Bacon's Rebellion

The looming showdown in the General Assembly looks like deja vu all over again.

In 2004, a Democratic governor and a Republican-controlled state Senate agreed on the need to raise taxes, primarily to fund increases in K-12 spending, while a Republican-controlled House of Delegates fought the increase.

Two years later, the situation is eerily similar: A Democratic governor and a Republican-controlled state Senate want to raise taxes, this time for transportation improvements, while the Republican-controlled House of Delegates finds itself in opposition. Indeed, yesterday, the House Finance Commitee nixed measures backed by Gov. Timothy M. Kaine to boost the tax on car sales and car-insurance premiums.

We all remember what happened in 2004: The House buckled under pressure from the Governor and the Senate, and a tax increase was pushed through. Will history repeat itself in 2006?

I don’t think so. My sense is that the House sentiment against a tax increase is even stronger than in 2004, and public support for another tax hike is considerably weaker.

In 2004 , Gov. Mark R. Warner and his allies, including then Lt. Gov. Kaine, argued that the state faced a long-term, “structural” budget deficit in the years ahead. It turns out they were wrong. Economic growth brought in far more revenue than the Warner team had forecast, and the state piled up massive surpluses.

The embarassment of riches has two implications. First, as the House Republicans have argued effectively, it’s ridiculous to raise taxes when the state is enjoying large surpluses. Secondly, the fact of the surpluses casts the pro-tax camp as the boy who cried wolf. The Big Tax zealots cried “fiscal crisis” in 2004, and it turns out they were wrong. The Big Tax apologists argue that road funding is facing a crisis as well, but they have less credibility than they did two years ago.

Here’s another important difference. The Democrats are less united behind a tax increase today than they were in 2004. Two years ago, the tax hike went to a cause that all Democrats could feel good about: public schools. Democrats are more ambivalent about raising money for transportation improvements, the bulk of which will go to roads. The influential environmentalist/ conservationist wing of the Democratic Party loves Gov. Kaine’s proposal to give local governments more power to restrain growth. But the Smart Growth activists have been less than vocal in their support for more money to build more roads. Indeed, many Smart Growth proponents regard it as a huge mistake to ramp up spending on transportation until fundamental land use reforms have been put into place first — and the Governor’s land use reforms only scratch the surface.

Here’s one more difference. In 2004, spending money on schools had broad bipartisan support across every region of the state. In 2006, voter frustration with traffic congestion is concentrated mainly in Northern Virginia and, to a lesser degree, in Hampton Roads. Outside those two metropolitan areas, legislators aren’t feeling any pressure to raise taxes. As long as a transportation tax scheme is statewide in scope while traffic congestion is localized, it will be a very hard sell.

The General Assembly has been doing yeoman’s work in studying the needs of manufacturers in Virginia. Although it accounts for an ever-diminishing percentage of jobs in Virginia, the manufacturing sector remains a vital contributor to the Commonwealth’s economy, especially in Virginia’s smaller metropolitan areas. The Senate has been investigating what the state might do to become more competitive in the manufacturing arena.

A joint subcommittee studying manufacturing has issued a preliminary report, with a final draft to follow after the General Assembly session. Among the highlights:

• Revamp the rules regarding the ownership of intellectual property developed at state universities through privately-sponsored research.
• Adopt a state energy plan which would include measures to improve the supply of natural gas.
• Reduce the state/local tax load on manufacturing, which is higher than for any other sector of the economy.

The usual criticism of blogs is that they are parasites on the Mainstream Media, that they do little original reporting. We’ve done our best to dispel that stereotype here at Bacon’s Rebellion, doing original reporting in the Road to Ruin project, as well as for the column in the Bacon’s Rebellion e-zine.

Now comes Waldo Jaquith, who has dared do something that we have not — actually attend the General Assembly and report directly on the proceedings. Waldo spent Friday blogging from the state capitol. Visit his blog, scroll down to his Feb. 2 posts, and give him encouragement.

The following is a two part posting:

PART ONE

First, let us consider “takings” – the use of eminent domain to create functional human settlement patterns. This topic was stirred up by the New London Hotel Case in the Supreme Court last June and was discussed at length last week on this blog:

(Before we start, yes this post is spilling more ink on the topic of “takings.” It is presented in the hope that it will lead to the spilling less ink on a whole range of issues as noted in PART TWO below.)

The problems and solutions raised by the recent series of postings and comments on the topic of eminent domain (26 Jan 2006 6:40 AM “BB&T Ahead of the Curve,” 27 Jan 2006 1:10 PM “Who Really Profits” and 27 Jan 2006 5:54 PM “Anonymous Graffiti and Cheap Shots” provide the basis for an important observation:

There is a solution that is completely unrelated to the emotional diatribes over “taking the poor widows house” and “property value/property rights.” This long overdue reform would cause most of the legitimate settlement pattern reasons to use eminent domain to disappear.

With the vast majority of the takings cases never coming up, it would be easier to develop a fair and equitable way to deal with the hard cases where balancing public rights and private rights is really the question.

Most of the cases where those concerned with the evolution of functional human settlement patterns would suggest use of eminent domain involve avoiding obscene monetary windfalls and preventing “real estate interests” from playing dog-in-the-manger with vacant and underutilized land until they are bought out. See “Who Really Pays” posted at 1:10 PM on 27 January.

The bottom line is that the current practice causes disaggregation and scatteration of human settlement pattern that cannot be sustained. Civilization depends on the evolution of Balanced Communities in sustainable New Urban Regions.

The “solution” (or at least a major step forward for vacant and underutilized land that triggers the need for the use of eminent domain)? We give you two words: Henry George.

Not two guys named “Henry” and “George” but one named Henry George. Mr. George was a 19th century “newspaper man” cum land economist why proposed a reform so simple, so logical and so powerful that he became a cult figure and was run out of the country by land speculation interests. If you do not already know a lot about Henry George, Google him.

In a nutshell, George argued that the property tax on land and improvements should be reformed to tax land and not tax improvements within the Clear Edge.

The George thesis is based on the reality that land has almost no value for urban land uses unless there is extensive public investment. The reasons why governments exist in the first place is the core issue here. Governments are formed to protect citizen’s heath, safety and welfare. Economic prosperity and social stability sustainability depend on enlightened government actions.

Stability – security and safety – provided or insured by the governance structure is required for functional markets in land and goods as well as for personal safety. Without these protections, there is no urban life and so no demand for urban land uses.

Mobility and access – roads, rails, pedestrian ways and the rights to use them are critical government contributions to urban civilization.

Of course, there are the “public utilities:” water, sewer, stormwater management, electricity, gas, telephone, cable, wireless, etc. are critical. There are forty plus or minus goods and services that make urban life possible and most are provided by or regulated by the governance structure.

If land owners each paid their fair share of the cost of providing those services regardless of what they built on the land, then almost no one would keep land vacant and underutilized as a strategy to secure future speculative profit. In addition, the public would not have to waste resources extending services, either directly (by paying for extensions e.g. roads and sewers) or indirectly (e.g consumers paying higher electric or cable rates).

(It goes without saying that those who own land outside the urban service area would pay far less than they pay now. There is some debate about the details of tax treatment in the Countryside but none inside the Clear Edge where the eminent domain problem is focused.)

Running urban services past vacant and underutilized land is very expensive. If you do not think this is the case, try a factor of 10. It is ten times more expensive to provide basic urban life support to dysfunctional human settlement patterns that it is to provide the same services to functional settlement patterns. That is the 10X Natural Law of Human Settlement Patterns and only address those services at the Alpha Neighborhood scale.

If the Henry George tax reform were implemented, it would wipe out most of the reasons to use eminent domain to aid the evolution of functional human settlement patterns that we have cited in the postings noted above and in previous discussion of eminent domain (See posting on this blog “New London Hotel Panic,” 23 June 2005.)

PART TWO

Now for the real reason for this posting:

Why not deal with all the social and political wedge issues that stir up partisans by focusing attention on a constructive way to solve the underlying problem rather than a knee jerk rush to a pandering “constitutional amendment” solutions that only addresses the surface condition and not the root cause?

In the case of the “do not raise taxes” issues the root cause can be gleaned from the Friday post and comments that dredged up the “bond rating crisis” (CA’s AAA Bond Rating Controversy: A Look Back,” 3:48 PM 2 Feb 2006).

The core problem is failure to allow the governance structure to evolve so that:

A The governance structure reflects the economic, social and physical reality of human settlement patterns, and

B The level of control is the level of impact

If governments evolved and were not moribund within ancient boundaries and saddled with outdated organizational structures citizens could understand and intelligently provide guidance for governance practitioners.

From time to time we will point out the underlying issue that plague discussion of:

Teen drivers auto accidents

Low public school test scores

And other issues directly related to human settlement pattern.

EMR

Please humor me and follow this train (wreck) of logic taking place in Virginia’s state Senate:

(1) Virginia is running short of money to pay for road maintenance and transportation improvements.

(2) One of the main reasons the Commonwealth is running short of money is that gasoline tax revenues are failing to keep up with the amount of driving that people do.

(3) A commonly cited reason for inadequate gasoline tax revenues is that people are driving more fuel efficient vehicles, which means they can drive farther between filling up their tanks and paying the tax.

(4) Therefore, to pay for Virginia’s road-funding needs, the Senate proposes raising taxes to the tune of more than $1 billion a year (although, for what it’s worth, not by raising the gasoline tax.)

Got that? Now, please explain this. According to an item in the Fredericksburg Free-Lance Star, “The Virginia Senate has voted to allow hybrid vehicles to use high-occupancy vehicle lanes until July 2007, extending the exemption for the pollution-cutting cars for another year. “

Hybrids, of course, don’t just pollute less — they’re more fuel efficient. It doesn’t take a Nobel Prize winner in economics to see that encouraging the purchase of hybrids makes the transportation funding problem worse!!

I can hear the apologists bleat: But that’s the price we pay for cleaning the air. Baaaa! Baaaa! Baaaa!

Let me propose a better way to clean the air. Convert the HOV lanes to HOT lanes that people must pay congestion tolls to use. Charging a toll for scarce roadway capacity encourages people to ride share… thus taking cars off the road and reducing pollution!!! As a bonus, the state raises more for highway improvements.

In poking around the General Assembly’s electronic archives, I stumbled across the findings of the Debt Capacity Advisory Committee in a report filed just before Christmas in 2005. Based on then-Gov. Mark R. Warner’s budget forecast, the Committee concluded that the General Assembly could prudently issue $886 million in new debt in 2006 and a like amount in 2007.

That got me to thinking… What did the Advisory Committee write two years earlier, in December 2003, when Gov. Warner, Sen Finance Chair John Chichester and others were beating the drums for a tax increase on the grounds that Virginia’s coveted “AAA” bond rating was in jeopardy?

Thanks to the wonders of the Internet, we can call up that very document, which the General Assembly considerately archives on its website. The Advisory Committee reiterated its endorsement of the “5%” rule, which holds that the debt service on state debt should never exceed five percent of anticipated revenues. Then it quoted the Fitch credit rating agency as follows:

Virginia’s AAA rating reflects its … careful attention to both the level and security of its debt obligations… The Commonwealth’s superior credit standing has reflected its conservative approach both to debt and to financial operations.” (Fitch Ratings, New Issue report, June 3, 2003)

After reviewing the state’s outstanding debt, the Advisory Committee said that based upon the state’s debt capacity model and the Governor’s official revenue forecast, the General Assembly could prudently issue up to $661.91 million in tax-supported debt, to be matched by a like amount in 2004.

A little refresher regarding the political climate at the time: Tax advocates were citing a move by a different credit rating agency, Moody’s, to put Virginia’s AAA bond rating on “credit watch.” Fitch and Standard & Poor’s never put Virginia on credit watch but, citing a threat to the AAA, Warner, Chichester and others argued that Virginia needed to raise more than $1 billion in taxes in the next biennial budget. Without the additional revenues, they warned, the margin of safety was perilously thin.

Yet the Warner administration’s own Advisory Committee, chaired by Secretary of Finance John Bennett, calculated that finances were sufficiently robust to borrow an additional $662 million without jeopardizing the AAA rating!! Further, the report noted how critical debt ratios had improved in 2003 over the previous year. Tax supported debt as a percentage of personal income had dipped in Virginia from 1.8 percent to 1.7 percent. Net tax-supported debt per capita had declined $566 to $546. Meanwhile, interest rates had declined by 22 basis points, creating opportunities, presumably, to refinance some debt at lower interest rates.

Why re-hash all this ancient history? Because the advocates of the 2004 tax increase have never admitted, despite gushing revenue surpluses, that they made a mistake. And now, unrepentant, Sen. Chichester and Gov. Timothy M. Kaine want to raise our taxes again, this time for transportation. Virginia doesn’t need to raise taxes now, and it didn’t need to raise taxes then. And the message must be hammered home until the voters understand it.

Everybody knows, or thinks they know, that Virginia doesn’t pay its school teachers enough. But how about college faculty? The higher up the economic food chain you go, the more competitive the salaries are. Do our public colleges and universities pay enough to attract and retain the bright stars of academe?

The House of Delegates has concerns, and has directed the State Council of Higher Education for Virginia (SCHEV) to look into them. The logic goes like this: “a college education is essential in a knowledge based global economy, and … increased knowledge and skills result in enhanced employability, higher earning power, career advancement, and a better quality of life. … Faculty expertise enables college graduates to become productive, tax paying employees for thousands of employers across the Commonwealth, region and nation.”

Citing a $350 million “base budget funding gap” in higher ed, the House resolution directs SCHEV to compare salaries and benefits by academic discipline and academic rank, identify best practices for recruiting and retaining high-quality facilty, and develop recommendations for Virginia’s public colleges and universities.

Bacon’s Rebellion published an earlier edition of Mike Thompson’s column, “How to Fund Transportation Without Really Trying” based on a preliminary draft. The published version omitted several important changes made by the author. We have since replaced it with the proper version. We apologize both to Mike and to our readers for the error.

Were it not for my friend Steve Nash, a University of Richmond journalism professor who has written extensively on the subject, I would know next to nothing about invasive species. But, trust me, the subject is really important. The consequences of introducing of alien species into environments where local flora and fauna have not evolved defenses against them can be devastating. You don’t have to be a tree hugger to be concerned. Nationally, invasive species cause billions of dollars of damage every year.

As a case in point, consider a story buried in the Richmond Times-Dispatch today: Virginia has hired a private firm to eradicate the only known infestation of zebra mussels within the commonwealth. The mussel, writes Kelley, “can clog industrial water-intake pipes, soil beaches and drive out native shellfish.” The price tag for removing them from a single quarry in Northern Virginia: $365,000.

O Frabjous Day! Callooh! Callay!” Pardon my chortling, but it’s not often that I espy unadulterated good news coming from the General Assembly. According to Jeffrey Kelley at the Richmond Times-Dispatch, a bill to encourage cable-TV competition sailed through the Senate Commerce and Labor Committee yesterday in an undisputed decision.

As Kelley explains:

Verizon Communications Inc. is laying a network in more than a dozen states, including Virginia, that will allow the phone giant to provide video and compete with satellite and cable-TV providers. But the New York-based telecommunications company wants to sidestep what it believes is too long a process to gain cable-licensing deals from every city or county it plans to serve.

Real competition is long overdue. Verizon, as I understand it, wants to extend fiber-optic cable directly into the home, at least in selected neighborhoods. That would provide a lot more bandwidth than can be pumped through a coaxial cable.

I don’t know about the rest of you, but the quality of my Comcast, “high speed” Internet access has diminished steadily over the nearly four years that I have been subscribing to it. It still works intermittently as billed, but much of the time it’s no faster than dial-up service. For that I need to pay $49.95 per month (plus taxes)?

Bring it on, Verizon, bring it on!

The American Journalism Review has published Marc Fisher’s feature on the Virginia blogosphere. Fisher, a Washington Post columnist, did a great job of capturing the vibrancy of blogging in the Old Dominion. Not Larry Sabato, Commonwealth Conservative, Waldo Jaquith, Raising Kaine, 750 Volts, Change Servant, Bacon’s Rebellion and Road to Ruin all garner mentions.

According to Fisher, Virginia has one of the most vibrant political blogging communities in the country. Bloggers have been a factor in national politics for a few years now, but Virginia bloggers are the first in the nation to become a major factor in a gubernatorial election.

In Virginia, one of only two states that hold gubernatorial elections the year after a presidential race, blogs became important enough that some campaign managers neglected their daily duties to obsess over the latest blogospheric gossip, state regulators began watching the blogs for compliance with campaign finance laws, lawmakers started grumbling about how to regulate speech on the blogs, and bloggers themselves began talking about setting standards and figuring out just how much coordination makes sense in a fraternity of extreme individualists.

Overall, it’s a thoughtful, well balanced piece, well worth reading. Not a bad job, coming from an unrepentent member of the MSM!

Waldo Jaquith has posted on the column already, as has Will Vehrs at Commonwealth Conservative.

In my most recent column, distributed at noon today, I outlined the advantages of outsourcing road and highway maintenance, a strategy that could conceivably generate efficiencies of $200 million a year — money that could go to new construction and offset some of the proposed tax increases being considered by the General Assembly. As I have argued ad nauseum on this blog, there is no silver bullet for Virginia’s congestion “crisis,” and wringing efficiencies from VDOT operations is only one of many needed reforms. But it sure beats raising taxes.

As I get reader response from the Bacon’s Rebellion e-zine, I will post it here on the Bacon’s Rebellion blog.

(As an aside, for a high-altitude overview of why I’m opposed to raising taxes for transportation right now, click here. This cites a number of columns I’ve penned and articles that Bob Burke has written for the Road to Ruin project. For an even more comprehensive treatment that emphasizes the need to reform Virginia’s dysfunctional human settlement patterns, there’s no substitute for perusing Ed Risse’s back columns.)

No need for riots in the steet or hurling molotov cocktails. The thinking man’s insurrection has arrived. Just sink into that ergonomically incorrect chair in front of your PC and peruse the Jan. 30, 2006, edition of Bacon’s Rebellion. Articles include:

The Waste in Maintenance
If the General Assembly doesn’t tackle the $200 million-a-year waste in road maintenance, lawmakers can’t even pretend to be serious about curtailing state spending.
by James A. Bacon

Transportation Hold ’em
Most of the cards on the General Assembly’s transportation table are lying face up. But it’s still too early to know who’s got the winning hand.
by Doug Koelemay

Kaine’s Plan Doesn’t Cut It
Tim Kaine’s transportation plan will cost more money – and it won’t work.
by Patrick McSweeney

Rethinking Education Policy
The problem with Virginia schools isn’t a lack of money — it’s the rigid, bureaucratic policies that dictate how the money is being spent.
by Patrick McSweeney

The Big, Bad Warner
Mark Warner is touring the country telling fables about his fiscal conservatism, i.e. ramming through a tax hike in a red state. Why, Governor, what big lies you have.
by Steven Sisson

Not Again (Sigh)
Once again, the General Assembly is talking about taxes for transportation. You’d never know that a global revolution in highway privatization and financing has taken place.
by Geoffrey Segal

How to Fund Transportation without Really Trying
These six strategies will stretch Virginia transportation dollars by billions of dollars — and put off the need for tax increases for years.
by Michael Thompson

Tax Fever
Just like the flu, a tax-increase fever is afflicting our legislators in Richmond. Unlike the flu, there is no vaccine to protect Virginia families from this malady.
by Philip Rodokanakis

Nice & Curious Questions:
The Petersburg Pluton and Volcanoes in Virginia
by Edwin S. Clay III and Patricia Bangs

Sen. John Watkins, R-Powtahan, makes the case for nuclear power in today’s Times-Dispatch, endorsing Nuclear Regulatory Commission initiatives to reduce the regulatory barriers to the construction of new nuclear power-generating units. Electricity consumption is projected to increase nearly 50 percent nationally between 2002 and 2005, he notes, and nuclear energy has proven to be more cost effective than the alternatives. Nukes don’t generate gases that contribute to the “greenhouse effect,” and there is no shortage of nuclear fuel.

“Virginia,” Watkins writes, “must include in its strategic energy policy efforts toward facilitating future nuclear energy development.” Surprisingly, he offers no specifics as to what Virginia migh do.

An opposing view is presented by Michele Boyd, legislative director for the energy program for Public Citizen, a group that has filed a petition against Dominion’s early site permit application for new nuclear units. Her most cogent objection is the difficulty of disposing of nuclear waste. As an alternative to nuclear fuel, she suggests development of newable energy sources such as wind and solar power.

I think wind and solar power are wonderful, but I’m skeptical that they’ll provide any more than a small fraction of Virginia’s increased demand for electricity. Virginians could do far more to conserve energy, an option that Boyd unaccountably overlooked. But in the end, I’m an advocate of that quaint old idea of letting the market decide. Let entrepreneurs compete to provide the most cost-effective best energy/conservation alternatives and let consumers choose the solutions that are best for them.

As for the problem of nuclear-waste disposal, they are real. And the cost of disposal should be built into the cost of electricity, not passed on to taxpayers. But the problems strike me as more political than technological. The French generate some 80 percent of their electricity with nuclear power (as my feeble memory recalls from watching CNN), and they have never had a serious nuclear incident. If the French can figure it out, we should be able to as well.

“Anonymous” postings are akin to profane graffiti. Spray it on and then go and hide.
I am particularly incensed by “Anonymous 3:10” posting following my comment on Jim Bacons “BB&T Ahead of the Curve” posting of yesterday. His/her suggestion that I would feel differently about balancing private rights and public responsibilities if the property in question was my house is below the belt.

In 1951 my mother and father bought a small parcel inside the Clear Edge around West Glacier / Belton, Montana. Over the next six years we built a three bedroom home, storage area, garage, septic system and cistern and landscaping on the property. The home incorporated a 1909 cedar log structure originally constructed in Apgar and then moved log by log on a stone boat over the snow to the site two miles away.

In 1970 the house and land were condemned for public use by the State of Montana. I know exactly how it feels to drive down a road on a trip back to ones home town to show ones children were you lived when you grew up and see only an empty field with a service station beyond.

In my professional practice I have also seen the collective best interests of the citizens of dooryards, clusters, neighborhoods, villages, communities and even regions thwarted by the selfish private interests.

An overzealous protection of private “rights” is exactly the sort of “traditional value” that Jared Diamond examines in “Collapse.” As we point out in “Collapse, an Appreciation,” 8 August 2005 at db4.dev.baconsrebellion.com Diamond believes that the failure to reexamine these traditional values is one of the two root causes of a society to fail. Our posting of this AM (“Who Really Profits”) places the need to create functional human settlement patterns in context.

Note to readers of “Who Really Profits”: If anyone has seen in that post (or any other place) a suggestion by us that a private owner should not be compensated for the full value of property taken for public use or that the new, imporved system we advocte to deterim the value that meets the Federal Constitution’s private property right guarantee be less than fair and equitable please let us know where such a statement can be found in our work.

EMR