Category Archives: Uncategorized

Cycling Rolls through Chesterfield, but Will it Reach the Finish Line?


By John Szczesny

It’s official, maybe: 360 new miles of bike paths and trails in Chesterfield County. Whether the plan endorsed this week by the Board of Supervisors in a 3-2 vote ever gets funded (and built) remains to be seen, but there’s no doubt cycling advocates scored a big victory.

Given county staff’s initial price tag — pegging the per-mile cost of bike paths between $250k and $1 million — early odds had favored denial in the low-tax, conservative Republican stronghold that sent Dave Brat to congress.

There remains strong opposition from residents who argued against the scope and astonishing cost of the plan. The growing county has multiple competing budget demands, and it’s fair to ask where bike paths should rank compared to education, public safety, infrastructure, and other concerns. But with over 1,000 petition signatures and a vocal lobbying effort in favor of the plan, county residents clearly want safe bicycling facilities in auto-dominated Chesterfield.

It remains to be seen whether county officials can acquire all the necessary right of way to construct the pathways, as any missing link could doom an entire trail. As innocuous as bike paths may seem, this complex project likely will require the services of outside engineering consultants for overall project management and full-scale paving, grading, and drainage plans. In addition, recently enacted and more stringent EPA storm water requirements must be reckoned with.

Cycling proponents can savor victory for now, but there’s still a bumpy road ahead in Chesterfield. So far they’ve proven willing and able to hang on for the ride.

The Politics of Big Data

big_databy James A. Bacon

Yesterday I blogged about the All-Payer Claims Database, which has the potential to provide unprecedented insight into medical outcomes and charges in Virginia. By consolidating medical claims data for hundreds of millions of health claims, the database will enable employers, insurers and hospitals to conduct analytical studies that were impossible previously.

There is a lot of maneuvering behind the scenes regarding the database, as I have learned from an informed source whom I will not quote because we were chatting informally and he might have thought we were off the record.

Participation in the database is voluntary, so it took years of coaxing and wrangling to persuade Virginia’s private insurance companies to relinquish their data. Anthem Blue Cross-Blue Shield, the state’s largest insurer, is the most ambivalent about the project. With more than one million Virginia customers, its database is big enough that it can go solo with the kind of analysis people envision for the statewide database. That ability confers it a significant competitive advantage over its smaller rivals. If Anthem dropped out, the value of the statewide database would diminish significantly. Accordingly, the General Assembly may consider legislation in 2016 to make participation mandatory.

That raises an interesting philosophical question: Is it justifiable for state government to mandate the sharing of outcomes data? In an era in which data confers tremendous marketplace power, any such mandate would penalize Anthem. The insurer could advance a plausible argument that a requisitioning of its data would amount to an uncompensated seizure of valuable property — property far more valuable than its office buildings, computer networks and other tangible assets.

But Anthem’s right to protect its property from government seizure conflicts with the public good that can be achieved through the sharing of data. The bigger and more comprehensive the database, the greater the benefits to public health that can be achieved by mining it.

Politicians comfortable with the exercise of state power will have no moral or philosophical compunction about extracting the data from Anthem against its wishes. But what of conservatives and libertarians who respect private property and distrust the arbitrary exercise of government power? Should we insist that any sharing be voluntary? Or should we compel Anthem to share?

I think there is a case to be made for mandated data sharing on conservative/ libertarian grounds that it can drive market-based reforms of Virginia’s health system. Health care in America is not a market-based system, it is a corporatist system negotiated between the federal government, hospitals, insurers, physicians and pharmaceutical companies. Prices are opaque to the patient-consumer. Accountability is so diffused throughout the system as to be meaningless. Making price and quality data available to the public, formatted in such a way that the public can understand it and act upon it, is essential to creating a market-based system.

But price and quality data are only part of the picture. Virginia has other state-level barriers to a market-based system, including the Certificate of Public Need (COPN), which restricts competition, and state-imposed insurance mandates, which force insurers to offer expensive plans with broad benefits. Price transparency cannot by itself drive the transformation to a competitive, market-based system. But as part of a bundle of reforms including the repeal of COPN and insurance mandates, data sharing could bring about a net gain in freedom, competitiveness and prosperity that would appeal to the conservative conscience.

McAuliffe Adminstration Gives P3s a Second Chance

Transportation Secretary Aubrey Layne. Photo credit: Daily News.

Transportation Secretary Aubrey Layne. Photo credit: Daily News.

by James A. Bacon

The McAuliffe administration has spent much of its first two years unwinding the legacy of botched and controversial public private partnerships inked by the McDonnell administration: radically truncating the plan to to build a U.S. connector between Petersburg and Suffolk, and revising significantly the tolling for Norfolk’s Midtown-Downtown tunnel project. Now, after the enactment of significant legislative reforms, the McAuliffe transportation team is turning to the P3 tool to help fund and/or operate its ambitious plans for Interstate 66 in Northern Virginia.

Transportation Secretary Aubrey Layne is confident that he can avoid the pitfalls of the previous administration, and that a public-private partnership can make a major contribution to improving mobility along a transportation artery that Governor Terry McAuliffe variously described Thursday as a “parking lot” and “the most congested road in America” at the 2015 Governor’s Transportation Conference in Virginia Beach.

“We’ll be a big supporter of P3s,” elaborated Layne in his own remarks to the conference. “We need to share risk with the private sector. [Virginia] will very much continue to be a leader.”

The I-66 initiative essentially consists of two separate plans: one for inside the Beltway and one for outside the Beltway. The outside-the-Beltway plan entails widening the Interstate, installing HOT lane tolls and ramping up commitment to mass transit. The Virginia Department of Transportation (VDOT) has generated 13 responses from private-sector players on how to structure the P3.

Where Sean Connaughton, Layne’s predecessor as transportation secretary, regarded P3s as a way to leverage finite public dollars with private investment, thus maximizing total dollars invested, Layne emphasizes the role of P3s in allocating risk. That feedback has been invaluable in surfacing cost and risk issues that VDOT had not considered. “Transparency is the way you have price discovery and risk discovery,” he said.

One set of risks revolves around building a major project on budget and on time. Another major risk is “demand risk” — the likelihood that traffic and revenue forecasts will materialize as projected. There also are risks associated with operations and maintenance. Layne is open to assigning those risks to a private-sector contractor. He has been far more skeptical, however, of relying upon private-sector capital. Private-sector demands for higher financial returns on investment can add hundreds of millions of dollars to the price of a project.

Layne’s approach is to establish public policy first — what does the Commonwealth want to accomplish along I-66, and how? The administration has made it clear that the I-66 corridor will be multi-modal, including transit, and that the state will not agree to covenants that would restrict for decades construction on other roads that might divert traffic, as the previous administration did in the Downtown-Midtown tunnel project. Those parameters are non-negotiable, except perhaps at the margins. Once those guidelines have been established, he said, the private-sector input can be extremely valuable.

In other remarks, Deputy Secretary of Transportation Nick Donohue told the conference that Virginia and California lead the country with their P3 laws, and that delegations from other states frequently visit the Old Dominion to see what has been done here. Stymied by transparency laws from talking to private corporations “off line,” he explained, other states cannot enact laws like Virginia’s. And that curtails the ability to put together deals like Virginia’s.

An open and transparent process is critical to Virginia’s P3 law, said Donohue, but so is the ability to engage in confidential negotiations. He believes that Virginia has done a good job, based upon its extensive experience with P3s, in threading the needle between transparency and confidentiality. “Steps we have taken in the last couple of years have addressed a lot of problems” with Virginia’s law, he said.

The decision-making process for the I-66 corridor will put the administration’s faith in P3s to the test. The issue of inside-the-Beltway tolls has exploded into a political furor. More controversy is bound to follow as the administration moves from the concept stage to specific proposals.

The Terry McAuliffe Show

Governor McAuliffe checks out a made-in-Virginia three-wheeler outside the Virginia Beach Conference Center.

Governor McAuliffe checks out a made-in-Virginia three-wheeler outside the Virginia Beach Conference Center.

by James A. Bacon

Terry McAuliffe doesn’t just fill the room — he fills the banquet hall. He’s loud, he’s animated,  he’s funny and he’s prone to superlatives. Economic development success, he proclaims, comes from superior salesmanship and the art of the deal. Indeed, if he doffed a wig of thinning blond, slicked-back hair, you’d be hard pressed to tell him apart from Donald Trump.

The governor regaled the audience at the 2015 Governor’s Transportation Conference in Virginia Beach around noon today. Among some of the more notable quotes:

Referring to Transportation Secretary Aubrey Layne, McAuliffe said with typical enthusiasm: “He’s the greatest transportation secretary in the history of Virginia!”

Similarly, John Rinehart, CEO of the Port of Virginia is “the greatest port director in America!” The recent increase in container traffic, the governor added, is “an absolutely extraordinary record! … Ladies and gentlemen, we are going to have the greatest port in America!”

Touting the benefits of the Interstate 95 tolled HOT lane project, he proclaimed the awesomeness of private-sector concessionaire Transurban. “Give Transurban a great round of applause!” he urged the audience.

As for those opposed to paying tolls on the proposed Interstate 66 megaproject in Northern Virginia, they’re not just misguided or mistaken. What they’re saying about tolls is “an absolute lie! It’s a fiction! It’s misleading to voters!”

McAuliffe said he has probably spent more time promoting Virginia overseas than any other governor. Ever. And one could surmise from his remarks that he’s given foreigners the hardest sell. He told a story about talking to some wine stewards in France. “I spent an hour convincing them that Virginia wines are better than French wines.”

The governor has made self-driving cars and unmanned aerial vehicles a major economic development priority for Virginia. His goal, he said: “I want a clone in every home in Virginia. And I wanted it manufactured in Virginia!”

Agree with him or disagree, McAuliffe is never dull.

A Tax Structure Finely Tuned for… a 20th Century Economy


Virginia business tax rates. Image credit: Tax Foundation, KPMG

A new study by the Tax Foundation and KPMG of state business taxes differs from previous studies, which look at average levels of taxation, by examining how state tax structures affect different types of business. The big conclusion from “Location Matters: The State Tax Costs of Doing Business“: Firms experience dramatically different tax rates because their exposure varies to different state and local taxes.

The study’s analysis of Virginia’s tax structure suggests that established companies experience much lower overall tax burdens than new companies. The Old Dominion ranks second best in the country for mature, labor-intensive manufacturing operations but only 35th for R&D facilities.

Bacon’s bottom line: I have frequently decried the lack of entrepreneurial dynamism in Virginia as a root cause for our sluggish economic performance. There may be many reasons for Virginia’s mediocre growth record in recent years but, based upon the data shown in the chart above, one of them is certainly the structure of business taxes.

In every category analyzed, new firms experience higher effective tax rates than mature firms. Just as important, look at the comparative ratings. Virginia ranks No. 2 in the country for mature, labor-intensive manufacturing companies — neither a growth sector, nor a particularly high-paying sector — but only 35th for R&D, the kind of economic activity every state covets. If we wanted to design an economy for the 20th century, not the 21st, we’ve done a pretty good job.

(Hat tip: Larry Gross)

Proudly Training the Next Generation of Indentured Servants

indentured_servantsIn the latest example of do-gooders creating social injustice, we now hear that nearly 7 million Americans have gone at least a year without making a payment on their federal loans.

As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, according to the latest quarterly data from the U.S. Department of Education, reports the Wall Street Journal. That translates into 17% of all borrowers with federal loans being delinquent. Millions more are behind on their loans but haven’t hit the 360-day threshold that the government defines as default.

Absent a change in legislation, student loan debt can’t be dismissed through bankruptcy. Of course, do-gooder politicians, who urged laxer lending policies to begin with, now are falling over themselves to find ways to ease the debt burden incurred by the intended beneficiaries. Hillary Clinton, for instance, has proposed a plan that would cost $350 billion over 10 years and would be financed by a reduction in tax deductions for affluent taxpayers.

Summing up the problem: the United States higher ed system experiences endless administrative bloat… the costs of which universities pass on to students by means of higher tuition and fees… which the U.S. government makes easier to pay by allowing nearly unlimited borrowing… while no one addresses the underlying problem of rising costs. And the solution to the debt problem? Stick it to affluent taxpayers!

What a racket!

The rise of massive student indebtedness, now approaching $1.2 trillion, is as a clear-cut example of social injustice in the United States as you can find, but it is not portrayed is such because (a) the building blocks were put into place by social justice warriors themselves, and (b) the primary beneficiaries, universities, are bastions of do-gooder thinking.

This is only one of many examples of how the social justice crowd has immiserated the poor and working class in the United States through misguided policy. Before “helping” with student loans, the social justice crowd pushed for lower credit standards for mortgages in order to promote home ownership. The result: a deluge of foreclosures on sub-prime loans causing one of the greatest liquidations of wealth among the poor in U.S. history. Now the social justice crowd wants to “help” the poor by jacking up the minimum wage to levels that will, according to reputable estimates, result in the loss of 5% of such jobs in the short run, increase automation of low-wage jobs in the long run, and make it difficult for the poor and young to find entry-level jobs.


Hiroshima and Nagasaki: the End of the Carnage

Mushroom cloud over Nagasaki, Japan

Mushroom cloud over Nagasaki, Japan

Seventy years ago, American aircraft dropped an atom bomb over Hiroshima, Japan, adding another horror to the train of horrors that was World War II. The hand-wringing over the decision to deploy the atom bomb, which resulted in roughly 250,000 deaths in Hiroshima and Nagasaki, continues to this day.

I’m not one of the hand-wringers.

Seventy years ago, my father was inducted into the U.S. Army immediately after graduating from high school. His likely destination: Japan. Americans had just suffered 50,000 casualties in the Battle of Okinawa, and there was every reason to believe the toll would be far worse in the struggle for the Japanese homeland. The Japanese had stripped China and Manchuria of soldiers in preparation for the final battle. They were fortifying the coastline and organizing squadrons of kamikaze-like, human-guided torpedoes (kaiten). Americans would have suffered hundred of thousands of casualties — the Japanese millions. The detonation of the two atomic bombs ended the carnage. My father never had to fight the Battle of Japan. He went on to raise a family and is living to this day.

Hiroshima was a tragedy and should never be forgotten. It serves as a reminder of how horrifying nuclear war can be. But do I regret the decision to drop the bomb? Never.


A Glimpse into the Byzantine World of Virginia Health Care



by James A. Bacon

To call the United States health care system Byzantine is to cast a slur upon the ancient empire of that name. A glimpse of the bizarre, Rube Goldberg-esque way in which the system functions in Virginia can be seen in today’s Richmond Times-Dispatch article about the state’s Certificate of Public Need (COPN) program.

A state working group is studying whether to scrap or modify the regulatory system, which requires hospitals and other health care providers to seek state approval for new or expanded medical-care facilities and the acquisition of expensive equipment. The system curtails competition by making it difficult for new enterprises to enter the marketplace, and it often ties regulatory approvals to promises to provide charity care.

In 2013, health care providers donated $1.34 billion worth of charity care to comply with the state-mandated obligations, the T-D quotes Peter Boswell, chief of Virginia’s Department of Health Office of Licensure and Certification, as saying. Statewide, 195 certificates of need are conditioned upon requirements of providers to administer free care. As an example of how that might work, the T-D says a cardiac catheterization lab might have a requirement to provide 3.8 percent charity care.

Don’t get me wrong. We need a mechanism for providing health care to poor people who fall between the cracks of government assistance, Obamacare and private insurance. This is just an insanely opaque way of going about it. That $1.34 billion is not subject to any form of market discipline or legislative review. State regulators cut deals with health care providers, and then it’s up to the providers to live up to their obligations. The state lacks the resources to audit compliance.

Assuming hospitals and other providers do comply, who ultimately pays? Do the $1.34 billion in payments come out of hospital profits? Or do hospitals simply pass on the cost by jacking up charges to paying customers? I doubt anyone really knows. If there’s one thing as opaque as the health care sector’s pricing system, it’s health care accounting.

Health care is an inherently complex business, involving trade-offs between price, quality, convenience and other factors that few consumers are equipped to make. That inherent complexity is compounded by layer upon layer of regulation, subsidy, cross-subsidy and other forms of complexity. I don’t see how it’s possible for anyone participating in the industry to make economically rational decisions. No wonder there is so much waste and inefficiency. No wonder costs are out of control. No wonder private health care insurance grows more unaffordable with each passing year. No wonder Congress felt compelled to enact health care “reform” (although the reform known as Obamacare makes the system even more bureaucratic, complex, opaque and uncompetitive).

Eliminating COPN in Virginia is not a silver bullet that will miraculously create a transparent, competitive market-based health care system. Other states have abolished COPN, and their systems are not notably lower cost or more efficient (that I know of). But it is one layer of anti-competitive complexity that Virginia legislators can strip out of the system, thereby making the state marginally less hostile to innovation and competition. Combined with other market-based reforms, it could make a difference.

If Virginia abolished COPN, what would happen to uninsured people who depend upon that $1.34 billion a year in uncompensated care? Aye, there’s the rub. Politically, it may be impossible to dismantle the program. Perhaps we are doomed to living (and dying) with an opaque, irrational and inefficient system.

The Ironies of Virginia’s Growing Diversity

Midlothian’s New Grand Mart taps state’s growing diversity

 By Peter Galuszka

Suddenly immigration is popping up as a major issue in Virginia and the nation.

Virginia Beach has been dubbed a “sanctuary city” for undocumented aliens by Fox News and conservative Websites. GOP presidential hopeful Donald Trump is scarfing up poll number hikes by calling Mexicans trying to enter the U.S. illegally “rapists” and proposing an expensive new wall project to block off the southern border. Pro-Confederate flag advocates are pushing back against anti-flag moves, but they can’t escape the reality they are conjuring up  old visions of white supremacy, not their version of respectable Southern “heritage.”

So, if you’d like to look at it, here’s a piece I wrote for The Washington Post in today’s newspaper. When I visited a new, international food store called New Grand Mart in Midlothian near Richmond, I was impressed by how large it was and how many people from diverse backgrounds were there.

Looking further, I found one study noting that Virginia is drawing new groups of higher-income residents of Asian and Hispanic descent. In the suburbs, African-Americans are doing well, too.

The Center for Opportunity Urbanism ranked 52 cities as offering the best opportunities for diverse groups. One might assume D.C. and Northern Virginia would rank well, and they do. More surprising was that Richmond and Virginia Beach rank in the top 10 in such areas as income and home ownership. True, mostly black inner city Richmond has a 26 percent poverty rate but it seems to be a different story elsewhere.

Stephen Farnsworth of the University of Mary Washington says that economic prosperity and jobs that had been concentrated in the D.C. area, much of it federal, has been spread elsewhere throughout the state. It may not be a coincidence that New Grand Mart was started in Northern Virginia by Korean-Americans who undertook research. It revealed that the Richmond area was a rich diversity market waiting to be tapped. They were impressed and expanded there.

Other areas that do well in the study are Atlanta, Raleigh, N.C. and ones in Texas, which show a trend of job creation in the South and Southwest outpacing economic centers in the Northeast, Midwest and in parts of the West. Another story in today’s Post shows that there are more mostly-black classrooms in Northern cities than in the South. The piece balances out the intense reevaluation of Southern history now underway. A lot of the bad stuff seems to have ended long ago, but somehow similar attitudes remain in cities like Detroit and New York.

This progress is indeed interesting since old-fashioned American xenophobia is rearing itself again.

In Virginia, the long-term political impact will be profound as newer groups prosper. They may not be as inclined as whites to embrace Virginia’s peculiar brand of exceptionalism, such as their emotional mythology of Robert E. Lee and Thomas Jefferson. Their interest in them might be more dispassionately historical.

And, as the numbers of wealthier people from diverse backgrounds grow, they may be less willing to keep their heads down when faced with immigrant bashing. That’s what people of Hispanic descent did in 2007 and 2008 when Prince Williams County went through an ugly phase of crackdowns on supposed illegals. They could strike back with their own political campaigns.

Whether they will be blue or red remains to be seen. It’s not a given that they’d be Democratic-leaning. Farnsworth notes, however, that as more diverse people move to metropolitan suburbs, whites in more rural, lower-income places may become more reactionary out of fear. Hard-working and better-educated newcomers might be out-classing them in job hunts, so they might vote for politicians warning of a yellow or brown peril.

In any case, New Grand Mart presages a very crucial and positive trend in Virginia. It shows the irony of the hard right echo chamber peddling stories designed to inflame hatred and racism, such as the one about Virginia Beach being a “sanctuary” for illegals. In fact, the city is attracting exactly the  well-educated and hard-working newcomers of diverse backgrounds upon whom it can rest its future.

But we’re in an age of bloated billionaires with helmet hairdos and no military experience claiming that former Republican presidential candidate John McCain, a shot-down Navy pilot who spent five years in a brutal North Vietnamese prison, is not a hero. If Virginia can ignore such time-wasters and embrace diversity, it will be a better place.

Dominion’s Curious Power Plan

The North Anna nuclear plant

The North Anna nuclear plant

Peter Galuszka

Dominion Virginia Power is taking a tepid approach towards planning its future generating units, as evidenced by its submission this week of its 2015 integrated resource plan to the State Corporation Commission.

As such, it claims it is in a “transitory” phase that will rely on natural gas as a “stop gap” measures as it waits to see what will happen with proposed U.S. Environmental Protection Agency rules on reducing carbon dioxide emissions.

To that end, it plans on building a new $1.3 billion natural gas plant in the Greensville County area and rely on shifting coal units at Chesterfield Power Station (the state’s largest single air polluter) to gas and also at a few other spots. The new gas plant will generate 1,600 megawatts.

The other news in the submission is that wind is out as far as Dominion is concerned. It has dumped a small prototype project off of Virginia Beach claiming that cost estimates came in at double the original $230 million or so for 12 megawatts of power.

Solar gets more respect – such as adding up to 4,000 of solar-based megawatts for about $4.3 billion.

What’s truly puzzling is that Dominion apparently says that a third nuclear unit at North Anna would run $7.2 billion. It is the first time, I’ve ever seen any figure from them and it seems very much low-balled. The Sierras Club puts its price as higher than $10 billion.

A case in point is Southern Company’s Vogtle plant in Georgia, which is adding two nukes to two existing ones. It has had cost overruns of about $4billion. The early estimates were about $7 billion each for the two reactor units. So, what will North Anna Three really cost?

And, by the way, for all penny-pinching conservatives out there who believe that government handouts are totally wrong, they only give you a fraction of the story. The federal government is putting up $6.5 billion on loan guarantees for the project. This would be on top of the billions over billions of dollars the feds have put into nuke power since the days of the Manhattan Project. One hears much whining on this blog about how it is utterly foolish to subsidize renewables in any way.

A couple of last points.

Dominion is hot-to-trot to build its controversial $5 billion Atlantic Coast Pipeline. Yet the new Greensville gas plant can easily be served by the existing Transco pipeline. If that’s true, why is it so urgent for an entirely new pipeline that will run past in the general area? Dominion insists this is not the case, but I can’t get the idea out of my head that ACP gas is for exports. If so, why are we mucking up bucolic Nelson County so some multi-nationals can scarf up some bucks or Euros or yuan or yen so Mumbai had have more power?

Also, I haven’t gone through the Dominion report line by line, but it seems that it is devoid of any emotional hysteria that one often sees from opponents of renewable power.

If so, then why was it so absolutely urgent in the last General Assembly for Dominion to ram through a bill that relieves them from SCC audits for five years? I still cannot figure what that was all about.

Industrial groups, supported by Dominion, made a boogy man of the EPA’s Clean Power Plan, which, in truth, is just a draft. We should know later this year what the real rules will be.

Where’s the hysteria now? And remember, folks, when you read this, remember that I am free of any monetary sponsorship by Dominion.