Category Archives: Economic development

Here, Piggy Piggy Piggy!

pork_barrel

Woo hoo! GO Virginia!

by James A. Bacon

Any time business leaders, university presidents and legislators agree on a great new spending initiative, I put my hand on my pants pocket to make sure my wallet is still there. When their brilliant idea slides through the General Assembly without a dissenting voice, or even a word of skepticism from the news media, I take out my wallet to make sure my cash hasn’t disappeared. The GO Virginia initiative — $36 million allocated over two years to incentivize regional cooperation in economic development — inspires that reaction.

I don’t adamantly oppose GO Virginia — I don’t know enough to form a strong opinion. What worries me is that the proposal has been subjected to so little critical analysis.

Thankfully, Attorney General Mark R. Herring issued a legal opinion yesterday finding that the Virginia Growth and Opportunity Act faces a “significant risk” of being found unconstitutional on the grounds that it violates the separation-of-powers doctrine by giving the General Assembly the power to appoint a majority of the board’s 22 members as well as a legislative veto over its grants. (See the Richmond Times-Dispatch reporting here.) Gov. Terry McAuliffe has until Sunday to amend or veto the legislation, which he originally supported.

It’s nice to see that someone has taken a serious look at the bill. Herring raises a critical point. If anyone needs an example of what can happen when legislators insert themselves into the executive function, one need look no further than the shenanigans of the Tobacco Indemnification and Community Revitalization Commission.

According to the GOVirginia website, the project was the brainchild of the Virginia Business Higher Education Council (VBHEC) and the Council on Virginia’s Future “to foster private-sector growth and job creation through state incentives for regional collaboration by business, education, and government.”

Why is the program needed? Backers argue the following:

Because Virginia is a large and diverse state, the opportunities for private-sector growth vary significantly from one part of our state to another, requiring collaborative innovation among employers, entrepreneurs, investors, researchers, educators, governments, and other leaders in each region. Too often this cooperation has been lacking, causing Virginia to lag behind other states.

State government can solve the problem:

The State can and must do more to encourage strategic, job-focused collaboration in each region. Significant state funds currently flow to localities, schools, and higher education institutions; the Commonwealth should use such resources to promote joint efforts on economic and workforce development and to encourage collaboration that can improve performance and reduce costs.

The original concept behind GOVirginia was to fund the program through “use of growth revenues, re-purposed dollars, and efficiency savings” — not new taxes, mandates or layers of government. Somewhere along the way, the initiative morphed into a program supported by $36 million in state funds over the two-year budget. The concept may well have morphed in other ways beyond its original formulation, although, judging from Travis Fain’s reporting for this Daily Press article, the legislative package of four bills has stayed fairly true to the original vision.

Here is how the money would be distributed:

The plan includes $5.5 million a year for the first two years to stand up the regional councils, vet project proposals and study various aspects of regional economies, particularly the gaps in education and skills training needed to support desired industries.

Beyond that, $15 million would be up for grabs, with regional councils competing to get the state board to fund their projects. The remaining $12.4 million would also go toward project-specific grants, but it would be broken down between the regions based on population.

Bacon’s bottom line: It’s a little late in the game, I’ll concede, but let’s get the conversation going. Is this a worthwhile expenditure of $18 million a year?

Let’s start by looking at the new overhead created: $11 million, or 30% of the funds allocated, would go to setting up the administrative structure for the program. That’s pretty much a waste. Don’t higher-ed institutions have mechanisms for discerning the job-training needs of local industry already? What can these new studies possibly add?

Then consider the how the money is distributed geographically. Funds will be distributed amongst a number of regional councils reflecting the diversity of the state’s economy. Let’s assume that roughly $15 million a year would be made available for actual grants. How would the sum be divvied up? By the merits of the projects? What if all the high-ROI projects were located in, say, Northern Virginia? Would the other councils feel short-changed? Conversely, what if the money were distributed evenly between regions, would some high-ROI projects be denied funding?

Next, consider the pork barrel aspects. Fain quotes House Majority Leader Kirk Cox, R-Colonial Heights, a local project – the Aviation Academy at Denbigh High School – as a good example of projects that would get funding.

The Newport News school system runs the school at the Newport News/ Williamsburg International Airport. It would get $100,000 a year under Gov. Terry McAuliffe’s proposed budget, but Del. David Yancey, R-Newport News, wants another $2 million next year and $1.5 million the year after that to expand the school.

Yancey will go before the House Appropriations Committee to ask for that funding, but with limited time during session to vet these proposals, Cox said he’d rather see projects like this bubble up through the regional councils.

Pork by any other name still smells like pork.

There is a vast gap between the airy and idealistic justification of GOVirginia and the ugly implementation guided by legislators toward their pet projects. If the Newport News project is a good example of what would get funding, I hate to see a bad example. I foresee GOVirginia funding projects that couldn’t raise the money from either the private sector or existing government programs, thus creating new programs of marginal value that will be dependent upon government for funding, and creating new constituents that lobby for government hand-outs year after year.

To some degree, I’m playing devil’s advocate — filling a role that no one else has seen fit to play. I’m open to arguments in favor of the program. But so far, I haven’t seen anything that persuades me and a lot to make me keep checking my wallet.

Virginia Beach on Another Wild Goose Chase

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by James A. Bacon

Virginia Beach City Council voted yesterday to give 155 acres to build a biomedical park, reports the Virginian-Pilot. The Virginia Beach Development Authority will oversee the design and promotion of the property.

Virginia Beach Mayor Will Sessoms justified the initiative to lure health care and biotech companies as a way to diversify the city’s economy away from the military and tourism sectors. “You’ve got to look around the country and see what is really growing. As you know, health care numbers continue to increase,” Sessoms said earlier. “We saw that as an opportunity.”

Economic Development Director Warren Harris said the city has identified some prospective tenants, including a regenerative medicine/cancer research firm and a stem cell research firm. MedImmune, a research and development arm of British drugmaker AstraZeneca, met with city officials last month and “left very impressed,” Harris said.

Bacon’s bottom line: This cannot end well. In its pursuit of “economic development” Sessoms seems to be chasing every shiny object that someone dangles in front of him. Last night City Council also voted to sign two agreements with the state that keeps on track plans to extend Norfolk’s light rail system into Virginia Beach on the promise of the most nebulous of benefits. The mayor also supports a mega-convention complex (committing the city more deeply to a tourism-oriented economic development policy). And he supported city subsidies to jump-start redevelopment of the old Cavalier Hotel into a resort complex (another tourism-oriented initiative). As if all these city-backed projects were not enough, now he wants a biotech park.

Well, get in line. Everybody sees high-tech medicine as the next big thing, and everyone wants a piece of it. Bacon’s Rebellion has highlighted the plans of Inova and George Mason University to build a Center for Personalized Health in Fairfax County, and the ambition of Virginia Tech and Carilion Clinic to build a biotech cluster around neuroscience in Roanoke. While both those initiatives face major challenges, they at least have resources that Virginia Beach doesn’t have. The Inova-GMU project is located in the Washington metropolitan area, one of the largest biotech clusters in the country, and Inova has publicly stated its willingess to put $200 million into the project. Meanwhile, Virginia Tech is the largest research university in the state, and it is partnering with western Virginia’s largest health care system.

There is no indication in the Virginian-Pilot reporting that Virginia Beach has forced an alliance with either the Eastern Virginia Medical School (EVMS) or the Sentara Health System. Despite the fact that the Virginia Beach site is not located anywhere near EVMS or Sentara General Hospital, the region’s flagship hospital, Harris sees the park focusing on diabetes, cardiovascular disease, neuroscience and traumatic brain injury. As for supporting assets, Harris cites a branch of Tidewater Community College and the Sentara Princess Anne Hospital, which opened in 2011. Virginia Beach also has donated $1 million to fund the initiative. Really? Is this serious?

The city has many assets. Biotech is not one of them. The chances of building a high-end biomedical cluster are just about nil. For biomedical projects lower down the value-added scale, a run-of-the-mill office park will likely do. If Virginia Beach wants economic development, maybe it should persuade Governor Terry McAuliffe to stop subsidizing the relocation of Virginia Beach businesses to Norfolk. In the meantime, the city should focus on providing core government services of the best possible quality at the lowest possible cost. It’s that simple.

Can Appalachian Cuisine Save Appalachia?

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Appalachian-style pork tenderloin. Photo credit: Washington Post

by James A. Bacon

As Baby Boomers hit retirement age with creaky joints and declining appetites for activities that involve running, leaping and moving at hurl-inducing velocities, they’re looking for something different in a vacation experience. As a rule, that means less adventure and more fine dining. My wife and I are exemplars of this trend, having just returned from three days of strolling through the historic district of Charleston, browsing art galleries and enjoying the city’s low country cuisine.

If you want to develop a tourism industry, you’d darn well better develop a first-class culinary experience to go along with it.

For a long time, that was a problem for much of Appalachia, which yearns for a source of economic activity to replace the decline of coal mining, tobacco cultivation and light manufacturing. There was only so much Appalachian communities could do to attract big-budget Boomers with hiking, kayaking and country music festivals when the most chi-chi restaurants in town were Olive Garden and Red Lobster.

But there may be hope. Foodies on the lookout for the next big thing in the culinary universe may find it in the valleys and hollows of central Appalachia, where a new generation of cooks is drawing upon the unique flavors of the mountain cooking tradition — from greasy beans, huckleberries and goosefoot to sour corn, kilt lettuce and apple butter.

According to Jane Black, writing in the Washington Post, “Southern and central Appalachia are acknowledged as the most biodiverse regions in North America.” Researchers have documented 1,412 distinctly named heirloom foods in the region, including more than 350 varieties of apples, 464 varieties of peas, and 31 kinds of corn. That’s a lot of different flavors.

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Travis Milton. Photo credit: Washington Post

Black profiles Travis Milton, who was born in Castlewood, Va., moved to Richmond and took a job at Comfort, a restaurant that showcases Southern cooking. The owner gave him the freedom to experiment. Writes Black: “He made Kentucky frogs’ legs and chicken wings glazed with Mountain Dew barbecue sauce. He also started making vinegars from all manner of things: turnip greens, honeydew melon, even Cheerwine, a North Carolina soda pop, which he in turn used to make cheeky vinegar pie.” Later this year, he will open Shovel and Pick, an Appalachian-themed restaurant, in Bristol, Tenn.

Last fall, scholars, chefs and activists hosted an Appalachian food summit in Abingdon, Va., to examine how the region’s food heritage can boost local economies. Milton, one of the chefs featured at the event, hopes to legitimize Appalachian food as a way to stimulate interest in artisinal Appalachian food products such as heirloom apples, cider and “Virginia-style” whiskey.

By itself, Appalachian cuisine can’t rescue the Appalachian economy. Consider it a necessary ingredient for developing viable tourism and artisinal-agricultural industries, which can help support the region. Baby Boomer travelers hunger for authentic cultural experiences in their travels. Combine the food with music, arts, crafts, hiking and biking trails, and beautiful landscapes, and you’ve got an economy that can support tens of thousands of people. Asheville, N.C., and Abingdon, Va., show how vibrant communities can thrive in the otherwise economically forlorn region.

Top-down economic development as propagated by the Virginia Tobacco Indemnification and Revitalization Commission hasn’t done much to help Virginia’s Appalachian counties other than prop up manufacturing industries that are likely to leave as soon as the subsidies cease. Bottom-up economic development, which builds upon the unique traditions and proclivities of the people, is far more likely to succeed.

Reveling in Small Spaces

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Charleston sidewalk scene: wide sidewalks, potted plants, and vine-covered buildings.

by James A. Bacon

One thing I look for in a city is the attention given to small spaces — the pocket parks, wide spots in the sidewalk, corridors between buildings and other features that lend texture and delight to an urban landscape. The antithesis is large parking lots, long buildings and the empty detritus of concrete that inhabitants long ago lost interest in.

The Bacon family is spending a short vacation in Charleston, S.C., a 300-year-old city with one of the nation’s largest historic districts, a great street grid, and an abundance of small spaces where Charlestonians have lavished love and care over the years. The city is most famous for the spectacular South of Broad neighborhood of handsome 18th- and 19th century buildings, a living architectural museum. But the city has a lot to offer North of Broad in a more conventional urban setting. The photos in this post come from a stroll around the block where our hotel, the Hampton Inn (comfortable but not exactly the most chi-chi address in town) is located.

Charleston4 I love the corridors between buildings where property owners treat what could be an ugly alleyway as a venue for creative landscaping. The corridor at left apparently leads to dwelling in the interior of the block, creating an inviting entrance for guests and a visual delight for passersby. Examples of these in Charleston are too numerous to document them all. This one is fairly typical.

 

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Another ordinary street scene: I like the cloistered effect created by the row of trees on one side of the sidewalk and storefronts abutting the sidewalk on the other side. Also, the awnings create visual interest. Continue reading

SCHEV Approves First School of Neuroscience

neuroscienceThe State Council of Higher Education for Virginia (SCHEV) has approved the Virginia Tech School of Neuroscience, the first school of neuroscience in the country. The school will study disorders of the brain, such as Alzheimer’s disease and traumatic brain injury, and the mind itself, including decision-making, behavior and creativity, reports Virginia Business.

The school will have 15 faculty members and enroll 150 students. Neuroscience students will have the opportunity to become involved with biomedical neuroscience research in the recently launched Health Sciences and Technology Innovation District in Roanoke.

Bacon’s bottom line: Congrats, Virginia Tech. It’s good for Virginia universities to push into burgeoning fields of knowledge. And I like the economic development tie-in with Roanoke. At the same time, universities can’t be all things to all people. As universities expand into new fields, they should contract in older, less relevant fields experiencing shrinking class enrollment. Somehow, we never seem to read about universities pulling the plug on declining programs. Maybe it happens, but we don’t hear about it.

— JAB

Citizens Take on Crony Capitalism in VA Beach

cavalierby James A. Bacon

Arlington County had its $1 million bus stop scandal. The City of Richmond had its mayoral cronyism scandal. Now Virginia Beach has its Cavalier Hotel redevelopment scandal. The FBI has undertaken a criminal investigation of a vote by Councilman John Uhrin in favor of providing $18 million in city funds to subsidize redevelopment of the landmark Cavalier Hotel. Days later, his wife Catherine Sassone was hired to sell luxury properties associated with the project. Uhrin has said he did not know when he voted that his wife would be hired.

I have no idea if Uhrin is guilty of anything — I have not followed the controversy closely enough to have an informed opinion — but I do admire how Virginia Beach residents residents are responding to the revelations. A group of about 25 citizens who believe “the taxpayers of Virginia Beach have been pushed aside for too long” have banded together to dredge up public records, publish them online and expose the crony capitalism at the heart of Virginia Beach government. The result is The Document Project:

When City Councilor John Uhrin arrived at City Hall on July 2, 2013, he did much more than just vote to give Cavalier Associates, LLC, the largest upfront taxpayer incentive in the city’s history. Uhrin’s vote unintentionally opened a window into the inner workings, backroom negotiations and financial wrangling that for a decade has become the shameful signature of Virginia Beach government.

And it’s all published here, for the first time. Courtesy of a federal subpoena, the FBI and Virginia’s weak, but still sufficient, public records laws.

Among the accusations:

  • Mayor Will Sessoms and former City Manager Jim Spore scheduled Cavalier meetings at the developer’s headquarters even after the mayor recused himself from voting because he had a conflict of interest.
  • A firm run by a member of the Cavalier Task Force, an independent body formed to protect the city’s interests, was working for the Cavalier developers without telling the public of his dual roles.
  • A city engineer describing a 968-foot roadway to be built with $2.5 million in public funds said the cost was so inflated that the developer could use “gold-leaf pavers” and still build the road for less.
  • During negotiations on city incentives, the city’s point man for the project, Barry Frankenfield, asked the developer if he might entertain a “pitch” from his son’s firm. Two months later Frankenfield wrote e-mails stating that the city could “edit out” and “tone down” critical comments made by its own engineers that questioned safety and financial aspects of the development.
  • The Cavalier’s developers applied for a tax break under the state’s GAP financing program. State regulations require all financing to be in place before approval. The developers did not have the financing in place when they applied, and in fact didn’t receive its $77 million loan from TowneBank until February 2016.

I have not examined the substance of the allegations. What I find encouraging, though, is the way citizens have taken matters in their own hands and done the hard work of sifting through a large body of public records to expose questionable ways of doing business.

Why is Hampton Roads among the worst for economic growth in the entire state of Virginia, when we have so much more to offer? Because we’ve long ago traded capitalism for cronyism. …

This website is here because the taxpayers of Virginia Beach have been pushed aside for too long as the same few developers and our elected officials make deals behind closed doors while saying, “trust us.”

Well, those days are over. And with Light Rail, the 15th Street Pier, the 27th Street boondoggle and so many more projects on the horizon, we’re just getting started.

Bravo. Virginia is sliding into a cesspool of corruption. The media is a largely defanged watchdog lacking the resources to conduct the investigative journalism that once was its hallmark. Citizens must take matters into their own hands.

Conservative, Yes. Sanctimonious, Probably. But Egomaniac? That’s a Bit Harsh.

by James A. Bacon

And now for another view…. John Fredericks, whose John Fredericks Show is heard in radio markets across Virginia, calls me a “sanctimonious conservative egomaniac” for asking questions about the use of the Governor’s Opportunity Fund to lure business investment to the City of Norfolk.

“It really irritates me,” said Fredericks on his show two days ago. “Any of these … 365 people in the Hampton Roads area that now have a job that didn’t have a full-time job, who can support their families, you know what, it’s a good deal for them, dude! … If you just got hired, and you got benefits, and you can now support your family, that’s a good thing. I’m for jobs. Period. … If you’re unemployed, and if Terry McAuliffe goes out and finds a business to hire you, he’s done a good thing.”

I’ve appeared on John’s show a couple of times, and I find him entertaining. (He refers to Governor Terry McAuliffe as “the Mackster,” which I do find amusing.) Indeed, because he is generally conservative in his views, I agree with a lot of what he says.

Believe it or not, John, I also agree that there are worse ways to spend government money than keeping jobs in Virginia. (If I have time this morning, I’ll post about some development expenditures in Virginia Beach that John might find questionable.) Job creation is the single best remedy for poverty and economic insecurity there is.

That said, given the resistance to paying higher taxes and the competing demands for state funds, Virginia has a finite amount of money that it can dedicate to economic development. We need to ensure that we spend these limited funds as cost effectively as possible. And when we spend money to shuffle jobs around the state — most of those “new” Norfolk jobs are coming from Roanoke and Virginia Beach — I don’t take it on McAuliffe’s say-so that we are getting the best deal possible, or for that matter that we’re getting jobs that we would have lost to other states. I’d like to see the proof.

Here’s what’s going on: Any time a corporation is ready to expand or relocate jobs, the top brass knows from experience that it has an opportunity to extract easy money from state and local governments by threatening to set up shop outside Virginia. They hire site-selection consultants to shop other locales and use that as leverage to extract subsidies and tax breaks. They almost always succeed in getting something. Once upon a time, the Governor’s Opportunity Fund was used to attract outside businesses to Virginia. Now it’s used extensively to keep Virginia businesses here.

Would Norfolk Southern and Movement Mortgage have made the decision to locate in Hampton Roads without the concessions? Economic developers don’t know, the governor doesn’t know, and the public doesn’t know. It’s a shake-down racket, and the only certain winners are the businesses in a position to negotiate special deals for themselves that other businesses don’t get.

The purpose of my original post, and this one, too, isn’t that McAuliffe should not have made the investment, it’s that we don’t know whether he made a good investment or not, and we will never know because there is insufficient transparency in the system. If corporations want to tap public funds, I argued, then they should waive any non-disclosure rights so citizens can evaluate the merits of the subsidy. Is that really so sanctimonious?