Category Archives: Finance

Learning from Buena Vista’s Golf Course Default

vista_linksby James A. Bacon

In 2005 the City of Buena Vista in the Shenandoah Valley issued $9.2 million in bonds to pay for construction of the Vista Links golf course.  To obtain financing, the city purchased insurance for $400,000 and pledged the golf course, police station and municipal building as collateral.

The city made its debt payments for several years but encountered difficulties in 2010 when the annual payment was scheduled to increase to $660,00 and the golf course was still operating in the red. The city went into default and entered into an agreement with its insurer, ACA Financial Guaranty Corp., to make half payments for five years. ACA remitted the other half but added it to the principal. The agreement calls for the city to return to the full $660,000 annual payment in 2016 and continue for 27 years.

On the logic that the city will be unable to make the full payment in 2016 if it continues make the half payments today, City Council voted earlier this week to default on its bond payment due in January 2015. Needless to say, ACA is unhappy with that decision. “The unilateral act by the current city council demonstrates an unwillingness to act in good faith to negotiate a solution,” said ACA in a press release. According to the Roanoke Times, ACA could foreclose on the golf course, police station and the portion of city hall that does not include the courts.

What possessed the City Council of Buena Vista, a city of less than 7,000, to go deep into hock to fund construction of a golf course? The Roanoke Times provides some background:

Vista Links was viewed as an economic development project that would move the city away from its industrial base and spur commercial and residential development while attracting visitors and their money.

“In the 1990s we were struggling to find an economic driver to enhance our aging housing base and diversify our economy,” [Mayor Frankie] Hogan said. “So we hired some consultants who showed city council projected numbers for a golf course that exceeded reality. Little did we know. But we should have.”

Bacon’s bottom line: Three lessons here. First, beware economic-development Hail Mary passes based on municipal debt. The city is far worse off now, saddled with debt and a ruined credit standing, than it would have been had it stuck to more prudent policies. Second, beware consultants. Maybe they know what they’re talking about, maybe they don’t. Third, beware fads. Other municipalities turned to golf courses as a development elixir. Many of those have fallen short of rosy projections. Indeed, the entire golf industry, public or private, is hurting.

The only people who should build golf courses are those who really understand the business and are prepared to handle the risk of failure — which excludes just about every municipality in the country. The lesson applies not just to golf courses but convention centers, baseball stadiums and other speculative “economic development” ventures. Local governments should stick to core competencies like education, public works and public safety at which they can excel.

Big Energy’s Conspiracy with Attorneys General

Former Va. Atty. Gen. Miller --toady for Big Energy

Former Va. Atty. Gen. Miller –toady for Big Energy

By Peter Galuszka

What seems to be strong opposition to a host of initiatives by President Barack Obama and the U.S. Environmental Protection Agency to curtail carbon and other forms of pollution is no mere coincidence.

According to a deeply reported story in Sunday’s New York Times, some state attorneys general, most of them Republicans, are part of what seems to be a covert conspiracy to oppose carbon containment rules in letters ghost-written by energy firms.

And, there’s a big Virginia connection in former Democratic Atty. Gen. Andrew P. Miller and George Mason University which have been bankrolled by conservative and Big Energy money for years.

The cabal has drawn its modus operandi from the American Legislative Exchange Council, funded by the ultra-right, oil-rich Koch Brothers of Kansas. In that case, ALEC prepares “templates” of nearly identical legislation that fits the laissez-faire market and anti-government and regulation principles held dear by the energy and other big industries. Many marquee-name corporations such as Pepsi, McDonald’s and Procter & Gamble have dropped their ALEC membership  after public outcries.

In the case of the attorneys general, big petroleum firms like Devon Energy Corporation of Oklahoma draft letters opposing proposals that might hurt their profits such as ones to regulate methane, which can be a dangerous and polluting result of hydraulic fracking for natural gas. The Times notes that Oklahoma Atty. Gen. E. Scott Pruitt then took Devon’s letter and, almost-word-for-word, submitted it in his “comments” opposing EPA’s proposed rules on regulating fracking and methane.

The secretive group involves a great deal of interplay involving the Republican Governor’s Association which, of course, helps channel big bucks campaign contribution to acceptable, pro-business attorneys general. In 2006 and 2010, Greg Abbott of Texas got more than $2.4 million from the group. Former Virginia Atty. Gen. Kenneth Cuccinelli got $174,5638 during his 2009 campaign.

One not-so-strange bedfellow is former Virginia Atty. Gen. Andrew P. Miller who was in office from 1970 to 1977 and is now 82 years-old. He’s been very business promoting energy firms. As the Times writes:

Andrew P. Miller, a former attorney general of Virginia, has in the years since he left office built a practice representing major energy companies before state attorneys general, including Southern Company and TransCanada, the entity behind the proposed Keystone XL pipeline. The New York Times collected emails Mr. Miller sent to attorneys general in several states.

“Mr. Miller approached Attorney General Scott Pruitt of Oklahoma in April 2012, with the goal of helping to encourage Mr. Pruitt, who then had been in office about 18 months, to take an even greater role in serving as a national leader of the effort to block Obama administration environmental regulations.

“Mr. Miller worked closely with Mr. Pruitt, and representatives from an industry-funded program at George Mason, to organize a summit meeting in Oklahoma City that would assemble energy industry lobbyists, lawyers and executives to have closed-door discussions with attorneys general. The companies that were invited, such as Devon Energy, were in most cases also major campaign donors to the Republican Attorneys General Association.

“Mr. Miller asked [West Virginia Attorney General Patrick Morrisey] to help push legislation opposing an Obama administration plan to regulate carbon emissions from existing coal-burning power plants. Legislation nearly identical to what Mr. Miller proposed was introduced in the West Virginia Legislature and then passed. Mr. Morrisey disputed any suggestion that he played a role.”

Not only that, but George Mason has an energy study center that is bankrolled by Big Energy and tends to produce policy studies of what the energy firms want. It also has the Mercatus Center, a right-wing think tank bankrolled by the Koch Brothers.

So, when you see what seems to be a tremendous outcry against badly needed regulations to curb carbon emissions and make sure that fracking is safe, it may not be an accident. And, it comes from attorneys general who should be protecting the interests of average residents in their states instead of being toadies for Big Energy.

Suddenly, It’s Raining Gas Projects and Tax Breaks

Anti-Pipeline By Peter Galuszka

Suddenly it seems to be raining natural gas pipelines and snowing millions of dollars in tax breaks and incentives for rich electric utilities.

Dominion Resources, the powerful and politically well-connected Richmond-based utility, apparently is getting $30 million in public money from the Virginia Tobacco Indemnification and Revitalization Commission without apparently asking for it to help build a new natural gas-fired generating plant in Brunswick County. The information was broken by the Associated Press.

Largesse for Dominion stretches to the other side of the Potomac River as well. The Washington Post reported Sunday that Calvert County Md., where Dominion has approval to convert a liquefied natural gas facility to handle natural gas exports, is going to give the utility about $560 million in tax credits.

And, back in Virginia, controversial is growing over the $5 billion natural pipeline that Virginia and three other southern utilities are planning to take natural gas drilled by hydraulic fracking methods from West Virginia to Virginia and North Carolina.

The Atlantic Coast Pipeline has drawn criticism from environmentalists who fear that gas is not the cleaner panacea to coal that many think. Landowners complain that Dominion and its powerful Richmond law firm, McGuireWoods, are using strong arm methods to force their way on their land to survey possible routes.

mountain valley pipelineYet another pipeline – this one doesn’t involve Dominion – is drawing concern in southwestern Virginia. The $3.5 billion Mountain Valley Pipeline that would likewise begin in the fracked gaslands of northern West Virginia and head south west of Roanoke and then cut to the small town of Chatham.

The complaints are the same as the Atlantic Coast Pipeline – green concerns about leaking methane and the threat of bulldozing bucolic private land by companies using eminent domain.

The Mountain Valley project is being spearheaded by EQT Corp. of Pittsburgh and NextEra Energy of Florida.

So what gives? Utilities like Dominion are using more gas, namely at its new Brunswick County natural gas plant and at an older coal-fired station that’s been converted at Bremo Bluffs on the James River. But how much gas does it actually need?

In the case of Cove Point, Dominion notes that the plant has been importing LNG from places like Northern Africa and Scandinavia for decades although imports have come to a spot given the glut of cheap, domestic gas.

Dominion, which bought the facility about a decade ago, can get gas from an older pipeline that for years has linked the Chesapeake Bay area with gasfields in Pennsylvania where some of the fracking for new product is occurring. Dominion can also tap gas from the venerable Transco Pipeline that for decades has transported gas the traditional way – from the Gulf State processing stations to the northeast.

Dominion says it already has contracts to export gas – from where it comes domestically – to utilities in Japan and India. But when one looks at the spaghetti-like twirl of all of the proposed new pipelines, one wonders what the game really is.

The Atlantic Coast Pipeline has a leg that bounds over to Hampton Roads from near the North Carolina border. Dominion says that this one will help supply one of its pipeline partners with gas because it serves South Hampton Roads. Ok, fine, but it might also serve another new LNG export facility in that area that has perfect deep water conditions for such a facility.

And, as some environmentalists and property owners wonder, why couldn’t the energy companies tap rights of way near existing pipelines? Why can’t existing pipelines be expanded? Go back to the utilities and they say they don’t know exactly where the pipelines will go.

That is very curious. While they don’t know where mega-billion project projects are going to go, they seem to be getting tens, if not hundreds, of billions of dollars in public funds and tax breaks to help them proceed with the Brave New World of natural gas.

 

Dominion’s Strange Tobacco Money

tobacco commission logo By Peter Galuszka

Dominion Resources, the powerful, Richmond-based utility with $13 billion in revenues, has strangely been getting $30 million public funds to bring a natural gas pipeline to a new generating plant in Brunswick County.

Odder still (or maybe not so) the public funds are coming from the GOP-controlled Virginia Tobacco Indemnification and Community Revitalization Commission which has figured in a wave of corruption since it was formed in 1999.

Even more bizarre, the tobacco commission made up of politically-appointed people arranged for Dominion to receive millions more than its own staff recommended, according to an intriguing report by the Associated Press.

The tobacco commission was created to use money from a massive 1996 settlement that 46 states received from four top tobacco companies in health-related lawsuits. Many states used their funds to promote health and anti-smoking campaigns. Virginia did some of that but created a pork barrel commission to dole out $1 billion to projects allegedly aimed at helping residents of Virginia’s Tobacco Road along the state’s southern tier for economic development projects.

In the Dominion case, the utility says it never lobbied for grants, but somehow it got $30 million – or $10 million over three years for a pipeline to its $1.3 billion Brunswick gas plant. The commission’s own staff said $6.5 million should have been sufficient for the first installment.

So, you have a situation where Dominion, which is a huge contributor to political campaigns,  says it never really wanted grants, the commission staff recommended one amount and the tobacco commission awarded a much bigger one. And, according to the AP, no one seems to know anything about it.

Well, that’s about par for the course. Here’s something I wrote for The Washington Post in September:

“No one seems to be checking whether commission projects are worth it. A 2011 study by the state’s Joint Legislative Audit and Review Commission found that, of 1,368 projects funded for $756 million, only 11 percent were measured for results. “They are just handing out money,” Del. Ward Armstrong (D-Henry) said in 2011.

John W. Forbes II, a former state secretary of finance and a tobacco commission board member, was convicted in 2010 of defrauding the commission of $4 million. He used the money for “The Literary Foundation of Virginia,” which he created, and set up himself and his wife with six-figure jobs. The rest was siphoned to shell companies.

The commission has awarded $14 million in grants to the Scott County Economic Development Authority, which is headed by John Kilgore Jr., Terry Kilgore’s brother (Terry heads the commission and his brother Jerry is major Republican politician). Meanwhile, their father, John Kilgore Sr., heads the nonprofit Scott County Telephone Cooperative’s board, which has received $7 million in tobacco money to expand broadband access.

The Kilgore family affair isn’t illegal, but it looks bad. The tobacco stench just doesn’t go away. In June, federal agents subpoenaed commission records in their probe of former state senator Phillip P. Puckett. The powerful Democrat from Russell was supposedly discussing a lucrative staff job on the tobacco commission with Terry Kilgore just before a key vote on expanding Medicaid. Puckett resigned in time to throw the vote toward opponents, most of them Republicans.”

The gas pipeline apparently would connect with a major interstate pipeline operated by Transco and runs from the Gulf State gas fields through Virginia to the Northeast. And, Dominion is one of four utilities planning a brand new $5 billion that would take natural gas fracked in West Virginia, over sensitive tops of the Appalachians, southeast to North Carolina. That project includes a spur line to the Dominion Brunswick plant.

One wonders why Dominion needs two pipelines to one plant — especially one built with funds intended directly for public service.

Well, as they say in the giant newsroom in the sky, good stories only get better.

Arlington Scraps Streetcar Projects

Rendering of a Columbia Pike streetcar.

Rendering of a Columbia Pike streetcar.

by James A. Bacon

Arlington County’s surprise decision yesterday to cancel proposed streetcar projects for Columbia Pike and Crystal City should not be seen as a rejection of the concept of streetcars but a rejection of the funding mechanism chosen by the board that asked taxpayers to bear the fiscal risks while property owners enjoyed the benefits.

Arlingtonians, who voted John Vihstadt to the County Board earlier this month in an election that had become a referendum on the streetcar projects, questioned whether the $550 million price tag justified the purported economic development benefits. Board Chair Jay Fisette cited the decisive election results in canceling the project for which he and other board members had spent 15 years shepherding through the planning and fund-raising process.

One big problem for streetcar backers was defending the Columbia Pike project in the face of escalating cost estimates. The $358 million price tag was up $48 million from a federal cost estimate last year and up $100 million from a previous county estimate. County officials, with years of planning invested in the project, maintained that the benefits still outweighed the costs. A substantial majority of citizens were skeptical, and they said the county’s transportation needs could be met more cost-effectively with improved bus service.

Streetcar advocates said that the investment in fixed streetcar assets would encourage property owners along Columbia Pike to invest in upgrades and infill along the route. In theory, rising property tax revenues would more than offset the county’s $170 million share of the capital costs as well as ongoing operating costs. Moreover, the county’s share of the funds would come from a special commercial real estate tax dedicated to transportation projects.

That is not an unreasonable argument to make, although the forecast of rising property values does require a leap of faith. In effect, county officials were willing to to invest local funds for both streetcar lines in the belief that the revenue from increased property values ultimately would exceed the costs. In effect, they were saying, “Trust us. Build it and the development will come.” It became harder to maintain that the project would be a net fiscal benefit when the estimated cost jumped $100 million.

County officials could have changed the political dynamic if they’d embraced the logic espoused here on Bacon’s Rebellion – moving to a system in which users and beneficiaries pay for the project. In previous columns, I advocated funding the project through a special tax district on property owners along Columbia and a separate district in Crystal City.

If the Columbia Pike streetcar will do as much to stimulate increased property values as claimed, the property owners along the route will be the main beneficiaries. Why should property owners enjoy a massive windfall without contributing anything directly toward the project? (The special commercial tax that would pay for the project comes from all over Arlington, not just the area affected.) If property owners believe that the value created would exceed the projected cost, they should be willing to bear that cost themselves. The county could add sweeteners in the form of increased density allowances, as needed. Using special tax districts to finance the streetcar projects would place the burden and the risk where it belongs: on the property owners who collectively stand to gain hundreds of millions, if not billions, of dollars in economic value, not the general taxpayers.

If the County Board had structured the deal this way, taxpayers would have had no cause to bellyache. The projects never would have been politicized in the way they were.

Of course, structuring the projects around special tax districts would create a political risk that property owners would not support them. But if the chief beneficiaries refused to support the project, what signal would that send? It would send the signal that the projects won’t have the wealth-creating effects claimed for it, that the projects cannot be economically justified, and that the projects shouldn’t be built.

Instead of giving up,  the Arlington Board should restructure the deal as a special tax district in which the local funding share is paid for by property owners affected by the project (rather than commercial property owners throughout the county). If the property owners bite, they’ll have a project. If the property owners balk, then it’s time to acknowledge that the putative benefits aren’t there.

Former Massey Coal Chief Indicted

DonBlankenshipBy Peter Galuszka

The indictment today in Charleston, W.Va. of coal baron Donald L. Blankenship, the former head of the notorious Massey Energy Company, for violating federal mine safety and securities laws, has been long awaited, especially by the families of the 29 miners who died on April 5, 2010 in a huge explosion at Massey’s Upper Big Branch mine in Montcoal, W.Va.

It was the worst coal mine disaster in this country in 40 years. It topped off a wild run by Blankenship, who thought he had political potential and spoke for the Appalachian coalfields while dodging safety violations and blowing away mountains in horrific surface mining practices.

He was a poster man for the view, popular among this country’s business elite, that cost cutting and productivity are sacrosanct, human lives are cheap and environmental concerns such as climate change are mere diversions from the country’s true goals. At one point he literally wrapped himself up in the American flag to push his ideas.

A federal grand jury today turned those arguments on their heads. The four charges accuse Blankenship of conspiracy in blunting the numerous federal safety violations that lead to the catastrophic disaster at the Upper Big Branch mine.

For several years leading up to that fateful day, Blankenship allegedly connived to ignore concerns that the mine had broken equipment and excessively high levels of highly inflammable coal dust. He also is accused of keeping federal mine inspectors from doing their jobs.

The grand jury also claims that Blankenship violated federal securities laws by giving investors misleading information about Massey stock.

Blankenship was a huge celebrity in the Appalachian coalfields. Tying himself to a reactionary ideal of doing what he thought was best for America, he spent a million dollars at what was an anti-Labor Day celebration in West Virginia in 2009. He wore a costume formed from an American flag and hired testosterone-infused country music stars Hank Williams Jr. and Ted Nugent to entertain his crowd.

The irony was that it was a holiday to celebrate labor unions while Blankenship and his firm were notorious for union-busting. He also had a habit of taking the chief justice of the West Virginia supreme court on vacation on the French Riviera.

Another irony is that Blankenship, like much of the U.S. coal industry, promotes the propaganda that there is a “War on Coal” and that coal is essential to “keeping our lights on.” Never mind that the free market and the flow of natural gas from hydraulic fracturing drilling from the very same area, not the U.S. Environmental Protection Agency, are what is really hurting the Appalachian steam coal market.

The coal mined at Upper Big Branch, however, had nothing to do with power generation. It was metallurgical coal that was exported to make steel in markets such as China. At the time of Upper Big Branch, China’s steel market was hot and met coal prices were going through the roof.

The indictment reads that the group of mines associated with Upper Big Branch “generated revenues of approximately $331 million, which represented 14 percent of Massey’s approximately $2.3 billion in in revenue.” Obviously, it was in Blankenship’s interest to keep the steel-making coal flowing.

In that process, according to the indictments, Blankenship oversaw efforts to cut corners, dodge safety issues and keep miners on edge. They are rich in detail about poor ventilation; flawed water sprays to keep explosive coal dust down and warning when federal coal inspectors were on the prowl.

After he was forced to resign from Massey Energy with an over-sized golden parachute, Blankenship kept quiet for a couple for of years. Recently he came back on the scene with a self-made documentary just on the eve of the fourth anniversary of the Upper Big Branch disaster. The movie was so tasteless that even Joe Manchin, a U.S. Senator from West Virginia who was quoted in the film, disassociated himself from it. Families of the dead mines were appalled.

The long-in-coming indictments illustrate the problems of coal as an energy and steel source and just how its issues have been ignored in the Appalachians for about 150 years. In the past, huge mine disasters, such as the 1968 blast at Farmington W.Va. that killed 78, sparked real safety reform.

Not so after Upper Big Branch. Pro-coal Republicans in Congress have blocked bills to toughen rules. This is a reason why the federal indictments are so important. They show that leading a culture of safety laxity will no longer be tolerated.

It may be curious that Blankenship’s indictments come just after President Barack Obama has just agreed to a turning point treaty with heavy polluter China to cut carbon emissions. But they should give some closure to long-festering problems in a part of the United States where industrial death and destruction are considered business as usual.

Debt and Deferred Maintenance at Virginia Colleges

debt-revenue

by James A. Bacon

Above, readers will find the chart I called for in yesterdays blog post: the debt burden of Virginia colleges and universities as a percentage of their budgeted revenues. The higher the debt-to-revenue ratio, the more leveraged the institution and, hence, the greater the risk of financial difficulties if and when student enrollments decline. This chart is useful because it suggests that we should start paying closer attention to Christopher Newport University and the University of Mary Washington, both of which have borrowed heavily to fund their building expansions.

Having a high debt/revenue ratio is not necessarily a worrisome sign. The University of Virginia also appears to have borrowed heavily, but (a) it has a multi-billion dollar endowment and a wealthy alumni base to fall back upon in times of trouble, and (b) there is such a high demand to attend the university that there is a negligible chance that it will see an involuntary decline in enrollment. By contrast, Norfolk State University, in the news recently for its eroding financial condition, has a modest debt load. Still, all other things being equal, a high debt-to-revenue ratio puts an institution at greater financial risk.

The debt figures, by the way, I took from the Joint Legislative Audit and Review Commission’s latest report on higher education. The figure denotes the outstanding principal and interest payments due over the next thirty years (FY 2014 to FY 2043). The revenue numbers come from the Virginia state budget “operating budget summary” combining both General Fund and Nongeneral Fund revenues.

Virginia State University and Norfolk State University are widely reported to be experiencing major financial difficulties, in large part reflecting their status as Historically Black Colleges and Universities fifty years after the formal end of racial segregation in America and the lower incomes of their student populations.

But, as Bacon’s Rebellion has been warning and the JLARC report confirms, rising tuition, fees and other expenses are outpacing the ability of students and their families to pay for colleges across the board, with the result that enrollment in Virginia colleges and universities declined last year. Declining enrollment translates into falling revenue, which can be especially devastating to institutions with high debt burdens.

My analysis suggests that Christopher Newport and Mary Washington, the two most highly leveraged public higher ed institutions in the state, could be among the most vulnerable. Neither is a prestige institution with strong pricing power and a large backlog of students clamoring to get in. In a positive sign, however, Christopher Newport’s enrollment did increase by 75 FTE students in 2013-2014 compared to the year before, according to State Council for Higher Education in Virginia data. On the other hand, Mary Washington’s enrollment declined by 138. I don’t want to make too much of one year’s enrollment data but if I were a board trustee at Mary Washington, I’d set a very high hurdle for any additional borrowing.

By contrast, Radford University serves a similar market niche, as a small/medium-sized liberal arts university appealing mainly to in-state students. Radford’s board has kept a very tight lid on debt, and the institution has the lowest debt/revenue ratio of all the colleges.

One more factor should should be considered in our analysis — deferred maintenance. Christopher Newport’s campus is so new that it has a negligible deferred maintenance backlog — about $0.5 million, according to JLARC. That contrasts to Virginia Tech’s $274.5 million backlog, the largest of any higher ed institution in Virginia. In theory, Christopher Newport won’t have major maintenance issues until it has paid off most of its 30-year debt. Mary Washington, by contrast, has racked up $42.5 million in deferred maintenance.

Deferred maintenance, Virginia public four-year institutions. Table credit: JLARC

Deferred maintenance, Virginia public four-year institutions. Table credit: JLARC

Takeaways From the GOP’s Big Win

gillespie warnerBy Peter Galuszka

The night of Tuesday, Nov. 4 was an ugly one for the Democrats and a big win for Republicans. Here are my takeaways from it:

  • U.S. Sen.Mark Warner clings to a tiny lead that seems to grow slightly, still making it uncertain if opponent Ed Gillespie will ask for a recount. The surprisingly tight race is an embarrassment for Warner. It likely takes him out of consideration to be Hillary Clinton’s running mate in 2016 although Democrats Tim Kaine and Jim Webb are still possibilities.
  • Ed Gillespie ran a smart campaign and came off as a solid candidate. Of course, we are comparing him against Kenneth Cuccinelli and that’s a very low bar but Gillespie’s projection of being relaxed and confident helped him. Gillespie did very well despite being dissed by the national Republican money machine. Look for him in the gubernatorial race of 2017.
  • Barack Obama takes his lumps — again. The country’s on the mend and things are going fairly well (despite what you may watch on Fox), but Obama is incapable of cashing in on that. His cool, detached style is a big minus and makes him seem careless and incompetent, especially when crisis like ebola come up that are not of his making.
  • The Republican wins on Capitol Hill are more significant than the Tea Party inspired once during the 2010 midterms.But the earlier races brought in a kind of mindless negativity and gridlock by both parties that truly hurt the country. Will that happen again? Or will older, wise heads prevail?
  • Increase in coverage my Obamacare The New York Times

    Increase in coverage by Obamacare
    The New York Times

    You might get some bipartisan action on taxes and the budget, but deadlock remains for Affordable Care and immigration. The fact is that Obamacare is too far along to change much and people actually like it, despite what you hear in the right-wing echo chamber. This chart from the New York Times shows that the ACA has boosted health coverage in some of the poorest parts of the country, such as the Appalachian coal country, the African-American belts of the Deep South; and poor parts of the Southwest like New Mexico and parts of Arizona. This alone is a big success.

  • Immigration. Look for Obama to use executive authority to come up with an immigration plan. It is an emotional, hot button issue that reveals lots of ugly attitudes. But something needs to be done fast. The GOP has no plan, except for George W. Bush who actually pushed a workable solution that was compassionate. That got soaked by the Tea Party, but then Republican Mitt Romney came up with a health care plan for Massachusetts that looks remarkable like Obamacare and was a precursor. If the GOP can get back to those helpful ideals, there may be hope.
  • Warner lots big swaths of voters who had been with him, like Loudoun County and parts of rural Virginia. This is alarming for the Dems and shows they need to project their messages a lot better. Warner’s poor performance in debates didn’t help either.

It is a big win for the GOP, but somehow I don’t feel as bitter as I was in 2010.

Why We’re Being Railroaded On “STEM”

 csx engineBy Peter Galuszka

When it comes to education, a constant mantra chanted by the Virginia chattering class is “STEM.”

How many times have you heard that our students are far behind in “STEM” (Science Technology Engineering and Mathematics)? We have to drain funding from more traditional areas of study (that actually might make them better human beings like literature, art or history) and give it to STEM. The two types of popular STEM are, of course, computer science (we’re all “illiterate” claims one journalist-turned computer science advocate) and biotechnology.

But how important is STEM, really? And if Virginia joins the STEM parade and puts all of its eggs in that basket, will the jobs actually be there?

The fact of the matter is that we don’t know what jobs will be around in the future and like the famous generals planning for the last war, we may be stuck planning for the digital explosion of Bill Gates and Steve Jobs that is like, so, 25 years ago.

To get an idea where markets may be, look at today’s news. Canadian Pacific is making a play for CSX railroad (headquartered in Richmond not that long ago) because of the unexpected explosion in fracked oil.

CP handles a lot of freight in the western part of Canada and U.S. where some of the most impressive new fracked shale oil are, namely the Bakken fields of North Dakota and Alberta. CP wants access to eastern U.S. refineries and transshipping points, such as a transloading spot at the mouth of the York River. CSX is stuck with dirty old coal where production and exports are down, although it has an extensive rail network in the Old Dominion.

The combined market value of the two firms is $62 billion — a far bigger potential deal than the $26 billion Warren Buffett paid for Burlington Northern Sante Fe in 2010. There are problems, to be sure. CSX isn’t interested and the Surface Transportation Board, a federal entity, nixed a matchup of Canadian National and Burlington a little while back.

But this isn’t really the point. The point is that the Old Steel Rail pushed by new sources of oil and to some extent natural gas has surprisingly turned domestic economics upside down. Many of the new oil fields are in places where there are not pipelines, so rail is the only answer. In 2008, according to the Wall Street Journal, six or so American railroads generated $25.8 million in hauling crude oil. Last year that shot up to $2.15 billion.

So, what does that mean for students? A lot actually, especially when we blather on about old-style STEM that might have them inventing yet another cell-phone app that has a half-life of maybe a few months. Doesn’t matter, every Virginia legislator, economic development official and education advocate seems to be hypnotized by the STEM genie.

A piece I just did for the up-and-coming Chesterfield Observer on vocation education in that county:

“The recent push to educate students in so-called STEM (Science, Technology, Engineering and Mathematics) may be case in point. The goal is to churn out bright, highly trained young people able to compete in the global economy with their counterparts from foreign lands.

“A subset of this area of concentration is computer science, which goes beyond knowing the basics and gets into the nitty-gritty of learning code and writing computer languages. By some accounts, such skills will be necessary to fill more than 2 million jobs expected to become open in the state by 2020.

“Critics question, however, if overspecialization in technology at earlier ages prevents students from exploring studies such as art and literature that might make them better rounded adults. And, specialization often assumes that jobs will be waiting after high school and college when they might not be.

“Peter Cappelli, a professor of management at the Wharton School of the University of Pennsylvania, has written about such problems of academic overspecialization in national publications such as The Wall Street Journal. He recently responded to questions from the Chesterfield Observer via email.”

“Not many science grads are getting jobs in their field,” Cappelli says. “The evidence suggests that about two thirds of the IT (information technology) grads got jobs in their fields, about the same for engineering. There is no guarantee in those fields. It’s all about hitting the appropriate subspecialty that happens to be hot. There are still lots of unemployed engineers and IT people.”

So there you have it. In my opinion, the over-emphasis on STEM training has the unfortunate effect of producing young adults who have one goal in mind – getting a job and making money, not helping humankind. And, if you insist on STEM, why not branch into something where there are actually jobs namely petroleum engineering, geology and transportation engineering.

I’ll leave the dangers of added petroleum cargoes in trains to another post.

Petersburg’s Renaissance

PetersburgBy Peter Galuszka

Petersburg has been a special place for me.

Years ago, when I’d pass through, I always felt I were driving onto the set of a 1950s or 1960s movie set in the South such as “Cape Fear” starring Gregory Peck and Robert Mitchum. A somnambulant ease pervades the place as does the down-home friendliness you don’t get in pretentious Richmond 30 miles to the north up Interstate 95.

I got to know Petersburg a lot better when my two daughters went going to high school there at the Appomattox Regional Governors School for the Arts and Technology. Drawing from localities from Richmond to Isle of Wight and Franklin, the school body was bright, diverse and creative.

Driving my children if they missed the bus from Chesterfield was a pain but the effort was worth it since they had some fine teachers and avoided the White Toast trap of entitlement one gets into in more affluent suburban schools.

That’s when I was introduced to Petersburg’s nascent arts community. I went to plenty of “Fridays for the Arts” celebration and hung out at Sycamore Street with the kids.

Returning again recently, I found that the arts scene is really taking off. They  seem to be at a sustainable critical mass.

It is due primarily to the city’s policy of remaking itself by setting up an arts district that is nationally recognized as historic and offering tax credits and abatements for newcomers to renovate properties they buy from the city. The big expansion at the Fort Lee military base in 2005 really helped (although it’s due for a cut).

I wrote about it in a cover story in Style Weekly. The heroes and heroines are far-sighted city officials, arts willing to risk a lot remaking some truly historic buildings and the next wave, restaurants that aren’t owned by franchises, coming in.

Not everything is wonderful. Petersburg still has a weak public school system and a poverty rate of 28 percent, a point higher than Richmond’s. But it also doesn’t have the in-fighting among powerful interest groups that far bigger Richmond does. There’s no endless debate over building a baseball stadium in Shockoe Bottom (to line pockets of developers) or keeping it at the Boulevard.

There’s no high level brinksmanship about where to put a Children’s Hospital.

In Richmond, you see, ball fans and sick children are the last ones to be worried about. What matters is Mayor Dwight Jones, Bill Goodwin, Michael Rao, the Timmons Group and the editors of the Richmond Times Dispatch. They are important and you are not.

You don’t get that in Petersburg. The little city (population 32,000) that has a historical richness than rivals Richmond’s doesn’t think it is better than anyone else.