Tag Archives: James A. Bacon

Bringing Big Data to the Poverty Debate

Here is a positive development in state government that will never get the attention it deserves: The Virginia Department of Social Services is joining four other state agencies in contributing data to the Virginia Longitudinal Data System (VLDS).

VLDS is a system for accessing data maintained by the Virginia Department of Education, the State Council for Higher Education in Virginia, the Virginia Employment Commission and the community college system. The program allows researchers to gain insight into what public policy initiatives will most cost-effectively prepare Virginians for a modern, 21st-century workforce.

The Department of Social Services brings new data to the mix and allows researchers to ask new questions, such as:

  • How does participation in public assistance programs (e.g. child care, WIC, Head Start, SNAP, TANF, Medicaid) in Virginia impact school readiness, school achievement, health, family cohesion, future employment and wages?
  • What is the return on investment from public assistance programs in Virginia? Are there patterns that suggest different program delivery models that may yield greater effectiveness or cost savings?
  • What are the most critical health, safety and community factors that contribute to children’s school readiness and school achievement?
  • How does investment in early childhood health and education impact future need for and cost of public assistance?
  • Are participants in Temporary Assistance for Needy Families (TANF) work skills training programs employed and earning a living wage one or two years after completing the program? Which work skills programs have the greatest success rates?

These are all excellent questions! I am heartened to know that people in Virginia state government are asking them.

So many debates about public policy issues occur in a data-free vacuum. People advance arguments based upon preconceptions and ideology. VLDS holds out the promise of allowing us to reach conclusions based on hard data. This is one wonk who looks forward to the research coming from this initiative — even if the conclusions contradict some of my own pet theories.

– JAB

Dulles Gets High Scores in at Least One Metric — Frustration

Washington Dulles International -- the wow factor ends with the architecture

Washington Dulles International — the wow factor ends with the architecture

by James A. Bacon

Washington Dulles International Airport is the Brazil of U.S. airports — it’s the airport of the future… and always will be. Unfortunately, that future is looking further and further off as both passenger and freight traffic decline precipitously. Peaking at 27 million in 2005, the number of passengers declined to 22 million last year. Peaking at 767 million pounds in 2007, air freight dove to 524 million in 2013, according to airport statistics.

It is dogma in Virginia’s political class that Dulles, along with the ports of Virginia in Hampton Roads, is one of the economic development “crown jewels” of the Old Dominion, and that whatever is good for Dulles is good for Virginia. Hence, proposals are working their way through the state’s transportation funding system to invest hundreds of millions of dollars in highway projects to make Dulles freight cargo more economically competitive — and that’s on top of more than $7 billion to extend the Washington Metro system to Tysons, Reston and Dulles.

Now comes the Airport Frustration Index published by Bloomberg, which ranks Dulles as the third most frustrating of 36 major North America airports, trailing only LaGuardia and Newark.  What are the factors that go into compiling the frustration index?

One is the length of the commute to get to the airport. The rush hour drive time, at 67 minutes, is the seventh worst in the country.

Another factor is the passenger experience at the terminal. Based on survey scores, Dulles scored 5.6 on a one-to-ten scale for security, the worst of any airport but Miami. Its restrooms, with a 6.3 score, ranked seventh worst. Shopping, at 5.1, also ranked seventh worst. Interestingly, competing Ronald Reagan Washington National and Baltimore Washington Thurgood Marshall outscored Dulles in all of these passenger-amenity ratings by wide margins.

Finally, Dulles scored 9th worst in on-time flights (tied with three other airports); only 75% of its flights took off on time.

Bacon’s bottom line: When the Silver Line service opens at Dulles in several years, its airport commute time may improve. (For $7 billion, it had darn better improve!) But the Bloomberg survey suggests that there are some fundamental management issues at work here. What excuse is there for poor security or dirty bathrooms? What excuse is there for a second-rate shopping experience?

Dulles is a tremendous economic development asset for Virginia, at least potentially. But if the Dulles airport lobby wants to soak Virginia taxpayers for hundreds of millions of transportation dollars in subsidies to make its air cargo business more competitive, I’d have a lot more confidence that the money would be invested effectively if I saw evidence that the airport was being run really well. But if airport management can’t keep the restrooms clean, how can it be trusted to build a world-class air freight business?

A “Campus Culture of Rape” or a “Culture of Drunken, Hook-up Sex”?

Watch it, buddy, make sure you read the University of Virginia's "Definitions of Prohibited Contact" before you touch that woman!

Watch it, buddy, make sure you read the University of Virginia’s “Definitions of Prohibited Contact” before you touch that woman!

by James A. Bacon

In the wake of gang rape allegations aired last week by Rolling Stone magazine, University of Virginia officials declare themselves to be angered by the incident and determined to prevent anything like it from happening again. “I write you in great sorrow, great rage, but most importantly, with great determination,” wrote President Kathleen Sullivan in a letter to the University of Virginia community. “Meaningful change is necessary. … This will require institutional change, cultural change, and legislative change, and it will not be easy. We are making those changes.”

If past is any precedent, we can look forward to a more verbose Student Sexual Misconduct Policy replete with legalese of the sort one might read in an Apple App user agreement, the hiring of more administrators to enforce the policy, the occasional drumming out of sexual offenders and… virtually no change to the “culture of rape” that led to the gang rape in the first place.

The reason that change will not occur is that the University of Virginia, like colleges and universities across the country, are caught between conflicting moral imperatives which Baby Boomer administrators are incapable of reconciling. On the one hand, Boomer administrators are appalled by sexual violence against women, which appears to have reached unprecedented proportions on their watch. On the other hand, they are unwilling to do anything to curb the licentiousness and promiscuity of the drunken hook-up culture that pervades the student culture and creates an ethical gray area regarding what constitutes a woman’s “consent” to sexual activity.

The only way that university bureaucrats know how to deal with this inherent conflict is to put into place stricter rules and procedures that students will ignore, just as they’ve ignored all the past rules and procedures. Even if the new regime of campus justice does succeed in bring more sexual transgressions into the maw of administrative review, students may well respond in unexpected ways. Already, male students are using videotapes to successfully refute charges of rape, according to the Women for Men blog. The net effect could well be to spur young more students to surreptitiously videotape themselves and their paramours in the act.

The problem is human nature. Young men and women, who are at the peak of their sex drive during their campus years, are obsessed with sex. This obsession is hard-wired into the species. Different civilizations and cultures over the eons have devised various mechanisms to channel and control the sex drive. In the United States the prudish “Victorian morality” prevailed for many years. That system stressed premarital abstinence and the strict policing of college campuses to limit the opportunities of couples to engage in sex. The system of Victorian morality was far from perfect, even on its own terms — it was, after all, fighting against human nature. Some women did get pregnant. Rapes did occur. As correspondent Gerald Cooper reminds me, in the so-called “Lawn Scandal,” three young men from prominent Virginia families were implicated in the gang bang of a young woman in a room on the Lawn around 1954. But there was no “campus culture of rape” in which 20% of all women were raped during their four years in college.

Victorian values were swamped by the sexual revolution and the rise of feminism. Few people who grew up in the 1960s or later regret the overthrow of the ancien regime. Most people, even many cultural conservatives, accept the proposition that single people should be free to express their sexuality. (Victorian morality still prevails when it comes to respecting the vows of matrimony; not everyone lives up to the moral norm but almost everyone accepts it.) On college campuses, the floodgates opened. When colleges ceased policing students’ sexual activities, students were free to pursue their primal instincts. Residential colleges like UVa threw together thousands of young people at the peak of sexual desire and looked the other way as a new culture arose that mixed heavy drinking with sexual license.

The Baby Boomers who dominate the ranks of college administrations today shocked their parents with their cavalier attitude toward sex before marriage. A few Boomers engaged in “swinging,” or the swapping of sexual partners, but that behavior was relegated to the fringe. The prevailing ethos among Boomers, even among singles, was to restrict sex to monogamous relationships. Boomers had more sexual partners than their parents did, but their morality still frowned on sexual promiscuity.

Now it is the Baby Boomers’ turn to be shocked by their children. Prevailing feminist theory on college campuses, reinforced by pop culture figures like Madonna, deemed it chic for women to be as sexually “empowered” as men, in effect to have sex with whomever they wanted whenever they wanted. For many men, this development was a dream come true — women offered sex without the encumbrances of emotional commitment. Whereas Boomer women bartered sexual access for emotional commitment, many  (not all, of course) Millennial women demanded nothing in return. Young people in college today live in a state of moral anarchy, some retaining vestiges of traditional morality, while others abide by no discernible sexual morality of any kind. The only recognized standard is the admonition that women must “consent” to sex.

The great question is how to interpret consent. The overwhelming majority of “rapes” on college campuses occur in a party context in which men and women alike are intoxicated. Sometimes the lines are clear. When a man plies a woman with a date rape drug and has sex with her, everyone would agree that that’s a case of rape, even if there was no violence involved. Everyone would agree that the gang rape at the University of Virginia, if it occurred as described, was horrific. No one sympathizes with the rapists in either case.

But the lines become blurred in an instance, say, in which a women gets drunk, starts making out with a guy, who also happens to be drunk, has sex with him and at some point along the line changes her mind. Is that “rape?” If so, do we place that in the same category of moral and criminal culpability as a case in which, say, a man stalks a woman and rapes her at gunpoint? Feminists might argue that in an oppressive, patriarchal society such a distinction is meaningless. Most people see a big difference.

Further blurring the lines is the rise of the exhibitionist “sexting” culture. Baby Boomers find themselves prudishly aghast as they hear of Millennials emailing photos of their their genitals to love interests. Do the kids have no sense of privacy at all? Then there is the phenomenon of “revenge porn.” Men create videotapes of themselves having sex with girlfriends and then post the videos online to get back at them for some perceived offense. Those trends have made it into the news, but they are just the tip of the iceberg. Google “college sex party” and browse the results. You will find dozens, if not hundreds, of videos posted of college kids stripping, walking around nude, engaging in oral sex and copulating without embarrassment in front of their peers. This kind of behavior may be extreme and unrepresentative of the general student population but its very existence is indicative of how thoroughly the old sexual norms have been obliterated.

I offer as a hypothesis the proposition that the college rape epidemic is deeply rooted in the drunken hook-up culture of the Millennial generation. Liberal Boomer college administrators, who make a fetish of being non-judgmental, have allowed this culture to arise without contesting it. The consequence is that as a matter of routine every Friday and Saturday night, young men and women are thrown into situations where the lines between consensual and non-consensual sex are blurred beyond recognition. It should come as no surprise that the victims of sexual transgressions and their friends are so often morally ambivalent about whether to report incidents or not.

Given the tenor of what takes place in college frat houses, dormitories or the bushes behind the Rotunda, how likely is it that the University of Virginia’s “Definitions of Prohibited Conduct” will have any effect upon students’ behavior?

The party desiring to initiate sexual activity is responsible for obtaining Effective Consent. In order to obtain Effective Consent, permission must be given prior to or contemporaneously with the sexual activity in question. Effective Consent should never be assumed. Lack of protest or resistance does not constitute Effective Consent. “No” means no, but nothing (silence, passivity, inertia) also means no. A verbal “No,” even if it sounds indecisive or insincere, should always be treated as a denial of Effective Consent. If there is confusion as to whether Effective Consent is present (e.g., words, gestures or other indications of hesitation or reluctance), the parties should stop the sexual activity immediately.

Surely they jest.  As reasonable as all of this may sound to a 55-year-old university administrator, it’s not likely to have much impact on 20-year-olds in the throes of passion. President Sullivan asserts that the University is working on making the institutional, cultural and legislative changes needed to end the college rape epidemic. I’d laugh if it weren’t so tragic. The only way to change the culture of drunken hook-up sex is to impose a regime so stifling and oppressive that the college students would rise in revolt. It will not happen.

Mamas, Don’t Let Your Daughters Grow up To Be Co-Eds

Phi Kappa Psi fraternity house at UVa.

Phi Kappa Psi fraternity house at UVa.

When I visited Virginia Tech a few weeks ago, the lead story in the campus newspaper was a take-out on the supposed “campus rape culture.” The number is widely touted that 20% of women are the victims of sexual assault while at campus. My instinct is to dismiss that figure as a figment of the feminist fringe, in which transgressions of any kind, from unwanted touching to real rape, are conflated as “sexual violence.” Many incidents are fueled by the combustible combination of rampant drunkenness and the casual sex of the hook-up culture, in which all normal standards of behavior are obliterated.

That said, rape that everyone recognizes as rape does occur. One such incident, which allegedly occurred at the University of Virginia, is profiled in Rolling Stone. The story of a first year student gang raped in the Phi Kappa Psi fraternity house, if accurate, is absolutely horrifying. What allegedly followed (or didn’t follow) is a travesty. Writes author Sabrina Rubin Erdely:

At UVA, rapes are kept quiet, both by students – who brush off sexual assaults as regrettable but inevitable casualties of their cherished party culture – and by an administration that critics say is less concerned with protecting students than it is with protecting its own reputation from scandal. Some UVA women, so sickened by the university’s culture of hidden sexual violence, have taken to calling it “UVrApe.”

Maybe that’s a fair take on what’s happening at UVa and other colleges, maybe it’s not. There are a lot of conservatives like me whom, I suspect, get turned off by the blather associating campus sexual violence with “patriarchal attitudes” and other such nonsense, as if society ever condoned rape as a “boys will be boys” thing to be swept under the rug. It was social conservatives, after all, who warned that the mixing of genders in college dormitories, the relaxation of visitation rules and the collapse of traditional moral values would lead to precisely the phenomenon we’re discussing today. Such fears were dismissed at the time, of course, as the hilariously antiquated thinking of prissy, tea-sipping old bitties.

But here we are. Feminists have discovered a “culture of rape” in what are arguably the most thoroughly enlightened and liberal institutions in the entire country, our colleges and universities. While I don’t think the Rolling Stone article has captured the entire truth of what’s happening on college campuses, I think it has captured part of the truth. And even that partial truth is ugly enough to take very seriously.

I would ask Virginia newspapers, why did Rolling Stone break this story, not you? If there is a campus rape epidemic on college campuses, are you going to continue to ignore it, highlighting only the cable news spectacles, like that of missing UVa student Hannah Graham, that are unrepresentative of the college experience? Conversely, if there’s not a campus rape epidemic, are you going to ignore that story, too? If the whole problem is wildly exaggerated — analogous, say, to the satanism scare of a couple decades ago — worried parents of college co-eds would like to know.

My suspicion is that there is a widespread problem but that it’s not as white-and-black as portrayed. College kids are… how shall I put this politely…. incredibly horny. The old social mores that held horniness in check have been obliterated. Concentrate thousands of males and females of the same age in a college campus, tear down the moral inhibitions against promiscuous sexuality, and dissolve inhibitions and judgment in a haze of alcohol, and you’re going to have a lot of sexual encounters, some percentage of which, in retrospect, are worthy of criminal punishment and some percentage of which participants simply regret. There is a cultural problem here. It’s not one of oppressive “patriarchy.” But it’s very real.

(Hat tip: The Nutshell by Frank Muraca. Check out Frank’s newsletter — it’s a short but punchy round-up of Virginia news, well worth reading.)

Racial Disparities in SOL Pass Rates Getting Worse

Bacon’s Rebellionmath_data
More SOL data from Lynchburg numbers cruncher Jim Weigand… The chart above expresses the Standards of Learning (SOL) pass rate for blacks and Hispanics as a percentage of the pass rate for whites between 2005 and 2014. The good news is that blacks and Hispanics consistently improved their educational performance through 2010, with Hispanics passing at 90% of the rate as whites in that year.

Then something happened. Minority SOL pass rates tanked. White pass rates declined (a trend not reflected in these charts) but minority pass rates fell even steeper. What happened in that period? Weigand notes that downturn coincides with tighter standards for the math SOLs  in 2012 and for the English SOLs in 2013. The impact of more demanding math tests can be seen in this chart:

SOL_data

 

Virginia school systems have made tremendous efforts to help minority students reach educational parity with whites (and Asians, who out-perform whites). But these charts call into question the effectiveness of those efforts.

If the tests were harder, then why weren’t all groups effected equally? Why did black and Hispanic scores decline relative to white scores? One possible explanation is that minority students are enrolled disproportionately in classes that “teach to the test.” Teachers in these classes got better at instructing their students to answer the kinds of questions that appear in SOL tests. (An analogy: My son is taking an AP course that explicitly, no-bones-about-it, is geared to helping students answer the kinds of questions that appear in AP tests.) But teaching to the test has a big drawback. Make the test tougher, and it doesn’t work.

Just a theory. It doesn’t fit the data perfectly. Perhaps readers can help me refine the theory or present better ones of their own.

Update: At the suggestion of Don Rippert, Jim Wiegand portrayed the same data as the chart above in a different way. Here’s the raw data for each ethnic/racial group, not normalized to whites as above. This shows clearly that whites suffered a decline in SOL pass rates, too.

SOL_pass_rates

Update: These numbers may be skewed by changes in Department of Education questionnaires that allowed students to select more than one race, says Hamilton Lombard with the Tayloe Murphy Center for Public Policy. As a result, for instance, the number of students identifying only as black dropped by 20% to 30% in some divisions. “With the changes, the SOL results by race are really for different populations in 2010 and 2012,” he writes.

– JAB

Proposed CO2 Regs Will Harm Virginia’s Economic Competitiveness

Image credit: Department of Environmental Quality

Image credit: Department of Environmental Quality

by James A. Bacon

Proposed federal regulations to cut future carbon dioxide emissions from electric power plants would put Virginia at a significant competitive advantage by giving the state no credit for its progress in reducing CO2 over the past ten years, asserts the state Department of Environmental Quality (DEQ) in a letter response to the Environmental Protection Agency (EPA).

Even back in 2005, Virginia power plants emitted less CO2, a greenhouse gas, per unit of energy produced than those of other many states, thanks to the state’s reliance upon nuclear power. Since 2005, Virginia power companies have phased out older coal-fired plants and substituted natural gas. Although natural gas is a fossil fuel that emits CO2, it is much cleaner burning than coal and produces less CO2 per unit of energy.

In 2005, coal accounted for 46% of Virginia’s electric generation; by 2012, coal had fallen to 20%.  Virginia reduced carbon “pollution” by 39% between 2005 and 2012, the seventh best performance nationally. In 2012 Virginia ranked 15th among the 50 states for the rate of carbon “pollution” from all electric generating sources.

Rather than credit Virginia for recent progress or how much citizens spent to get there, argues the DEQ letter, the EPA Proposed Emission Guidelines bases its performance targets on a state’s electric generating system as it exists now. States the letter:

EPA’s approach fails to recognize the achievements made by many states, including Virginia, that have reduced CO2 emissions by making significant investments in zero and low carbon emitting generation, such as nuclear power, and rewards states that have not done so by giving them substantially higher CO2 emission reduction targets.

carbon_goals

Source: Division of Environmental Quality

All of Virginia’s neighboring states have electric generating systems that are more carbon-intensive than Virginia’s, but all have emission rate goals substantially higher than Virginia’s final goal of 810 [pounds per Megawatt house]. In fact, the Proposed Emission Guidelines would require greater reductions in megawatt hours or carbon intensity from affected units in Virginia than from similar units in either Kentucky of West Virginia, even though those states generated approximately twice the amount of electricity on a megawatt hour basis from fossil fuel than did Virginia in 2012.

“The disparity in state goals,” writes the DEQ, “leaves Virginia at a competitive disadvantage to its neighbors and numerous other states because they will be able to comply with the Proposed Emission Guidelines more cost effectively. … Such states could use their competitive advantage over Virginia to keep their state electric rates or taxes relatively lower in order to lure away existing Virginia businesses and render Virginia less competitive in the quest for new business.”

Governor Terry McAuliffe says he supports the EPA’s goal of reducing carbon emissions to combat global warming. But he says the proposed regulations could be “more equitable,” according to the Times-Dispatch.

Bacon’s bottom line:  Not only are onerous new environmental regulations being imposed by executive fiat, not based upon anything contemplated by Congress when it enacted the Clean Air Act… Not only are these regulations being enacted  on the basis of claims that runaway global warming (a) is occurring, (b) will prove to be an unmitigated catastrophe and (c) that re-engineering the U.S. economy by reducing CO2 emissions is the best way to deal with it… but the state-by-state implementation of the regulations will punish Virginia for its previous efforts to be environmentally virtuous.

Virginia, like the United States, faces many environmental challenges. As a society, I believe, we should steadily increase our investment in environmental protection. But we also need to prioritize that investment to accomplish the most good per dollar spent. I’m far from convinced that spending billions of dollars — the proposed EPA regs could cost Virginians an estimated $5 billion — will generate anything tangible for Virginia or its environment. If these regulations go through, they will be a tragedy of the first order.

More Money for Millionaires

by James A. Bacon

Here’s one way to look at it: If the commonwealth is going to shower millions of dollars in tax credits and grants to multimillionaires for making movies in Virginia, it might as well give it to Virginia multimillionaires. At least that keeps the money in the state!

According to the Times-Dispatch, the state gave a $200,000 grant and an $800,000 tax credit to the production company that filmed “Field of Lost Shoes” about the Civil War battle of New Market in which VMI cadets helped defeat a Union army. The company is owned by Thomas Farrell II, CEO of Dominion Resources, who co-wrote, invested in and raised money for the movie. Farrell’s son, Peter Farrell, a Henrico County delegate to the General Assembly, also was an investor, co-producer and actor in the movie.

If the state is going to shell out that kind of money to lure film production to Virginia — the independent film company spent nearly $4 million in “qualified expenses” on the project — why give it all away to the likes of multibillionaire Steven Spielberg, who filmed “Lincoln” in the Old Dominion? Share the wealth, baby!

Of course, I’m being totally facetious. The state has no business subsidizing film production for anyone — Virginian or non-Virginian; millionaire, billionaire or pauper — any more than it has subsidizing painters, fiction writers, graphic novelists, musicians, bloggers or any other artist.  Welfare (or incentives, whatever you want to call it) for millionaires is not justifiable in anybody’s moral framework.

The point of the film tax program is to encourage economic activity — film production — in Virginia that wouldn’t take place here otherwise. Did giving Farrell’s production company $1 million induce him to film in Virginia as opposed to somewhere else? Where else was Farrell, a University of Virginia grad, going to film a movie about VMI and a battle fought in the Shenandoah Valley? Kentucky? Southern California?

This is one more instance of Virginia’s political class picking the pockets of taxpayers and redistributing it to the wealthy and politically connected. Republicans, who increased this particular subsidy under the McDonnell administration, are blocking the expansion of Medicaid on the grounds that we can’t afford it (which we can’t). But they’re OK with subsidizing a millionaire’s personal artistic passion? Shame! Shame!

While I deplore the tax breaks, I have to say, the movie trailer looks pretty good. The Farrells lined up some serious B-List talent — Jason Isaacs, Tom Skerritt, David Arquette — and the acting and production values come across as very professional. I hope the movie is a financial success. If it is, maybe Tom Farrell will film more stories from Virginia history… without the benefit of tax breaks.

Optimism Bias and Risk in Public Private Partnerships

The tolling technology is better than ever -- but traffic forecasts are a disaster.

The tolling technology is better than ever — but traffic forecasts are a disaster.

by James A. Bacon

Randy Salzman, a free-lance Charlottesville writer, has spent the last couple of years trying to understand how Public Private Partnerships (P3s) work in Virginia. If the private sector is supposed to be so much more efficient than government, he asks, how  come so many big P3 transportation projects in Virginia and across the nation have gone bankrupt? Why do private sector companies continue investing in similar projects despite the obvious risk? And what exposure do taxpayers when deals go bad? He doesn’t have any definitive answers, but he lays out a lot of good questions in the latest issue of Style Weekly.

Salz, an occasional contributor to Bacon’s Rebellion, gets closest to the truth when he mentions the “optimism bias” in traffic forecasts. In project after project across the country, private P3 companies and  their government partners have over-estimated traffic volumes on the roads they build. Writes Salz:

One study found that the projections tended to be 109 percent more than actual traffic — or more than double — and that nowhere in completed American P3s have actual traffic and toll income come close to projections.

Here in Virginia, flawed traffic forecasts were at the root of the Pocahontas Parkway debacle in eastern Henrico County and, if I’m not mistaken, the Dulles Greenway bankruptcy in Loudoun County (although that was not a P3 project). And there’s a very good chance that the Capital Beltway Express’s Northern Virginia HOT lanes project will experience a similar fate.

I think there are two things going on here. First, the private sector’s flawed traffic project models paralleled flawed public sector models. Everybody in the transportation business extrapolated the growth trends of the ’60s, 70s, ’80s and ’90s indefinitely into the future. I warned a decade ago that that was folly, but not many people listened. Reality set in in the mid-2000s when growth rates started tapering off and during the 2007-2008 recession, when traffic volume actually declined. The reasons are many and complex, as I have enumerated ad nauseum on this blog, but they are fundamental and lasting, not just a blip. We will not in our lifetimes return to the traffic-volume growth rates experienced during the post-World War II era.

The forecasts of traffic volume and associated toll revenues for the P3 projects were predicated on the assumption, now revealed to have been astonishingly naive, that traffic volume would increase on the same trajectory pretty much forever. That’s why the bankruptcies ensued, and why there will be more to come.

If experience tells us anything, the private sector will figure that out before the public sector does. As Salz quotes Lane Construction as saying in regard to proposed Interstate 66 toll lanes near Washington: Traffic projections have an “optimism bias.” Which brings us to the second reason for the wave of bad deals. Once someone, whether a private investor or a government agency, invests hundreds or thousands of man hours in analyzing a project, they get personally invested. No one likes to pull the plug. They want to see the project move forward. They tend to adopt assumptions that will make the project look more viable in order to obtain the financing needed to move it from paper to reality. This bias is so endemic in all types of projects that we can almost call it a part of human nature.

The private sector has built-in bullshit detectors. They’re called investors and bond holders. Investors want to generate a positive risk-adjusted return on investment. Bond-holders want to get their money back, plus interest. They may rely upon flawed traffic projects that no one questions, but they don’t suffer from the optimism bias of the project sponsors. They are naturally skeptical and have an interest in asking tough questions. Now, these investors and bond holders aren’t infallible by any means. They make bad investments, too. But they demand a higher standard of certainty than, say, politicians who want the glory of building a road but won’t be around to take the blame if the project falls apart.

Every toll-backed P3 project sells bonds to investors. How, then, did so many go wrong? The key is to look at how the public partner biased the outcome through subsidies and loan guarantees. Every big P3 project applies for financing from the federal Transportation Infrastructure Finance and Innovation Act (TIFIA). These federally guaranteed loans create a tranche of subordinated debt that creates a layer of protection for private bond holders. In other words, if Project A experiences a revenue shortfall, what revenues it does produce will go to bond holders first. Here’s how the Federal Highway Administration describes it: “The TIFIA lien on project revenues may be subordinated to those of senior lenders except in the case of bankruptcy, insolvency, or liquidation of the obligor.”

This layer of protection significantly reduces the risk for senior bond holders, who then demand fewer assurances than they would otherwise before purchasing the bonds. In Virginia, the commonwealth has reduced project risk by making significant cash contributions as well. Most of the P3 projects set up in Virginia in recent years have used some combination of TIFIA funding and public subsidies to make the projects work. Without these contributions, the perceived risk would have been far higher, and the chances of getting pure private financing would have been much diminished. It’s fair to say that many, if not most, of the deals never would have happened.

Combine these three factors — highly flawed long-term traffic projections embraced by the public and private sectors both, the optimism bias for specific projects, and the diminution of risk through TIFIA financing and public subsidies — and we can explain a lot of went wrong. That’s not an exhaustive list of explanations but it accounts for a lot. Continue reading

The Statewide Implications of the Vihstadt Election

Vihstadt interacts with supporters. Photo credit: ARL Now

Vihstadt interacts with supporters. Photo credit: ARL Now

by James A. Bacon

The election of John Vihstadt to the Arlington County Board in the general election last week, which has gotten very little play downstate, is rocking the Democratic political establishment in Virginia’s most liberal jurisdiction. Electorally speaking, Arlington is bluer than the sky on a clear October day — Obama won 69% of the vote in 2012, Romney 29% — yet citizens have had it up to their eyeballs with gold-plated spending schemes.

Arlington has done a superb job in managing transportation and land use, with the result that it enjoys the best of both worlds: a relatively low tax rate and a bountiful flow of tax dollars into the treasury. The county’s liberal Democratic majority deserve credit for having stuck consistently to their Smart Growth development strategy for decades and for doing an excellent job on execution.

But liberal Democrats do love to spend money, and a series of controversies over $1 million bus stops, an $80 million aquatics center, a $1.6 million dog park and a $350 million streetcar project has a lot of citizens up in arms.

Vihstadt, a Republican-turned-independent, won a special election in April, campaigning against the streetcar project as his signature issue. He won re-election last week with nearly 56% of the vote, making him the first non-Democrat to win a general election since 1983. It’s not as if the Dems didn’t turn out for the election — Arlington voters backed Senator Mark Warner with more than 70% of the vote.

County Board member Libby Garvey, a Democrat, has joined Vihstadt in opposing the controversial project in the five-person board. Now some observers are saying that the three pro-streetcar board members, two of whom stand for re-election next year, are on the hot spot.

The punditocracy has devoted considerable ink to the divining the extent to which the 2014 elections were a genuine Republican “wave” or a reflection of the fact that core Democratic constituencies don’t turn out in off-year elections. Vihstadt’s victory is indicative that something deeper than voter turnout or a new-found love of Republicans lies at the root of the election results. Democratic turnout was not an issue in Arlington’s local election — almost everyone’s a Democrat to begin with. But it seems clear that even some Democrats are uneasy with what is perceived to be runaway spending.

Not everyone sees it the way I do. Robert Parry, a former investigative reporter for the Associated Press and Newsweek, sees the vote as a triumph of the liberals’ all-purpose bogeyman — racism! As Parry observes in a recent column, white Arlingtonians don’t think of themselves as racist. But how else does one explain voter rejection of a streetcar that would provide transportation services to the county’s black community, which has been victimized by slavery… Jim Crow… residential discrimination… income disparities, etc., etc.

“Tea Party-style politicians have learned that — whatever the reality — they can exploit the Old Confederacy’s subterranean racial divisions for political gain,” writes Parry. “As we’ve seen in Arlington County, the strategy works not only in the rural Deep South but in relatively sophisticated communities in Northern Virginia.”

Talk about denial — Arlingtonians may be the most affluent, educated and liberal electorate in Virginia but they are closet racists who were duped by the Tea Party!

Sometimes opposition to big spending is simply… opposition to big spending. Republicans and independents may be greed-heads who selfishly want to spend their own money themselves rather than handing it over to politicians to spend it for them. But even some idealistic Democrats realize that if the United States is to preserve the welfare state, the country, the state and the county can’t afford to run out of money because they frittered it away on wasteful projects.

Other politicians with big spending plans should pay heed. Republican Virginia Beach Mayor Will Sessoms — are you paying attention? Democratic Richmond Mayor Dwight Jones — how about you?

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