Bacon's Rebellion

Virginia has the 41st lowest tax burden in the country, according to the Tax Foundation, a nonprofit fiscal policy research group. The Foundation ranked the 50 states plus Washington, D.C., on the state/local tax burden as a percentage of pe capita income. Virginia’s average tax load of $4,056 amounted to 9.5 percent of income. (See the CNN article and chart.)

Virginians get to keep a lot more of their income than the residents of Maine, who pay 13.5 percent of their income to state/local government. Virginians also keep more of their money than their neighbors, North Carolina (10.5 percent, ranking 23; and Maryland, 10.7 percent, ranking 19.)

What the Tax Foundation doesn’t do, but someone should, is run a regression analysis to ascertain how much of the variation in the growth of per capita income is tied to the level of taxes in that state. As a mathematical dunce, I don’t know how to do that. But if someone could show me how, I’d run the numbers.

One of the major players behind the scenes of the Rail-to-Dulles controversy is the Lerner family, a leading landowner and developer in Tysons Corner. (See “Follow the Money.”) Alex MacGillis and Dana Hedgpeth with the Washington Post profile the reclusive family in considerable detail. The lead-in focuses on the Lerners’ role in development of the Washington baseball stadium and environs, but the story later delves into the negotiations between Lerner and Fairfax County.

My take-away from the article is that the Lerners understand risk in the real estate business better than their counterparts in local government do. Any good negotiator in a transaction shovels off as much of his risk to other parties as he possibly can. If the other party is naive, or politically motivated to close a deal, he will overlook the risks he is taking on. When disagreements arise, the Lerners say, “Let’s look at the fine print.” Things usually turn out in their favor, and local government officials are dismayed. A case in point:

Lilla Richards of McLean, a county supervisor in the 1990s, is still upset about what she sees as the Lerners’ success in invoking the fine print of zoning agreements to delay building a much-needed bridge over Route 123 in Tysons.

“What [Lerner] does is get the [lawyers] to write the document in a way that most gentlemen would understand in one way,” she said. “But after the document is signed and everyone is happy and goes away, then they find out, ‘Oh my God, there is a loophole in here we didn’t see.’ “

The Lerners say they are simply abiding by the letter of agreements. “I guess we’re just going to have to get used to the fine-print rap,” [Robert K.] Tanenbaum said. “A lot of times, you’ll find that when people have different expectations, the argument of refuge is, ‘They’re insisting on details.’ We’re just going to have to be okay with that.”

That’s business, folks. When you’re playing in the big leagues, that’s the way it’s done. The Rail-to-Dulles project is big-league business. So is the redevelopment of Tysons Corner. If Fairfax County doesn’t want to get taken to the cleaners, it needs to hire attorneys and finance people who understand real estate development — and all of its risks — as well as the Bechtels, the Lerners and the West*Groups.

“Seventy-five Years” is the first of three columns exploring the thinking behind the House of Delegates’ transportation agenda. The House plan to restucture the institutional arrangements that Harry F. Byrd put into place in 1932 is one of the most sweeping reform proposals of my 30 years of reporting on Virginia government. Incredibly, the Mainstream Media has brushed it off as a figleaf or subterfuge to avoid raising taxes. The MSM coverage of the transportation debate amounts to nothing less than journalistic malpractice.

This column documents that the transportation debate is taking place at two levels.

1. Institutional reforms. Virginia’s mechanisms for building and maintaining roads, defined nearly 75 years ago, have not kept pace with the dramatic shifts in human settlement patterns. The MSM is not covering this discussion at all, indeed, is barely even cognizant that a discussion is taking place.
2. Who pays? Virginia’s transportation system clearly needs more money. The question is who pays for the improvements. The MSM has mischaracterized the debate as a simple one, between more taxes/no taxes. But the issues are, in fact, far more complex.

Future columns will take a close look at the keystone solutions the House proffers for transportation reform: the creation of Urban Transportation Service Districts and Urban Development Areas.

An interesting debate is unfolding in Albemarle County, where Supervisor David Slutzky has proposed a Transfer of Development Rights program to protect most of the countryside from development and steer growth into a concentrated urban district equal to about one percent of the county’s land.

At a news conference earlier this week, Slutzky was accompanied by representatives of the Piedmont Environmental Council, the Southern Environmental Law Center, the Free Enterprise Forum (a pro-business advocacy group), and the Blue Ridge Homebuilders, which all supported the idea of looking into such a program.

Brian Wheeler with the Charlottesville Tomorrow blog summarizes Slutzky’s plan as follows:

– The expansion of Albemarle’s growth areas from 5% of all the County land to 6% to create a receiving area for the transfered development rights. Mr. Slutzky describes this as a boundary area, adjacent to parts of Albemarle’s existing growth areas, where development would be allowed by-right (i.e. no rezonings, no proffers, and no requirements to follow the County’s Neighborhood Model).

– A rezoning of rural land to a minimum of one house per 50 acres (current zoning allows one house per a minimum of 21 acres). However, with a change in state law, a grandfathering system would protect any existing development rights such that they could be transferred into the TDR program AFTER the rural area downzoning.

– A bonus density reward for the landowner purchasing the development rights. For every rural area development right purchased a developer could convert it to two housing units in the boundary area (or three housing units if determined to be “affordable housing” units).

– Mr. Slutzky argues that these aspects of a TDR program would create a market based system that would protect more rural land and generate new property tax revenues.

You can also read the Daily Progress’ account, including responses from members of the community, here.

I like the idea of creating a market-based system for trading development rights — it’s inherently more flexible than a system of government regulations. But I’m concerned whether setting aside only one percent of developable land in Albemarle will be enough to accomodate future growth. As Charlottesville/Albemarle transforms itself into a research-intensive, knowledge-based economy, it is bound to grow in the years and decades ahead. If the one-percent land set aside for TDRs is insufficient, where will growth go? Will it leapfrog into neighboring counties, with all the negative consequences of thousands of people commuting long distances to jobs in the urban core?

I don’t know the answer — I merely ask the question. I will follow this debate with interest.

There are road bikes and mountain bikes, and bikes for kids. Now bicycle manufacturers are catering to a burgeoning new market: bikes for commuters.

According to today’s Wall Street Journal, nearly every major bicycle manufacturer has rolled out a new or revised commuter model for 2007.

They may look like 1940s Schwinns, but materials like alumnium and carbon make the frames lighter, while technological advances mean better brakes, shock-absorbing seats, smoother shifters and even electric power. The models usually come with practical accessories, like racks for carrying briefcases, fenders for splash protection on wet roads, lights that turn on automatically at disk and big chain guards to keep legs and clothing away from chain grease.

Europeans, the Journal notes, have been riding commuter bikes for decades. In Holland, it’s a lifestyle: There are twice as many bikes as cars, and nearly as many bicycles as people. The U.S. bicycle industry is pitching commuter biking as an antidote to high gas prices and obesity. For lazy bikers (or those who perspire too much), there’s always the option of the electric bike, which can range in price from around $1,500 to $2,000.

New York City is planning to add 200 miles of new on-street bicycle lanes over the next three years. A new Florida law requires motorists to maintain a three-foot distance when passing bikers. Arizona, Minnesota, Oklahoma, Utah and Wisconsin have similar legislation.

Sales of commuter bikes have increased 15 percent over the past two years, according to the WSJ. However, commuters are still a niche market. Fewer than one half of one percent of Americans commute to work on bicycles. The number of commuters could double and not make a dent in traffic congestion.

There is no silver bullet to gridlock. There is only a multitude of solutions, each of which address a sliver of the problem. If we pursue enough of them, we can make a difference. It’s time for legislators to begin thinking how to make Virginia more bicycle friendly.

(Photo credit: The Electra Amsterdam Classic, posted on BikePortland.org.)

Moody’s/Economy.com has just published a forecast of single-family housing prices in the nation’s 150 largest metropolitan areas, “The Single-Family Housing Market Monitor.” The news is not good — especially for the Washington metropolitan area. (I cannot link to the report directly. But go here and then click on “View a sample copy.”)

According to a Wall Street Journal article based on the study, economists are projecting a 12 percent price decline in the Washington area from the peak in the fourth quarter of 2005 to the second quarter of 2008 when the market hits bottom.

In Appendix B, the report ranks Bethesda, Md., as the most overpriced market in the country, followed by Washington, D.C. (which appears to include Northern Virginia). Richmond ranked 75th out of 150 metro regions for overpricing — meaning, essentially, that its housing market is in balance. Hampton Roads (Virginia Beach) is ranked 90th, also in balance.

The news about Northern Virginia should come as no surprise to readers of Bacon’s Rebellion. We’ve been predicting a bursting of the credit- and speculation-driven bubble for more than a year. What’s interesting is that Moody’s/Economy.com has put a number on the price decline.

Politically, what happens when housing prices drop 12 percent on average? Long-term home owners who have built up significant equity in their houses will feel relatively little pain. But newbies, many of them leveraged to the hilt, and old-timers who have borrowed against their rising house values, will see their housing equity evaporate. That will severely undercut their ability to borrow and spend.

Under those circumstances, you can be sure that Northern Virginians will perk up and pay attention when local governments jack up nominal tax rates by 12 percent just to maintain the same revenue flow — something they haven’t had to do in years. Paying $3,000 a year in property taxes doesn’t hurt so much when the value of your house has increased $25,000. But it hurts real baaad when your house has lost $25,000 in value, wiping out half of your equity. A political firestorm seems inevitable.

The timing could not be worse for Gov. Timothy M. Kaine, who is threatening to make taxes for transportation an issue in the 2007 General Assembly elections. Kaine and his allies in the Axis of Taxes will be calling for $1 billion or more in state tax increases at the very same time that homeowners are suffering from declines in net worth and, most likely, voluably protesting rising local property taxes. I find dubious the proposition that voters will respond warmly to the call for higher state taxes.

As the Northern Virginia real estate debacle slowly unfolds, the political implications will become increasingly obvious to everyone.

Gov. Timothy M. Kaine sounded the right note on “global competitiveness” in an address to the 58th Virginia Conference on World Trade in Roanoke yesterday.

“We ought to decide that we want to be winners and do what it takes to be winners,” Kaine said, as reported by Rex Bowman with the Times-Dispatch.

“Attitude toward globalization is a key component. So many communities in Virginia have lost jobs overseas, have lost economic opportunities. In many parts of Virginia there is understandable anxiety about the global economy. Can we acknowledge that anxiety but really go after global connections? We are better positioned than any other state to be winners in a global economy.”

Global trade is a net positive — it creates far more wealth than hunkering down with protectionist policies. At the same time, trade creates short-term losers. Rather than insulate the losers from change — a recipe for stagnation — state policy should be to help the losers adapt. That’s why the Kaine administration task force on workforce development is so crucial. Virginia needs to do a better job of mobilizing its resources to help workers displaced by trade (or, more frequently, by new technology) learn new, more marketable skills.

It’s also crucial that the state find solutions for moving freight out of the increasingly bottlenecked Virginia ports. So far, most energy has been expended on building a Third Crossing, widening Interstate 95 and building a new U.S. 460. Perhaps we also should be examining the option of using Public Private Partnerships to increase rail capacity out of the ports. Just a thought…

The citizens of Stockholm, Sweden, have voted in a referendum to approve “congestion pricing” as a permanent solution to reduce traffic congestion in their densely populated city. The vote follows an experiment in which motorists were charged a toll that varied by time of day when they passed any one of 23 tolling points around the central city.

An article in the Wall Street Journal (summarized on this blog) noted that the tolls reduced congestion by changing many peoples’ behavior. Many Stockholm residents switched to buses and bikes for transport, or changed their routes entirely. Thanks to the dynamics of traffic flow, an arithmetical reduction in peak traffic leads to a geometric reduction in congestion.

Congestion pricing is a congestion-mitigation tool being considered in Virginia. The Virginia Department of Transportation is studying the application of the strategy in Hampton Roads, while Del. Chris Saxman, R-Staunton, has submitted bills that would encourage Virginia to participate in a federal congestion-pricing pilot project.

Details of the Swedish vote come to me by way of C.P. Zilliacus, principal transportation engineer with the Metropolitan Washington Council of Governments. You can read the account in the Dagens Nyheter here. If you don’t read Swedish, you may not get very far. Fortunately, Zilliacus is fluent in the Nordic tongue. And it appears from his translation that the new center/right government is doing in Sweden exactly what I recommended in my recent column (“The Swedish Solution“) be done in Virginia, which is to plow revenue from the congestion tolls into transportation improvements.

If the Governor and lawmakers are looking for a long-term, sustainable source of transportation revenues, this is the best way to get it. Unlike taxing people when they purchase automobiles or buy car insurance, which does nothing to induce positive changes in behavior, congestion pricing both (a) raises revenue, and (b) induces people to drive less.

If we add the proviso here in Virginia that all congestion-tolling revenues in are to be reinvested in the same traffic corridor, we could create a self-regulating mechanism that would ensure that no more money was being taxed than was actually needed. It would work like this: Congestion tolls would raise money for new projects — new lanes of roadway, more buses, more bus stations, traffic light synchronization, incident-response management, etc. Those new projects would reduce congestion… Less congestion would mean lower tolls… at least for a while.

Contrast that with plans to raise $1 billion or more in general fund revenues. Those taxes would never be removed, and the money would be spent regardless of the demand for new projects. What the congestion-pricing scheme would not do is subsidize construction of road projects designed to open new areas to develop.

While I’m plugging worthy causes, let me just pass on this note: The Sorensen Institute for Political Leadership is now accepting applications for its 2007 program season. I’ve known many grads of the program, and they’ve all gotten a lot out of the experience. If you’re among the one percent of the population that’s passionate about Virginia government and politics — and if you have a bit of spare time — then this program is for you.

For more information, visit the Sorensen website.

In case you missed it, Bwana over at Renaissance Ruminations has launched his “Fall 2006 Virginia Blogosphere Book Fair.” It’s fun — go visit. See what other bloggers are reading.

I was astounded to see that the person whose reading list most closely replicates my own is Lowell Feld at Raising Kaine. Of all people! If I’d listed more than my current reading list, I would have added several of the same books, including: “The World Is Flat,” “Freakonomics,” “Guns, Germs and Steel,” “Collapse” and “Blink.” Who needs Amazon.com to see what people like me are reading. I’ll just start reading Lowell’s recommendations!

To see what other bloggers are reading, click here.

To see Bwana’s Virginia history and politics list, click here.

What is going on inside the Governor’s Office? Unremarked by the MSM, Gov. Timothy M. Kaine has done a 180-degree flip flop on legislative and political strategy. We’re talking Hungry Jack pancakes here!

First, a quick walk down memory lane:

On Aug. 31, Gov. Timothy M. Kaine gave a blog-conference interview, stating that he hoped to make progress in three areas: (1) reform and privatization of the Virginia Department of Transportation; (2) making the connection between transportation and land use planning; and (3) bolstering stable, ongoing transportation funding. Although shy on details regarding land use reforms, he did offer one specific initiative he wanted to solve: Under what circumstances should VDOT accept subdivision roads into the state road system?

“Let’s focus on the areas where we agree,” Kaine said. While some people were pessimistic that the special session would yield anything meaningful for transportation, he added, “I’m not among them. We have an opportunity to make some great things happen.” (See my post, “Kaine on the Transportation Session.”)

As we all know, the transportation session was a bust — no thanks to Kaine, who did a total about-face, abandoning any interest in VDOT reform or land use, and elevating the need for a tax increase to his sole rhetorical priority. House Republicans even submitted legislation tackling the issue of subdivision roads, addressing an issue that Kaine had indicated a specific interest in. But during the session, he never voiced support for that idea (not that I saw, anyway).

Now, Kaine is on the warpath. Castigating Republicans for their obstructionism, he’s said that he doesn’t expect to accomplish anything on transportation in the 2007 session. Indeed, he wants to wield transportation as an issue against House Republicans in the late 2007 elections. He told a Daily Press editorial board that he would recruit candidates to run against “no-tax, no-fee, limited-toll Republican lawmakers,” as DP writer John Bull put it.

What happened between Aug. 31 and Sept. 31? Why did Kaine lurch from compromiser to warrior? I’ve heard one partial explanation. It’s a Republican source, so you can take it for what it’s worth. My source thinks that there are two camps within the Kaine administration — a pragmatic, let’s-get-things-done camp, and a political, let’s-get-tough-with-those-stinking-Republicans camp. Both have influence on the Governor. But right now, it looks like the tough guys are prevailing.

If anyone can shed any insight, pro or con, on this theory, I would be most interested in hearing it.

Jim Wamsley raises an important point with respect to the application of Henry George in his comment on “Shades of Henry George” posted yesterday.

Wamsley suggests the application of “concentric areas.” In the context of Regional Metrics we call these “Radius Bands.”

This tactic for application of Henry George would work well for small, isolated urban agglomerations that do not exceed the scale of an Alpha Community –25,000 to 200,000 population depending on the distance the agglomeration is from the nearest large New Urban Region(s).

Simple concentric areas / Radius Bands will not work for the application of Henry George in larger agglomerations, especially for large New Urban Regions or their subregions. A discussion of this idea may, however, help some grasp the importance of a Comprehensive Conceptual Framework for understanding functional human settlement patterns.

In larger urban agglomerations such as the Virginia portion of the National Capital Subregions (population 2.2 million +/- ) one must also use place “concentric areas” / Radius Bands around the Core of each Alpha or Beta Community, the Core of each Alpha or Beta Village – especially if the Village-scale agglomeration has at its Core a shared-vehicle system station.

At S/PI we believe it would be necessary to have a set of Radius Bands around the Core of each Alpha or Beta Neighborhood and perhaps around the Cores of some Alpha or Beta Clusters.

These rings of differing urban intensity / flux would be overlapping (any given site in five or six different Bands) and thus very difficult to calibrate for a Henry George tax application.

It would be better to follow the Three-Step Process outlined in Handbook and sketched out in The Shape of Richmond’s Future,” 16 Feb 2004 at db4.dev.baconsrebellion.com.

Even with the Radius Band / concentric area technique, there is still the need for a Clear Edge between the Urbanside and the Countryside.

The application of “Reverse Henry George” as summarized by Jim Bacon in the original posting would be useful in the context of our notes although Henry George purists hate the idea with the passion of True Believers.

We recognize that those who are in denial about the organic structure of human settlement pattern and / or who hope to profit from the further scatteration of urban land uses across the Countryside (the creation of dysfunctional human settlement patterns) will attempt to obfuscate reality.

EMR

On Friday, I noted that it was only a matter of time before the editorial writers of Virginia’s major newspapers would blame House Republicans for the legislative breakdown in the special transportation session. The Daily Press was quick to oblige. But not the Washington Post. One day went by, then another… and another… Now, finally, the pontificators on the Potomac have made up for lost time with a classic case of invective crowding out thought:

Led by a band of Republican obstructionists in Richmond — ideologues and anti-tax fundamentalists — the General Assembly has decided to let Northern Virginia commuters stew in their own juices for a couple of years. (My italics.)

So many insults in such a short space! Let the spittle fly!

I can respect those who take the trouble to understand the issues, weigh the pros and cons and then, considering the balance of the arguments, stake out a position opposite from mine. But the Post pundits have not even bothered to ascertain what arguments the House Republican Caucus might offer, much less to actually rebut them. There is no nuance — a characteristic held in great esteem when the issue was the presidential aspirations of John Kerry — to the Post’s rants whatsoever: It’s all black and white, good and evil. Why, if I didn’t no better, I’d think that the Post editorial writers were the ideologues!

As I explained Friday (“General Assembly Car Wreck — Who’s to Blame?) it takes two to compromise, and there is no evidence that the Axis of Taxes or any of its “acolytes” (to borrow another demeaning Post label) budged one iota.

Fortunately, a world of new ideas is fermenting beyond the mental horizons of the Washington Post. There is tremendous creativity flowing from both the low-tax, free-enterprise wing of the Republican Party and the conservationist/smart growth wing of the Democratic Party. Loads of new ideas are circulating. Lawmakers are transforming those ideas into legislation. Even some editorial writers — I would cite the Richmond Times-Dispatch, the Fredericksburg Free Lance-Star and the Winchester Star — are taking the discussion of transportation issues beyond the traditional confines of tax-spend-build.

By remaining ignorant of these ideas, the Post is marginalizing itself. Its editorials really have nothing to offer.

Update: It’s nice to see that I’m not entirely alone. Washington’s Examiner offers much the same take on the WaPo editorial and the special session as a whole.

When voters go to the polls in November, they may have macaca on their minds, but they will have an opportunity to vote on three amendments to the Virginia constitution. One of the more obscure measures would expand the rights of localities to offer tax breaks to encourage redevelopment of blighted areas. It’s obscure but potentially significant.

According to Pamela Stallsmith with the Times-Dispatch:

“Localities need additional tools to clear out blight and provide better land use for some of the urban areas,” said state Sen. John S. Edwards, D-Roanoke, who sponsored the amendment. Many urban areas have empty lots where buildings have been torn down and not replaced. “The thought was if you can give a real estate tax break for the [new] structure versus the land itself, then you could encourage developers to invest in urban areas where there are vacant lots,” Edwards said.

The logic behind this idea resembles the argument of Henry George. The 19th-century writer/economist is best remembered for his proposal to tax land, not the improvements upon it. But George wouldn’t have restricted his schema just to blighted areas.

Under a Henry George system of taxation, landowners would not be penalized with taxes for adding value to their land, as they are now. The overall tax burden would be the same — but it would be shifted to the land, not the buildings. That would increase the burden on landowners who let their ladn sit vacant or blighted, perhaps speculating that the value would increase. Because their carrying costs on that land would be considerably higher, they would be incentivized to quickly convert the land to its highest and best use.

While people dispute the value of higher density, I don’t know anyone who contends that Swiss cheese-style development, which leaves vacant holes in areas served by roads and infrastructure, is a good idea. One way to tame the rising cost of local government is to fill in those holes.

Fellow Bacon’s Rebellion columnist Ed Risse has argued that Virginia cities and urbanized parts of counties should switch to Henry George taxation across the board, not just for blighted areas. But Risse offers a twist: what he calls “reverse Henry George.” Risse would draw a “Clear Edge” around those urbanized areas. Inside the Clear Edge — cities and urbanized counties — only land would be taxed. Economic forces would move to build on the vacant land and redevelop under-utilized land.

Outside the Clear Edge, in Risse’s scheme, improvements would be taxed. This would relieve the burden on households who depend upon land-intensive farming and forestry for a living. And it would discourage — not prevent, just discourage — developers from plopping subdivisions in the middle of rural areas, miles from public services.

I have yet to hear any persuasive arguments against the idea. A Henry George scheme would help accomplish many of the aims of the Smart Growth community without imposing a new regulations and hiring administrators to enforce them. It would rely upon market forces, not big government.

If Virginians approve this constitutional amendment, they won’t be adopting a Henry George arrangement, but they’ll be accepting the underlying logic. Perhaps at that time, Virginia would be ready for Risse’s idea to go mainstream.