Category Archives: Economic development

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

Boomer….Wha?

a-bomb peace signBy Peter Galuszka

Remember the federal deficit that lurked behind the corner? Where did it go?

Al Kamen of The Washington Post asks that question in a column today. He writes:

“Not long ago, the federal deficit was projected to destroy the country, our country’s future and just about everything else. The politicians and the news media regularly fretted about what to do. Budget battles shut down the entire government for a couple of weeks.”

He continues: “So, what happened? The simple answer, of course, is that the deficit is way down and, for now, is no longer a big problem.”

The Congressional Budget Office estimated last week that the deficit for f/y 2014 is $492 billion or 2.8 percent of GDP. That puts us back in the early years of the George W. Bush administration.

Hmm. Kinda of makes you wonder where all this out-of-control spending is coming from that the Tea Party types talk about so much.

It is off the media radar screen. The Post has a graphic showing that the words or mention of the “national debt,” federal debt” or “federal deficit,” reached a high around the first half of 2010. The conservative Washington Times the most at 18; The Post with 13; and the New York Times with 10. Now it’s around three.

This isn’t to say that federal spending doesn’t merit watching. But where is Jim Bacon when you need him?

RAM, Coal and Massive Hypocrisy

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

By Peter Galuszka

Sure it’s a photo op but more power to him.

Gov. Terry McAuliffe is freshly arrived from the cocktail and canape circuit in Europe on a trade mission and is quickly heading out to the rugged and impoverished coal country of Wise County.

There, he, Attorney General Mark Herring and Health and Human Resources Secretary William A. Hazel will participate in a free clinic to help the mountain poor get free health care. The political opportunity is simple: Many of the 1,000 or more who will be attending the Remote Area Medical clinic are exactly the kind of people getting screwed over by the General Assembly’s failure to expand Medicaid to 400,000 low income Virginians.

RAM makes its Wise run every summer and people line up often in the wee morning hours to get a free medical and dental checkup. For many, it’s the only health care they get all year unless it’s an emergency. Another problem: Distances are great in the remote mountains and hospitals can be an hour away.

Mind you, this is Coal Country, the supposedly rich area upon which Barack Obama is waging war and harming local people by not going along with coal executives’ demands on environmental disasters such as mountaintop removal, keeping deep mine safety standards light and avoiding carbon dioxide rules.

The big question, of course,  is why if the land is so rich in fossil fuel, are the people so poor and in need of free medical care? It’s been this way for 150 years. And now, coal’s demise got underway in Southwest Virginia in 1991 when employment peaked at about 11,000. It is now at 4,000 or less. It’s getting worse, not better.

In June 2011, by coincidence, I happened along a RAM free clinic in Pikesville, Ky., not that far from Wise when I was researching my book, “Thunder on the Mountain: Death at Massey and the Dirty Secrets Behind Big Coal.” My photographer Scott Elmquist and I spotted the clinic at a high school. There must have been hundreds of people there –  some of whom told me they had been waiting since 1:30 a.m. It was about 8:30 a.m.

Attending them were 120 medical and dental personnel from the U.S. Public Health Service. They were dressed in U.S. Navy black, grey and blue colored fatigues. The University of Louisville had sent in about 80 dental chairs.

Poverty in Pike County had been running about 27 percent, despite the much-touted riches of coal. Pike is Kentucky’s biggest coal producer.

One man I spoke with said he had a job as a security guard, but he doesn’t qualify for regular Medicaid and can’t afford a commercial plan. In other words, had I interviewed him more recently and had he been a Virginian, he would have been lost through the cracks of Medicaid expansion. Alas, he’s in luck. In 2013, Kentucky opted for a “marketplace” expansion system where federal funds would be used to help lower income buy health plans through private carriers.

Lucky the man isn’t from here. The marketplace plan is exactly the kind that McAuliffe has proposed and exactly the one that stubborn Republicans such as Bill Howell in the General Assembly are throttling. The feds would pick up the bill for expanding Medicaid to 400,000 needy Virginians, at least initially.

Yet another irony. Expanded medical benefits are available just across an invisible border in two states whose coalfield residents somehow never got the great benefits of King Coal.

Does Virginia Want to Be a Wireless Friendly State?

cell_towerStates and regions that want to stay in the vanguard of economic growth need to expand their broadband infrastructure. Mobile data traffic will increase 13-fold between 2012 and 2017 by some estimates. To accommodate that growth, the wireless industry will have to build new cell towers, distributed antenna systems (DAS) and other infrastructure. However, permitting and regulation is a big problem in many states, according to George state Sen. Judson Hill.

Writes Hill in The Hill:

New tower construction and collocations of antennas on existing sites helps local economies. New towers typically cost between $250,000 and $300,000, and collocations run upward from $25,000. Moreover, new 4G wireless broadband networks support local job growth and improve economic vitality. Economists Robert Shapiro and Kevin Hassett found in their recent study that “every 10 percent increase in the adoption of 3G and 4G wireless technologies could add more than 231,000 new jobs to the U.S. economy in less than a year.”

Unfortunately, differing, cumbersome and unnecessarily complex local government permit processes have impeded investment and construction of new wireless facilities infrastructure in many states. Denials or long delays in approving permits for new cell towers or antenna collocations have been the experience for countless wireless infrastructure providers. Public safety communications challenges and lost economic opportunities, including foregone job creation, are regrettable byproducts of these denials and delays.

Georgia law requires local governments to issue timely permits — within 150 days — and ends the practice of imposing excessive processing fees. He concludes: “States should proactively pursue regulatory and tax reforms to remove roadblocks to wireless infrastructure facility construction. Greater economic and public safety benefits will come to states that best position themselves to enhance their 4G wireless broadband network build-out.

Bacon’s bottom line: How does Virginia stand when it comes to cell tower permitting? Hill suggests that Georgia, Missouri and Washington are the only states that have addressed these issues legislatively so far — but maybe Virginia doesn’t have a problem that needs fixing. Or maybe it does. Does anyone know?

– JAB

More Defense Cuts Plague Virginia

Special deliveryBy Peter Galuszka

Virginia continues to see painful military spending cuts in the aftermath of the years’- long U.S. intervention in Iraq and Afghanistan.

Among the latest news is that the Army may cut 3,600 jobs at Ft. Lee, ironically the site of a recent and large expansion, by 2020. That could result in a decline of 9,000 residents near Petersburg which is close to  the base.

Plus, the Air Force plans on cutting 742 positions at its Air Combat Command headquarters at Langley Air Force Base in Hampton although some of the positions are already vacant and won’t be filled.

These are just some of the changes that are affecting Virginia, which is the No. 2 defense industry state after California. Many of the cuts involve active duty personnel whose vacancies are not being filled or are being asked to take early retirement.

Defense industry jobs are likewise taking cuts. A report by the National Association of Manufacturers states that in 2014, California will lose the most military-related jobs (148,400) followed by Virginia (114,900) and then Texas (109,000). Maryland will lose 40,200 jobs, the report says.

Many of the jobs are in heavy manufacturing, such as aerospace and ship building, and search and navigational services, but general business and other services will also be affected.

The news is especially hard on Petersburg and nearby Ft. Lee which just a few years ago enjoyed a major boost after a Base and Realignment and Closure round consolidated many multi-service logistics and supply functions. The influx of thousands of soldiers, contractors and their families boosted the city and surrounding areas.

Hampton, the location of Langley Air Force Base, doesn’t seem to be in store for such heavy impacts since the cuts involve some jobs already being lost to attrition. Other bases and areas hurt by the Air Force cuts include Washington, D.C.; San Antonio; Texas; Dayton, Ohio; and Belleville, Illinois.

Newport News Shipbuilding, now owned by Huntington Ingalls Industries, could lose a deal to build one submarine and might delay another to build as Ford class nuclear attack carrier, if automatic defense budget cuts return in 2016. Another potential hit: refueling the nuclear-powered carrier George Washington but may mothball the ship if the budget cuts kick in. About 24,000 people work at Newport News Shipbuilding, making it the largest private employer in the state.

Besides the Washington area, Hampton Roads is greatly dependent upon defense spending. Some 47 percent of the regional economy depends on it. Anticipating more defense cuts, former Gov. Robert F. McDonnell formed a commission to come up with ideas before he left office this year. One of them is to be pro-active and recommend cuts of its liking before the federal government acts.

One of its recommendations cuts both ways on environmental issues. It recommends against offshore oil and gas drilling in watery areas where the military trains, thus making them available over the long term. It likewise recommends against wind turbines in the same areas.

These are interesting, but very difficult choices.

Virginia’s Jobs-Skills Mismatch

skills_mismatchEvidence is mounting that a reason for slow economic growth and high unemployment — not the main reason but a significant one — is the mismatch between the skills required for the jobs that American companies have to fill and the skills that American workers actually possess.

A recent survey of 87 small and midsize business CEOs conducted by the Robins School of Business at the University of Richmond and the Richmond Council of CEOs found the following: 70% staffing was a significant issue, particularly the finding, recruiting and training of operational and sales talent.

When asked how much their annual revenues might increase if their talent concerns were resolved, more than half of all CEOs (51.7%) indicated they would experience growth of 11% or more, with 17.2% of firms indicating potential revenue growth of more than 20% if they could solve their staffing issues.

The problem is concentrated in two main areas: sales and IT. “The CEOs I work with are very concerned with attracting talent in two areas,” says Scot McRoberts, executive director of the Virginia Council of CEOs. “Many small business CEOs are raising the bar for their sales teams. … In our local IT community, programmers and coders are just not there in sufficient skill and quantity.”

Let’s see…. Businesses want employees with different skill sets. Employees want skills that will get them hired. Virginia has a massive educational/job training establishment — colleges, universities, community colleges, job training programs — that spends billions of dollars a year. Yet, somehow, the system is not functioning properly. Old skills are obsolescing faster than ever as businesses strive to incorporate new technologies, and the education/training system can’t keep up.

Bacon’s bottom line: If those 87 CEOs are representative, thousands of jobs in Central Virginia alone are going begging. Instead of trying to create jobs by building baseball stadiums and sports arenas, perhaps our political and civic leaders should focus on the jobs-skills mismatch. On the other hand, maybe they shouldn’t. Given their track record, maybe they should just stay out of the way.

Regardless, we need a new system to equip Virginians with the skills they need to be employable and that businesses need to be competitive — a system that can keep up with fast-evolving technology. Will we get that system? Don’t count on it. The existing system is ossified in place by funding streams determined more by politics and institutional privilege than by market demand.

– JAB

Should Virginia Beach Subsidize a New Arena?

Image credit: ESG Companies

by James A. Bacon

United States Management (USM), a Virginia Beach development company, wants to build a $200 million, 18,000-seat arena and sports complex adjacent to the city’s convention center, which, it claims, will create jobs, boost the local tourism industry, bolster city property values and bring events to Hampton Roads that enhance the regional quality of life. Backed by $150 million in financing from Chinese interests, the company would spend $200 million of its own money.

All it will take from the City of Virginia Beach is a $52.7 million contribution to infrastructure costs for road improvements, utilities and parking. … Plus $26 million in optional streetscape improvements and additional road improvements…. Plus $7 million yearly in tax revenue generated by the project to pay down USM’s debt.

This project has consumed the attention of Hampton Roads much in the way that the Shockoe Bottom baseball stadium has absorbed Richmond residents. The arena is back in the local news thanks to the release of a consultant report detailing the commitment the city would have to make under the terms of the deal proposed by USM. That commitment, though large, is significantly smaller than called for in a proposal made and rejected earlier in the year, which makes it look good by comparison. Virginia Beach Mayor Will Sessoms is supportive of the project, although some City Council members have expressed concern about the public cost.

If Hampton Roads residents wonder why their region has been such an economic laggard in the current business cycle, the fact that Virginia Beach is debating how much to subsidize a sports arena should tell you all you need to know. Sessoms had shown a penchant for grandiose public projects — extending light rail from Norfolk to the Virginia Beach resort area is another — that require the expenditure of massive public funds for highly speculative benefits. Rather than focusing resources on making Virginia’s largest city more competitive in a technology-intensive knowledge economy, the mayor is doubling down on the city’s past as a tourism destination – a second-tier tourism destination, at that.

It is undoubtedly true that the proposed arena, which could host everything from a pro basketball team to monster truck rallies, would stimulate economic activity. In a 2012 study, economist and former Old Dominion University James V. Koch estimated that an arena would generate $98 million in revenue throughout Hampton Roads, two thirds of it in Virginia Beach itself. (Two critical caveats: Koch’s study assumed that the arena would attract an NBA team that would play regular games there, and it included a multiplier effect as initial spending rippled through the economy.)

As Koch made clear in his study, he drew no conclusions regarding whether the arena should be built or how it should be financed. Nor did he, nor anyone else that I have been able to find, analyze the city’s Return on Investment of public dollars. Nor did he or anyone else conduct a risk analysis of what could go wrong, and what exposure the city would have, if, say, a recession came along and the wonderful assumptions behind the economic forecasts fell short. Risk analysis, as citizens of Southeastern Virginia should have learned from the U.S. 460 fiasco, is critical. Finally, I have seen no analysis of what alternative uses Virginia Beach might have for $53 million to $79 million.

Personally, I can think of many other ways for Virginia Beach to invest sums of that magnitude, although none would be as flashy as a new arena. The city could invest in creating islands of mixed-use, higher-density urbanism that bring in far more taxes, with fewer offsetting spending liabilities, than traditional suburban-style development. The city could invest in “smart cities” technologies that could cut energy expenditures, reduce water consumption and do a better job of managing traffic. The city could invest in integrating online learning into the curriculum of Virginia Beach schools. If city officials were feeling especially adventurous, they could foster the creation of innovation districts that would stimulate sustainable, entrepreneurial-based economic growth. Most of those priorities, however, require a decidedly un-sexy, stick-to-the-basics approach in which government focuses on those things that government can do well while leaving risky development schemes to the private sector. Alas, stick-to-the-basics doesn’t garner headlines or add to the aura of activist mayors.

Local governments in Virginia face chronic fiscal challenges. Virginia Beach doesn’t have a lot of money to waste. City officials need to show discipline in allocating tens of millions in discretionary spending. Once they commit to spending that money, they foreclose alternatives that could offer bigger payoffs at less risk.

McAuliffe Hits Private IT Outsourcing

mcauliffeBy Peter Galuszka

Just a decade ago, privatizing and out-sourcing traditionally government work was all the rage.

Virginia’s Democrats and Republicans alike saw a philosophical advantage in fending off Information Technology, road maintenance and other work to for-profit, private companies who supposedly – if you believed the hype then  –could always do things better, faster and more efficiently than state workers.

The concept of “government” workers always seemed to be negative. Not only would taxpayers have to pay their health and retirement benefits, they might try to join unions and make labor negotiations even more difficult. It didn’t wash with Virginia’s conceit of being an anti-labor, “right-to-work” state that promised to keep workers docile as the state tried to recruit outside firms.

Now, Gov. Terry McAuliffe is turning this concept on its head. He is ordering a review of state contracts, especially on out-sourced IT service work that he says may be inefficient and expensive. “I am concerned that state government is inappropriately dependent on expensive contract labor when traditionally appointed state employees can perform at a higher level at a lower cost.”

Now that’s a major turn-around, even for a Democrat. After all, it was fellow Democrat and former Gov. and now U.S. Senator Mark Warner, currently running for re-election, that worked the get the state to accept a $2.3 billion contract for defense contractor Northrop Grumman to take over and upgrade the state’s antiquated IT system in 2005.

That deal proved disastrous as the contractor’s performance issues brought on bouts of oversight and renegotiation. The state ended up extending its contract with Northrop Grumman by three years.

An underlying problem is that while the contract lasts until 2019, the state must make some decisions if it wants to continue with the outsourcing route or start relying on its own state workers.

Another problem is whether the state identifies independent contractors as such or employees of state organizations. About 1 percent of the state’s workers were misidentified as independents. Apparently, state workers have their Social Security and taxes withheld from paychecks. But are they really independents? Or is it just window dressing to play homage to some fad thought up by fiscal conservatives?

McAuliffe is right to start thinking in these terms. What he’s going to have to face, however, is the conventional wisdom in Virginia that “public” is always bad and “private, for-profit” is always good. For evidence of this hidebound view, just read this blog regularly.

In Praise of an Unsung Hero

John D. Bassett III

John D. Bassett III

by James A. Bacon

Nearly 40 years ago I moved from the big city to a place had I barely heard of, Martinsville, Va., to embark upon my journalism career as a cub reporter for the Martinsville Bulletin. Compared to Washington, D.C., where I had spent most of my time growing up, it seemed a hard-scrabble place. Little did I know, those were the glory days.

Martinsville was reputed to have more millionaires per capita than anywhere else in Virginia. (Those were the days before the rise of Northern Virginia’s high-tech industry sector.) There was poverty, to be sure, but the region had pride. As the headquarters town for three major textile and apparel companies, Martinsville claimed to be the Sweatshirt Capital of the World. In the days before off-shoring, the town dominated the global knitted fabrics sector. Martinsville and nearby communities of Bassett and Stanleytown also comprised one of the largest concentrations of furniture manufacturing in the country. There was a large DuPont plant there as well, and even a high-tech company started by immigrant Julius Hermes, Martin Processing, that manufactured advanced film coatings.

Other than DuPont, all the businesses were locally owned and operated. Martinsville was no branch-plant economy. The town had a strong middle class of middle managers and professionals. And even the poor weren’t destitute. Many workers lived on plots of land in the country, supplementing their factory wages with garden crops and, often, small plots of tobacco. To my recollection, the population was affluent enough to support four country clubs. The local delegate to the General Assembly, A.L. Philpott, was speaker of the House. Martinsville was small but it punched above its weight.

In just a few short decades, however, it all came tumbling down. America embraced globalization and open trade. It was something the nation had to do, and there has been a huge payoff to companies and their employees who could provide the higher value-added services where American was globally competitive. But free trade came at a cost — and the people of Martinsville were among those who paid it. First the DuPont nylon plant closed, for reasons that may or may not have been connected to free trade (I can’t remember). The textile-apparel sector was the next to go. Within a couple of decades after I had left, the entire sector had shut down, shuttering the huge knitting mills, as production moved to Asia. Then the furniture industry met its demise. That process was more protracted, and some of the companies survived. Although most production moved overseas, local companies like Bassett, Stanleytown and Hooker survived as furniture designers, marketers and distributors of Chinese-manufactured goods.

That’s all prelude to the purpose of this post, which is to highlight a new book, “Factory Man,” by Roanoke Times reporter Beth Macy, which received a rave book review in the New York Times. Macy tells the story of John Bassett III, president of Vaughn-Bassett Furniture, who fought the fight to preserve furniture manufacturing in Virginia and North Carolina longer and harder than anyone. As the NY Times recapitulates the story:

[Macy] went looking for mountain families who had spent generations working for the region’s furniture giants, until the whole industry was walloped by cheaper furniture imported from China. She found all that and more in the battling Bassetts, a feudal family of factory owners who controlled a string of these companies and the bank, hospital, school, clinic and housing their workers used.

Questions of how the business can survive weigh heavily on manufacturers’ minds.

The ’80s answer brings JBIII’s attitude into stark contrast with those of his fellow owners. Companies merge; Wall Street takes over; laying off workers and closing plants is seen as smart rather than damaging. And nobody much cares what happens to those workers except for JBIII, who can’t bear thinking of them “in unemployment lines instead of assembly lines.”

After leaving the Martinsville Bulletin, I worked for the Roanoke Times from 1979 to 1984. That was before Macy joined the newspaper. I did not know her, but my hat’s off to her for finding the color and the drama in Bassett’s largely Quixotic quest and for telling a story that truly deserves to be told. John Bassett will never be remembered as one of America’s great innovators, like Steve Jobs, or one of its captains of industry, like Jack Welch. Unlike them, he failed. He could not revitalize American furniture manufacturing; China’s economic advantage of cheap labor was overwhelmingly decisive. But he deserves America’s admiration as a businessman who cared about the people who depended upon him, who chose to follow the hard path rather than the easy one, and who gave it his all.

(Hat tip: Patrick Zilliacus)

The First to Join the Luddite Parade

DMV headquarters -- just doing its job... of snuffing out innovation.

DMV headquarters — just doing its job… of snuffing out innovation.

by James A. Bacon

Upstart transportation companies Uber and Lyft, which link drivers and passengers by means of a smart phone, have run into resistance from taxicab companies and municipal regulators around the country. But Virginia is the first state to crack down on the two companies, contends Ken Cuccinelli, former attorney general, in a Sunday op-ed in the Richmond Times-Dispatch. That fact should give pause, he suggests, to anyone who fantasizes about Virginia staying in the vanguard of technological progress.

“For all the talk in my home state about being an innovative and inviting place to do business, when the rubber meets the road — literally in this case — it doesn’t always play out that way,” Cuccinelli writes. “Virginia holds the dubious distinction of being the first entire state to join the Luddite parade.”

Remarkably, while the Virginia code permits automobile ride-sharing it does so only for “those which do not involve transporting passengers for profit.” Earlier this month the Department of Motor Vehicles issued cease-and-desist letters against Uber and Lyft to halt their “illegal” operations until state law is modified and urged them to participate in a study group that will issue a report before the 2015 General Assembly session. The two companies assert that they are operating legally and have refused to shut down their Virginia operations.

Anyone who wonders why Virginia has tumbled from a No. 1 rating in CNBC’s Best State to do Business rankings to No. 8 need look no further for an example why. The state code literally discriminates against for-profit enterprises. While DMV deserves a modicum of credit for opening up the issue for study, any recommendations contained in the report are likely to be influenced by participating “stakeholders”… such as the taxicab lobby, the limousine lobby and other transportation providers who feel threatened by the superior technology of the Silicon Valley upstarts.

But there are larger issues at stake than Uber and Lyft. Cuccinelli makes some valuable points:

Starting with Virginia, governments need to change how they react to new and innovative (even disruptive) businesses that don’t fit neatly within traditional regulatory structures. Their first reaction must be to question the relevancy of their regulatory structure rather than immediately attempt to crush the new entrant. …

We need our governments and regulatory systems to accommodate innovation and new providers, not crush them — which is the current knee-jerk reaction of many governments and regulators. …

If Virginians want to be able to use Uber or Lyft to get a ride within 10 minutes instead of calling a taxi and hoping one arrives in an hour, then we need a government that doesn’t put the taxi owners in charge of regulating Uber.

Governments need to rethink their regulatory models, Cuccinelli writes.

Otherwise the rest of us aren’t just going to be denied more convenient and cost-effective transportation, we will be denied an infinite number of other goods and services in the future as well, because other companies that would make our lives better for less money will never come into being.

On this point, Cuccinelli is absolutely right. I have written repeatedly about the coming transportation revolution, of which Uber and Lyft are only a small part, that could bring extraordinary benefits to Virginia (See “Virginia Transportation in the Slow Lane.”) We can lead this revolution by creating the conditions for it to take place here first, or we can cling to old ways and fight the inevitable. The banking banking deregulation of the 1980s is a useful point of comparison. North Carolina was faster out of the gate to deregulate its banks, with the consequence that its banking industry consolidated more rapidly than Virginia’s. North Carolina became a national banking center surpassed only by New York, and Virginia’s major banks were all swallowed up. The Old Dominion suffered a dramatic loss to its business leadership.

Virginia missed a once-a-generation opportunity then. Let’s not miss the next one.