about global warming is that a rapidly changing environment adds one more source of stress to many species. In a pre-human environment, species would respond to a warming climate in Virginia by migrating north. But human activity — cities, farming, subdivisions, roads, railroads and power lines — fragments wildlife habitat and creates barriers to migration.

Human pressure is causing one of the greatest mass extinctions of species the planet has ever seen. But not everyone gets weepy at the prospect of demise of the Littlewing Purleymussel or Rock Gnome Lichen, endangered species here in Virginia. Some people say, “So what? What’s it to me?”

There is tremendous unrecognized value to biodiversity, Healy Hamilton, chief scientist with NatureServe, argued in a session yesterday at the University of Richmond that preceded the meeting of the Climate Change and Resiliency Update Commission. Just to mention those species that are directly useful to humans, she said 30,00 plant species have edible parts; 7,000 are used as foods. Forty percent of all medicinal drugs come from plants, animals or micro-organisms. Timber, firewood, fibers, rubber and biofuels, all derived from plants, are multibillion-dollar industries.

And that’s just for starters. Increasingly, scientists are turning to nature for solutions to engineering problems, a phenomenon called biomimicry. Nature and evolution have worked over billions of years to accomplish such tasks as enhancing flow without causing friction, or creating light, flexible materials. The greater the number of species in existence, the greater the number of potential solutions.

While there is value to preserving individual species, there also is value to preserving ecosystems. Hamilton referred to “ecosystem services,” or tangible economic benefits that ecosystems provide humans. Pollinators like bats and bees contribute roughly $30 billion a year in services nationally to agriculture and landscaping. Coastal wetlands provide billions of dollars annually in storm-surge protection. Nature provides billions of more of value in recreation and tourism. The inspiration upon arts and philosophy cannot be expressed in dollars.

Hamilton described biological diversity as “a magic carpet ride of life we don’t even know we’re on.”

Bacon’s bottom line: Of all environmental issues, the loss of wildlife habitat and biodiversity is one that bothers me most. When species go extinct, they are gone forever (unless someone figures out how to reconstruct a wooly mammoth from DNA, but re-creating one mammoth isn’t enough to resurrect the species). The greater the biodiversity of an ecosystem, the greater its stability. The loss of species makes the system more prone to debilitating perturbations, which, even if you care nothing about gray bats or dustytail darters, can impact those species (pine trees, corn, azaleas, whatever) that humans do care about.

The loss of wildlife habitat and biodiversity is real, it’s here, and it’s now. To me, it’s a lot more real than catastrophic climate change, an outgrowth of computer model forecasts that failed to see the current 17-year temperature plateau. (Yeah, yeah, I know I’m a heretic. Burn me at the stake!)

What I’m groping for here is the idea that biodiversity may be a patch of common ground where wild-eye climate alarmists and sober-minded skeptics (ha! ha! I’m just trying to goad LarryG and PeterG) can actually agree on something. While the two camps will likely disagree over the desirability of re-engineering the state’s energy economy, perhaps we can come together in promoting environmental resilience by buffering the impact of human activity on threatened species.

In the near future, I will explore some ideas generated by some bright University of Richmond students on practical ways Virginia can protect biodiversity from human threats of all kinds, whether climate change or humanity’s heavy footprint the landscape.

McAuliffe Climate Change Commission Playing for Small Stakes

climate_changeby James A. Bacon

In December 2008, Governor Tim Kaine’s climate change commission issued a detailed action plan. In 2009, Bob McDonnell was elected governor, and work on anything remotely connected to climate change promptly ended. In January 2014 Governor Terry McAuliffe took office, and he set up a new commission to review and update the Kaine plan. What can we expect from this latest initiative?

Judging from the proceedings of a meeting of the Climate Change and Resiliency Update Commission yesterday at the University of Richmond, nothing breathtaking is likely to emerge from this group. Part of the reason is that the Obama administration’s proposed Clean Power Plan, which would radically restructure Virginia’s electric power industry for the purpose of reducing carbon-dioxide emissions, is so massive that everything else seems small by comparison.

But the other reason for expecting only tweaks to existing policy is that McAuliffe set politically realistic goals. McAuliffe understands that multimillion-dollar spending or regulatory initiatives to combat climate change will be still-born in the Republican dominated General Assembly. So, he has charged the Commission to develop recommendations that can be implemented either through executive action or in partnership with private groups. And it’s quickly becoming obvious that only so much can be accomplished this way.

The small-bore nature of the proposals under discussion became evident from preliminary reports of working-group chairs.  The education/outreach work group, for instance, suggested building a website to function as a authoritative clearinghouse for Virginia-related climate change and resilience information. Of course, that can happen only if resources can be found within an already over-stretched state workforce to build and curate it. Another work group is trying to identify data sources on everything from sea-level rise to the carbon sequestration capacity of Virginia forests for use in intelligent decision making. It’s not clear yet how much of this data even exists.

The public-funding work group seeks ways to leverage limited public funds with private dollars. “We don’t have a printing press here in Virginia,” quipped Walton Shepherd with the NRDC. His group is looking for opportunities to create public-private partnerships, to create “resiliency bonds” for infrastructure-hardening improvements, or to find a clever way that the up-front cost of flood-proofing improvements, such as elevating houses, can  be paid for through lower flood insurance rates. This group is thinking creatively, but it’s not clear whether it can come up with anything tangible.

The energy work group is wrestling with some of the biggest issues, like how to promote cogeneration (which utilizes waste heat) and microgrids (which better accommodate small-scale renewable energy sources). Not only would such recommendations likely require General Assembly action, however, it may be difficult to obtain consensus within the work group. As an example of the potential friction within the commission, an individual representing Virginia’s electric co-ops questioned the blithe assertion of another commission member that a warming climate will increase the frequency and severity of storms. Contrary to predictions, the incidence of hurricanes along the U.S. Atlantic coast actually has declined in recent years.

More to the point, it is difficult to see how a commission that meets episodically over one year can master an incredibly complex suite of issues and develop solutions that meet McAuliffe’s political criteria. As Jagadish Shukla, with the Institute of Global Environment and Society at George Mason University, said at one point, the commission needs more time. “Two hour meetings don’t do justice to these problems.”

— JAB

Obama, I Hardly Knew Ye

Persident Obama and Japan Prime Minister Abe

Persident Obama and Japan Prime Minister Abe

Just saw President Obama on the Chris Matthews show making the case for the Trans-Pacific free-trade agreement… It was not an Obama I was accustomed to seeing. It was eerie — he kept talking, and I kept agreeing with what he said. I’ve never experienced that before. I wondered if I was hallucinating.

I suspect that most Republicans will agree with him, too. Indeed, when it comes to getting fast-track negotiating authority through Congress, Obama probably can count on far more Republican support than Democratic.

Good for Obama. Those aren’t words you often hear from me on this blog. When the president supports win-win economic policies, I am happy to back him.

So, if there’s a vote in Congress, and if the Trans-Pacific trade agreement wins support mainly from Republicans, what does that do to the narrative that Republicans hate Obama so much that they’ll shoot down anything he proposes? Perhaps a new narrative will emerge. Perhaps the country will come to understand that Republicans are not opposed to Obama — just (most of) his policies. If Obama were willing to triangulate like President Clinton did, perhaps he could carve out bipartisan support for his initiatives and we could get something accomplished in this country. That would be something to celebrate.

– JAB

Two Cheers — Venture Funding Rebounds in D.C. Metroplex

vc_funding

Good news/bad news business story out of the Washington area… Venture capital funding is rebounding. Washington-area companies scarfed up $330 million in funding during the first quarter — 55 percent more than in the same quarter of 2014 and the best first quarter since 2001, reports the Washington Business Journal. That’s just what the regional tech economy needs to shake off the effects of federal sequestration and to start growing again.

The not so good news is that the D.C. metropolex, which includes Northern Virginia, is a loooooong way from establishing national leadership in the venture space. The total funding for metro Washington barely amounted to a rounding error for Silicon Valley.

Broken down by state, Virginia ranked 12th in the country for venture funding in the 4th quarter of 2014 (the most recent data available online today), according to data compiled by PricewaterhouseCoopers and the National Venture Capital Association. The $156 million raised by Virginia firms compares to $7.6 billion for California and $1.9 billion for Massachusetts.

Why so little? Northern Virginia has the best educated population of any region in the United States and one of the most tech-savvy workforces. Supposedly, corporations and capital like to locate in markets where there is  a deep labor pool of technical talent. The usual response is that, well, California has Stanford and Berkeley, and Massachusetts has Harvard and MIT, and all Northern Virginia has is George Mason University… and… and… Marymount College. (OK, that’ s not entirely fair. The George Washington University engineering campus is in Loudoun County.)

But what world-class R&D powerhouses can be found in New York or Florida, both of which raised way more money? And how do you explain that Maryland, home to the Johns Hopkins University, which ranks No. 1 in R&D spending, ranks even lower than Virginia?

Clearly, the presence of a strong research university is an advantage when it comes to raising venture capital, but it’s hardly a prerequisite. I’m happy to be proven wrong on this, but I keep coming back to the fact that the corporate culture of Washington-area tech firms is geared to operating in sync with the metabolism of the federal government, not Silicon Valley. Yes, there are exceptions — and, I’d wager, they’re the ones getting the venture funding. But there don’t seem to be enough to change to fundamentally alter the nature of the Northern Virginia economy.

If Northern Virginia is ever going to wean itself from its dependence upon the federal government, we’re going to have to see a lot more venture funding than $150 million a quarter. As for the rest of Virginia, it would be nice to see any venture funding at all!

– JAB

Solid Coverage of the U.S. 460 Fiasco. But the EPA Travesty? …. Chirp. Chirp.

crickettsThe Virginia Department of Transportation has canceled its contract with US 460 Mobility Partners to build the U.S. 460 Connector between Petersburg and Suffolk, Transportation Secretary Aubrey Layne announced Wednesday. The action paves the way for initiating legal action to recover $252 million paid to the public-private partnership concessionaire for preparation and asset mobilization to start building the highway.

Layne had pulled the plug on the project a year ago when it was evident that the U.S. Army Corps of Engineers might not issue required wetlands permits along the proposed 55-mile route. It’s not clear what recourse the McAuliffe administration has to recover payments provided for under a contract negotiated and signed by the McDonnell administration. There is no evidence that U.S. Mobility Partners has done anything wrong (other than negotiate a highly favorable contract). Still, it’s worth the effort. Even recovering half the sum would be a big benefit to taxpayers.

Now… If only the McAuliffe administration would try to recover money from the Environmental Protection Agency for mandating hundreds of millions of dollars in upgrades to coal-fired power plants to reduce toxic emissions like mercury and sulfur dioxide — only to turn around and issue another set of regulations a few years later, the Clean Power Plan, that will effectively force Dominion to shut down three of the four coal plants it just upgraded.

Governor Terry McAuliffe did protect ratepayers from that fiasco, which would have cost Virginia ratepayers some $1.6 billion or more, assuming the facilities were shut down within five years — by getting Dominion to eat the costs instead. In exchange, however, in a legislative deal carved out earlier this year, Dominion gets to freeze its base rates for five years. Some observers characterize that concession as a give-away to Dominion (although Dominion strenuously disagrees).

While the U.S. 460 fiasco rightfully generated a slew of in-depth newspaper reports, the EPA fiasco made one brief blip in the news cycle and then disappeared. The media has made no comparable effort to examine the issue, much less to hold the EPA accountable for the absurdity of enacting regulations that will likely force Dominion (and other electric companies with coal plants) to shut down investments that the agency had required just a few years previously. If Dominion had been ripping off ratepayers to the tune of $1.6 billion, I suspect we’d be hearing about it. But when the EPA is doing the gouging… all I hear is crickets chirping.

– JAB

The Next Wave of Energy Conservation: Collaborative Business Districts

open_iot

Click for more legible image. Graphic credit: Tridium

by James A. Bacon

As the Obama administration presses forward with its campaign to restructure the U.S. electric industry to reduce carbon dioxide emissions, the Environmental Protection Agency (EPA) and its friends in the environmental movement have touted the potential for energy conservation to ease the transition to a clean energy economy. One key premise of the EPA’s Clean Power Plan EPA plan is that it should be possible to cut energy demand by 1.5% annually over the next 15 years from what it otherwise would be. The EPA is short on specifics, however. It’s not clear exactly where those energy savings would come from.

As it happens, there is tremendous potential to conserve energy — way beyond weatherizing old houses and installing Energy Star appliances. An entire industry, the building automation industry, has arisen around the opportunity to squeeze energy savings out of office, retail and industrial buildings. Although there are many other applications for building automation, the most tangible Return on Investment comes from reducing electricity consumption from HVAC, lighting, computers and industrial processes.

The industry is charging full-steam ahead with no special incentives from government. Property owners find that installing building automation systems is a competitive use of capital that lowers operating costs. Even more encouraging, the industry could be just scratching the surface of potential savings. Energy conservation could move to a new, higher plateau if property owners began collaborating.

Wayne C. Tighe, vice president of sales for Tridium Inc., a company for which I have done some free-lance work, has written an important paper for ei, a magazine of the National Electrical Manufacturers Association. The next step, he says, is for the industry to move from creating open building systems. in which different devices within a building talk to one another, to open city systems, in which different buildings and municipal infrastructure systems talk to one another.

Tridium provides an open platform, Niagara, that connects dozens of different types of sensors and devices inside buildings. “But we see no logical reason,” writes Tighe, “why connectivity should end at the property line. Our goal is to integrate buildings with each other and with municipal systems.” He continues:

Building automation systems optimize energy consumption of HVAC, lighting, elevators, servers and computers, and other electricity-consuming devices inside buildings and building complexes. But commercial buildings plug into electric grids. Smart grid technologies enable power companies to become defter at managing electric loads. Utilities are experimenting with time-of-day pricing, load shedding, and other strategies to reduce peak electric loads.

The more data that power companies and commercial buildings can share, the more power companies can curtail capital expenditures that get passed on to ratepayers. Sharing energy consumption data also opens the potential for businesses to generate and share their own power in eco-districts — installing solar power, perhaps, or generating electric power and utilizing heat waste.

Tighe describes other benefits from what he calls the “open Internet of Things”: water conservation; conservation of outdoor lighting; improved tracking of employees, visitors and their cars; optimization of space dedicated to parking; and transportation demand management.

From a managerial perspective, implementing building automation in individual buildings is simple —  there’s only one property owner to deal with. Creating functional groups out of the businesses, government entities and non-profit groups across an entire business district, with all their conflicting priorities and financial capabilities, is more complicated. But that’s the future of energy conservation.

Tighe’s article highlights Envision Charlotte, the not-for-profit group that has pulled together 61 of the 64 largest buildings in downtown Charlotte, N.C., to promote sustainability as a competitive economic advantage. I don’t see any comparable activity here in the Old Dominion. We’d better get moving soon, or once again we Virginians will find ourselves eating Tarheel dust.

Medicaid Expansion an Inefficient Way to Prop up Rural Hospitals

medicaid_expansionby James A. Bacon

One commonly cited argument in support of expanding Virginia’s Medicaid program in concert with the Affordable Care Act is that enrolling more poor Virginians would help prop up financially shaky rural hospitals. Rural hospitals tend to serve disproportionately poor populations, which means they tend to provide disproportionate amounts of uncompensated care. Expanding Medicaid coverage to poor and near-poor populations, the logic goes, would provide these hospitals with much-needed cash infusions. If Virginia doesn’t expand Medicaid, many struggling rural hospitals may close, making health care even more inaccessible for the poor.

Marc D. Joffe and Jason J. Fichtner have taken a look at that argument in a new paper, “Hospitals and the Proposed Virginia Medicaid Expansion,” and found it wanting. The study was published by the Thomas Jefferson Institute.

Overall, Virginia’s hospital industry is in sound financial condition, generating net income of more than $1.5 billion in 2013, the authors note. Profits were not distributed evenly, however. The large, multi-hospital health systems such as Sentara, Carilion, Inova and Bon Secours were highly profitable, while many rural hospitals lost money.

Expanding the Medicaid program would pump millions of dollars into Virginia’s health care system without consideration to a hospital’s fiscal profitability, Joffee and Fichtner argue. Most of Virginia’s hospitals remain solidly profitable despite the burden of providing uncompensated care. They don’t need extra Medicaid revenue to remain profitable. Moreover, not-for-profit hospitals already receive important benefits — the ability to receive tax-deductible contributions, exemption from property taxes and corporate income taxes, and access to tax-exempt bond funding.

If  legislators want to prop up Virginia’s struggling rural hospitals, the authors write, they should target failing hospitals directly rather than subsidizing rich and poor institutions alike.

Rural hospitals have bigger problems than uncompensated care; between 1990 and 2000, 208 rural hospitals shut closed nationally, mostly the result of consolidations or low utilization. That trend continues. Lee Regional Medical Center in Lee County, for instance, had  a 34% staffed-bed occupancy rate in 2012 before it closed — way lower than the median occupancy of 63%.

“In free, competitive markets, suppliers that attract fewer customers are more likely to fail,” the authors write. “Small low-utilization hospitals struggle and are sometimes obliged to shut down.”

Bacon’s bottom line: Joffe and Fichtner make sense: If Virginia legislators want to keep struggling rural hospitals open, they should target aid to struggling rural hospitals, not to hospitals generally. But I would go a step further. I would argue that the idea of supporting general hospitals, which provide a broad range of medical services, may be an outdated idea. Perhaps rural health care systems should restructure around providing good primary care, supported by free-standing out-patient centers that inexpensively provide non-acute services, while referring patients with more acute conditions to larger, regional hospitals. Large-volume tertiary care centers can provide those services more cost-efficiently and with better outcomes than low-volume rural hospitals can. In exchange for the inconvenience of traveling further, rural patients likely would wind up with better care.