Author Archives: James A. Bacon

Virginia’s Trial of the Decade

Maureen Williams and Jonnie Williams. Photo credit: Daily Progress

Maureen Williams and Jonnie Williams. Photo credit: Daily Progress

by James A. Bacon

Jury selection for the trial of former Governor Bob McDonnell and his wife Maureen begins today. The 43-page federal indictment against the former First Family piles up a mass of detail to present a devastating portrait. Particularly damaging are revelations that the McDonnells intervened behind the scenes to help their friend and patron Jonnie R. Williams Sr., CEO of Star Scientific, in his efforts to establish research relationships with the University of Virginia and Virginia Commonwealth University.

Opinion seems universal, even among those inclined to defend McDonnell, that the First Family’s behavior recounted in the indictments are beyond the pale — not only insufferably “tacky,” as a lawyer friend of mine put it, but downright shameful. However, before we convict the former governor of corruption, let us pause a moment and catch our breath. The indictment represents a cherry picking of the facts most damaging to the McDonnells. Let us also remember that the McDonnells will seek to establish a different narrative. At this point, we don’t know what that narrative will be. But whatever it is, I will hazard a guess that it will reveal a lot of information that has yet to surface about the relationship between the McDonnells on the one hand and Jonnie Williams Sr., CEO of Star Scientific, and his wife Celeste on the other.

The indictment consists of a recitation of facts shorn of context. The feds charge that the events described amount to “a scheme to use Robert McDonnell’s official position as the Governor of Virginia to enrich the defendants and their family members.” They list a series of events and communications in chronological order, creating the strong impression that favors Williams performed for the McDonnells were directly related to favors the McDonnells performed for Williams. That may be an accurate impression. But it also might be a deceptive one. The way in which the information is presented precludes the possibility that anyone was acting out of personal friendship.

Missing from the indictment is any evidence describing the relationship between Mr. and Mrs. McDonnell and Mr. and Mrs. Williams, which would be highly relevant in interpreting the events described by prosecutors. Celeste Williams barely figures in the picture at all. Reading only the indictment and the news reports based upon it creates the impression that Maureen McDonnell and Jonnie Williams were extraordinarily close — almost creepily so. What kind of man takes his friend’s wife shopping in New York? As outside observers, we have to consider the possibility that Maureen McDonnell and Celeste Williams were close, too, that Mrs. Williams was a participant in the shopping expeditions and conceivably that she cajoled her husband into helping the McDonnells financially out of friendship. If that were the case — and I have no idea if it is or not — it would complicate the prosecution’s narrative immeasurably.

From the published record, we have only a few clues by which to piece together a portrait of the two families’ friendship.

“We had a very positive relationship for three or four years,” a somber McDonnell told The Associated Press last August.

McDonnell, who carefully couched his relationship with Williams in the past tense during the AP interview, said the enterprising venture capitalist had been his kind of guy: a self-made man from working-class stock who, like the governor, got his start in the health care services and supplies field. Both are in their late 50s. They discovered they had even both honeymooned in the same spot, Bar Harbor, Maine.

“I admire people who are entrepreneurial, who are finding ways to create opportunities in Virginia and that’s one of the reasons that when I first met him back in ’09 (or) ’10 that we established a friendship,” McDonnell said. “We both had big families. He had four kids, I had five.

“We had interesting early discussions about the field of health care and about our families,” he said.

The two men met in March 2009 when McDonnell was running for governor and Williams, a major bankroller of a previous Republican candidate, Jerry Kilgore, loaned him his airplane. When McDonnell was elected November 3, according to the indictment, “they had no personal relationship and were merely professional acquaintances at that time.” Continue reading

The Movement Grows

City living -- not just for liberals anymore.

City living — not just for liberals anymore.

Political and philosophical conservatives in the United States are far more likely to live in rural areas or suburbs than in the city  – and that augurs ill for the conservative movement and for America, observes Michael Hendrix, in the inaugural guest blog post in a new blog, “New Urbs.”

Cities are the centers of wealth creation and cultural influence in the modern world. By concentrating disproportionately in small towns and rural homesteads, conservatives isolate themselves from the institutions that dominate the country. “If conservatives feel like they’re on the outside looking in on culture-making now, just wait a decade or so—it’ll get worse,” Hendrix writes. “Both for our culture’s sake and our own, conservatives should learn to stop worrying and love the city.”

If Hendrix’s contribution is any indication, New Urbs is likely to make a lively contribution to the small but growing ranks of conservatives who advocate development of more compact, urbane, fiscally sustainable communities.

The blog is an initiative of The American Conservative. Explains Associate Editor Jonathan Coppage:

This is an emerging discussion on the right, and we’re excited to take a leading role in pushing it forward. Talk of conservative reform can only get so far before it accounts for the actual ways in which people live. Transit, development, zoning codes all shape our culture, and are ripe for conservative engagement. Conservatives have too often neglected cities to their own disadvantage. We aim to fix that.

Keep it coming!

Update: I just came across by a great essay by Matt Lewis (a denizen of Alexandria) explaining why New Urbanism (an urban design movement which bears much in common with Smart Growth) “isn’t just for liberals.” Conservatives, he argues, should embrace it, too.

– JAB

Tim Kaine Versus the Mole People

mole peopleThe Silver Line extending the Washington Metro to Tysons is scheduled to open Saturday, and people are getting excited about the impending event. Mass transit supporters are hailing the momentous achievement, which provides the impetus to transform Virginia’s largest business district into a more balanced, livable and walkable community. Indeed, there is much to celebrate.

But others are lamenting the plundering of Dulles Toll Road commuters to pay for much of the project, especially the soon-to-start second phase to Washington Dulles International Airport and beyond. Critics have ample grounds for their bitterness. The Silver Line constitutes a massive wealth-redistribution scheme. Riders and property owners enjoying windfalls in property values will pay for only a fraction of the cost of building and operating the system.

Some day, someone will write a book about the Silver Line project and the extraordinary political maneuvering it took to make it happen. When he (or she) does, they’ll find a treasure trove of source material in the Library of Virginia. The state library is archiving 1.3 million emails generated by Governor Tim Kaine and members of his administration. The Kaine Email Project is making those emails searchable and accessible online.

Out of the Box, the Library of Virginia blog, is highlighting correspondence regarding selected topics, including the furor over whether to build the Silver Line under ground or above ground where it ran through Tysons. The controversy was covered heavily by the press but the Kaine Email Project gives a closer look at Kaine’s decision-making process. In a quick and superficial perusal, I didn’t find any great surprises here — Kaine was a pretty straightforward guy — but the emails do show whom he communicated with as he worked his way through the controversy.

This email dated Dec. 12, 2006, and addressed to Chief of Staff Bill Leighty, Transportation Secretary Pierce Homer, Communications Director Delacey Skinner and Counselor to the Governor Larry Roberts, provides some color.

Yesterday in our leadership meeting, we talked about the rumor that the [Federal Transit Administration] would send me a letter saying “the choice not to pursue the tunnel was yours alone and we had nothing to do with it.” Last night, Lin Holton gave me a letter circulating in Northern Virginia. The Tysons Tunnel group asked William Coleman — former Secretary of Transportation under Nixon and Ford — to write a letter that seems to suggest that the tunnel or no tunnel decision was not the FTA’s but the Governor’s. This may be the rumored letter — or it may give a hint of what a forthcoming FTA letter would say. I will give the letter to Delacey — she can provide copies to you.

At some point, we will be asked for some statement on the whole thing. Just to have a statement ready if and when we need it — for a press response or for a letter to the Mole People or someone else — I thought I would put into my own words a quick narrative of the process up to this point, trying to be diplomatic and not heedlessly hack anyone off (i.e., Congress people, Fairfax, FTA, etc.)

It’s fascinating to see Kaine grappling with rumors, responding to the circulation of letters by advocacy groups and referring to “Mole People.” Is that what he called the tunnel zealots? Pretty funny.

– JAB

How to Convince Your Mom that Congestion Pricing Is Good

by Michael Brown

Odds are if you show up at a family reunion and try to convince your parents and siblings that congestion pricing is good, you’ll be lonely pretty quickly. People want the freeways to work but they hate paying tolls! If you are reading this, then you’re probably part of the choir. My goal isn’t to convert the converted as much as to provide new arguments and sound bites when talking to others.

So, how do we reach others? Millions must be convinced to put down their pitchforks long enough to test the theory and decide for themselves if congestion pricing is worthwhile. Elected officials are afraid to take a position contrary to polls, and polls are overwhelmingly dominated by uninformed opinions.

Too many citizens “learn” the issues of the day in 30-second television spots. Even those who make an effort to stay well informed are not the best ones to ask.  There are many fine teachers, dentists, and doctors with intelligent opinions but if you ask them about Congestion Pricing, most would focus on a single point – “double taxation.” Because no one listens long enough for a good explanation, politicians conform to polls of the uninformed rather than risk trying to change public opinion.

congestion_pricing1

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This is the fourth part of a four-part series.

Part 1        ◊       Part 2
Part 3   
     ◊       Part 4
=================

Geeks and used car salesmen

Congestion Pricing’s true believers are insiders who spend years exploring how market mechanisms can solve our transportation headaches. Typically, they are “nerdy engineer” types and Ph.D.’s at universities. They come up with great ideas but their main focus is convincing other geeks. Peer-reviewed articles loaded with incomprehensible equations and data may be good stuff and true, but the world will never move out of the congestion morass until the world “gets it” at the lowest-common- denominator level of things that matter to them.

Many geeks know Congestion Pricing is worth billions but they’re poor at delivering the message personally. So they set aside “public awareness budgets” that are embarrassingly tiny relative to the potential payoff. That’s like hiring a used car salesman to deliver the message. That approach may persuade a few but it won’t convince your mom – it won’t even reach your mom. Great ideas need great enlightenment efforts.

congestion_pricing2Evangelists and professional marketers

When the Wright Brothers invented the airplane, they actually had a hard time selling it. Everyone was intrigued, of course, but few understood how it could help them in a way that was worth the price. The airplane seemed like an exciting new toy that could kill you! So the Wrights became evangelists. They met with government officials and anyone else with the means and potential motive to buy, and sold them hard on dozens of potential uses. Now we could scarcely imagine the world without planes.

Think of the Bible. Many find it very difficult to read and hard to get excited about. But some people are very passionate about the bible, and very gifted at translating its meaning to large crowds. Congestion Pricing and Freeway Optimization have been peddled mainly by geeks and insufficient public awareness efforts. Are we really surprised that people are skeptical?

Gifted evangelists are essential but so is “Hollywood.” By that, I mean it takes people who have figured out how to sell stuff to people. We need marketing artists who can place an object in the hands of a big star, then watch that object fly off the shelf in the following month. For ideas worth billions, we should spend millions to attract the top-notch marketers, and give them a budget to craft emotionally persuasive visuals and sound bites. Continue reading

The Happy Map

Just one more happiness post, and I’ll quit for now. This map comes from the study mentioned two posts below, “Unhappy Cities,” by Edward L. Glaeser, Joshua D. Gottlieb, and Oren Ziv, published by the National Bureau of Economic Research. happy_map When viewed as a geographic phenomenon, happiness appears to be associated with the Southeastern and Inter-Mountain states. Glaeser et all examine a variety of economic and demographic variables to explain the differences and find some weak correlations but don’t come up with any compelling conclusions. One variable the authors did rule out was income inequality — it doesn’t explain life satisfaction at all. I wonder if the geographic differences are cultural. Could there be a link between happiness and friendliness? – JAB

More Happiness

In celebration of the widespread happiness in Virginia, I’m posting all the “Happy” videos from around Virginia that I could find. If I’ve missed one, let me know and I’ll add it! – JAB

The RVA Happy video:

The Fredericksburg Happy video:

The Lynchburg Happy video:

The Virginia Beach Happy video:

A Hampton Roads Happy video:

The Bel Air Woodbridge Happy video:

I didn’t realize until compiling this post that Happy videos are an international phenomenon. They are infectiously fun to watch — a great way to waste a work-week morning. Beside videos celebrating happy cities, you can find happy Virginia State University, Virginia Union University, Henrico Doctors’ Hospitals, Meadowbrook High School, NBC-12 News, Virginia Tech Muslim videos and probably a whole lot more.

By the way, Pharrell Williams, composer-performer of Happy, grew up in Virginia Beach. Here is is on CBS Sunday Morning talking about growing up in the color-blind suburbs. You gotta love this guy — you can see why he’s the one who created the Happy song!

(Hat tip to LarryG for sharing the Fredericksburg video.)

Happy!

We bitch and moan a lot on Bacon’s Rebellion about the failings of our fair state, but the Old Dominion must be doing something right. Researchers at the University of British Columbia and Harvard University found that residents of Virginia metropolitan areas are the happiest in the country based on self-reported survey data on subjective well-being gathered by the Centers for Disease Control and Prevention.

Dig this! Richmond-Petersburg ranked No. 1 in happiness of all metros with more than one million people. I can vouch for that. I love my home town and I’m darned happy here. It isn’t perfect — as anyone who reads this blog will discover in short order — but it’s a great place to live.

Number two on the list of large metros — Hampton Roads! How awesome is that?

Number three — Washington, which, of course, includes the Northern Virginia suburbs. The traffic is awful, but everything else must be great!

Now for the pièce de résistance — among smaller metros, Charlottesville ranked highest in reported happiness.

That’s a clean sweep, folks! Who needs “Best States for Business” when you’ve got the happiest citizens?

– JAB

Fully Funded? Not Even Close

stock prices2by James A. Bacon

Earlier this month the Virginia Retirement System (VRS) announced that it had generated a 15.7% return on its investment portfolio over the previous year, bringing its total assets to $66.1 billion. It’s always good news when the pension fund for 600,000 state and local employees and retirees goes up, not down. That’s money that state and local governments won’t have to extract from taxpayers.

But pension-fund investing is a game for the long haul, and Jeff Schapiro raises interesting questions in his column in the Times-Dispatch today. Did a decision after the 2007 stock market crash to shift some assets away from stocks and bonds into “alternative” investments like hedge funds leave more than $6 billion on the table?

Schapiro quotes Ed Burton, a former VRS chairman, who criticized the investment strategy, which had the effect of moving from a portfolio of 70% stocks/30% bonds to a more complex scheme equivalent to 65% stocks/35% bonds. As a consequence, the VRS benefited less from the Obama-era bull market in stocks than it could have. It also paid millions of dollars in higher fees charged by hedge fund managers.

While the VRS had a strong year last year, over the past three years its returns have averaged a more modest 8.6%.

Investment strategy can can be argued back and forth forever without ever resolving anything. Maybe the VRS board made the right decision, maybe it didn’t. But there’s a bigger issue that Virginians need to be thinking about. Markets go up and markets go down. For the past few years, aided by an expansionist Federal Reserve Board policy, markets have gone up. Perhaps stocks and bonds will depart from 300 years of history and never go down again. But a prudent man wouldn’t bet on it.

The VRS assumes that it can generate annualized investment returns of 7% for years to come. That assumption is actually more conservative than the investment returns assumed by many states, so the VRS board deserves credit for that. But the Commonwealth of Virginia’s assertion that the VRS will be “fully funded” by the 2018-2020 biennial budget is exceedingly fragile. For starters, the state’s definition of “fully funded” is 80% or more of what the actuaries say is needed to meet pension obligations, as Erik Johnston, director of government affairs at the Virginia Association of Counties, pointed out Monday at the annual conference of the Virginia Chapter of the American Planning Association.

I wonder if the bank would be happy with 80% of my mortgage payment?

The other question is what happens when the Federal Reserve Board reverses years of monetary stimulus, as it has indicated it will do. Everyone agrees that interest rates will go up. But nobody knows how much. That will depend in part upon the strength of the economy — stronger growth will drive up demand for credit and push interest rates higher.

When interest rates go up, the market value of bonds go down. The 30-year bull market in bonds will come to an end. A bear market in bonds also puts pressure on stock multiples (price-earnings ratios), which move inversely with interest rates. It is hard to see how any money manager can replicate the performance of the past few years. All it takes is a few years of sub-7% returns and the VRS goal of “fulling funding” the pension slips farther and farther into the horizon.

Hey, everything may work out just hunky dory. The VRS may be totally vindicated. But there is considerable risk that it will not. Nobody knows the future but we do know one thing: Each percentage point that the VRS falls short of its ROI goals for a $66 billion portfolio translates into a $660 million obligation for state and local government.

How Planners Can Rescue Virginia from the Fiscal Abyss

This is a copy of a speech that I presented to the Virginia Chapter of the American Planners Association Monday, with extemporaneous amendments and digressions deleted. — JAB

Thank you very much, it’s a pleasure to be here. Urban planning is a fascinating discipline. As my old friend Ed Risse likes to say, urban planning isn’t rocket science – it’s much more complex. Planners synthesize a wide variety of variables that interact in unpredictable, even chaotic, ways. In my estimation, you don’t get nearly enough respect and appreciation for what you do

OK, enough with the flattery. Let’s get down to business.

toastThis is you. You’re toast. Unless you change the way you do things, you and the local governments across Virginia you represent are totally cooked. … Here’s what I’m going to do today. I’m going to tell you why you’re toast. And then I’m going to tell you how to dig your government out of the fiscal abyss, earning you the love and admiration of your fellow citizens.

Why You’re Toast

old_people2Here’s the first reason you’re in trouble — old people. Or, more precisely, retired government old people. Virginia can’t seem to catch up to its pension obligations. The state says the Virginia Retirement System is on schedule to be fully funded by 2018-2020. But the state’s defines 80% funded as “fully funded,” which leaves a lot of wiggle room. The VRS also assumes that it can generate 7%-per-year annual returns on its $66 billion portfolio. For each 1% it falls short of that assumption, state and local government must make up the difference with $660 million. As long as the Federal Reserve Board pursues a near-zero interest rate policy, depressing investment returns everywhere, that will be exceedingly difficult. A lot of very smart people think 5% or 6% returns are more realistic. In all probability, pension obligations will continue to be a long-term burden on localities.

potholesSecond, the infrastructure Ponzi scheme — that’s Chuck Marohn’s coinage, not mine — is catching up with us. For decades, state and local government built roads and infrastructure, typically with federal assistance, proffers or impact fees with no thought to full life-cycle costs. State and local governments have assumed responsibility for maintaining and replacing this infrastructure. Well, the life cycle done cycled, and the bill is coming due. We’re finding that we built more infrastructure than we can afford to maintain at current tax rates, leaving very little for new construction.

accotinkThird, after years of delay, serious storm water regulations are kicking in. Local governments bear responsibility for fixing broken rivers and streams like Accotink Creek, showed here. (Yeah, that’s a creek. It’s having a bad day.) Best guess: These regs will cost Virginia another $15 billion. But no one really knows. And it may just be the tip of the iceberg. I recently talked to Ellen Dunham-Jones, author of “Retrofitting Suburbia,” and she noted that a lot of the storm water infrastructure that developers built in the ‘50s and ‘60s is crumbling. The developers are long gone. Someone’s going to have to fix that, too. Guess who?

property_taxMeanwhile, the largest source of discretionary local tax dollars – real estate property tax revenues – is stagnating. According to the Demand Institute, residential real estate prices in Virginia will increase only 7% through 2018 – the third worst performance of any state in the nation. Don’t count on magically rising property tax revenues to bail you out.

In fact, the tax situation is worse than it looks. Demand for commercial real estate is dismal, too. Consider what’s happening to the retail sector. We’re going from this…

shopping_centerTo this..

amazon_warehouse

Every Amazon.com distribution center represents dozens if not hundreds of chain stores closing. It means more vacant store fronts, more deserted malls, less new retail development. Continue reading

The Top Ten Positive, Sustainable Effects of Congestion Pricing

Congestion pricing on the Capital Beltway Express

Congestion pricing on the Capital Beltway Express

by Michael Brown

This is the third part of a four-part series.
Part 1        ◊       Part 2
Part 3   
     ◊       Part 4

“Free” freeways aren’t as free as they used to be. Adding new capacity costs billions of dollars and mires communities in unaffordable debt. We can’t continue borrowing, taxing and building like we did a generation ago. In Parts I and II of this series, I outlined a  strategy for using tolls to limit access during periods of peak demand in order to avoid the roughly 30% capacity loss caused by overloading a freeway. Not only will this Freeway Optimization strategy help preserve the environment and reduce the fiscal burden on the next generation, it will provide tangible benefits today!  Here are the Top 10 Benefits of Freeway Optimization.

#10. Use more off-peak capacity

Freeways have a lot more capacity than we think. It’s just that much of the time it isn’t being used. If there are incentives to avoid peak travel, some people will shift some of their trips to off-peak periods — in effect utilizing some of that unused capacity.

Utah's FrontRunner

Utah’s FrontRunner

#9. Triple transit ridership

Salt Lake City recently opened FrontRunner, an 80-mile commuter rail line from Ogden to Salt Lake to Provo, that competes directly with Interstate 15. The price for a monthly pass is nearly $200, which, of course, drives off some would-be riders. But how many? In the 1980s Austin, Texas, tested “free fare transit” for over a year. Ridership system-wide nearly doubled. (Hasselt, Belgium, went fare-free in 1996 and by 2006 had increased ridership 13-fold.) Austin discontinued the program in part due to complaints of vagrants and in part to insufficient capacity to handle the volume. Today, smart cards can handle the vagrancy problem. Taking the Austin experiment as a benchmark of what free transit can do, Salt Lake could use revenue from congestion pricing to reduce or eliminate the fare on FrontRunner. Austin doubled ridership in an environment where driving was free and far less congested.  Imagine what could happen to ridership on Salt Lake’s FrontRunner if premium slots on I-15 at 5 pm were sold at fair market value, and proceeds were used to make FrontRunner free or very low cost! Judging from Austin, ridership could at least double if not triple!

#8. Recover lost 30% of capacity

As noted in Part 2, when the system fails, it is like having a V-8 motor that only fires on 5 cylinders — the freeway loses 30% of its capacity. Preventing failure ensures maximum value from your freeway infrastructure.

#7. Reduce spillover to side streets

A common objection to congestion pricing is that motivating drivers to leave the freeway will push them onto parallel arterials, displacing congestion from the freeways to the arterials. Seems logical, but it isn’t true. When freeways go into failure and lose 30% of their throughput, many of those drivers are already seeking other routes. With freeway optimization, the system intentionally hovers at about 5% under maximum throughput in order to avoid losing 30%. The net effect is that arterials could carry less traffic because freeways will carry more.

#6. Bring A Closer to B

When we had Free and Fast, we adopted far-flung lifestyles. There are benefits to sprawling cities but there are also many costs and side-effects. Congestion (Free But Not Fast) sets in , which forces us to shorten our overall driving – a good thing for reducing sprawl. But accepting congestion also means we’re not solving the problem, which is inefficient, frustrating and politically unacceptable. One last shot at Fast And Free requires adding capacity, which is becoming too expensive now and causes more sprawl. But a third way — Fast But Not Free using congestion pricing – can give us reliably high speeds while also discouraging excessive freeway usage.  To some, that may sound like social engineering. In reality it is just free market allocation of a limited resource.

#5. Make freeways more environmentally sustainable

With pricing, you don’t need to widen freeways. Just sell premium slots to those willing to pay. Those unable or unwilling to pay for any given trip will opt instead for transit, try parallel free roads, or travel during off-peak times.  The overall effect is to reduce congestion, dependence on foreign oil and the emission of Greenhouse gases – common ground for conservatives and liberals. Continue reading