• The Federal Subsidies for HOT Lanes

    The question arose in response to my December post (“HOT Lanes on the Capital Beltway Only Five Years Away“) about the role that Uncle Sam is playing in the financing of the $1.4 billion HOT lane project on the Interstate 495 Beltway. According to Quintin Kendall, deputy assistant secretary for management and budget at the Department of Transportation, TIFIA loans and PABs “were a large part of the deal all along.”

    For those unfamiliar with federal acronyms, TIFIA stands for the Transportation Infrastructure Finance and Innovation Act. That program provides direct loans, loan guarantees and lines of credit for surface transportation infrastructure projects.

    PAB stands for Private Activity Bonds. Federal law allows the federal government designate private companies to issue up to $15 billion in tax-free for qualifying projects.

    What this means for Virginians is that we are the beneficiaries of an indirect form of federal boodle. While the Beltway HOT lane project will not be subsidized through direct cash outlays, the Fluor-Transurban partnership building the HOT lanes will be able to line up financing on highly advantageous terms. How much of the implied subsidy will flow through to HOT lane riders and how much will bolster the bottom lines of Fluor and Transurban is not a topic upon which I am willing to hazard a guess.

    From the perspective of federal transportation policy, the Bush administration very much wants to get some demonstration congestion pricing projects up and running. HOT lanes on the beltway around the national capital would serve that aim nicely.


  • Searching for “Plan B”

    With education a topic of consideration on the blog recently, I’ll toss this into the mix:

    A prominent supporter of a market-based approach to improving public schools, Sol Stern, says he no longer believes charter schools or vouchers are a “panacea.”

    In an article published in the latest edition of City Journal, Mr. Stern, a Manhattan Institute fellow, portrays the libertarian approach that once inspired him as a failed experiment, and urges those who agree with him to search for a “Plan B.”

    I don’t have access to the City Journal article referenced in this New York Sun piece, so it’s difficult to assess just how dispirited some in the choice camp may be these days.

    But it seems rather deep, if Chester Finn’s lament is any indication:

    …Finn, who has been a vocal advocate of school vouchers and charter schools, said yesterday in an e-mail message that he has “growing sympathy” with Mr. Stern’s skepticism. Mr. Finn stoked debate himself recently by declaring that one factor hurting charter schools in Ohio is “too much trust in market forces.”

    I’m not sure it’s time to strike the tent and give up on school choice. I’m also not sure one can have “too much trust in market forces.”

    But has the time for choice come and gone? And if it has, is there a Plan B?


  • Wahoo Alumni Study Civil Rights Movement – For Recreation

    Here’s a sign of the times. I just received a e-mail from the University of Virginia “Travel & Learn” program, which I presume is targeted at alumni of advancing age like myself with the time and financial means to enjoy travel. The sales pitch is fascinating in itself:

    Join leading U.Va. faculty and their colleagues worldwide for the School of Continuing and Professional Studies portfolio of 2008 Travel & Learn Programs for Adults. Explore fascinating topics while at historic destinations in these short domestic and international seminars. Discover, as one participant wrote, “spending quality time with an extraordinary faculty in a beautiful setting studying a stimulating topic is a transcendent experience and downright fun.

    This is the future — travel and learn. Eco-travel and heritage-travel are hot. Baby Boomers aren’t content to loaf beside the pool, drink daiquiries and work on their tans. (Personally, I can dig the loafing by the pool and drinking daiquiries, but I’d rather read in the shade than expose my pale, white skin to the merciless pounding of the sun.) No, Baby Boomers want to keep their minds alive.

    Here’s the other remarkable thing: One of the programs is entitled, “Civil Rights and the South: In the Footsteps of the Movement.” The teacher is Julian Bond. Says the plug:

    See, live and understand the American Civil Rights struggle like you never have before as Julian Bond, Civil Rights leader, Chairman of the NAACP and faculty member of the University of Virginia, leads a remarkable journey through the movement as it happened.

    My generation of Wahoos is pretty conservative. It’s a remarkable sign of how far our society has come to think that anyone would find a profit opportunity in selling a vacation to beautiful downtown Montgomery, Selma and Birmingham to retrace the Civil Rights movement to people of my generation.

  • Brain Gain: Building Human Capital

    In the ongoing saga of the “Economy 4.0” series, I have arrived at the topic of building human capital — an issue that barely registers on the public-policy radar screen here in Virginia. Oh, sure, there’s lots of debate about education and training, which are components of the larger task of upgrading the level of skills and education in Virginia’s population, but discussions are narrow and institution focused. And there is next-to-no discussion about recruitment and retention — recruiting economically productive people to Virginia, and then ensuring that they want to stay here.

    What Virginia and its regions need, I argue, are comprehensive plans for (1) developing human capital (educating and training the people already here), (2) recruiting human capital, and (3) retaining human capital. No one leg of this trifecta can do the job alone.

    As an example of what can happen when only the first aspect is addressed, I cite the example of Massachusetts. Public education in the Bay State is consistently ranked as the best, or among the best, systems in the country. And no state can compare to the concentration of higher education — from Harvard and MIT on down. Massachusetts does, in fact, have among the best educated populations in the country. But between 2000 and 2004, an net average of 42,000 native-born migrants left the state. Folks, that’s called a brain drain.

    Currently, Virginia is a net beneficiary of migration patterns. We’re experiencing a modest Brain Gain. That’s an economic positive because the newcomers are more highly educated and make more money than the natives. Insofar as the newcomers are members of the creative class, they contribute disproportionately to artistic, scientific and entrepreneurial innovation as well.

    The United States is reaching a new era of chronic labor shortages as Baby Boomers retire and the ranks of younger generations are too frew in number to replace all of them. The battle for economically productive talent will intensify. Inevitably, states and regions will begin competing for top talent, just as they now compete for capital investment. Those regions that start thinking about how to win the migration wars will enjoy a significant competitive advantage over their rivals. Although some Virginia regions have been talking about the “creative class,” the discussion hasn’t gotten very profound or led to anything concrete. We need to get started.

    As awareness increases that human capital is the critical driver of economic prosperity, political, business and civic leaders will start paying more attention to creating more livable and sustainable communities as a way to attract and keep economically productive employees. Thus, economic development will morph into community development. As this set of issues comes to the fore, Virginia regions will be compelled to address the dysfunctional human settlement patterns that detract so much from sustainability and quality of life.

    I develop this line of argument in more detail in “Brain Gain,” supplemented with some cool internal-migration statistics. For your wonkish pleasure, I have made that data accessible for both the United States and Virginia. I think I’ve drawn some interesting and counter-intuitive conclusions. Perhaps readers can mine this data for more refined insights.

    Gray Matter Migration. A chart ranking the 50 states by net in-migration.

    Virginia Migration Winners and Losers. A spreadsheet ranking Virginia localities by net in-migration.

    (Cut-line: Homer Simpson lives in Springfield. Could he be a Virginian? Image credit: Asymptopia.)


  • Another Year, Another Rebellion

    The New Year has blown in a breath of fresh air: The January 14, 2008, edition of the Bacon’s Rebellion e-zine. If you don’t visit this blog regularly, subscriber for a free subscription to make sure you never miss an issue. Click here.

    Here is our line-up of commentary:

    Building Human Capital
    Human capital is the driving force of prosperity in a globally competitive economy. Soon, regions will vie for it like they compete for investment capital. Will Virginia be prepared?
    by James A. Bacon

    Gray Matter Migration. A Web chart ranking the 50 states by net in-migration.

    Virginia Migration Winners and Losers. A spreadsheet ranking Virginia localities by net in-migration.

    Hypercompetition
    Here’s the sub-text of Tim Kaine’s state of the commonwealth speech: Invest in Virginia’s economic future. We can afford it. Our economy is still out-performing the nation’s.
    by Doug Koelemay

    The Road Ahead
    As the MainStream Media fails to provide information citizens need to function as voters and consumers, a citizen-driven media will emerge to fill the void. It’s not yet clear what that new media will look like.
    by EM Risse

    Unleash the Private Sector
    Many localities are too financially strapped to execute Tim Kaine’s pre-K initiative for at-risk tots. He could bypass that bottleneck by engaging private daycare providers.
    by Chris Braunlich

    Rooting for Hillary
    Hillary Clinton has friends in strange places. Among the millions of Americans who reveled in her New Hampshire primary comeback, there were quite a few in Virginia’s Republican Party.
    by Norm Leahy

    Hot Air or Cold Logic?
    The Governor’s Commission on Climate Change could guide Virginia’s energy and environmental policy for years to come. One option it needs to consider: geo-engineering.
    by David Schnare

    Nice & Curious Questions
    Birdies, Bogies and the Back Nine: Golfing in the Old Dominion
    by Edwin S. Clay III and Patricia Bangs


  • Mo’ Money for Schools — to Honor the Civil Rights Movement

    So, this is what the Civil Rights movement has come to 50 years after Brown v. Board of Education: There’s nothing wrong with Virginia’s failing public school systems that showering them with more money won’t solve. In a nutshell that’s the message conveyed by Oliver Hill, Jr., and Andrew Block in an op-ed piece in today’s Times-Dispatch.

    Hill and Block construct a rickety argument that leans upon nearly every prop of liberal thinking about schools in common currency today. They start their column by hijacking the moral authority of the 1960s civil rights movement. “Our political leaders,” they write, “should continue to honor Virginia’s civil rights legacy by funding an educational system that meets the needs of all of our students, including those same children of color for whom so many fought so hard.”

    The Standards of Quality, which redistributes billions of dollars in state aid from affluent school districts to poor ones, is not enough to “ensure equality of educational opportunity,” they continue. Neither is the $354 million in “at risk” funding that supports special programs for poor children. Low-income students, they assert, need “additional resources to be successful.”

    Nowhere in their column do Hill and Block allude to the fact that many minority-dominated school districts spend significantly more per pupil than neighboring suburban school districts. Nowhere do they mention the scandalous bureaucracy and waste in many of those school districts — a bureaucracy that Mayor L. Douglas Wilder, incidentally, has targeted in his ongoing battle with the Richmond School Board.

    The thrust of the Hill-Block column is to absolve minorities from making any financial sacrifice themselves, restructuring educational bureaucracies or altering their own cultural values or attitudes towards education. More money is the solution, and the onus falls squarely upon the taxpayers of Virginia to dig deeper into their pockets — or dishonor the civil rights movement.

    This is the same old, minorities-as-victims ideology that has fostered passivity among poor African-Americans and kept them them dependent upon the largesse of whites. While Hill and Block purport to honor the heroes of the Civil Rights movement of 50 years ago, their antiquated thinking keeps poor African-Americans mired in the role of supplicants. Virginia would do far better to emulate the example of those hundreds of thousands of African-Americans who have escaped poverty and joined the economic mainstream of society. What was their secret? How can their success be replicated?


  • Oh… My… God…

    That’s my reaction to the news that Pat Robertson, chairman of the Christian Broadcasting Network, is a potential bidder for the Virginian-Pilot newspaper, which the Batten family has put up for sale. According to an Associated Press story:

    โ€œAlthough the price for The Weather Channel is a little rich for my blood, I am considering a potential bid for The Pilot and have asked my attorneys to look into it,โ€ Robertson said in an e-mail statement provided Friday by his assistant, G.G. Conklin.


  • Kalahari, Central Park and Fredericksburg Tax Revenues

    Outside of the Rail-to-Tysons heavy rail debate, the most fascinating development battle taking place in Virginia at the moment is in the Fredericksburg region. The City of Fredericksburg, which is experiencing major fiscal stress at the moment, is pushing development of the Celebrate Virginia project just off Interstate 95 as a way to expand the tax base.

    The developer, the Silver Companies, is touting the project as a net plus to the region because attractions like the National Slavery Museum and the Kalahari waterpark would bring in thousands upon thousands of visitors, who will fill city coffers with sales and lodging taxes. Critics contend that the project will incur millions of dollars in tax breaks, public subsidies and other costs — many of them hidden — and could never stand on its own.

    Today in the Free Lance-Star, reporter Emily Battle underlines City Council’s motivation for backing the project. Revenue from the sales tax, the city’s second largest source of taxes, is down. In November sales tax revenue fell short of $900,000 — the first time November revenues had dipped below $1 million since 2003 before Central Park, a massive retail project at the intersection of I-95 and Rt. 3, opened. That project, ironically, also was developed by the Silver Companies amidst considerable controversy and billed as the city’s financial savior.

    Noting that the City has spent $30.2 million so far this year but has brought in only $25.5 million so far, the Fredericksburg City Manager is implementing a hiring freeze. Under the circumstances, some councilmen argue that the City needs the Kalahari waterpark all the more.

    Before betting the farm on Kalahari, however, City Council might be well advised to revisit the deal they cut with the Silver Companies to develop Central Park. Back when the deal was being inked, what sales tax revenues did the City expect Central Park to yield in fiscal 2008? How do those forecasts compare to reality? If Central Park tax revenues are falling short of expectations, what assurance is there that Celebrate Virginia projections can be relied upon?

    Just asking.


  • SOQs Out of Control

    As the General Assembly works on its budget, the “rebenchmarking” of the educational Standards of Quality looms large. This Constitutionally mandated process recalculates how much Virginia school districts receive in some $6.2 billion in Direct Aid to Public Education dollars distributed by the state.

    As I’ve often observed before, this rebenchmarking process represents one of the greatest inter-regional transfers of wealth in the state. By a complicated process, it punishes municipalities that choose to spend more local tax dollars on tax education. Each time the SOLs are rebenchmarked, the more dramatic the redistribution gets. Accordingly, it is instructive to see what happened when the SOLs were last rebenchmarked, in 2006. Many Virginia cities and counties enjoyed such a windfall of state revenue that they could cut their contributions of local tax dollars.

    Chris Braunlich, a Fairfax resident and regular contributor to Bacon’s Rebellion, has documented this perverse effect. You can view the full document here. Here are some highlights:

    In 2006, the City of Lexington received $1,139 in additional state funds per pupil — and cut their own contribution by $446 per pupil.

    The City of Covington received $796 per pupil more from the state, and cut its local contribution by $644.

    My home county, Henrico, an affluent suburban jurisdiction, received $423 more per pupil and cut its local contribution by $53.

    Chesterfield County, the fourth most populous jurisdiction in Virginia, received $415 more per pupil and cut its own contribution by $239.

    If Northern Virginia taxpayers want to know how they’re getting shafted in Richmond, this is where they ought to be looking. As a Henrico resident, I’m a beneficiary of the funding formula. But that doesn’t make it right. This formula is broken. Lil Tuttle with the Clare Booth Luce Policy Institute has suggested a formula that makes far more sense. If lawmakers sincerely want to fix public education — as opposed to perpetuate the current boondoggle — they could start here.

    (Hat tip: The blogger known as Too Many Taxes.)


  • Empowering NIMBYs, Accelerating Sprawl

    Here’s an idea I never would have expected to see coming from a Republican lawmaker: Lt. Governor Bill Bolling is backing legislation that would make it easier for citizens to appeal land use decisions they don’t like. In a recent e-mail, he writes:

    Under current Virginia law, citizens can appeal an adverse land use decision by a local governing body to the Board of Zoning Appeals, and ultimately to the Circuit Court. However, if the citizen prevails in such appeals there is no mechanism for them to recover the costs they incur as a result of the appeal. Because these appeals can be very expensive, the lack of a cost recovery process serves as a deterrent to citizens in appealing adverse zoning decisions, even if those decisions adversely impact their private property rights.

    To correct this, I will support legislation to enable citizens to recover the costs associated with such appeals from the local government if their decision is reversed by either the Board of Zoning Appeals or the court.

    Superficially, it sounds appealing to empower individuals in their David-vs.-Goliath battles with big developers. On the other hand, Goliath isn’t always the bad guy. I’m not persuaded that we need to strengthen the hand of NIMBYs in Virginia.

    If enacted into law, this proposal would make it exceedingly risky for anyone who wants to vary from the approved development template codified in municipal zoning codes and comprehensive plans. Rather than invest time and resources into creating more livable communities that require special zoning variances, developers will be more likely to pursue by-right development. In most municipalities, by-right development will lead to more scatteration, more low densities, and less connectivity between development pods. In effect, this proposal will perpetuate — nay, accelerate — the inefficient human settlement patterns that ruin quality of life and drive up the cost of government.

  • Bragging Rights

    As a rebel by temperament, I tend to be highly critical of the way we Virginians conduct our business. But it’s OK to remind ourselves occasionally that we do a few things right. In his State of the Commonwealth speech yesterday, Gov. Timothy M. Kaine listed a number of accomplishments that Virginia can be proud of.

    As our Department of Health prepares to celebrate its 100th year of service, they have helped Virginia capture one of the highest rankings in the nation for preparedness for public health emergencies.

    Virginia was named the best state for business in the nation this year by Forbes.com, CNBC, and other business publications. We have one of the lowest unemployment rates in the nation, our average wages are among the highest, and with your support for the Governorโ€™s Opportunity Fund, we announced the creation of over 15,500 new jobs in 2007. Just yesterday, we started 2008 off with a great economic development victoryโ€”RTI will invest $100 million and bring 150 high-paying
    titanium processing jobs to the Martinsville/Henry County region.

    Virginia’s per capita state and local tax burden as a percent of income ranks 43rd โ€“ one of the lowest in the nation โ€“ and our per capita income is the 9th highest in America. Our fiscal stewardship has been rewarded with rare Triple A ratings by all three major bonding agencies.

    According to Education Week, children born in Virginia have the best chance of life success of any children in the nation. Ten Virginia high schools made Newsweekโ€™s top 100 high schools list, and three of Virginiaโ€™s public universities are ranked in US News and World Reportโ€™s top 100.

    For more information about that $100 million investment in Martinsville, which will create 150 jobs, click here.


  • Space Hogs

    The Urban Richmond blog provides a great visual on how much space cars take up compared to buses and bicycles. Truly a case where a picture (or, in this case, three pictures) are worth a thousand words.


  • Fredericksburg’s $61 Million Waterpark Subsidy

    When last we visited the Kalahari water park project in Fredericksburg (see “Kalahari and the Politics of Interstate Interchanges“), the all-consuming issue was who would pay to build an interchange at Interstate 95 to serve the water park and the rest of the massive Celebrate Virginia project.

    Now controversy is focusing on the enormous tax breaks the City of Fredericksburg has granted Kalahari developer. Emily Battle at the Free Lance-Star has the details:

    Fredericksburg would give back nearly half of the local taxes paid by Kalahari Resorts as part of a 20-year, $61 million incentives package that helped convince the Wisconsin-based company to build a water park hotel and convention center in the Celebrate Virginia tourism complex.

    The agreement calls for the city to waive $3.35 million in up-front development fees for the project. The bulk of that is a waiver of the roughly $3.2 million in water and sewer availability fees Kalahari would have to pay to connect to the city’s utility system. In addition to fee waivers, the deal calls for the city to return 47.5 percent of the local tax revenues that Kalahari generates to the resort on a quarterly basis for 20 years.

    In return, Kalahari will promote Fredericksburg in its marketing, and it will set up 500 square feet of space in its main lobby to promote other attractions in the city. Finally, Kalahari promises that it won’t build any other facilities in Virginia. Ooooo. Water park promotions will drive a lot of traffic to historic downtown, I’m sure. Plus the exclusive Virginia franchise for Kalahari concept. Who knows what that’s worth. Fredericksburg knows how to drive a hard bargain.

    Celebrate Virginia and its developer, the Silver Companies, keep popping up on my radar screen. Let’s see… First, there is the matter of those $61 million in tax concessions from the City of Fredericksburg. Then they want the state and feds to pay for a new Interstate interchange to provide access to their property. There’s also those $28 million in tax credits that Silver Companies claimed for putting riverfront land under conservation easements — now disputed by the Department of Taxation.

    Questions: Would Celebrate Virginia ever happen in a free-market economy where developers competed on a level playing field? What are the implications of this project for downtown Fredericksburg and all the other interchange-centered development in the Fredericksburg/Stafford/Spotsylvania corridor? While the tax revenues may net out positive for Fredericksburg, what happens to the tax base of neighboring Stafford and Spotsylvania?
    (Image credit: Kalahari Resorts.)

  • The Push for Greater Transparency

    Rick Sincere has an excellent post (compete with video!) of the press conference yesterday at which a proposal to create greater budget transparency was introduced.

    It’s a good step forward — Virginians deserve to know where their money is being spent and, perhaps, legislators and others will feel a greater degree of responsibility for ensuring that those funds are spend wisely.

    Well I can dream, can’t I?

    Politically, the measure has an interesting number of supporters. Sens. Cuccinelli and Petersen were on hand to give their backing for it, and they were joined, either in person or by proxy, LTG Bill Bolling, AG Bob McDonnell and a number of Delegates. Where is the Governor in all this? Discussions have taken place with his policy people, so he’s at least being kept in the loop, if not yet on board.

    I suggest he does. While transparency alone is no guarantee that the worthies will become better stewards of our money, it does create a means through which (some) taxpayers will be able to track spending, question priorities and perhaps even offer constructive feedback. (I can still dream, right?)

    Rick pulled this editorial from the Free Lance-Star, which I think frames the matter extremely well:

    A couple of existent programs nibble around the edges of what the senator and his co-patrons hope to accomplish. Virginia Performs, an administration creation, rates the progress of state agencies in pursuing quality-of-life goals. The state Auditor of Public Accounts’ Commonwealth Data Point, a Web site, paints a broad-brush portrait of how state government operates, including in the budgetary realm. But both programs are deficient in the all-important “fine print” category.

    Mr. Kaine should support this transparency initiative, not because it would make his life easier operationally–the measure, for example, would expose to the cyberized world the practice of some state agencies to shift funds among program accounts–but because in principle it’s the right and progressive thing to do. The money with which the legislative cardinalate and administration nabobs play government is the people’s money. They should be able to see what becomes of it, quickly and easily, every step of the way.

    I think the measure’s backers had an editorial board with the RTD, too. I couldn’t find any mention of it in the online paper today (though Robert Frost manages to get a couple of inches…yeesh).


  • Electric Regulation: Should California Be a Model for Virginia?

    We can argue in endless circles whether Dominion and other Virginia power companies need to build major new power plants, or whether conservation and renewable energy sources can meet Virginia’s energy needs for the foreseeable future. What is not up for argument is that Virginia can do far more than it currently does to encourage conservation.

    All you have to do is look at California. According to today’s Wall Street Journal, California regulators use a carrot-and-stick approach to incentivize power companies to conserve. The regulatory scheme rewards electric utilities cash equal to 12 percent of the costs they avoid if they meet or exceed conservation targets, but punishes them if they fall far short.

    Thus incented, PG&E, which serves northern California, has subsidized the sale of 7.6 million compact fluorescent lightbulbs so far, and expects to raise the total to as many as 20 million — enough to fill 10 percent of the light sockets in northern California homes. The CFLs use only a quarter of the electricity of regular bulbs. And the CFL subsidies are just the most visible program. PG&E has some 85 programs in all, employing 462 people, to help customers cut energy use: from helping Safeway Inc. choose more efficient chicken rotisseries to paying computer manufacturers to supply more efficient power-supply units.

    PG&E has one big advantage over Dominion in encouraging conservation: It’s electric rates are so much higher that consumers get a much higher payback on their investments in energy efficiency. Dominion can hardly be criticized for keeping its electric rates low. Indeed, I say, thank you very much. But low rates are no excuse for Virginia’s failure so far to put into place regulatory incentives and rate structures that encourage conservation where it makes sense. Give us the option, please. Let us make the decision ourselves.

    Update: Dominion has just issued a press release noting that sales of CFL bulbs have reached 558,000 in the first three months of its light bulb initiative. Dominion provides a $1.50 discount on single bulbs and $3 for multi-packs. The company’s goals now are to sell 5 million over three years.