Author Archives: James A. Bacon

Nerdistans in Trouble

nerdistan

How badly are suburban office parks getting clobbered in the current real estate environment? Take a look at the Westfields Corporate Center near Washington Dulles International Airport. Two buildings known as Washington Technology Park I and II were appraised at $187.5 million at the peak of the 2000s-era real estate boom. They were just reappraised for $61.1 million — a 68% reduction, according to the Washington Post.

How could that happen? WaPo reporter Jonathan O’Connell provides the background: First, the buildings lost key tenants as the slowdown in defense spending gutted Northern Virginia’s defense-contracting sector. Defense giant Northrup Grumman paid $4.7 million to get out of the lease. Government consulting firm CSC cut back its space from 180,000 square feet to 20,000. Meanwhile, the office vacancy rate climbed throughout Northern Virginia, driving down lease rates generally. Then, on top of that, writes O’Connell:

Buildings far from public transit and walkable amenities like restaurants began to suffer in particular, as young workers flocked to more urban, transit-accessible neighborhoods. So far this year, 92 percent of all office leases of 20,000 square feet or more are within half a mile of an existing or planned Metro station, according to the services firm JLL.

A decade ago, urban geographer Richard Florida famously termed the sterile and isolated office campuses as “nerdistans,” predicting that they would have little appeal to the rising generation of the so-called “creative class.” It has taken a while, but Florida’s insight has become the new conventional wisdom.

The two Washington Technology Park buildings have other problems as well. The owner, Corporate Office Properties Trust (COPT) based in Columbia, Md., has been unable to keep up payments on the $150 million in debt it took on to acquire the buildings. Unable to renegotiate terms, the company stopped making payments. The debt has been transferred to a firm that manages distressed loans. COPT has blamed the drop in market value in part on the property’s fractured ownership.

Bacon’s bottom line: The Washington Technology Park buildings may be an extreme case, but they are indicative of systemic problems in the Northern Virginia real estate market — and suburban real estate markets generally.  In a down market, some properties suffer worse than others. There’s nothing wrong with the buildings. The problem is location. The worst off are office parks on the metropolitan fringe offering none of the community amenities — walkable urbanism, access to mass transit — that workers and employers are increasingly looking for.

Residential development continues in outlying suburban counties because the population continues to grow and urban cores can’t infill fast enough to handle the surge in demand. Not so with commercial development. Businesses are moving to more space-efficient work patterns and they need less space per employee than they once did. That problem is compounded in Northern Virginia, where the market over-built commercial space in anticipation that the 2000s economic boom would continue forever. With the shift in consumer preference to walkable urbanism, car-dependent Nerdistans are the big losers. We’re accustomed to the specter of ghost malls. Don’t be surprised if we soon start seeing ghost office parks.

– JAB

Dead End for Virginia’s Higher Ed Tuition Model

Peter Blake... an establishment perspective but a thoughtful one.

SCHEV chief Peter Blake: an establishment perspective but a thoughtful one.

by James A. Bacon

The tuition model of public Virginia colleges and universities is evolving. In the old model the state made college attendance more affordable to everyone more or less equally by providing financial support to each public institution. In the new model, institutions make attendance affordable for lower-income Virginians by raising tuition and then offsetting it with financial aid.

In the 1990s, the General Assembly set a goal of covering two-thirds the cost of providing an undergraduate, in-state education, and consistently managed to hit the target, Peter Blake, executive director of the State Council for Higher Education in Virginia (SCHEV), told me last week. As recently as the 2001-2002 school year during the Gilmore administration, the state share rose as high as 77%.  Since then, that percentage has steadily eroded. This year state support covers only 47%.

Tightening state support for higher ed may be understandable, given the relentless spending pressures the General Assembly faces on all fronts. But there are consequences. Colleges and universities offset the loss of state revenue by raising tuition and fees. Then, because lower-income students find the higher charges unaffordable, university boards raise tuition again to set aside funds for financial aid. Middle-income students lose because they wind up paying more. Even lower-income students lose in the bargain because the financial aid lags the tuition.

The University of Virginia and the College of William & Mary can get away with increasing tuition aggressively: Demand for admittance is so high that people are willing to pay. But less prestigious institutions run into the harsh realities of the marketplace. They can’t raise tuition without losing students and their overhead is resistant to cost cutting. The finances of many institutions is precarious.

“I worry about a financial aid model that relies upon individual institutions,” said Blake. Some institutions will be able to provide aid, others won’t. The results, he said, will be “uneven.”

What’s to be done? It’s easy to say we should increase state support. But higher ed competes with K-12, Medicaid, transportation, prisons, mental health, pensions and other priorities. Every category of spending faces its unique challenges that warrant more state spending. And taxpayers, battered by stagnant incomes, aren’t especially receptive to higher taxes.

In theory another option is to give colleges more independence from state oversight and regulation. That was a deal that UVa, W&M and Virginia Tech struck in exchange for reduced state support several years ago. Freedom from state regulation, it was thought, would give them more flexibility by shortening the decision-making loop.

But Blake doesn’t think that there’s much more to gain from deregulation. “Virginia’s system is so decentralized,” he said. “How much regulatory relief can there be?” Control from Richmond is minimal, he said. Each university is self-governing; it has its own board of visitors. A primary function of SCHEV, he could have added, is to avoid unnecessary duplication and redundancy within the state higher-ed system. As the main instrument of state control, SCHEV acts to restrain spending and costs, not to increase them.

How about administrative bloat? Blake said there are good reasons that administrative costs have increased — usually in response to some perceived societal need such as economic development, community engagement or racial and gender equity. He sees no easy cuts to be made.

Toward the close of our conversation, Blake made an unexpected observation. If judged by growth in enrollment, he said, the most successful institution in Virginia is Liberty University, the institution founded by deceased televangelist Jerry Falwell, Not only is its Lynchburg campus growing, its online learning program is exploding. Liberty, which caters to evangelical Christians, delivers educational services not only to Americans but thousands of students overseas. It is the largest university in Virginia.

The quality of an online Liberty University learning experience probably isn’t the same as that of UVa seminar with a professor interacting with 15 students in the same classroom. But, then, it’s probably a whole lot cheaper. I would conjecture that Liberty, an institution not long-lived enough to develop hoary traditions and an entrenched academic culture has found it easier to adapt to the new technology. One reason college tuition is increasing so rapidly nationally is what’s not happening in higher ed rather than what is. Colleges are not making the productivity gains we have seen in nearly every other sector of the economy. Traditional universities have powerful constituencies — often referred to as “stakeholders” — whose interests must be placated.

If traditional colleges can’t find some solution to their rising costs and rising tuition, they’re in big trouble. Liberty University or institutions like it will eat their lunch.

Rising College Costs Hit the Poor the Hardest

by James A. Bacon

In 2009 President Barack Obama set a goal for the United States to have the highest proportion of college graduates in the world. To reach that goal, more than 65% of individuals between 25 and 34 need to possess a college degree. Things aren’t working out well.

Conclude the authors of a new report, “The Effects of Rising Student Costs in Higher Education,” by Ithaka S+R, a not-for-profit consulting and research service:

Declining state appropriations and increasing reliance on tuition revenue have substantially increased the cost of public education to Virginia students, and the trend has accelerated since the Great Recession that began in 2007. Rising costs have deterred students from remaining in college and completing their degrees, and the lowest-income students have been hit the hardest.

Drawing upon an exceptional richness of data in Virginia, the authors of the Ithaka report used the Old Dominion to illustrate trends that are national in scope. Like Virginia, other states have cut state support for higher education, and colleges and universities have increased tuition and fees aggressively to make up the difference. While higher ed institutions also have bolstered financial aid to lower-income students, that aid has not kept pace with the increase in tuition and fees. The inflation-adjusted net cost — defined as the difference between a student’s estimated cost of attendance and total amount of gift aid — has risen steadily.

net_costs

Source: “The Effects of Rising Student Costs in Higher Education”

Between 1997 and 2007, net costs for the poorest quintile of Virginia students actually fell, while it rose for middle-class and affluent quintiles. But the trend has reversed in the past five years, with net costs increasing more rapidly for the poor. (While the report does not emphasize this, the net cost for lower-income students is less than two-thirds that of the most affluent students, and their net costs have risen less rapidly over the entire 15-year period.)

institutional_groupings

Source: “The Effects of Rising Student Costs in Higher Education”

The Ithaka report distinguishes between what it terms “Lower Dependence on the State” (LDS) institutions and “Higher Dependence on the State” (HDL) institutions. (The institutions deemed less dependent include The University of Virginia, College of William & Mary, George Mason University, Virginia Military Institute, Virginia Military Institute, Virginia Commonwealth University, James Madison University and Virginia Tech.) LDS institutions have more flexibility in their tuition strategies and have been more successful in recruiting out-of-state students willing to pay the full freight. HDS institutions are dominated by in-state students and have fewer resources to provide financial aid. Those institutions find the current environment especially challenging:

Tuition charges may be reaching their market limit at many of these institutions, and further increases could both adversely impact institutional finances and endanger the goals of ensuring quality and broad access for students across the state. HDS institutions, in particular, appear to have reached — or come close to — this limit, as they were unable to increase tuition charges enough to offset the most recent funding cuts and have thereby seen declines in total revenue per student. …

These financial strains may force institutions to choose between sacrificing either access or quality (or some combination of both), particularly for low- and middle-income students.

If the public goal is to educate and graduate as many students as possible from four year students and to reduce gaps between socioeconomic groups, concludes Ithaka, something has to change. Ithaka recommends increasing state support for higher education and targeting those funds to reduce net costs for lower-income students. Also, recognizing the limited ability of state legislatures to increase funding, the authors also urge colleges and universities to “re-engineer their systems to become significantly more efficient … which means that they have to find ways to adjust their own underlying costs.”

Bacon’s bottom line: The Ithaka study has many useful things to say, but I question the underlying premise — that it is feasible for 65% of future generations of Americans to graduate from four-year institutions of higher learning. I would advance the proposition, for purposes of stimulating discussion, that (a) the goal is unachievable given the current state of K-12 education in America today, and (b) it does a dis-service to lower-income students who lose income by attending college instead of working, rack up significant student debt and never end up acquiring the credential — a Bachelor’s Degree — that will improve their opportunities in the job market.

The fact is, Virginia high schools are graduating thousands of students who are ill-prepared for college. Poor students drop out at a disproportionate rates not only because finances are a burden, but because they often find the course work to be beyond their capabilities. Expanding college enrollment without addressing the disparities in education at the K-12 (or even the pre-K) level is setting up poor students for failure and a lifetime of indebtedness. Under the guise of doing good, this policy does great harm.

A Plan to Build the Best Educated Workforce by 2030

A multi ethnic group of graduates in graduation gownsby James A. Bacon

Virginia has one of the better educated workforces among the 50 states. The Old Dominion ranked 4th nationally in 2009 by the percentage of population 25 years or older with an advanced degree, and 6th nationally for the percentage with a Bachelor’s degree. Those statistics reflect the fact that the Northern Virginia suburbs of Washington, D.C., have among the highest levels of educational attainment anywhere in the country. Go outside of Northern Virginia, and it’s a different picture. Ranked by the percentage of workers who have graduated from high school, Virginia tumbled to 30th.

What would it take to set the standard for the United States — to build the best educated workforce in the entire country?

The State Council for Higher Education in Virginia (SCHEV) has been asking that question. Indeed SCHEV has developed a statewide strategic plan with four broad goals to achieve that objective by 2030. This plan has no money behind it at present but it provides a road map for how to become No. 1 in educational attainment should the political and cultural will exist to get there.

Virginia’s public universities will develop their own six-year plans that align with the SCHEV plan, says Peter Blake, SCHEV’s executive director, but they can’t get there by themselves.  At some point, he says, the General Assembly will have to increase its public support to make it a reality. Says he: “It’s the commonwealth’s plan.”

The statewide strategic plan has four broad goals:

Provide affordable access for all. Strategies include expanding outreach to traditionally underserved populations; improving readiness of all students; cultivating affordable post-secondary pathways; and align state appropriation financial aid and tuition and fees so students have access regardless of their ability to pay.

Optimize student success. The plan calls for strengthening curricular options to ensure graduates have competencies necessary for employment and civic engagement; helping students to complete their degrees; and engaging adults and veterans in certificate and degree-completion programs and lifelong learning.

Drive change through innovation and investment. Blake describes these goals as the “creative disruption” part of the plan, in which colleges and universities rigorously evaluate what they’re doing on an ongoing basis. Strategies include cultivating innovations that enrich quality, promote collaboration and improve efficiency; fostering faculty excellence, scholarship and diversity; and enhancing higher ed leadership, governance and accountability.

Advancing economic and cultural prosperity. Strategies include building a future-ready workforce in all regions of the state; catalyzing entrepreneurship and business incubation; promoting research and development; and expanding public service to the community.

The framework (goals and strategies) is in place, says Blake. The next step is to adopt metrics by which to measure progress toward those goals. Draft metrics include the following targets:

  • 1.5 million total undergraduate awards
  • Closing the graduation gap between under-represented populations (URPs) and other populations
  • Address the financial needs of 50% of low- and middle-income students
  • 80% of graduates earn sustainable wages within three years of graduation
  • Double R&D expenditures to $2.84 million

Those are the biggies, says Blake, although SCHEV proposes 12 more “related indicators” such as persistence (the percentage of enrollees who graduate within six years), default rates on student loans, state funding, and completions of high-demand degrees.

UVa’s Silent Crisis

UVa_revenue

Note: Numbers not adjusted for inflation.

by James A. Bacon

While the University of Virginia positions itself in the academic marketplace as an elite Southern Ivy akin to Duke University with the full support of faculty, administrators and the Board of Visitors, students aren’t terribly happy about the rising tuition and fees. The university’s “Affordable Excellence” is long on excellence and short on affordability. Protestors with the student group UVa Students United expressed their displeasure by blocking the doors of the room where the BoV was holding a meeting yesterday, as reported by the Daily Progress today.

Against that backdrop, permit me to present some data to put the tuition hikes into perspective. UVa administrators, like their university brethren across the state, like to blame cuts in state support for skyrocketing tuition and fees. But take a gander at the chart above, with data taken from UVa’s annual President’s Reports (specifics shown below). State appropriations between 2006 and 2014, as seen in the green line, have been stable in absolute terms. The red line shows the steady march of revenue from tuition and fees.

revenue_table2

Source: UVa Presidential Reports. Note: These numbers do not count hospital and health system revenues.

What about the blue line? That tracks what administrators call “sponsored programs,” also known before 2010 as “grants & contracts.” After rising steadily through 2011, this category of revenue declined markedly in the past three years — by 19%.

Is there a link between falling grants & contracts and rising tuition? I’d never considered that question before. But a comment to a previous blog post by a certain “ZS” is worth pondering.

I was recently invited to put in for a senior position at UVA and as part of my application research I found that much of their recent financial problems had to do with decreases in grant and contract revenue. Basically, in the past three years UVA’s grant and contract funding is down almost $80M/year (about 4% of operating revenue) and hasn’t been this low in real terms since the mid 1990’s . This loss of revenue equates to roughly $4k/student and looks like it’s being made up through tuition and hospital fee hikes. While some will point to sequestration as a cause, the numbers and the numbers of UVA’s peers in higher education don’t bear this out.

The problems look to be internal and most likely is a lack of leadership accountability. Submitting proposals for grants and contracts is tedious work and not something most people like doing, but it’s important for helping to offset operating costs. If leadership (President and COO) aren’t holding department heads accountable, then it’s very likely that proposals aren’t being done or are being done in a poor, going-through-the-motions manner that doesn’t result in an award (UVA’s award percentage numbers do bear this out).

BTW, state appropriations are less than 5% of UVA’s revenue. Focusing on that portion of UVA’s financials misses where the management issues are in the University. The major tuition hikes aren’t happening because of loss of State appropriations or even from operating cost increases year to year. These are simply distractions to the real issues internally.

This decline in sponsored revenues is consistent with the tumble in UVa’s reported R&D expenditures. According to National Science Foundation data, R&D expenditures fell from $398 million in 2011 to $386 million in 2013, the most recent data available. UVa’s national R&D ranking declined from 54th place to 59th. (However, it must be said that the 2011 numbers represented a huge leap from the previous year, 2010, when R&D expenditures were only $276 million.) By contrast, Virginia Tech increased its R&D expenditures from $450 million to $496 million between 2011 and 2013.

It is noteworthy that UVa President Teresa Sullivan assumed office on August 2, 2010. A surface analysis would suggest that the decline in sponsored-program revenue and R&D funding occurred on her watch. I have seen no evidence in the media coverage that the Board of Visitors has focused on this issue, much less the relationship between declining sponsored revenues and rising tuition & fees. Perhaps it’s time it did.

Measuring the Impact of Complete Streets

complete_streets

“Complete Street” projects that make streets more hospitable to pedestrians, bicycles and mass transit have a multitude of benefits, concludes Smart Growth America in a new report, “Safer Streets, Stronger Economies.” In a study of 37 projects, the authors found that complete streets tend to result in higher property values, fewer traffic accidents and injuries and more walking, biking and transit usage.

Previous studies of complete streets tended to focus on the health benefits associated with encouraging people to walk and bike more. People who live in walkable neighborhoods get 35 to 45 more minutes of moderate physical exercise each week, reducing their incidents of obesity. Youths who walk or bike to school tend to focus more and perform better in classrooms. The Smart Growth America report focused more on the economics of Complete Streets. Among the findings:

  • Fewer collisions. About 70% of projects studied experienced a reduction in collisions, and more than half a reduction in injuries. That translated into $18.1 million in lower collision costs in a single year for the 37 cases studied. “If a Complete Streets approach was used strategically … the savings over time could run into the hundreds of millions or billions of dollars.”
  • More walking, less driving. Among projects that tracked pedestrian and biking activity, 12 of 13 projects showed an increase in walking and 22 04 23 showed an increase in cycling. Among those that tracked driving, 19 of 33 projects had fewer cars than before, 13 had more, and one did not change.
  • Positive impact on local economy. Although results were mixed, the redesigned streets tended to report an increase in the number of businesses and the number of people employed. Of the ten projects that reported before-and-after data for property values, eight reported an increase in property values while two reported no change. In two-thirds of the studies for which comparable data was available, property values outpaced that of the city as a whole. In one project, Dubuque, Iowa, property values increased 111%.
  • Lower construction costs. The construction cost of upgrading streets to “Complete Streets” costs less per mile than average arterial cost per lane mile.

Not all Complete Streets are created equal, however. As with roads and cars, streets that add to pedestrian, bicycle and transit networks create more value than stand-alone projects. States the study: “The real value of a transportation system is in creasing an interconnected network, whether designed for people in cars, on transit, walking or bicycling. Building facilities without connecting them reduces their utility.”

The study did not calculate the Return on Investment of Complete Streets versus conventional road-building projects. Nevertheless, it concluded: “For transportation professionals the clear implication is that Complete Streets may be one of the best transportation investments they can make. These projects should be allowed to compete and be evaluated against other projects on the bsis of their low costs and the benefits they provide.

– JAB

Let UVa Be UVa

uvaThe University of Virginia is preparing to take another step in its incremental evolution toward a private-university business model. The Board of Visitors is scheduled to vote this week on a proposal to increase undergraduate tuition by 3.6% — and at the graduate-level programs at the Batten School of Leadership and Public Policy by a whopping 39% for in-state students.

The undergraduate tuition increase maintains the relentless increase of past years. While 3.6% seems modest in absolute terms, it occurs against a backdrop of negligible inflation. According to the Bureau of Labor Statistics, consumer-price inflation for the 12 months ending February was zero… as in 0.0%. Nothing new here — this is Business As Usual. Despite negative PR regarding campus rapes and race relations, UVa continues to exercise its pricing power as an elite institution. It can increase tuition, so it will.

The main constraint is not market demand but political. Administrators are pushing as fast as they can without sparking a legislative backlash. Politically, the tender spot is the cost of an undergraduate education. What Virginians value is the ability, if they can meet the stringent admission requirements, to get a top-flight undergraduate education (and/or debauched party experience in the fraternity scene) at a price that is affordable to the middle-class.

Graduate programs are a different matter. Voters don’t get as upset if UVa’s super-elite business and law schools charge more. Batten School administrators, reports the Daily Progress, are moving toward a “high tuition/high financial aid” pricing model similar to programs at Georgetown University, Duke University and the University of Michigan. Expect to see more of the same in the university’s other prestigious graduate schools.

(Update: Lo and behold, a follow-up Daily Progress article notes that the Darden School of Business is jacking up tuition by 5.9%, while the School of Law tuition will rise 4%.)

Bacon’s bottom line: Deep down inside, UVa wants to be an elite Southern Ivy like Duke. I say, let ‘em be what they want to be. Let ‘em admit whom they want and charge what they want. Take the $133 million in state support and use it to build up Virginia’s non-elite institutions.

– JAB

What the SGP Scores Reveal… and Don’t

by James A. Bacon

John Butcher, writing on Cranky’s Blog, has been on a tear recently as he’s plowed through the reams of “Student Growth Percentile” (SGP) data that the Virginia Department of Education has released recently under the prodding of the federal government.

The problems with using raw Standards of Learning (SOL) data to rate teachers, principals, schools and school divisions are well known. Roughly 60% of the variability in SOL scores between schools reflects the socio-economic status of the student body. It is patently unreasonable to compare the educational efficacy of a school teaching poor, inner-city kids with a school teaching affluent suburbanites on SOL scores alone. But the SGP gets around that problem by calculating the improvement in scores over time. Improvement is correlated with the quality of teaching and administration, not socioeconomic status.

In one recent post, Cranky… er, I mean John… demonstrated that there is almost no correlation between SGP and the divisional expenditure of money. The correlation coefficient between divisional expenditure per student and average SGP is less than 1% — meaning that less than 1% of the variability between school divisions can be explained by how much money they spend.

Graph credit: Cranky's Blog

Graph credit: Cranky’s Blog

For details, read the full post here.

John then took VDOE to task for suppressing the identity of individual teachers. The data anonymizes the data, identifying teachers only by a five-digit number. Delving into the City of Richmond data, John shows the wide variability in the ability of teachers to teach.

teacher_variability

The chart above shows a representative sampling of teacher SGPs. John homes in on Teacher 74415, seen in the purple line above:

The principal who allowed 25 kids (we have SGPs for 24 of the 25) to be subjected to this educational malpractice in 2014 should have been fired.  Yet VDOE deliberately makes it impossible for Richmond’s parents to know whether this situation has been corrected or whether, as is almost certain, another batch of kids is being similarly afflicted with this awful teacher.

Read the full post here.

Lastly, John makes an intriguing suggestion — using the SGP data to rate the quality of teachers from Virginia’s schools of education.

Just think, VDOE now can measure how well each college’s graduates perform as fledgling teachers and how quickly they improve (or not) in the job. In this time of increasing college costs, those data would be important for anyone considering a career in education. And the data should help our school divisions make hiring decisions.

In addition, VDOE could assess the effectiveness of the teacher training at VCU, which is spending $90,000 a year of your and my tax money to hire Richmond’s failed Superintendent as an Associate Professor in “Educational Leadership.” Wouldn’t it be interesting to see whether that kind of “leadership” can produce capable teachers (albeit it produced an educational disaster in Richmond).

Go, Cranky, go!

An Inexpensive Experiment

Henrico industrial property anyone?

Henrico industrial property anyone?

by James A. Bacon

Henrico County, my home county, is conducting an inexpensive public policy experiment. If it pans out, the county could improve its competitive posture as a manufacturing location. If it doesn’t, the county hasn’t lost much and can always revert to the previous status quo.

County Manager John A. Vithoulkas has included a 70% cut to the county’s machine & tools tax in next year’s annual budget from $1 per $100 in value to $0.30, a measure that will cost the county an estimated $1.5 million a year in revenue. The cut appears poised to pass, reports Ted Strong with the Richmond Times-Dispatch. It received no opposition in last week’s legislative budget hearings.

“In the long term, this should lead to more manufacturing jobs, which will add more revenue to the county’s coffers,” Vithoulkas said. “We are competing for jobs in the world market now. And we aim to not just compete, but to win.”

The move will help the county capitalize on increased activity in the manufacturing sector, especially “on-shoring” or the repatriation of manufacturing jobs to the United States from abroad, said Gary McLaren, executive director of the Henrico County Economic Development Authority. “We’re serious about attracting manufacturing jobs to Henrico County, and I think this is proof of that.”

Brett Vassey, president of the Virginia Manufacturers Association, described the tax as one of the biggest impediments to manufacturing expansion in Virginia. The tax discourages companies from spending on new equipment that will make them more competitive. “Capital is like water. It flows to the lowest point,” he said.

I’m not totally convinced that the tax cut will make a difference, and it will be hard to determine if is a decisive factor even if Henrico does attract new manufacturing investment. But I think it’s worth a try. On-shoring is a major trend, and Virginia localities should try to exploit it. As labor costs rise in China, many companies are thinking about pulling some of their manufacturing operations back to the U.S. The trend is especially strong in energy-intensive industries that can take advantage of super-low natural gas prices.

But I have two questions. First, will the surging value of the U.S. dollar hurt Virginia (and the rest of the nation) as a manufacturing platform? The economic commentary is almost unanimous that manufacturing will be one one of the hardest-hit sectors. As long as Europe and Japan persist in competitive devaluations of their currencies as a tool to stimulate their economies through their own versions of Quantitative Easing, U.S. manufacturing will suffer.

Second, will Virginia be in a position to exploit natural gas prices? Virginia produces very little of its own natural gas; it relies upon pipelines to bring in gas from the Gulf Coast or (in the future) the Marcellus Shale gas-producing areas of the country. Virginia is bumping up against the ceiling of its gas capacity.

During a February cold snap, Virginia Natural Gas, the AGL Resources subsidiary that distributes gas to the Hampton Roads area, was hard pressed to keep the gas flowing. “Every valve was open,” Ken Yagelski, managing director of gas supply, told me in a recent interview. “We were utilizing all the capacity resources we had to serve our customers.” The company curtailed service to all 108 of its customers who had contracted to have their gas supply interrupted in exchange for a discount in rates. Those customers were prepared for the interruption, so no harm was done, but Yagelski says the incident could be a prelude to the future.

Demand for natural gas in in VNG’s service area is growing one or two percent yearly. VNG is looking to the proposed 550-mile Atlantic Coast Pipeline, a venture in which it is a partner, to supply the gas for the next generation of growth. But the routing of that pipeline has proved to be incredibly controversial, and there is no guarantee at this point that it will be built. If it isn’t,  supply curtailments likely will become more frequent and, at some point, VNG would have to stop taking new customers.

VNG serves Hampton Roads, but would-be industrial customers in the Richmond region would be just as concerned about the reliability of gas supplies.

Bacon’s bottom line: Attracting new manufacturing investment through lower machine & tool taxes is no slam-dunk, and it would be unwise to create expectations that it will lead to sudden success. But if the spike in the value of the dollar proves to be temporary and the Atlantic Coast Pipeline does get built, Henrico’s bet should be one well worth taking. At the very least, a broad-based tax cut that benefits incumbent businesses as well as newcomers is vastly preferable to doling out subsidies and tax incentives to bribe one specific company to invest here.

Parole Abolition — Did It Work?

parole_boardby Sarah Scarbrough

What does “worked” mean? What does “success” truly mean? If it means having offenders spend the majority of their sentence behind bars and don’t get released early, then, sure, it worked. If it means seeing crime rates drop, then one could argue it worked. But, there are so many other factors associated – really, so many factors that it is close to impossible to give a definitive answer one way or another. So here goes – my attempt to explain many of the associated factors.

Former Governor George Allen’s plan to abolish parole could be seen as a “success” in that it established truth in sentencing through the requirement that felons served 85% of the time they were sentenced. When looking at the Virginia statistics 12 years after (2008), it was found that those convicted of first-degree murder spent 91 percent of their sentence in prison, with the average sentence being 32 years, rather than 12 years with parole.  The sentence of “life in prison,” now truly means “life in prison.”

Since abolishing parole, the violent crime rate in Virginia fell by 23 percent, the murder rate decreased by 30 percent, and forcible rape decreased by 15 percent. When examining the crimes and statistics before 1995, it was found that previous offenders committed the majority of these serious and violent offenses; therefore if a rapist serves 18 years rather than six years, he will not be able to hang out in parking lots waiting for his next victim.

However, the reason for the decline in the crime rates is debatable and hard to pin down. Many believe it is because of the abolition of parole – Virginia releases fewer people than ever before. The idea is that individuals “age-out” of crime when released now because they spend longer behind bars. However, the relatively new phenomenon of re-entry, programs, and treatment also likely is contributing to the decrease. Historically, upon incarceration, offenders were simply warehoused – they were not provided with an opportunity for programming, thus, breeding better criminals during incarceration. However, with today’s strong focus on providing opportunities, offenders are now being equipped with the tools to be successful upon release. They are being provided with tools that directly assist in overcoming the barriers to entry into the community. Furthermore, according to Dr. John Reitzel, with the Department of Criminal Justice at California State University, San Bernardino, “Both violent and property crime started dropping in Virginia a few years before the state abolished parole. And, we must keep in mind that nationally, crime started dropped in 1993 too.”

The examination of recidivism rates also can provide some insight, however, this too is fairly complex. Currently, Virginia has the second lowest recidivism rate in the nation. However, that rate is calculated if an individual gets released from prison and then goes back to prison – this means they are convicted of a crime and sentenced to more than 12 months. So, if someone reoffends and is found guilty but sentenced to 11 months, they are not seen to have recidivated. I believe this truly presents a problem when truly trying to define success. From working in a jail full time, I can tell you the true recidivism rate in Virginia is much higher than this statistic claims.

There are also problems present with the implementation and practice of the abolition of parole. Currently there are more than 37,000 individuals incarcerated in Virginia, of whom about 3,500 were eligible for parole in 2013 because their crimes and imprisonment occurred before the abolition in 1995. The Citizens United for Rehabilitation of Errants-Virginia, Inc. (Virginia C.U.R.E.) claim that all of these prisoners were sentenced by prosecutors and judges with the assumption that the length of their sentence would be subject to mitigation through the consideration of parole. However, because parole was abolished, the likelihood of receiving it is slim. In 2012, the Parole Board heard 3,156 cases, of which only 116 were granted parole, according to Virginia C.U.R.E. – this is just 3.7 percent of those who were eligible. However, Bill Muse former Chairman of the Parole Board under the McDonnell administration had slightly different views: “The rate during McDonnell administration was about 4%. About 92% of those who were eligible were serving long sentences on extreme cases. The “easy” ones were already released.”

At least 44 percent of the denials were attributed to the “serious nature and circumstances of the crime.” As such, many prisoners were receiving this same response year after year. Moreover, many denials from the Board did not suggest their own comments or guidelines, such as changes in behavior, their motivational levels, development of education, release plans, or employment skills attained while imprisoned.  However, in 2013 legislation was passed and then signed by Governor McDonnell requiring the Parole Board to list specific reasons why an individual was denied so the individual would know what they should or should not be focusing on.

Muse explained: “Every parole case is entirely different and you have to look at them differently. One of the common questions asked is, ‘He got parole and has a similar offense doing the same number of years as my son, so why won’t you let him go?’ But we have to look at them differently – there aren’t two offenses that are exactly the same – one type of murder may occur because of a drug deal gone bad and the other an execution style robbery – even if they have the same sentence, they are still very different. We also have to take into consideration when the crime occurred – a 16- or 17-year-old would be considered differently than someone older because of their age when committed.”

Muse explained how the parole board also examines things the offender was involved with while in prison and if they took advantage of each opportunity they had, such as work, religion, or schooling. Disciplinary issues while incarcerated are also considered – did they cause staff a hard time, did they obey the rules? “If you can’t behave in prison, why would we expect you to behave when you are on the street,” Muse remarked. The Board also looked at factors associated with release – supportive family, housing, under what circumstances will they live (in same neighborhood), will they continue with addiction treatment if needed, among others?  “All of these things are taken into consideration – and more really. All of these factors contribute to why each case is treated individually.

The Board does not personally interview the prisoner or confer with the prisoner’s counselor and only allows one member of the Board to meet with a family member or other representative.  In over 70 percent of other states, however, Board panels carry out inmate interviews. Under the Board procedures currently followed, “some parole eligible inmates are serving longer terms than some non-parole inmates convicted of the same crime and sentenced under the state’s post 1995 sentencing guidelines” Many believe that the Board’s behaviors are inconsistent with the original intention of the General Assembly, through retroactively abolishing parole for prisoners who came in before 1995. Continue reading