Category Archives: Infrastructure

In Hampton Roads, Life Is Not a Gas

natural_gas

Hampton Roads and other Tidewater communities see proposed natural gas pipelines in Virginia as a boon to economic development.

by James A. Bacon

While debate rages in western Virginia over the economic impact of natural gas pipelines on property values and local economies, we hardly hear a peep from the low country areas of Virginia and North Carolina that would benefit from an expanded supply of gas.

Elected officials claim, and economic developers confirm, that inadequate supplies of gas to Hampton Roads and outlying communities prevent them from competing for energy-intensive industrial customers, crimping efforts to grow their economies and create jobs.

“I’ve heard from cities and developers and builders. … We’ve got to get more capacity here,” says Sen. Bill DeSteph, R-Virginia Beach, chair of the Hampton Roads Caucus, who persuaded the region’s 33 state senators and delegates to sign a March letter supporting the proposed Atlantic Coast Pipeline (ACP).

Voices from Hampton Roads and places like Brunswick and Greensville counties, where new gas-fired power plants are being built, have been quiet during the pipeline controversy. The impact of pipeline construction is less tangible and immediate than it is for, say, landowners in the path of the ACP and the proposed Mountain Valley Pipeline. And the benefits are more theoretical — fresh gas supplies would put their communities in the running for manufacturing projects they can’t compete for now, but it’s not as if there’s a big job-creating project waiting in the wings. Natural gas proponents aren’t barraging the media with press releases, filing lawsuits or marching on the state capitol.

Still, economic developers and political leaders have quietly lined up behind pipeline development, especially the Atlantic Coast Pipeline. For DeSteph, the aha! moment occurred about two-and-a-half years ago when demand from a severe cold snap swamped the local gas distributor, Virginia National Gas. The utility had to tell some of its largest customers to curtail their use of the fuel, as called for under contract. “I was shocked that we shut down the gas supply,” says DeSteph. “In my opinion that’s something we should never do.”

While big industrial customers usually can manage such outages, supply curtailments send a signal that gas supplies are limited. No energy-intensive manufacturer would want to locate or expand in Hampton Roads when they could locate worry-free in other communities. Noting that the Norfolk Naval Station was one of the entities that curtailed its gas use, DeSteph even fears that the capped gas supply could undermine the region’s status as a military hub.

The decline in natural gas prices made possible by fracking and the exploitation of the Marcellus/Utica gas fields has driven the re-shoring of energy-intensive manufacturing back to the United States, says Rick Weddle, president of the Hampton Roads Economic Development Partnership. But the areas benefiting from the trend have been those with access to the abundant gas supplies. Hampton Roads isn’t in the running.

The Atlantic Coast Pipeline, designed to carry 1.5 billion cubic feet of gas per day, could change that. The pipeline would run from West Virginia through Virginia to North Carolina. A spur would split off from the main pipeline to deliver gas to Virginia Natural Gas, which has signed a 20-year customer agreement, and whose parent company AGL Resources is one of the partners in the project. The pipeline also would serve Piedmont Natural Gas serving the North Carolina market, which is a partner, too. (Dominion Resources, a sponsor of this blog, is the managing partner.)

A bigger supply of natural gas to the region would expand the prospects that Hampton Roads could compete for. “We would target new industries,” Weddle says.

The same logic applies to smaller communities in eastern Virginia and North Carolina, which also sit at the end of the existing pipeline distribution system.

The big five utilities in the industrial recruitment game are wastewater, electricity, fiber-optic cable and natural gas, says Christopher Chung, CEO of the Economic Development Partnership of North Carolina. “Most companies want gas, whether they’re using it for heating or as part of the manufacturing process. Not one hundred percent need it, but most do. It’s really hard for a community to make the case to recruit a manufacturer if it doesn’t have natural gas. Not impossible. But so many locations do have it that you’re at a major competitive disadvantage if you don’t.” Continue reading

Metro Positions Itself for the Big Ask

metroby James A. Bacon

Staring into a fiscal black hole, Washington Metropolitan Area Transit Authority Chairman Jack Evans is trying to nail down the authority’s 2018 spending plan by November, months earlier than usual. The move, suggests Washington Post writer Martine Powers, “is a signal that the transit agency is preparing to ask the District, Maryland and Virginia for additional money if fares are not raised or the federal government does not come forward with more funding.”

How much money? Between $75 million to $100 million per jurisdiction.

Evans issued the warning after a meeting in which the WMATA board discussed a presentation by McKinsey & Company indicating that the mass transit organization was paying significantly more for expenses than comparable transit agencies.

The McKinsey report, issued in April, is must reading for Virginia legislators pondering how to respond when WMATA approaches, tin cup in hand, begging for more money or risk seeing the collapse of the mass transit service so critical to Northern Virginia’s economy. That report clearly lays out the management challenges facing the authority and provides concrete ideas on how to address them.

WMATA’s long-term mismatch between revenues and expenses has been getting worse, not better. According to McKinsey, Farebox recovery has declined from 47% of costs in 2011 to 45% today and will continue to drop further as passengers fed up with the rail system’s poor reliability commute by other means. Rail system revenues would need to grow at 7% yearly just to maintain the current operating deficit. Personnel growth averaging 5% annually has driven most of the cost inflation. The authority has more employees who getting paid more (wages growing 4% annually) to work less (regular hours per full-time equivalent employee down 2% annually).

Poor railcar maintenance is the single-most important driver of service unreliability — 63% of all rail line delays are caused by railcar failures, the report says. There are two main reasons for cars being unavailable: parts are frequently out of stock, and repair throughput is exceptionally low. “Estimated technician wrench time ranges between 25% and 40%, below a best-in-class standard of 60%.” The reasons for the low productivity can be traced to systemic management failures such as the uneven distribution of cars between shops, turnover in mechanic staff, and technicians starting work orders without all necessary tools and parts.

The report also took note of the high cost of MetroAccess, a transportation service for people with disabilities. McKinsey estimated that WMATA could cut the $110 million program’s costs 20% by experimenting with innovative delivery models. The report also recommended extensive changes to WMATA’s capital allocation model and the structure of its pension, retirement-benefits plans and workers compensation plans.

Bacon’s bottom line: The McKinsey report provides an objective checklist of reforms that WMATA needs to make before entrusted with any more Virginia taxpayer dollars. Give management the money without conditions, and the urgency to implement the reforms disappears. Make added money contingent upon implementing reforms, and WMATA actually might wind up needing less than it thinks it does. If WMATA’s board and management are unwilling or unable to execute these of equivalent reforms, Virginia should give them no more money.

Hat tip: Tim Wise

When Balanced Budgets Aren’t Really Balanced

hide_the_peaby James A. Bacon

The politics of fiscal implosion are ugly. Just look at what’s going on in Petersburg and Richmond.

  • Confronted with a massive budget deficit last year in contravention of the state constitution and the prospect of a deficit in the year ahead, Petersburg City Council bravely agreed to cut the compensation of the city’s 600 employees — but carved out exemptions for senior city officials and themselves.
  • Another trustee has resigned from the board of the city of Richmond’s severely under-funded retirement fund, which has been embroiled in governance issues over who calls the shots over investment decisions.
  • City of Richmond officials say they have nearly completed their comprehensive annual financial report for 2015 — seven months late! The city has not completed the required report on time since 2014. City officials blame IT issues.

That’s just in the Richmond region, which I am familiar with because I read the Richmond Times-Dispatch as my daily newspaper. Who knows what’s happening elsewhere? While Virginians pride themselves for their fiscal rectitude, it is increasingly clear that some jurisdictions don’t hew to standards much higher than Chicago, Cleveland or Detroit.

In theory, the state constitutions requires the state government and each political jurisdiction to balance its budget each year. Virginians should be concerned that Petersburg failed to do so in fiscal 2016, that it shows every sign of failing to do so again in fiscal 2017, and that there appears to be no sanction or penalty in sight. Likewise, we should be concerned of the various tricks the state and its localities can use, if so inclined, to hide long-term structural budget deficits. Here are three:

  • Under-fund employee pensions. The Commonwealth drastically under-funded the Virginia Retirement System in the last recession, although it is now doing penance by accelerating repayments. The City of Richmond has under-funded its government-employees pension, which it operates independently of the VRS.
  • Slow pay creditors. This tactic comes straight out of the Illinois Fiscal Irresponsibility Playbook. Petersburg, it has been revealed, delayed payments of millions of dollars not only to the VRS but schools and the regional jail.
  • Defer maintenance. Rather than properly maintain roads, streets, buses, water systems, sewer systems, school buildings and the like, save money by scrimping on maintenance, even if it means even higher costs down the road.

To what extent do local governments rely upon these and other budgetary sleights of hand to balance their budgets? Nobody knows. Let me rephrase that: The public doesn’t know.

The bottom line here is that citizens cannot take at face value that their local governments are truly balancing their budgets. Some might be. I have faith that my home county of Henrico, whatever its other failings, runs a tight fiscal ship and doesn’t play bookkeeping games. But I don’t know it for a fact. Speaking generally, not specifically about Henrico County, government administrators are subject to the temptation of hiding bad news. And in most cases, local elected officials are either too timid or too untutored to ask tough, probing questions about how money is being spent.

Citizens unite! There are active taxpayer groups in Arlington, Fairfax County and Virginia Beach that I know of. I hope and pray that there are others of which I remain ignorant. Rather than fight lonely fights, they need to pool resources and expertise. I invite like-minded citizens to join Bacon’s Rebellion to create a platform to share knowledge and hold state and local governments more accountable than our elected officials seem able to do on their own. If anyone is interested in such a collaboration, please contact me at jabacon[at]baconsrebellion.com.

Rocky Mountain High Real Estate Values

Street scene in Aspen, Colo.

Street view in Aspen, Colo.

by James A. Bacon

According to a 2011 Wall Street Journal article, Aspen, Colo., could boast of having the most expensive real estate in the country. I don’t know if that’s still true, but I wouldn’t be surprised. As I sit here blogging at Ink! Coffee, looking upon a patio filled with Pellegrino umbrellas and baskets of bright mountain flowers while perusing the real estate ads in The Aspen Times, it quickly becomes clear that this is a place where I could never afford to live. A 3,414-square-foot home with a view of Aspen Mountain and within walking distance of downtown is on the market for $4,995,000. Select neighborhoods in Manhattan might be more expensive on a per-square-foot basis — I don’t pretend to know the national real estate market — but there cannot be many places that are.

Prone as I am to over-thinking absolutely everything, I have been asking myself, how did Aspen get to be one of the most desirable locations in the planet, while small mountain towns in Virginia with comparable natural beauty slide into senescence? Does Aspen provide lessons that Virginia communities can learn from — not with the unrealistic aim of becoming a playground of the one percent, but with the modest goal of attracting tourists and retirees, supporting jobs, lifting the tax base, and paying for amenities that make life more enjoyable for the people who live there?

In the article that follows, I will endeavor to address those questions, fully cognizant that anything I say is based upon the hasty and superficial impressions. My methodology is simple: I stroll around town with iPhone camera in hand and an eye to observing land use, architecture, transportation, and the retail scene. As always, I pay attention to the quality of the public sphere and the “small spaces.” When possible, I engage people in conversation. As it happens, Aspeners (or Aspenites, whatever they call themselves) are incredibly friendly and eager to talk about their fair city.

Aspen got its start in the late 1880s as a silver-mining boom town. When the silver boom went bust, so did the town. Fortunes did not revive until 1946 when Friedl Pfeifer, a former Austrian skiing champion, linked up with industrialist Walter Paepcke and his wife Elizabeth to form the Aspen Skiing Corporation. The town’s most enduring resource, as it turned out, was not silver but world-class skiing.

The inter-mountain west has many  popular ski resorts, but none has done as well as Aspen at winning name recognition and attracting the super-rich. One key to its phenomenal success, I would suggest, is its silver-mining inheritance: a downtown laid out in a classic grid street pattern, a number of handsome brick buildings, and a municipal government intent upon preserving that heritage. Aspen has something that many of its ski-resort peers does not: walkability. Admittedly, Aspen isn’t the only walkable ski town — Jackson, Wyoming, springs to mind — so pedestrian ambiance is not exclusively responsible for vaulting it into the real estate stratosphere. But a comparison with Virginia/West Virginia ski resorts such as Wintergreen, Snowshoe and Massanutten lacking downtown districts suggest that walkability is a critical differentiator.

Downtown Aspen, comprising about two dozen blocks, is a destination in itself, and real estate ads tout houses’ proximity to the urban center. While the “Mountain Modern” style of architecture often presents a jarring contrast with the 1880s-era buildings, the overall effect is still magical. Visitors come to Aspen, fall in love, and gladly pay a premium to buy a house or condominium that allows them to live here.

Aspen5

Not only are historic buildings from Aspen’s silver-mining past architecturally distinctive but they help define the walkable street space.

Walkability

One of the first things my wife, friends and I noticed when strolling around downtown was the paucity of cars. Traffic was negligible. I assumed the empty streets reflected the lassitude of the summer season at a skiing destination. But a friendly acquaintance, a commodities trader who moved here from Chicago, assured me otherwise. We were, in fact, experiencing peak downtown traffic. Summer tourism is booming, and a lot of people bring their own cars and four-wheel drives to take advantage of the hiking, fishing, rock climbing, and whitewater rafting.

While cars may be scarce, human beings are everywhere. The ability to live here without driving is a prime attraction. People can meet most of their daily needs by walking and biking. The commodities trader said he goes a week at a time without ever stepping in a car. Another acquaintance, a native Philadelphian who lives here eight months of the year and does business in New York, said when he recently sold a Jeep he’d owned twelve years, it only had 15,000 miles on it.

Uncongested streets are the result of thoughtful design. Aspen hews to the rules of classical urbanism. For starters, the buildings define the street space. Rather than standing out and saying, “Hey, look at me” with egocentric starchitect designs, they conform with one another in size, height and relationship to the street. By abutting the sidewalks, their facades delineate the public space of the sidewalk realm. While you won’t see many cars driving around, plenty are using the on-street parking — and that’s a good thing. Parked cars and building facades bracket the pedestrian domain as a distinct space. This pedestrian realm, as I shall describe, is adorned by flower gardens, rain gardens, statuary, street seating, and window shopping that make it extraordinarily inviting. Continue reading

Virginia’s New Road Funding Process — Less Political but Still Opaque

Project scorecard for

Project scorecard for improvements to intersection at Patterson Ave. and Parham Road.

by James A. Bacon

In a rare bipartisan achievement, Virginia is doing something that no other state in the union is doing: basing its transportation investments on an objective scoring system.

Earlier this month, the Commonwealth Transportation Board (CTB) approved $1.7 billion to be spent on 163 projects selected through the System for the Management and Allocation of Resources for Transportation, or SMART SCALE. The process rates projects for their impact on safety, congestion reduction, accessibility, land use, economic development and the environment.

“SMART SCALE revolutionizes the way Virginia delivers transportation,” wrote Transportation Secretary Aubrey Layne in a Richmond Times-Dispatch op-ed Sunday. “Future administrations can’t develop wish lists on a whim. Projects must be scored and vetted through the data-driven system.”

The bottom-up process starts with a consistent set of standards by which localities select projects for scoring. All nominated projects are screened and scored and funding recommendations made on the basis of the scores. The scenarios are presented to the localities and the public for a round of input. Then the CTB has the final say.

The legislation setting up the new system originated with General Assembly Republicans and was embraced by Governor Terry McAuliffe. The reform is remarkable in that the governor and powerful legislators relinquished much of their power to reward friends and punish enemies through the doling out of transportation dollars and turning it over to a process-driven system.

“No longer are we allowing politics and wish lists determine what gets built. This process is critical to moving people, jobs, and commerce, all of which is essential to building the new Virginia economy,” said McAuliffe in a press release touting the CTB vote.

“With SMART SCALE, we are promoting greater accountability, safeguarding against waste and ending the politicization that has been rampant in our transportation process for so long,” said House Speaker William J. Howell in the same press release.

Bacon’s bottom line: So, I can visit the SMART SCALE website and find a list of 287 projects along with a breakdown of their scores. There, I can see that a project about a mile from my house — $5 million to make improvements to the intersection of Patterson Avenue and Parham Road, a miserable, stinking, soul-scorching abomination of a crossroads if there ever was one — ranked 92 statewide among all projects. And I can view the scores assigned to a variety of metrics, as seen here:

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That’s all well and good, but none of this is intuitive. I don’t have the faintest idea what these scores mean. Are higher scores better than lower scores? I can imagine that a major benefit of the project would be improving “travel time reliability,” as reflected in its 24.6 score. But why would “travel time delay” be so meager at 0.6? Isn’t that closely related to travel time reliability? Is the same scale being applied to each criteria? Is the scale 0 to 1, 1 to 100, or something else entirely? The explanation on how to read a scorecard doesn’t help much.

And how about the data underlying this statistics? How many car crashes and injuries occur at this intersection? How many hours of delay occur, and how is that number measured? How does one calculate the increase in access to jobs? And how does one evaluate the impact of the project on land use?

The information available to me as a member of the public doesn’t allow me to evaluate much of anything. Further, I can’t imagine being a CTB board member and finding the data any more helpful — unless they are given special training in interpreting the numbers or have VDOT staff at their beck and call to answer their questions.

While SMART SCALE undoubtedly represents an improvement over what preceded it, the state might as well be publishing its scores in hieroglyphics. Transparency is not served when the the scoring system is so indecipherable as to be unintelligible as to defeat all efforts at understanding.

Bikes, Bees, Beauty

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by James A. Bacon

New York City has its High Line park built upon an abandoned, elevated freight rail line. The City of Richmond has its Low Line park, built underneath CSX Corp. railroad trestles.

In the seven years since opening to great fanfare, Manhattan’s High Line has attracted millions of visitors and inspired the construction of nearly 1,400 housing units along its two-mile route. By contrast, the opening of Richmond’s Low Line has been decidedly low key, and no one is expecting it to become a magnet for real estate development. But the Low Line could well become an integral part of Richmond’s park system and spur reclamation of the riverfront.

The vision for the $6 million project calls for flower plots with benches, covered walkways beneath the trestles, rain gardens along the Kanawha Canal, and trees shading HOW MANY?? hundred yards of bike path. Capital Trees, a not-for-profit organized to promote urban greening, has committed to fund the ongoing maintenance.

A year ago, the area was an overgrown ruin, neglected by CSX and the City of Richmond, which shared ownership of the land for more than a century. Located in the flood plain, the property had little value. No one had reason to invest in it or even care about it.

“There was no advocate for this area. It was blighted,” says Susan Robertson, co-chair of Capital Trees. “People would ride on the canal boats from the manicured, renovated canal walk [in Shockoe Bottom] and encounter a scene with invasive weeds and trees. From June through November, you couldn’t see the canal [from the land].”

When the Low Line is complete, it will knit together a cluster of recreational assets including the Richmond terminus of the 52-mile Capital Trail, the Great Shiplock Park, the Kanawha Canal, and Chapel Island with its trails and kayak launch. The Low Line also will provide an amenity for the 1,500 residents of Tobacco Row apartments and condominiums on the far side of the flood wall.

“It’s so great,” Victoria Hedegger, a Tobacco Row resident, said recently while walking her new-born in a stroller. “It was nice before. Now it’s even nicer. [The gardens] make the trail so much more attractive.”

Before Capital Trees got involved, this was the view from the Capital Trails bike path.

Before Capital Trees got involved, this was the view from the Capital Trails bike path.

Capital Trees originated as a collaboration between the Richmond region’s four garden clubs in the expectation that they could undertake projects with greater impact if they worked together. The new generation of garden club leaders aren’t content with traditional beautification projects. They are exploring the intersection of beautification, conservation, storm water management and urban place making.

In its early incarnation, the group worked with city officials to reform the urban tree-planting program. Then it spear-headed the building of rain gardens on 14th street in Richmond’s downtown to control storm water runoff. With each success, Capital Trees’ projects became more ambitious.

In 2011 Lynda Miller, head of New York City’s Central Park Conservancy, visited Richmond to describe how volunteers had reclaimed part of Central Park. “She told use we could tackle big, important projects that can make our lives better, recalls Clare Osdene Schapiro, a Richmond Times-Dispatch writer active in the organization. Continue reading

The Tradeoffs of Burying Electric Power Lines

How much is it worth to ensure faster restoration of electric service after a major storm? A lot, if it’s you. Perhaps not so much, if it’s someone else!

by James A. Bacon

Anyone who regards the State Corporation Commission as a wholly owned subsidiary of Dominion Virginia Power really isn’t paying attention. SCC commissioners have their own priorities, and they aren’t necessarily those of Dominion. An example was on display yesterday when the commission held hearings on a Dominion request to spend $140 million to bury its most vulnerable power lines so it could get customers back on line quicker after widespread outages.

The SCC had rejected an earlier Dominion proposal to spend $263 million on a plan to bury the 20% of overhead lines most responsible for outages and time lost. Dominion had argued that burying those lines would cut average electricity restoration times after major storms in half. After the SCC rebuffed that proposal, the utility came back with a scaled-back proposal to spend $140 million, adding a modest $6 per year to customers bills.

Based on their comments and questions, the commissioners did not look favorably upon it. Writes John Ramsey with the Richmond Times-Dispatch:

Commissioner Mark C. Christie said during the hearing that the utility’s calculation of the societal benefit to justify the plan is the wrong measurement since less expensive options to reduce outages — such as increased tree trimming — would have similar impact.

“The whole question about this thing is bang for the buck,” Christie said. “Certainly, you will get fewer outages when the storm comes through. But how do you know all the extra money you spent on undergrounding was more cost-effective than having more trucks out there or tree-trimming or whatever less expensive options?

“We know if you underground a line down a block, we know it’s going to benefit that block in all likelihood. Does that mean it was worth the expenditure that goes into peoples’ bills?

Dominion maintains a portfolio of a dozen different reliability programs, encompassing tree trimming, upgrading old equipment to current standards, and installing sensors to detect failing parts and prioritize investment, among others. (See “Towards a Smarter Grid.”) The company is continually fine-tuning its allocation of resources. For example, it has moved from trimming routes every three years to an approach that takes into account line voltage, how fast the trees grow and many other factors. The inability to trim trees outside of electric-line right of way, said Dominion lawyers at the hearing, places a major restriction on how aggressively the company can trim.

Bacon’s bottom line: Two points…

First: Electric reliability is part of the company’s DNA. One of the metrics Dominion uses to gauge its own performance is the speed at which it restores electricity service. Undoubtedly the SCC commissioners take reliability into account, but they appear to be more concerned at the moment with the impact of spending on rate payers. And who can blame them? Dominion, like other utilities across the country, has spent billions of dollars meeting tougher federal standards for toxic emissions, and it expects to spend billions more meeting the Clean Power Plan standards for carbon emissions. With all the concern over terrorism, cyber-attacks, electro-magnetic pulses and other threats to grid security, the company also is spending hundreds of millions on measures to harden the grid. Ultimately, citizens and businesses pay for all this. In the instance of restoring service after storms, the SCC seems to be prioritizing cost over reliability.

Second: Dominion has sought, or is seeking, SCC approval for a half dozen major electric transmission line projects that have aroused the ire of citizens concerned about the visual impact. Invariably, transmission-line foes suggest burying the line. That option has been prominently suggested for the controversial Surry-Skiffes Creek line which would impact views of the James River near the historic Jamestown settlement. I am speculating here, but I’m wondering if the SCC is skeptical about the cost of burying electric lines in any context, not just for ensuring reliability.

In terms of pure self interest, Dominion has no reason to object to burying distribution and transmission lines — as long as the SCC allows it to recover its costs. If Dominion balks at burying lines, it’s because the executives who deal with the SCC daily and know the minds of regulators anticipate a tough sell before the commission. It may be hard for people to wrap their mind’s around this, but the SCC is boss and Dominion is the supplicant.