Bacon's Rebellion

  • Whatever Happened to the Lockbox for the Transportation Trust Fund?

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    James A. Bacon

    Gov. Timothy M. Kaine delivered some bad news to the Axis of Taxes yesterday, saying that a state Senate plan to raise the gas tax by five cents per gallon won’t make it through the House of Delegates. Reports Jeff Schapiro with the Times-Dispatch (my italics):

    Kaine, who favors new taxes for transportation but won’t fight for them this year, said House Republicans are firm in their opposition to any tax increase.

    “They haven’t decided the way they’re going to kill them, but they’re going to kill them,” Kaine, a Democrat, told reporters yesterday.

    Does anybody remember when Tim Kaine was running for office? Does anyone remember his promise not to raise taxes for transportation until an amendment to the state constitution prevented any budgetary raids on the Transportation Trust Fund? I still remember but Mainstream Media has been seized with amnesia. You can argue that the lockbox is a moot point as long as Kaine is not actively plugging for hikes in the gas tax, as opposed to merely expressing sympathy for them. But you’d think that maybe, just maybe, a reporter would ask him, “Whatever happened to that lockbox idea? Why aren’t you trying to move that forward?”

    Here’s my hunch: The lockbox idea was a ploy to make tax hikes for transportation more palatable — not born of a genuine conviction that it was needed. It serves no useful political purpose anymore, so it has been all forgotten. For what it’s worth, I still think it’s a good idea.

  • Nichols Ally Resigns from W&M Board

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    James A. Bacon

    Protesting criticism of former President Gene Nichol by fellow board members, Paul Blair has announced his resignation from the William & Mary Board of Visitors. In a letter to the William & Mary community posted on a Student Assembly web page, he praised Nichol’s track record of promoting diversity at the university. Nichol resigned last week after the Board refused to new his employment contract.

    Blair’s letter lends some insight into the reaction of Board members to the firestorm set off by Nichol’s abrupt resignation.

    In praising Mr. Nichol I in no way seek to diminish the critical work and achievements of our former President Tim Sullivan. They are many. Some would try
    to drive a wedge between Mr. Sullivan and Mr. Nichol, because Mr. Nichol takes credit (and is blamed) for progressive policies now in place, some of which I think built upon Mr. Sullivan’s work. …

    There has been an incipient effort by some members of the Board of Visitors to pick apart President Nichol’s accomplishments. To what end? They gained their stated objective. I have also seen mean-spirited communications that are not worthy of the professional deliberations of any managing board, but most especially not the Board of Visitors of William and Mary. Such communications call into question the real motivation for the initial decision not to renew the President’s contract.

    I know the reasoned reactions, as well as the emotional ones, of Board members are in response to the President’s message of February 12th to the William and Mary Community. Would I have refrained from some of what Mr. Nichol said? Certainly, but then I knew more than he.

    Based on this letter, I have to modify a key statement that I included in a previous post (“The Nichol Resignation Narrative Looks Weaker and Weaker“): that the Board of Visitors decision not to renew Nichol’s contract was unanimous. As Blair makes clear, Blair was one among “several” board members who fought for the renewal of the contract. (However, Board member John W. Gerdelman confirmed to the Daily Press that board members were unanimous in their final decision, although no formal vote was taken.)

    The letter also highlights what some board members are not saying publicly: They were angered by the way in which Nichol, in his resignation letter, had hogged the credit for achieving greater diversity at William & Mary — presumably at the expense of his much-beloved predecessor Timothy Sullivan. Not all BoV members, it appears, were as willing as Blair to overlook Nichol’s one-fingered salute to them on his way out.

  • Financial Terrorists

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    James A. Bacon

    Payday lenders got a black eye yesterday when Cameron Blakely denounced in a press conference yesterday the predatory lending practices he engaged in last year as manager of a Washington, D.C., Check ‘n Go. As the Associated Press reports, Blakely said he was trained to encourage people to take out the maximum $500 payday loan as a way to keep them coming back for more money.

    “I realized I was working for financial terrorists, bent on financially enslaving as many hardworking Americans as they possibly could,” Blakely said at a news conference. He appeared with John LaCombe, founder of CapAmerica, a group of former payday loan borrowers and whistleblowers.

    Check ‘n Go attorney Yancy Deering countered that the company does not lend the maximum amount to people it doesn’t think will be able to repay the loan. “We want the product to work, and for it to work people must be able to pay it back on the date that the loan becomes mature.”

    Blakely’s charges, if true, would prove very damaging to the Payday lending industry. It’s one thing to offer emergency loans with high interest rates and high fees — the loans are small, short-term, expensive to adminster and inherently risky. It’s quite another to deliberately entrap customers in a cycle of indebtedness. The Payday people had better present some convincing evidence that Blakely’s charges are either untrue or an aberration, or they’ll lose me, an otherwise consistent defender of the industry, just as they’ve lost many others in this debate.

    I would say this, though. Rather than imposing all sorts of restrictions on interest rates and other lending terms and conditions, shouldn’t the General Assembly simply ban the practice of deliberately cultivating indebtedness? I can’t think of how that would be done, but there must be a way that more precisely targets the abuses that Blakely described than the restrictions the Payday foes are clamoring for.

  • Sidewalks to Nowhere

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    James A. Bacon

    One of my pet pieves is sidewalks that don’t connect anything — they just take up space because some county ordinance required some developer to build one. It turns out that sidewalks to nowhere bother other people, too. In fact, there is a website entitled Sidewalks to Nowhere with illustrations from around the country. (That’s where this image, from Fletcher, N.C., came from).

    Cortney Langley, a staff writer with the Virginia Gazette in Williamsburg, sees the nonsensical nature of disconnected sidewalks as well. “Along Mooretown Road [in James City County],” she writes, “you can take a stroll along a freshly poured sidewalk. For about 200 feet. … Throughout the county there are signs of the seemingly absurd: small patches of disconnected sidewalks that begin or end randomly, often with no connecting path in sight.”

    County ordinance requires that new development, even commercial, provide sidewalks out front, no matter where they’re built. The idea is that someday they will link up. Bill Porter, development manager for the county, said that for the most part, it works pretty well. Especially for the county, which gets the sidewalk expense covered by the builder.

    Maybe the sidewalks will link up one day. But even if they do, the question remains: Will anyone use them?

    To be useful, sidewalks must connect multiple destinations in close geographic proximity. You can use them to walk to your next-door neighbor or to a friend’s house down the street. You can walk two or three blocks to the corner store to pick up some tomato sauce. You can walk to a pocket park, to a restaurant or a neighborhood video store. Sidewalks don’t work in low-density environments that translate a 10-minute walk into a 40-minute trek.

    In Henrico County where I live, the problem isn’t so much sidewalks that go nowhere — although there are some that do — it’s sidewalks that are utterly uninviting. More than a few are located just a few feet away from cars whizzing by at 45 miles per hour. Henrico sidewalks are uninviting also because of the vast distances that must be covered. In my observation, the few people who use them are joggers and strollers looking for exercise. Almost no one uses the sidewalks to actually get somewhere. For the most part, sidewalks are a recreational amenity, not a tool to promote mobility and access.

    In scattered, low-density areas where houses, offices and stores are rigidly separated, sidewalks are more useless than teats on a boar hog. Building them simply creates a commitment for someone to maintain them. Frankly, I see no point in requiring developers to build the darn things.

  • How About a Dulles Busway?

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    James A. Bacon

    Instead of building a heavy rail line to serve the Dulles corridor, Virginia should build a bus corridor, or “busway” in the median of the Dulles toll road, contends Gabriel Roth, a research fellow with the free-market Independence Institute in the Washington Times. The busway could run spurs to Tysons Corner, Reston and Herndon.

    Bus service is not highly regarded in the United States today, Roth concedes, but he believes a Bus Rapid Transit system could work in the Dulles Corridor. First, he notes, buses would enjoy unimpeded mobility, allowing them to move quickly and keep to schedules. Second, buses could be outfitted to higher standards than typical city buses — to whatever level the market demands. (Again, I’ll tout my preference for buses that allow passengers to plug in their laptops and access the Internet so they can read e-mail and surf the Web on the way to work.)

    While the capital costs of BRT would be a fraction of heavy rail, a busway would have a much higher theoretical carrying capacity. The maximum travel forecast for Dulles Rail is 9,000 passengers per hour. An unimpeded highway lane can carry 1,000 buses per hour. If the market doesn’t support that many buses and mini-buses, a busway could accommodate other high-occupancy vehicles such as vans.

    As with all such analyses, Roth assumes a Business As Usual scenario for land use. At the risk of sounding like a broken record, transportation planning cannot occur in isolation from land use planning. Where would the bus stations be located, how would passengers access those stations, and what are the appropriate densities and urban-design features around those stations? Any serious bid to serve the Dulles corridor with BRT would have to answer those questions. But Roth does makes a good case for at least taking a serious look at BRT.

  • Bus Rapid Transit Studied for Charlottesville

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    James A. Bacon

    As part of its effort to clean up the congested U.S. 29 North corridor, Charlottesville and Albemarle County leaders have made a commitment to build a more robust bus system. Next year, they plan to ask the General Assembly to give them authority to create a regional transportation authority that can float bonds and levy fees. The money would help create a bus network linking downtown Charlottesville, the University of Virginia and the regional airport by way of the 29 corridor.

    The big question now is whether to go a step further and create dedicated lanes for moving the sleek new buses faster and more reliably, reports the Daily Progress. Such a Bus Rapid Transit system would cost an estimated $138 million. That’s a lot of dough for a region the size of Charlottesville-Albemarle. Albemarle Supervisor David L. Slutzky thinks that future presidential administrations will be more transit friendly and willing to subsidize the project.

    Bacon’s bottom line: BRT might be a good idea for the Charlottesville area: I would like to see an authoritative analysis. But relying upon the federal government for hand-outs is not. If BRT makes sense, the region should find a way for riders, property owners, employers and other beneficiaries to pay the tab. Taxpayers from Dubuque, Iowa, should not pay for Virginians’ regional transportation projects any more than we should pay for theirs.

  • Heavy Rail and Flying Pigs

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    James A. Bacon

    Ken Orski, publisher of Innovation Briefs, makes the case that the era of massive federal funding for system-building investments in urban rail transit is coming to an end. Rail transit funding will continue, he writes, but “it will shift to incrementally expanding existing rail networks and commuter rail services rather than embarking on construction of brand new rail transit systems.” Writes Orski:

    After 30 years of sustained federal investment in urban rail systems— an investment program that resulted in the construction of 22 new light rail systems and 5 new heavy rail systems— the New Starts program is beginning to run out of cities that can afford or justify cost-effective rail transit investment. Norfolk, VA, has been the only new urban area to have joined the “club” of rail cities in recent years.

    Such conclusions are probably warranted under the current Business-As-Usual paradigm in which transportation projects are made in isolation from land use decisions. The economics of rail could improve dramatically, however, if projects were part of a more encompassing process that combined planning for transportation and land use together. Of course, if pigs had wings…

  • Republicans Finally Squabbling with Democrats Instead of Each Other

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    James A. Bacon

    As the budget-making drama unfolds in the General Assembly, we’re seeing a very different political dynamic at work. In contrast to past years, in which Republicans tore themselves to shreds, Elephant Clan senators and delegates appear to be acting with common purpose. The party conceivably could emerge stronger than when Elephants ruled the chamber under the leadership of nominal Republican John Chichester.

    The evidence for change can be seen in what Tyler Whitley and Jeff Schapiro are billing in today’s Times-Dispatch as “a revolt” of the state Senate’s Republican minority. In a departure from the Senate’s traditional “bipartisan comity,” they write, seven Republicans on the 16-member Senate Finance Committee opposed the Democrats’ proposed revisions to the two-year, $78 billion budget submitted by Gov. Timothy M. Kaine.

    In contrast to previous years, in which a Chichester-dominated Republican caucus warred with the Republican House caucus, Elephant Clan senators are aligning themselves closely this year with their counterparts in the House. Arguably, Republicans have as much power now as when they supposedly controlled both chambers. As Whitley/Schapiro paraphrases Sen. Charles J. Colgan, D-Prince William: Without bipartisan backing for the Senate version of the budget, the Dems will have little leverage against House negotiators in cobbling a compromise budget.

    Most interesting is the change in Sen. William Wampler, R-Bristol, once an ally of Chichester and, like him, a frequent advocate of higher taxes. Now Wampler maintains that the state should cut state agency budgets by six percent instead of raiding the Rainy Day fund and expanding the pre-K program. Chastened by conservative unrest during last year’s primaries and freed from the Rasputin-like influence of Chichester, Republican senators appear to be taking up the banner of fiscal conservatism.

    The result of this realignment could be the emergence of the Elephant Clan as a genuine spend-less, tax-less party. But the Republicans have a long road to travel before than can rightfully claim that mantle. Until they repudiate the shyster-like mechanisms for raising new transportation funds that they enacted last year — increasing a wide variety of taxes, fees and fines by small amounts in obscure places in the hope that no one would really notice — they won’t deserve to be taken seriously.

    Hiking the gas tax, favored by Senate Democrats, is a far preferable mechanism for raising revenue. The tax is easy to administer, it is transparent, and it encourages people to drive less, thus incrementally reducing the demand for additional improvements. Only when Republicans fully embrace the principles of tax transparency, efficiency and user-pays, will I believe they’ve had a genuine change of heart.

    Update: Seth McLaughlin confirms this analysis in today’s Washington Times.

    It’s no longer House Republicans versus Senate Republicans. It’s Republicans versus Democrats. “The dynamics are different now,” J. Scott Leake, spokesman for Senate Republicans, told The Washington Times. “You have a divided Senate and united House.”

  • Grouchy about the Grantor’s Tax

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    James A. Bacon

    Uh, oh, it looks like the Northern Virginia Transportation Authority won’t have as much money as it hoped to finance its transportation improvements. The NVTA, reports Dan Genz with the Washington Examiner, is expected to slash its revenue estimates for seven new taxes and fees because of the region’s economic downturn.

    More than half of the $336 million slated for road and rail projects was expected to come from a tax on property sales — the so-called “grantor’s tax.” But home sales have plummeted 50 percent in Fairfax and Loudoun Counties, and have declined elsewhere across the region. NVTA officials, Genz says, expect revenues to drop below $300 million.

    Once again, I nod my head in wonder: How did legislators ever devise such an abomination of a transportation scheme? As Hans Bader, a staffer with the Competitive Enterprise Institute, points out:

    It’s an odd source of funding for transportation, since a homeowner’s sale of her home contributes nothing to transportation costs. And the tax is anything but fair. It is paid only by Virginians, not the out-of-state motorists who make up much of the traffic on Northern Virginia’s roads.

    And, of course, it is a notoriously volatile revenue source that varies with the business cycle. Bader has had more to say about the grantor’s tax in the Examiner, the Times-Dispatch, and Openmarket.org, the staff blog of the CEI.

    Bacon’s bottom line: A rational system, as opposed to the Rube Goldberg contraption we have, would scrap all miscellaneous revenue sources like the grantor’s tax and raise the gas tax by a like amount. The gas tax is relatively stable, so transportation planners can actually plan. It is also transparent. That means drivers know what they’re paying, and they can adjust their driving behavior if they don’t like paying it. Once we’ve shifted to the gas tax, then we need to start planning for the inevitable demise of the gas tax (when people shift to hybrids, electric cars, fuel cells, etc.) by beginning the spadework for a Vehicle Miles Driven tax.

    The transportation-financing system we have now defies all reason, is counter productive, and is something that only politicians could love.

  • The Inscrutable Meaning of the Shrinking Trade Deficit

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    James A. Bacon

    Buried on page 2 of today’s Wall Street Journal is a single-columned story headlined “Slow Spending Helps Narrow Trade Deficit.” After decades of a stagnating exports and steadily rising exports, the United States trade gap narrowed 6.9 percent in December to $58.8 billion. Despite higher oil prices, the trade gap for the full year narrowed 6.2 percent — the biggest decline in percentage terms in 16 years. At last, the positive impact of a weaker dollar is kicking in.

    Why does the shrinking trade gap matter to a blog that focuses exclusively on Virginia? Because Virginia’s economy is inextricably tied to global trading patterns. Not only that, but lawmakers are being urged to make massive infrastructure investments based on those global trading patterns.

    Hampton Roads is undergoing a massive expansion of port capacity predicated on the view that the volume of imported containers, mostly from China, will continue basically forever. Anticipating a surge in the volume of cargo shipments, port and maritime interests are urging lawmakers to spend billions of dollars to build a Third Crossing and upgrade U.S. 460 in order to accommodate those trucks. To pay for those multi-billion investments, Hampton Roads politicians have yoked the citizens and businesses of the region with significant transportation taxes.

    But no trend continues in a straight line forever. Even the world’s largest economy cannot sustain balance-of-payment deficits approaching $1 trillion — that’s trillion with a “tr” — a year forever. Inevitably, the value of the dollar has plummeted, and there is little prospect, given the easy-money regime of the Federal Reserve Board, that it will get stronger any time soon. Americans have seen the downside of the weak dollar in the form of higher prices for oil and other imported goods. Now we’re finally seeing the upside. Exports rose to a record $144.3 billion in December. More to the point of this blog post, as the WSJ reports:

    Exports rose while imports fell. That underscores a shift in the economy as domestic consumer spending slows and foreign demand for U.S. goods remains strong. … The drop in nonpetroleum imports — a major gauge of consumer demand — was widespread. … “Disturbingly, the drop in imports was led by autos and consumer goods,” wrote Lehman Brothers economist Drew Matus.”

    As far as the Ports of Virginia are concerned, it shouldn’t much matter whether exports and imports are rising and falling as long as the same volume of goods gets funneled through the ports. But the ratio of imports to exports very much matters to transportation planners. Right now, thousands of trucks pick up containers in Norfolk, haul them to inland destinations, and then dead-head back to the port to pick up more containers. Rising imports implies the need for more trucks — and highway capacity. But a leveling off of imports suggests that the anticipated surge in truck traffic may not materialize. The surge in exports poses no comparable problem because rising volumes can be accommodated by filling up trucks now driving back empty to the ports.

    What worries me is that the business-political establishment of Hampton Roads will plunge ahead blindly with its monumental road improvement projects, saddling the region with a massive extra tax burden in order to handle an increase in imports that never materializes. Hold gun firmly in hand. Cock trigger. Point gun to head. Pull trigger.

    Declining imports and rising exports have other implications that Bacon’s Rebellion shall explore as occasion permits. One trend worth watching: A surge in exports could underpin the U.S. economy, strengthening the manufacturing sector to offset weakness in the homebuilding and financial sectors. The economic downturn may not be as severe as anticipated. That may be good news for lawmakers in Richmond fashioning the next two-year budget.

    A second trend worth watching: A newly competitive U.S. manufacturing sector is very, very good news for Virginia’s mill towns, which have seen their manufacturing-based economies hollowed out for some three decades now. With U.S.-based manufacturing suddenly looking more competitive, Virginia should consider investing more heavily in the Virginia Economic Development Partnership, the organization that promotes both Virginia exports and inbound manufacturing investment. We could well see a pick-up in the number of announcements like the one made yesterday in which Com.40 Ltd, a Polish manufacturer of mattresses and upholstered furniture, will invest $36.3 million and create 813 jobs in the City of Danville.

  • Illegal Immigrants Pay Taxes, Too

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    James A. Bacon

    With all the consternation about how much illegal immigrants cost the taxpayers of Virginia, argue Michael Cassidy and Sara Okos with the Commonwealth Institute for Fiscal Analysis, it’s important to remember that they pay taxes, too.

    Virginia’s undocumented population numbers between 250,000 and 300,000, they guesstimate in a new report, and it pays between $145 million and $174 million in state income taxes, sales and excise taxes, and property taxes. Further, undocumented immigrants working “on the books” pay an additional $114 million to $137 million in Social Security and Medicare taxes, a sum that their employers match.

    There’s a lot of guesswork in those estimates, as the authors readily admit, but the numbers are as reasonable as anyone else’s. Let’s assume they’re accurate. Taking the high end of each set of estimates, that works out to about $580 in state and local taxes per illegal.

    Bacon’s bottom line: Big whoop. Nobody said that “undocumented workers” don’t pay taxes. The problem is the perception that they pay significantly less than they and their families receive in services and the fact that, I know it’s just a technicality, they are here illegally. Trouble is, we still don’t have any reliable numbers on how much illegals cost, so we can’t say for absolutely certain that they are a drain on the public fisc. Let’s develop some credible numbers, compare them to the Cassidy/Okos numbers and see what we get.

  • Tax Me! Tax Me!

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    James A. Bacon

    In 2002, Virginia set up a special fund for the benefit of those who, either because they believed they were not taxed highly enough or because of an outpouring of generosity, were inclined to voluntarily pay the Commonwealth of Virginia more money than they legally owed.

    Since then, reports the Washington Times, the fund has collected $10,217.04. “Public generosity reached its high point in 2003 when Virginians forked over $6,602. The low point was in 2006, when the state received a measly $19.36. “That’s a tad shy of what it takes to cover a $74 billion biennial budget.

    Gov. Mike Huckabee first instituted the idea in Arkansas. In his book, “From Hope to Higher Ground,” Huckabee explained the thinking behind the idea: “It was a potent way of pointing out the hypocrisy of the insincere vocal minority who proved by their failure to write a check that they wanted more taxes to be paid, but they wanted them to be paid by someone other than themselves.”

    Remember, the art of politics is all about getting the government to give you what you want — and getting someone else to pay for it.

  • Jon, Meet Doug

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    James A. Bacon

    Via Jason, I see that one of Richmond’s most thoughtful and entertaining bloggers, Jon Baliles, is backing away from his keyboard to take a job with the city of Richmond. Jon explains his move here:

    …I have been offered and accepted a position within the Mayor’s Office as a Public Information Manager.

    I was not expecting such a position to be proffered and I was even less sure I would take it. It took several days of hard thinking and talking with confidants about the opportunity. Nevertheless, I determined the time was right.

    Putting on a tie and shaving and riding the bus to the same office every day is something I have avoided like the plague for most of my adult life. Yet, awkwardness aside, it is now an opportunity to put forth some of the ideas I have crowed about from this perch.

    It gives me the opportunity to see how the city works from the inside and bring ideas and action and a fresh perspective to the discussion and possibly reality (or the dustbin). It takes away some freedom and independence that blogging allows, but it pays a lot better than the $0 per year I have been making.

    He also notes that he discussed the move with fomer Bacon’s contributor Conaway Haskins (who works for some guy up north, I think).

    This is an interesting move on a number of levels. While I can certainly appreciate the reluctance to wear a tie, Jon’s 90 day experiment (or longer, if things work out)on the inside of the beast he has ridden so hard over the last few years will be more than just an exercise in sartorial splendor, the glories of the GRTC or how one relates to a mayor who can be…mercurial. It will also give at least one blogger a taste of what life is like on the other side of the digital fence — selling proposals and ideas to a cautious, sometimes indifferent, and genuinely irrational public rather than critiquing them from afar. Perhaps the rest of us will be able to learn something from his efforts.

    Best of luck, Jon. And remember: the only person on Doug Wilder’s team is Doug Wilder.

  • Bonds Go Begging

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    James A. Bacon

    The state of Virginia is proud of its AAA bond rating. Local governments, like Henrico, are fond of such ratings, too. But what happens when the larger bond market suddenly decides it won’t buy any bonds at all — AAA rated or not?

    We’re seeing some of what can happen right now. Today’s Wall Street Journal has a piece on how one wealthy family told its bankers to stash their cash in the safest investment vehicles available. The results weren’t pretty:

    The Mahers rank among the earliest victims of “auction rate” securities, a once-obscure type of bond now sending shock waves through broad swaths of the U.S. economy. Auction-rate securities — an unusual type of long-term bond that behaves like a short-term bond — have become a keystone of modern finance. They are routinely used to fund everything from college student-loan programs to municipal road-and-bridge projects.

    These bonds became popular with investors looking for cashlike investments, because they offered better returns than traditional money-market investments but were just as easy to buy and sell.

    Recently, however, that advantage has disappeared. The market for auction-rate securities has dried up amid fears about fallout from the subprime-mortgage crisis. This week, New York’s Port Authority saw the interest rate on some of its debt jump to 20% from 4.2% amid disruptions in this market.

    We may not weep for the huge losses billionaires endure (the Mahers are still worth several hundred million dollars each), but the spreading trouble in auction-rate securities means even bigger problems for municipalities and local authorities issuing debt. The Port Authority’s example is truly eye-opening:

    The Port Authority of New York and New Jersey’s interest rate jumped Tuesday to 20% from about 4.2% when bidders didn’t show up at an auction of its securities by Goldman Sachs Group Inc. For the next week at least — until the rate is reset again in the next auction — the Port Authority, which oversees New York-area transportation facilities such as bridges and tunnels, will have to pay close to $390,000 in interest payments to holders of the securities. That is up from $83,611 the week before, said a Port Authority spokesman.

    Yes, the pain may be temporary. But the underlying affliction may take a long time to heal:

    In less tumultuous times, the banks might be expected to step in and buy some of these securities themselves to help smooth the process. But their balance sheets are already stuffed with other holdings — loans to corporate borrowers, lines of credit to customers, mortgage debt and more — so they have decided not to intervene in this market.

    As a result, well over $10 billion worth of auction-rate securities have been frozen. These included borrowings for Massachusetts prep school Deerfield Academy, Carnegie Hall and California’s De Young Museum, among many others.

    Issuers have said that they were originally drawn to the auction-rate market because it offered them low short-term interest rates on long-term debt. It also gives them an easy way to pay down debt if they become cash rich: simply participate in the auction and take it back.

    Investors have liked them because they have offered slightly higher interest rates than other plain-vanilla liquid holdings, such as Treasury bills. Corporate treasurers often hold them as alternatives to cash.

    Now, they are having second thoughts. Several government and pension funds, some of which sustained steep losses during last year’s credit crisis, are rewriting their investment rules and are adopting more conservative strategies.

    I do not know if any of Virginia’s bond debt, or that of its local governments and other debt-issuing authorities, is caught up in this latest crunch. But until the market works through its current problems, the debt window is a lot less friendly, and a lot more expensive, place than it was even a few weeks ago.

  • The Nichol Resignation Narrative Looks Weaker and Weaker

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    James A. Bacon

    The Nichol controversy continues to bubble after the College of William & Mary president submitted his resignation Sunday. Faculty and students have held protests and vigils — Nichol, it seems, was a popular president. Meanwhile, the blogosphere is aflame with accusations that the firing represents a triumph of right-wing, Christian mullahs — a sentiment that Nichols inflamed with his claim that the Board of Visitors refused to renew his contract for, among other reasons, his removal of the cross from the Wren Chapel and his consent to allow a sex workers show to be held on the campus.

    Nichol’s version of events is getting wide play because he’s the only one to speak openly about the reasons for his departure — he wrote a lengthy letter giving his side of the episode, blasting out a campus-wide e-mail describing his version of events. Other than to deny that it acted for “ideological” reasons, the Board of Visitors initially was circumspect. But details of Nichols’ termination are leaking out.
    For starters, the Virginia Gazette reports that the Visitors’ decision not to renew Nichol’s contract was unanimous. That is significant because it is difficult to imagine that the Visitors would have been unanimous had the decision been based upon culture-war issues like church crosses and sex shows. To see why I say that, let’s see who the Visitors are. (I have included the gubernatorial administration in which they were first appointed):

    Officers
    Michael K. Powell, Rector, Fairfax Station; Warner
    Henry C. Wolf, Vice Rector, Norfolk; Warner
    Suzann W. Matthews, Secretary, McLean; Warner

    Members
    Charles A. Banks, Gloucester; Kaine
    Robert A. Blair, Washington, D.C.; Warner
    Janet M. Brashear, Virginia Beach; Warner
    Thomas E. Capps, Richmond; Warner
    John Gerdelman, McLean; Warner
    Sarah Gore, Newark, Del.; Warner
    R. Philip Herget III, Alexandria; Warner
    Kathy Hornsby, Williamsburg; Kaine
    Jeffrey L. McWaters, Virginia Beach; Gilmore
    Joseph J. Plumeri II, Scotch Plains, N.J.; Warner
    Anita Poston, Norfolk; Warner
    John Charles Thomas, Richmond; Kaine
    Jeffery B. Trammell, Washington, D.C.; Warner
    Barbara B. Ukrop, Richmond; Warner
    Only one board member, Jeffrey McWaters, was appointed by Gov. Jim Gilmore, and he was reappointed by subsequent Democratic administrations. While this group very much represents the business, professional and government establishment — Michael Powell, the son of General Colin Powell, ran the Federal Communications Commission for several years — they all belong to the political mainstream, very much in line with Democratic governors Mark R. Warner and Timothy M. Kaine. Nary a right-wing, evangelical nut-job to be found among them.

    After Nichol released his resignation statement via e-mail to the W&M campus, Rector Powell expanded slightly upon the statement that the Board had previously made. Reports Bill Geroux with the Times-Dispatch:

    Though Nichol was an inspiring and charismatic leader, Powell said, the president’s job entails many less-glamorous duties such as operational planning, fundraising, community relations and crisis management, and Nichol had “meaningful weaknesses” in some of those areas.

    The board had tried to work with Nichol to clear up those problems, Powell said, but Nichol’s contract was coming up for renewal, and “sometimes at the end of the day you can’t make a fit.”
    Lending credence to Powell’s statment is a press release that the Board of Visitors issued on Sept. 28, 2007, regarding Nichols’ status at the university:

    One of the most critical responsibilities of the Board is to evaluate the performance of its chief executive. Conscious of our duty, the Board has developed a structured, objective and thorough review process. The Board intends to abide by its established process before reaching any decision. Pursuant to the terms of the President’s contract, the review will examine achievements as measured against goals and objectives presented by the President to the Board as well as other metrics. Additionally, our appraisal will include a 360 degree review, which is a feature of the best appraisal systems. Once this process is complete and we discuss the matter with the President, a final decision will be made solely on the best interest of the College. That decision should be expected in the spring of 2008.

    In other words, it has long been known that the Board has had concerns about Nichol’s operational performance, and it had developed an evaluation procedure that would be comprehensive, balanced and objective — a wise precaution, given Nichol’s volatile behavior.

    Whose version of events, then, do we believe: Nichol’s or the Board’s?

    Nichol listed four reasons for the termination of his contract: (1) removal of the Wren cross, (2) refusal to ban the sex workers art show, (3) implementation of the Gateway scholarship program, and (4) efforts to increase diversity and internationalization.

    While the Wren cross issue was unquestionably controversial, Nichol does not describe exactly how it might have played a role in the BoV’s decision. He implies that the Board’s objection to his handling of the situation was ideological. We are expected to believe that on his say-so. But it is entirely possible that the Board disapproved of the action less than the decision-making process, and the lack of consultation, that was behind it.
    The controversy over the sex workers art show popped up only in the past few weeks. There is no reason to think that it was a factor back on Sept. 28 when the BoV initiated its contract review process. The Visitors clearly were troubled by Nichol’s management style before the sex show controversy became a public spectacle.

    As for the Gateway scholarship program and efforts to increase diversity and internationalization, Nichol presents no evidence whatsoever that the BoV had any problem with them. Indeed, according to the Daily Press, Powell stated that the university plans to continue many of Nichol’s policies, particularly the emphasis on increasing diversity at the school.

    In other words, there is ample reason to believe that Nichol substantially mischaracterized the reasons for the BoV’s decision not to renew his contract. If that suspicion proves to be the case, then Nichol’s performance has been utterly hypocritical and contemptible. While taking on the mantle in his resignation letter of one who loves the College, he actually has defamed it by misrepresenting the cause of his resignation, portraying the institution as ruled, in effect, by mullahs and troglodytes, and resigning in such a way as to garner maximum attention — sending out a campus-wide e-mail with his tendentious version of the story.
    Combine this behavior with the suggestion leveled by Del. Bob Marshall, R-Manassas, that Nichol refused to yield important documents when presented with a Freedom of Information Act request (see “More to the Nichol Story at Wm & Mary“), and it looks like Nichol is neither someone who can be trusted with the truth nor someone who holds the interests of the College above his own.
    The Visitors have been dignified and restrained in responding to Nichols’ calumnies. I wish they would go public with Nichol’s performance evaluation and detail his deficiencies as a college president. Of course, they can’t: They are bound to keep personnel matters confidential. Nichol knows that he can say anything he wants, and they cannot. But that does not mean the public has to suspend its critical judgment and believe him.
    (Photo cutline: President Gene Nichol… Oops, sorry, that’s Nicholson, not Nichol.)

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