Bacon's Rebellion

The Macerich Corporation laid out its vision last week to the Fairfax County Planning Commission for transforming Tysons Corner into a walkable community built around high-rises and condos near a proposed Metro station. The expansion, which Macerich has been planning since 2004, would change Tysons Corner Center into a “downtown” of 3.5 million square feet, comparable to Reston Town Center, reports the Times Community newspapers.

The main concern was one familiar to readers of this blog: What would be the impact of the increased density upon traffic congestion? Tysons Corner is already a nightmare. Wouldn’t more offices, more people and more cars just make it worse?

Writes Monty Tayloe:

Macerich’s proposal would attack the traffic problem by improving and widening several roads in the vicinity of the shopping mall, including routes 7 and 123, constructing additional facilities for Metro and shuttle buses, and emphasizing pedestrian movement throughout the area. Macerich has also agreed to pay large financial penalties if specific transportation goals are not met.

Here’s the way I see it. Macerich will be rolling out its project in four phases. If it fails to deliver on its promises, and if gridlock only intensifies, it will lose its shirt. Who will want to lease office space or buy a condo constipated with congestion? Throw in the penalties for failing to meet county transportation goals, and Macerich has every incentive to deliver the goods.

Here’s the question that local homeowners — and our friend TooManyTaxes — are not asking. What’s the alternative? Are things going to get any better under the status quo?

If growth doesn’t go into Tysons Corner, where will it go? Will that growth take the form of even more scattered, disonnected, low-density development that is plaguing communities across the region? Will people be forced to live farther out? Will they be driving greater distances, clogging ever more miles of arterial Interstate, and congesting the arterials to reach the jobs being created in Tysons?

I don’t know enough to comment upon the specifics of the Macerich proposal. All I’m saying is that the reasons for opposing the proposal don’t add up.

(Rendering credit: Macerich Corporation.)

Gov. Timothy M. Kaine is making a new sales pitch to raise taxes for transportation: Keeping Virginia competitive in a global economy. As the Associated Press reports from Roanoke:

Virginia can thrive in the 21st century’s global marketplace with an international airport and a major port but will falter if it cannot provide road and rail access to both, Gov. Timothy M. Kaine said Tuesday. …

The 27 million passenger visits a year at Dulles International Airport in northern Virginia could be increased to 50 million, Kaine said, but more roads and rail access are needed in the traffic-clogged region. The same is true of Hampton Roads, he said, where the port could become the busiest in the nation with dredging to accommodate even bigger ships. “Are we going to be winners, or are we going to leave these great assets withering and dying?” he said.

Kaine raises a legitimate point: Virginia must bend every effort to maintain its economic competitiveness. That’s always been the dominant theme of Bacon’s Rebellion. So, let’s give the Governor the benefit of the doubt and examine his proposal to raise taxes by $1 billion a year to build the kinds of transportation projects he says will do the trick.

If someone gave you $1 billion a year to increase competitiveness, dear reader, would you spend it all on roads? Or would you spend some of it on education? Or R&D? Or recruiting and building industry clusters? Or, here’s a thought… on cutting taxes?

The problem is that there is no way to evaluate the cost-effectiveness of competing proposals in the absence of a Return on Investment analysis. What is the ROI on upgrading U.S. 460 between Petersburg and Suffolk? No one has calculated such a number, but it apparently is not very high. We know this because three competing proposals from the private sector all say that tolls alone cannot pay for the project. If the Virginia ports, trucking companies, shippers of manufactured goods and the residents of Hampton Roads are not willing to pay tolls sufficient to finance the project, why should the Commonwealth tax its citizens?

Because the $1 billion project would create jobs? So would $1 billion spent in other ways.

Because a more free-flowing port would make warehousing/distribution and manufacturing in Southside more competitive? Fine, that’s a reasonable argument. But let’s see the spreadsheet. How many facilities would Virginia attract with an upgraded U.S. 460 vs. the number we could attract with the old U.S. 460? How does that compare to economic activity that would be generated by letting taxpayers keep the money in their pockets?

Economic development is a worthy cause — perhaps the most worthy of causes. But it does not come from the missallocation of investment capital by the political process, subject as it is to manipulation by special interests.

With an executive order, Gov. Timothy M. Kaine has created the Transportation Accountability Commission to ensure that Commonwealth’s transportation agencies “deliver maximum value for taxpayers, implement rigorous management standards, adhere to appropriate free market principles, and promote wise investments.”

States a press release from the Governor’s office:

“While significant additional public and private investments still are needed to upgrade our transportation system, it is critical that current funding is used in the most efficient and effective manner possible,” said Governor Kaine. “This commission also will consider ‘best practices’ and develop performance measures to further improve public accountability of our transportation agencies and professionals.”

The commission also will recommend “quantifiable outcome measures” for aligning transportation and land use planning.

Norfolk Southern Corporation Senior Vice President James A. Squires has agreed to serve as chairman of the Commission, which will be composed of 15 members, including three cabinet members, local government leaders, legislators, business leaders, and community leaders.

This sounds like a positive development. Cynics might suggest that the Governor is trying to co-opt the House Republican Caucus on the issue of structural reform. So what? The Governor is helping legitimize issues — VDOT and land use reform — that have gone unrecognized for too long.

Last Friday, Jim Bacon posted an item on Albemarle County’s proposed transfer of “development” rights program that generated several interesting responses. In the third comment Larry Gross asked what we thought of TDRs. We are getting behinder and behinder but have not written on this topic recently and were trying to find time for a short post. Then along comes C. P. Zilliacus.

Zilliacus nailed the topic. Montgomery County, MD, the nation-states most widely heralded example of TDRs, is a strategic flop.

The TDR sending area has become a McMansion / Hobby Farm zone. This low density urban area has raised the cost of housing in the Maryland portion of the National Capital Subregion. It has also made it harder to get from jobs in the Core of the Subregion to scattered aggomerations of dwellings that approach affordability in Frederick, Washington and Carroll Counties and in West Virginia and Pennsylvania.

The TDR receiving areas are no different than other badly conceived urban agglomerations.

Unless there is a sound regional strategy to create settlement patterns in balance with mobility facilities and is a strategy that recognizes the need for a Clear Edge between the Urbanside and the Countryside, the result is unsustainable.

As noted in The Shape of the Future, TDRs (and the other tactics in the generic class we call Transfers of Property Rights or TPRs) are just tools. In the hands of the current governance structure and with a vacuum of rational regional resource allocation, TPRs are blunt instruments that cause more damage than good.

That is true for most of the “land use control” tools as noted in “The Role of Municipal Planning in Creating Dysfunctional Human Settlement Patterns” at db4.dev.baconsrebellion.com.

EMR

Sometimes it’s hard not to gloat. In August, Forbes magazine conferred upon Virginia the top business climate among the 50 states. (See “Eat My Dust, Texas.”) Now comes a ranking of another kind: If Americans could live in any state they’d choose, they’d pick Virginia No. 2 in the country, trailing only North Carolina.

So says a first-of-its-kind global public opinion poll called the Anholt State Brands Index, based on the responses of 9,000 U.S. citizens. Both states scored in the top 10 for all major categories: climate, physical attractiveness, leisure amenities, ease of finding employment, commercial opportunity, and education.

Said author Simon Anholt: “It is well known that even highly rational decisions – such as major investments and business relocations – are partly driven by so-called ‘soft’ factors, and measuring the brand images of states is an excellent way of getting a handle on these factors. … Brand image is critically important to the prosperity of all communities.”

In a poll of 13,000 foreigners, Virginia ranked behind the mega-brands like California, Florida, Hawaii and New York, but still scored a respectable 7th place. But what do a bunch of foreigners know? Speaking of North Carolina and Virginia, Anholt said: “Their high domestic ranking is presumably all down to local knowledge of the real economic situation of the states, whereas the foreigners are largely guessing.” (Read the press release. Read the report.)

This is heartening news. We Virginians know we have a good business climate. And most of us love living here, too. But we’re biased. On the other hand, Anholt and 9,000 other Americans are not. They love us! They really love us!

If global warming leads to a melting of the polar icecaps and a rise in sea levels, it looks like the Chincoteague National Wildlife Refuge is toast. According to a report issued by the Defenders of Wildlife, Chincoteague ranks among the ten most endangered national wildlife refuges in the United States. States the report:

Chincoteague NWR is one of the top five resting and feeding spots for migratory birds east of the Rocky Mountains. It is part of the United Nations’ World Biosphere Preserve network and is designated an International Shorebird Reserve. More than 300 species of birds, a variety of turtles, otters, muskrats, deer and endangered Delmarva Peninsula fox squirrels and piping plovers make their home on the refuge.

And let us not forget the wild ponies!

I’m not convinced that the alarmist global warming scenarios will play out, but the prospect of having Chincoteague inundated does have a way of concentrating the mind.

(Photo credit: Il Porto del Cavallo.)

According to the Washington Metropolitan Area Transit Authority website, the Metro generated $617 million in revenue in fiscal 2006, spent $1,049 million and required an operating subsidy of $432 million. Those raw numbers understate the real cost of operating the system, however. If Metro is allowing the system to depreciate, it is generating bigger losses than the raw operating numbers let on.

The Washington Post provides an example of the slow-motion depreciation that appears to be taking place. Citing the “escalating” cost of repairs, Metro management is looking at replacing 23 escalators with conventional stairs at 15 stations. Writes Lena H. Sun:

Nonfunctioning escalators trigger more complaints from Metro customers than almost any other problem. Metro has so many escalators because the subway was built so deep beneath swampy Washington. In some places, stairs aren’t an option because all available space is devoted to escalators.

Metro, with 86 stations and average weekday ridership of about 720,000, has 588 escalators and 267 elevators. In contrast, the London Underground, which serves 275 stations and carries more than 3 million passengers a day, has 412 escalators and 112 elevators.

At any given moment, 40 to 45 of Metro’s escalators and about six elevators are typically broken or scheduled for maintenance.

The Metro is a critical transportation asset for the Washington Metro area. There may be a case for expanding the system to Dulles airport and other locations in Virginia. But Virginians will want to be assured that the system isn’t slowly disintegrating before signing up for billions in construction charges and multi-millions in ongoing maintenance costs.

(Photo credit: Answers.com.)

The Daily Press is reporting that a rift is developing between local and state officials on how to develop Fort Monroe. The state has a big say-so because half the property reverts to the state when the U.S. Army shuts down its operations there in 2011. The controversy arises from disagreements in the Memorandum of Understanding that would set the guidelines and goals of the city-state partnership.

Let’s hope they get it sorted out. The City of Hampton is defining a compelling vision for the property. Essentials include:

• Preservation of historic structures.
• Expansion of the marina, opening of the beach and development of a waterfront esplanade. (I confess, I had to look up “esplanade” in a dictionary: It’s a stretch of paved or grassy ground designed for walking along a shore.)
• Mixed land uses and building types.
• Blending of culture, commerce, workplaces, housing, tourism and lodging.

In sum, the vision is to create an urban gem with a distinct sense of historical and geographic place. The re-developed Fort Monroe, I would expect, will be capable of sustaining some of the highest per-square-foot property values in Hampton Roads.

This is a case where federal divestment of an antiquated military facility will result in an enormous plus for the community.

(Hat tip to Kevin Grierson for pointing me to the Hampton presentation.)

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.