Monthly Archives: July 2012

Beyond Beautification

The Capital Trees project in downtown Richmond shows how public and private investment in urban canopy can advance strategic community goals like reducing storm water runoff and cleaning up the James River.

Capital Trees: a splash of green on a barren street, and less storm-water run-off.

by James A. Bacon

In November 2009, the Garden Club of Virginia invited Rachel Flynn, then the City of Richmond’s planning director, to speak at its Conservation Forum in Charlottesville. She described how trees played a critical role in defining city street scapes. Although the City of Richmond had funded an extensive planting program, she said, many trees had died. By her count, some 500 empty tree wells were scattered around town.

Intrigued by the presentation, Jeanette McKittrick, president of the Three Chopt Garden Club contacted Flynn and arranged for her to give the four Richmond-area garden club presidents a tour of the city. In that tour, she gave a running commentary about gateways, landscapes, parks and streetscapes and their importance to the city’s identity. That tour inspired a dialogue among the members of the Boxwood, James River, Three Chopt and Tuckahoe of Westhampton garden clubs. Trees, they realized, play a dual role. They are key components in beautification projects, and they are essential to the environment as well.

Over the years, the Garden Club of Virginia has been most closely identified with historic gardens, from Monticello to Maymont, from the Governor’s Mansion in Richmond to the grounds at the University of Virginia. Perhaps it was time to try something new – beautification with an environmental twist.

14th Street before the project.

The four Richmond-area chapters approached the city to join them in a major demonstration project – the landscaping of 14th Street between Bank and Main Streets in the heart of downtown. The goals: to soften a barren, concrete street scene and to reduce storm water overflow into Richmond’s antiquated sewer system.

“It was a concrete canyon. It was ugly,” recalls Susan Robertson, who at the time served as president of the James River Garden Club. Not only was the street an uninviting place to walk, it contributed to the city’s most pressing environmental problem. “There was a significant elevation drop,” she explains. “In heavy rains, water came down, drained into the sewer and ran straight into the river.”

While separate sewer and storm-water systems serve two-thirds of the city, the downtown area still has a combined sewer overflow system, parts of which date to the 19th century. Ages ago, it was state of the art. Today it’s a liability. In heavy rains, storm water merges with sewage to overwhelm the city’s sewage treatment plant, and raw effluent washes into the James River. Upgrading the system would cost roughly $500 million, and the city is under the gun from the State Water Control Board to make steady and demonstrable progress in reducing the overflow.

Planting more trees downtown won’t solve the problem by itself, but the Capital Trees project could make a contribution. “We’re looking at these pilot projects to see how green infrastructure can support the gray infrastructure,” says Michelle Virts, deputy director at the city’s Department of Public Utilities. “The potential exists to reduce the investment needed.”

“One mature shade tree deflects 13,000 gallons of water a year from entering neighboring streams,” says Robertson. Asa bonus, trees prevent silt from entering streams, filter carbon monoxide and other pollutants, trap airborne particulates, muffle urban noise, provide cooling shade in summer, act as windbreaks in winter, and function as carbon sinks.

After their tour with Flynn, the Garden Club ladies set about educating themselves about urban tree canopies. They drew heavily from the pioneering work of Casey Trees in Washington, D.C., which has the mission of restoring and protecting trees in the nation’s capital. Casey Trees had developed best practices for selecting trees appropriate for specific settings, for making sure they had sufficient soil and root space to thrive and for making sure someone watered them as they matured. Read More.

Equal Opportunity Cronyism

From Liz Essley in yesterday’s Washington Examiner:

The day after Mame Reiley resigned for health reasons from the airports authority overseeing the $6 billion Dulles Rail project, the authority quietly created a full-time job for her as a “senior adviser” to authority CEO Jack Potter and agreed to pay her $180,000 a year. …

Reiley, a longtime Democratic activist from Virginia, left the Metropolitan Washington Airports Authority on Feb. 15 after serving 10 years as the state’s representative. The next day the authority, which recently drew a rebuke from federal investigators for wasteful spending and questionable contracting practices, hired Reiley to consult with it on issues she helped oversee as a board member, authority officials said.

Reily, who is fighting cancer, had been donating between 75 to 100 hours per month to MWAA. When she she could no longer afford the volunteer time, airport officials suggested that she become a full-time employee. Potter defended the decision, citing her “invaluable” skills, professional contacts and institutional knowledge.

Well, at least you can’t say Virginia isn’t changing with the times. MWAA isn’t an old boy’s club anymore. It’s an old boy’s and girl’s club.

— JAB

Full Throttle for I-95 Expressway Project

Hopefully, there will be fewer days on I-95 that look like this.

The McDonnell administration has entered into a comprehensive agreement with 95 Express Lanes LLC to build roughly 29 miles of express lanes on Interstate 95 in Northern Virginia. Construction will begin early next month and is scheduled for completion in late 2014.

The I-95 express lanes will tie into the Capital Beltway express lanes already nearing completion, creating one of the largest networks of tolled expressways in the country. Arguably, Virginia is conducting the most significant experiment in subjecting a regional highway system to supply-and-demand economics anywhere in North America.

The $925 million project will expand existing express lanes and add new ones over a 29-miles of length of I-95 in Fairfax, Prince William and Stafford counties. Drivers will pay a toll that will vary according to the level of traffic in order to avoid congestion on the free lanes. Express lanes will remain open for buses, van pools, motorcycles and high-occupancy vehicles, and 95 Express Lanes will add 4,300 parking spaces to new or expanded parking lots to make it easier for commuters to shift to buses.

“The 95 Express Lanes combined with the nearly completed 495 Express Lanes will bring a transportation network that manages congestion efficiently, saving time and better connecting commuters with some of Virginia’s most important employment centers and military sites,” said Transportation Secretary Sean T. Connaughton in a prepared statement released late this morning.

In theory, the project should be well received. First, it will take only $71 million in public subsidies, a far smaller sum than other mega-projects approved by the McDonnell administration. And second, it will expand options. No one is forced to use the express lanes. Drivers can continue to use the old lanes as before. Indeed, insofar as the new lanes divert traffic from the old lanes, drivers will enjoy somewhat reduced congestion at no cost to themselves. Meanwhile, the project will expand the bus option and allow anyone who is in a hurry or who otherwise places a high value on his or her time to pay to use the express lanes.

It’s anybody’s guess how the project will influence human settlement patterns. By reducing the unpredictability of travel times for marathon commutes, the project could foster sprawl by reducing the pain of driving long distances. Conversely, the shift of growth and development back toward the Washington region’s urban core could dampen demand for expressway tolls below what project partners Transurban DRIV and Fluor Enteprises have forecast. Transurban has already announced one write-down in Virginia, an investment in the Pocahontas Parkway outside Richmond, because expected residential growth never materialized.

The 95 Express partnership will provide $854 million in funding, of which $3oo million will be backed by federal TIFIA guarantees. The $71 million contribution from the Virginia Department of Transportation (VDOT) will be less than the original estimate of $97 million, due to lower-than-expected financing costs at closing. Tolls will be collected electronically using the E-ZPass, including the new E-ZPass Flex , eliminating the need for toll booths.

The concession will extend 76 years. 95 Express will assume the risk of delivering the project on time and on budget. The project will pay to beef up the Virginia State Police presence on the Interstate to reduce HOV violators.

Among the questions not answered in the press release:

  • What happens if traffic volumes and toll revenues do not increase as planned? Does the state have any exposure?
  • To what extent is 95 Express protected from competition? Are VDOT’s hands tied in any way from making improvements to U.S. 1, which runs parallel to I-95? Is the state limited in the support it can provide to van pools and buses, or the extent to which it can promote Transportation Demand Management programs?
  • How will the project change traffic patterns in the I-95 corridor? Will new congestion hot spots arise, and how much will it cost the state, if anything, to ameliorate them?

— JAB

Virginia Ekes Out Budget Surplus

Virginia eked out a $129 million surplus for its $41 billion budget in Fiscal Year 2o12, Governor Bob McDonnell reported in a press release this afternoon. It’s the third straight year with a surplus, although the sum is smaller than the $228 million recorded in FY 2010 and $403 million in FY 2011.

There won’t be much money for the politicians to play with. The surplus is all spoken for: $78.6 million for the Rainy Day Fund, $12.3 million for the Water Quality Fund, $20.2 million for transportation, and the rest toward payment of a state employee bonus.

The press release attributed the surplus primarily to stronger-than-expected revenues. Collections rose 5.4% compared to 4.5% forecast.

McDonnell took the opportunity to praise Virginia’s conservative fiscal management while taking a swipe at the spending culture in Washington, D.C. “For too long, elected officials from both parties have over-promised and overspent, and the result is the fiscal crisis we see unfolding in Washington D.C. Here in Richmond, we are committed to a culture of fiscal responsibility and restraint in state government. We have made some very tough choices. We have reduced spending, not raised taxes and focused government on its core functions. Virginia continues to live within its means.”

All true.

Virginia spending in FY 2012 has rebounded since the recession to 2008 levels. With economic growth expected to slow over the next two quarters, there will be no let-up for the budget hawks. Then the threat of sequestration, which would result in massive cutbacks to federal spending in Virginia, looms in 2013. Fortunately, the General Fund budget calls for only 1.1% in spending this fiscal year.

— JAB

Special thanks to personal injury lawyer Thomas Soldan for supporting Bacon’s Rebellion.

Density and Creativity

Shockoe Bottom: There's a reason it's Richmond's creative hub.

In Virginia, discussions about the density of growth and development tends to focus on the fiscal dimension. Is there an optimum level of density to maximize revenues versus costs for local governments? (See “The Fiscal Fix” for a discussion of these issues.) But there is another angle that may be just as important. What is the optimum density to stimulate creativity and innovation?

Economic geographer Richard Florida addresses the question in a Wall Street Journal op-ed today. The optimal level of density may be associated with mid-rise development, he says, not hyper-crowded skyscrapers like the buildings clotting the horizons of the world’s biggest cities, especially in Asia.

Florida argues that a city’s physical layout can affect the ability of its inhabitants to mix, network and engage in the kind of informal encounters that stimulate great ideas. Echoing the critique of anti-modernist architect Leon Krier, he likens giant skyscrapers to vertical cul de sacs — dead ends for interaction. He also quotes urban economist Jane Jacobs on the critical need for pedestrian scale to facilitate interaction and affordable, sub-Class A office space where start-ups can get traction. New York’s hubs of innovation aren’t its skyscraper districts, he notes, but its mid-rise, mixed-use neighborhoods.

Richmonders need to be asking the same kinds of questions: Can we alter the physical design of our communities to create what Florida terms “Jacob density,” an urban form that sparks street-level interaction and informal encounters? Chasing after downtown high-rises or glass-and-steel boxes set amid acres of asphalt parking won’t do much to crank up Richmond’s metabolism.  But the re-development taking place in three- and four-story buildings in Shockoe Bottom and Manchester very well may.

Regionally, the City of Richmond is leading the way, acting as a magnet for artists, architects, engineers, advertising agencies, small IT firms, video production shops and other creative professions. Henrico and Chesterfield have yet to crack the code. Unless they do more to encourage mixed-use redevelopment on a wide scale, not just in pockets, they will cede the local creative movement to the city.

— JAB

Don’t Tax You, Don’t Tax Me. Tax that Fellow Behind the Tree.

Congressma Randy Forbes

by James A. Bacon

Congressman Randy Forbes, R-4th, whose district runs from Chesterfield to Chesapeake, has asked Gov. Bob McDonnell to scrap his proposal to place tolls on Interstate 95 near Emporia. The tolls will “disproportionately burden” residents of a rural region already suffering major economic challenges, he wrote in a letter to the governor.

Forbes’ high-profile intervention bolsters efforts of Virginia Trucking Association, national trucking organizations and local governments affected by the tolls to mobilize opposition to the project. Under a plan recommended by the Virginia Department of Transportation, passenger vehicles would pay $4 and trucks $12 at the main tolling station and smaller sums at on- and off-ramps. The tolling would raise an estimated $35 million to $40 million yearly for improvements in the I-95 corridor.

The congressman’s critique of the tolls is spot on… yet unsatisfying. As he concedes in his letter, “I understand the financial challenges facing the Commonwealth in meeting its transportation needs are great.” Yet nowhere does he propose an alternative solution. His answer is to just say, “No, not here.”

That said, Forbes does have a point. If you live in Emporia, Greensville County or Sussex County and use the Interstate for local traffic, the tolls will pose a disproportionate hardship, made all the more onerous by the fact that per capita income in Emporia is 30% lower than the statewide average. Moreover, as Forbes rightly observes, the tolls will discourage economic development in the “economically challenged” communities.

Politically, here is the nub of the problem: People go ballistic whenever you try to put tolls on roads that they used to use for free. Just ask the residents of Hampton Roads who vociferously oppose the tolls on the Midtown and Downtown tunnels. At least those tolls are paying for a major upgrade that will address traffic congestion there. The residents of Emporia and environs won’t even get that consolation. There is no local congestion, and the tolls will pay for improvements up and down the corridor.

Conversely, no one is up in arms over a the proposed building of a new Interstate-quality highway between Petersburg and Suffolk, the U.S. 460 Connector, because local residents would be able to continue using the existing highway for free. Nothing is being taken away from them. (The estimated $1.8 billion cost and economic justification for the project are an entirely different matter.)

Forbes is right to say the tolls would create a major injustice. A toll discounting scheme for local traffic, under consideration by the McDonnell administration, would do nothing to change that fact.

On the other hand, McDonnell is quite correct when he says that the state is running out of money for new construction projects. He is borrowing up to the limits of the state’s AAA-rated borrowing capacity, and he’s trying to leverage public investment with private dollars through public-private partnerships, but there still aren’t enough dollars to go around. I presume that Forbes is not willing to go out on a limb and demand an increase to the motor fuels tax. If Virginians don’t want to watch their roads, highways and bridges systematically degrade, what alternatives does he propose?

That’s the root problem of Virgina’s intractable transportation-funding issue: Everybody wants more spending on roads, highways and rail, but they want someone else to pay. Virginia needs to return to a user-pays system in which the users and beneficiaries of transportation projects (which include landowners whose property values increase) are the ones who should pay for the improvements. If the beneficiaries of a project can’t be persuaded to pony up the funds through tolls, proffers or special tax districts, the project probably cannot be economically justified.

VUU: Canary in the Higher Ed Coal Mine?

Virginia Union is known for its fine collection of African and African-American art.

by James A. Bacon

Virginia Union University (VUU), a historically black university tracing its founding to the end of the Civil War, has been publicly sanctioned by its accrediting agency for non-compliance with financial and financial-aid standards. The Southern Association of Colleges and Schools’ Commission on Colleges (SACS), cited deficiencies in control over financial resources and funded/sponsored research and programs, reports the Times-Dispatch.

The news follows an SACS decision to terminate accreditation for Saint Paul’s College, a historically black college based in Lawrenceville.

Here’s the big question: Are these troubles merely anecdotal or do they indicate broader woes faced by traditional colleges and universities in the face of runaway tuition and increasing competition from non-traditional enterprises?

One could argue that these citations reflect mainly the woes of historically black colleges and universities (HBCUs), which were founded to educate African-Americans during decades of rigid segregation in Virginia and throughout the South. As long as they enjoyed a captive market, so to speak, these institutions survived. But when segregation ended, they had to compete with larger, better-funded and more prestigious public and private universities for a finite pool of black college-bound students. Thus, according to this line of logic, the problems of HBCUs are unique to HBCUs, not to higher education generally.

I would argue that, as the most vulnerable institutions, HBCUs are simply the first to experience the mounting consumer backlash against rising prices. They cater to a demographic that is lower-income on average and more dependent upon financial aid than the population as a whole. Accordingly, they have less pricing power — ability to raise tuition and fees — than other institutions at at time that students and their families are rebelling against the unaffordable cost of a college degree.

The State Council for Higher Education in Virginia (SCHEV) compares tuition, fees, room and board for public colleges. Virginia Union is a private college, so it is not included in the comparison. However, Virginia’s two public HBCUs — Virginia State University (VSU) and Norfolk State University (NSU) — are included. And it turns out that they charge the lowest tuitions in the state, save at Radford University and two-year Richard Bland College.

Virginia’s flagship institution, the University of Virginia, charged $20,600 in 2011-12, according to SCHEV’s “2011-12 Full-Time Resident Undergraduate Student Charges.” Moving down the scale, Virginia Commonwealth University charged $18,200. By contrast, VSU charged $16,000 and NSU only $14,600. Of course, those institutions also benefited from state support amounting to $8,400 per student in 2008-2009.

Richmond-based Virginia Union charged $22,200 for the 2011-2102 year. As a sign of the institution’s lack of pricing power, VUU is keeping charges flat in 2012-2013.  Read the strategic plan and see how much the administration is focused on cost control, from curtailing health-care and energy expenditures to engaging in bulk purchasing and establishing tighter audit controls.

Here’s what I would predict for the next few years: While the most prestigious colleges and universities may have the pricing power to continue raising tuition and fees, though at a more restrained rate than in the past, less prestigious institutions will not — especially those that cater to a lower-income market. The financial vice will continue to tighten. As these institutions struggle, accrediting agencies will sanction them more and more.

The age of austerity — it’s an ugly, painful thing. But it often takes pain to drive transformative change.

Virginia’s Pension Bomb Is Still Ticking

by James A. Bacon

Back in February the Virginia Retirement System (VRS) and Gov. Bob McDonnell were disputing what rate of return to assume on the VRS’s $54 billion in assets –8% as McDonnell wanted, or 7%, as the more conservative VRS board preferred. By assuming that the VRS will make more money on its investments, the governor’s assumption of a higher return would allow the state to contribute less money to make up the gap between VRS assets and retirement liabilities.

I’m not sure how that discussion was resolved, but the issue needs to be revisited. One could argue that even the VRS’ conservative assumption was too generous. Recent news and analysis suggests that there are at least two reasons for doing so, and I would add a third.

Thank you, Helicopter Ben. Responding to the sluggish pace of economic growth, Federal Reserve Board Chair Ben Bernanke has indicated that the Fed may engage in another round of monetary stimulus, which means that the Fed will act to keep interest rates lower… for longer… than ever before. I’ll leave it to the pundits to debate whether or not the flood of dollars has kept the U.S. out of another depression. But one thing we can say for certain is that Fed policy has held down the borrowing costs of the world’s largest debtor, the U.S. government, which otherwise would be paying $100 billion or so more per year in interest payments than it is now. The flip side is that savers and creditors are making less money. Among the largest creditors in the country are Social Security and state, local and corporate pension funds.

Thanks to lower interest rates, Social Security earned only 4.4% on its $2.4 trillion portfolio of Treasury bonds in 2011, compared to 5.9% on a smaller portfolio ten years before. That’s one reason, among several, that the Social Security trust funds will run out out sooner than previously forecast. Meanwhile, writes Martin Hutchison with the Prudent Bear, the unfunded pension liability of the S&P 500 companies reached a record level of $355 billion in 2011, an increase of over $100 billion from the end of 2010 and $50 billion more than at the bottom of the 2008 bear market.

Finally, despite widespread actions by state legislatures to shore up their state-employee pensions, as reported by Reuters earlier this month, the average “funded” ratio — assets versus liabilities — for the 50 U.S. states had declined in 2010 to 73.7%, down from 75% in 2009. That represented an improvement from the previous year, which had seen a 7% decline. But down is still down. (Performance varied widely from state to state. Funding ratios varied from 45.4% in Illinois to 99.8% in Wisconsin.)

One rule for me, another rule for thee. The pension situation is actually worse than it looks, contends Andrew G. Biggs in “Public Sector Pensions: How Well Funded Are They Really?” writes Biggs:

The accounting rules followed by U.S. public sector pensions are more forgiving than those required for private sector pensions or public sector plans in other countries. So-called “fair market valuation” more fully reveals the value of public sector plan liabilities and shows that the average public employee pension plan in the United States is only around 41 percent funded while total unfunded liabilities as of 2011 are roughly $4.6 trillion.

The trick is how to account for risk. Once upon a time, pension funds invested primarily in lower-return, lower-risk bonds. Over time, to increase their returns, they have taken on more risk by investing in stocks, private equity and hedge funds. Those alternate investments may, in fact, generate a higher rate of return. But they also have a higher risk of loss. To insure against that risk is a cost that public U.S. pension funds aren’t taking into account. Both Canada and Great Britain accounting rules are stricter for government pensions. Writes Biggs:

The International Public Sector Accounting Standards Board … dictates that the discount rate should not incorporate a risk premium and should be based upon government bonds or high-quality corporate bonds, not, as U.S. public pensions do, the expected return on stocks, private equity or hedge funds.

For what it’s worth only 21% of the VRS’s portfolio is invested in fixed income.  The rest is in a diversified portfolio of riskier assets.

Boomergeddon or Boomergeddon Lite, take your pick. We are not in normal times. There is enormous downside risk to all categories of investments, which are currently being held aloft by super-low interest rates and a general expectation that somehow we’ll manage to muddle through. As I have argued for two or more years now, the U.S. economy is spinning out of control. We may be experiencing crummy, sub-par growth, but with $1 trillion-a-year fiscal stimulus and zero-interest rate monetary stimulus, this is as good as it gets. We have jammed the pedal to the floor, and the ol’ jalopy can’t move any faster.

I hew to the school of thought that the U.S. political class will continual to defer the hard choices that must be made, that U.S. fiscal integrity will continue to erode slowly at first, and then, triggered by some external event, it will unravel with terrifying speed. Borrowers will stop buying federal debt, the government will be unable to sustain its spending, the Fed will become the T-bond buyer of last resort, flooding the economy with dollars, the dollar will collapse and runaway inflation will ensue. The unlikely, best-case alternative is that Congress finds a fiscal spine and actually brings the fiscal gap under control by means of spending cuts and/or higher taxes. In either case, the effect will cripple economic growth. Whichever scenario you choose, the outcome is highly bearish for pension fund investments (and everyone else’s).

Bacon’s bottom line: Virginia’s pension-funding issues are far from over. We have patched them up for now, but the fundamentals continue to deteriorate. The United States has entered an age of austerity, and we had better get used to it. Making unrealistic assumptions about future returns on the VRS portfolio may ease Virginia’s fiscal pressures today, but will wreak a terrible vengeance when those assumptions prove to be unfounded and the commonwealth is legally committed to meet its pension obligations.

Virginia Scores No. 5 in Creative Class Ranking

Economic geographer Richard Florida has published a new book, “The Rise of the Creative Class, Revisited,” and now that he’s blogging for The Atlantic, he’s publishing a lot of his data on his blog. Good news for fans of his creative-class analysis.

I was pleased to see that the Old Dominion ranks fifth in the country as measured by the creative-class share of the workforce. The creative class, by Florida’s definition, includes professionals in the fields of science and technology, design and architecture, arts, entertainment and media, and healthcare, law, management and education. Comprising one third of the national workforce, the creative class contributes disproportionately to innovation and economic growth.

Virginia, where 36.4% of the workforce falls into the creative category, owes its high ranking to inclusion in the Washington metropolitan statistical area. Washington, D.C., where the creative professions account for 57.8% of the workforce, took the top spot on the list. In Maryland, ranking third nationally, the share is 38%. Also in the Top 10 were Massachusetts (39% share), Connecticut (37%), Colorado (35.9%), New Hampshire (34.8%), New York (34.7%), Washington (34.7%) and Minnesota(34.6%).

Florida’s ranking of the top creative “counties” in the country is dominated by Northern Virginia jurisdictions. (Florida includes small independent cities such as Fairfax and Falls Church as counties.)


But the story is not all Northern Virginia. Albemarle County ranks 15th in the country. That distinction can’t be attributed solely to the University of Virginia. You don’t see any other college towns on the list, do you? (It would be interesting to know how Albemarle would have ranked if its numbers had been combined with the independent city of Charlottesville, making it truly comparable to counties outside Virginia.)

And then there’s York County in Hampton Roads. York County? Who would have figured it as one of the nation’s creative-class hotbeds?

All things considered, not a bad showing.

— JAB

Keeping the Silence About Guns

By Peter Galuszka

 Late morning near Ashland, the shopping crowd of mostly middle-aged white  men is busy poring over the wares at Green Top  Sporting Goods. Although it is  only late July, hunting season looms and buyers are checking guns and rifles of  all types and sizes. Also on display are scores of handguns, mostly automatics, in glass cases. In the corner behind the counter are assault-style, semi-automatic rifles in evil-looking metal and plastic.

In one aisle, a boy of about 13 picks up a bolt-action hunting rifle with a scope. “Look dad, this one can go to 1,000 yards,” he says.

Green Top has been a local landmark since 1947 in its familiar green-roofed building on U.S. 1 just north of Richmond. The building will shut down within about a year and Green Top, which also offers lots of fishing gear, will move about a mile away to a big box store already closed by Gander Mountain Co. Both are not far from yet another big gun dealer, Bass Pro Shops.

The two chain stores are noteworthy these days. James Holmes, who allegedly shot and killed 12 and wounded 59 in a mass shooting at a Colorado movie theater, bought his weapons at local outlets of Gander Mountain and Bass Pro Shops.

At Gander Mountain, Holmes picked up a Smith and Wesson .233 semi-automatic rifle and a .40 caliber Glock pistol. At Bass Pro Shops, he got a Remington 870 shotgun. Somehow, he allegedly snuck all three firearms,  along with thousands of rounds of bullets he bought on the Internet, into a  midnight showing of “Dark Knight Rises” while wearing bizarre, combat-looking regalia.

In Virginia, there’s nothing essentially wrong with firearms since the state has many square miles of excellent hunting land. Yet the gun mentality is very strong. The Colorado killings are strangely drawing little comment. Even more strange is that the theater killings still don’t match the 2007 Virginia Tech shootings that ended up with the shooter and 32 others dead. Still, Colorado doesn’t come up much.

The Virginia Tech terror lurked in the background on Feb. 28 when Gov. Robert F. McDonnell signed into law a repeal of 1993 statute that limited the purchase of more than one handgun every 30 days. The law had been a signature bill by former Gov. Doug Wilder who was incensed that Virginia had been funneling illegal firearms into large northern cities.

Conservative forces and Second Amendment activists had lobbied for years to get rid of the ban. Families of Virginia Tech victims begged McDonnell not to go along with the General Assembly although he had backed ending the repeal. Before he signed the  repeal into law, his staff dutifully alerted reporters. But the usually talkative McDonnell made no statement. As is the case now, the silence was maintained.

Planning for Development that Will Never Come

Change in jobs and people per acre (2010 to 2040). Yellow areas show an increase of 2 to 7 jobs and people per acre. Increasingly levels of density increases are indicated by light green, dark green, blue and violet. (Click to view a larger map.)

by James A. Bacon

Back in October the McDonnell administration announced what seemed to be a positive step forward in thinking about transportation. The Department of Rail and Public Transit (DRPT) launched a “Super NoVa” study of commuting patterns to help determine transit and transportation demand management (TDM) enhancements for Northern Virginia. While generally positive, I did express the concern that the study might project past growth and development trends far into the future and endeavor to fashion transportation policies to serve populations that will not exist.

Now, it appears, my fears are being realized. DRPT is building its plan on a rickety foundation that assumes, in effect, that land use patterns will continue to develop over the next 30 years as they did in the last 30.

As I have blogged repeatedly, the 2007-2008 recession marked a tipping point in the political economy of the United States, marking the transition from the 60-year era of Mass OverConsumption to what will prove to be a multi-decadal era of austerity. That sea-change will be seen in an abrupt halt, if not reversal, to growth in the size and scope of the federal budget. And it will be seen in a reversal of six decades of scattered, disconnected, increasingly low-density human settlement patterns in metropolitan regions across the country.

We are not experiencing “just another recession” after which things return to Business As Usual. The federal government and the banking system have stopped bankrolling sprawl because the federal government must cut spending or risk triggering a catastrophic fiscal crisis. With constrained finances of their own, state and local governments can no longer afford to maintain land use patterns that intensify traffic congestion and create unbearable fiscal strain.

The new economic realities have yet to be reflected in city and county comprehensive plans, which are still predicated upon the assumption that growth will resume as before — just as soon as the economy gets moving again. DRPT’s projections are based to some degree upon those outdated local projections. “We are using the latest growth projections and we have confirmed those projections with local county stakeholders,” stated Amy Inman, DRPT manager of transit planning in an email to E M Risse, a land use planner, author and former contributor to Bacon’s Rebellion, who tipped me off to the issue. (DRPT also has conducted a “growth and land-use sensitivity analysis,” she added, but it won’t release those findings until September.)

Growth and development are shifting from the periphery of the Washington MSA back toward the core. That trend is being driven by several mega-trends, all of which have been illuminated on this blog and elsewhere: (1) a new, higher plateau of gasoline prices as well as the continually rising cost of owning and operating an automobile; (2) a marked preference among members of the Millennial Generation, already experiencing massive indebtedness for college, to live in walkable communities with access to mass transit; (3) a return of many empty nesters from the suburbs to the urban core, with its superior cultural amenities; (4) a spreading green consciousness that recognizes the fact that per-capita energy consumption is lower in higher-density urban areas than lower-density rural areas; and (5) the superior economic returns, from a local government perspective, on infrastructure invested in higher-density, mixed-use projects than in scattered, low-density projects.

In Risse’s view, the most effective possible transportation policy is not extending mass transit or TDM to low-density locations where they cannot possibly be effective but to help commuters to become “former commuters” in locations where transportation options can be supported. That entails fostering development of communities with a balance of housing, jobs, shopping and amenities all in close proximity and easily accessible to one another not only in cars but by walking, biking and mass transit.

Despite Inman’s assurances to Risse that “we absolutely welcome your input and look forward to your continued interest and participation,” his thinking (which largely coincides with mine on this issue) cannot possibly be incorporated into the study, no matter how sincere, well-meaning and open-minded the DRPT staff. The problem is intrinsic to the design of the project, as seen in the chart below.

Source: DRPT. Click for larger image.

The process starts with data collection. The data, as I have explained, is inherently outdated and flawed. Therefore, any analysis, needs assessment, travel demand models and recommendations that flow from that data also will be outdated and flawed. The best outcome will be one in which the study is published and then collects dust on a shelf, doing no harm. The worst outcome is if people use it as the basis for channeling the investment of hundreds of millions of state and regional transportation dollars into actual projects.

I know that sounds harsh. I have no doubt that the DRPT staffers working on this study are sincere, well-meaning people. They are probably even very bright people and good at what they do. But they are working from flawed premises that will render their labors a waste of time and money.

Sorry, Junior, We’re Not Paying to Send You to a Resort for Four Years

Andrew Rosen

Andrew Rosen, chairman and CEO of Kaplan, Inc., during the Pearson Learning Summit in Phoenix, Arizona, last April:

College today is a bundled product. In order to get the education, you have to buy the football team, the gardens and the climbing walls and stuff. You can’t just buy the education. But I think that the private sector is going to offer learning experiences that are compelling enough that families will start to say, I’d love for my kid to go to Georgetown, I’d love for them to have that experience, but the difference between $10,000 and $300,000 is just unbridgeable. They’re going to say, sorry Junior, we’re going to invest in your education, but we’re not going to invest in you going to a resort for four years.

The same logic, by the way, applies to private schools, the most prestigious of which are almost as unaffordable as college.

Warning Signs for Three Virginia Universities

My previous post, “Higher Ed’s Liquidity Crisis,” highlighted the findings of a new report, “The Financially Sustainable University,” that details the rising spending, increasing leverage and deteriorating finances of American colleges and Universities. While 40% of higher-ed institutions remain in reasonably good shape, a third are in trouble, according to the report.

The report allows readers to access limited data on the performance of individual institutions between 2006 and 2010. The publishers, Bain & Co. and Sterling Partners, withheld the juiciest numbers, presumably in the interest of generating more consulting business. However, the data provided for Virginia public universities, summarized below, suffice to whet the appetite.

The following chart displays unfavorable changes to equity and expense ratios that put schools at risk. As I read this, an increase in the expense ratio is a bad thing, indicating that expenses are rising expressed as a ratio of assets. An increase in the equity ratio is a good thing, meaning a higher percentage of equity and a lower percentage of debt on the balance sheet. (Bad indicators are shaded with yellow.)


Thus, the record of public Virginia institutions appears to be a mixed bag, with a bit more bad than good. If I have interpreted these numbers correctly, Christopher Newport is a stand-out, significantly whittling down its expense ratio while also improving its equity ratio. VCU is the only other university to show an improvement in both measures, but those gains were marginal.

By contrast, ODU, VSU and Mary Washington bear close watching, showing deteriorating expense and equity ratios. As an added concern, none of these three have large endowments to fall back upon should enrollments and tuition revenue begin to falter.

Maybe it’s time for their Boards of Visitors to start asking some tough questions.

— JAB

Higher Ed’s Liquidity Crisis

Building boom: the explosion in higher ed facilities and debt expense. Source: "The Financially Sustainable University."

by James A. Bacon

The affordability crisis in higher education has seized the public imagination for good reason. Student loan debt now exceeds $1 trillion, millions of college students have mortgaged their personal futures, and Americans are questioning for the first time whether a college education is worth the price. This consumer backlash creates a huge problem for the higher ed industry, which has enjoyed decades of freedom from fiscal discipline and has evolved an organizational culture resistant to change.

Now comes a study that suggests higher ed’s problems are even worse, and more deeply rooted, than commonly perceived. Not only has the higher ed market reached the saturation point, according to “The Financially Sustainable University,” the financial picture for most universities is deteriorating as well. Argues the report, published by Bain & Company, a consulting firm, and Sterling Partners, a private equity firm:

Many institutions have operated on the assumption that the more they build, spend, diversify and expand, the more they will persist and prosper. But instead, the opposite has happened: Institutions have become over-leveraged. Their long-term debt is increasing at an average rate of approximately 12% per year, and their average annual interest expense is growing at almost twice the rate of their instruction-related expense. In addition to growing debt, administrative and student services costs are growing faster than instructional costs. And fixed costs and overhead consume a growing share of the pie.

While universities do engage in strategic planning, the study says, they are focusing on the wrong thing: moving up to the next level and gaining greater prestige. “As a result,” write the authors, “most of the strategic planning that happens in higher education is on the margins and not focused on making the hard decisions that will ultimately lead to success.” (University of Virginia pay heed!)

The report provides some of the best management advice to higher-ed management that I have yet seen. Here are some of the highlights:

Define the core mission. Many universities are unclear about the value they add. Trying to accomplish too much, they spread themselves too thin. Focusing on the core is difficult — authority is diffuse in a university culture and people don’t like to be told no. But universities cannot be all things to all people. “The worst-case scenario for an institution is to be relatively expensive and completely undifferentiated. Who will pay $40,000 per year to go to a school that is completely undistinguished on any dimension?”

The increase in administrative overhead. Graphic credit: "The Financially Sustainable University." (Click for more legible image.)

Bring administrative costs under control. As universities think about where to cut expenses, they should start with administration, not the core of teaching. The reasons for the growth in overhead are often legitimate, the authors write. “But as new programs are added, old programs often are not curtailed or closed down. The resulting breadth of  campus activities creates too much complexity for staff to manage with any efficiencies of scale.”

In the decentralized university community — universities are like federations of schools, and schools are like federations of departments — fragmentation is endemic. The study cites decentralized and redundant procurement and data center management as particular problems. Also, most institutions have too many middle managers. Before an administrative reorganization, Berkeley managers had an average of only four direct reports, compared to more than six for companies and closer to 10 for best practice companies.

Divest inessential assets. Universities can strengthen their cash positions by better managing assets: selling real estate holdings such as lodging and restaurant facilities; engaging in sale-leasebacks of IT assets, power plants and cogeneration facilities; and improving the performance of their intellectual property portfolios. U.S. higher ed spends $92 billion each year in R&D and realizes a $2 billion yearly return, a fraction of what technology corporations generate.

Define your online strategy and invest in it. Colleges are acutely aware of the online challenge. They just haven’t figured out how to respond.

For some institutions, rushing into the online space too rapidly to grow enrollment and create new revenue is another me-too strategy. There are already too many entrenched players and new entrants with significant capital in the market for an undifferentiated strategy to succeed.

As online courses enter the market and employers begin to accept “badges” and other credentials (further decreasing demand for traditional degrees), the price students will be willing to pay for undifferentiated brands will continue to fall. While this won’t be a problem for elite institutions like Harvard and MIT, it represents a significant challenge for most colleges and universities.

Managerial mayhem. The collegial, faculty-empowering environment so beloved of academics makes it difficult to drive coordinated institutional change. There are multiple levels of decision making, with the result that it’s unclear who’s responsible for such critical items as classroom technology. While faculty members tend to hold themselves to high academic standards, they don’t apply the same rigor to the administration of their own departments.

Too many university stakeholders think that current crisis mentality will subside when the economy improves, as it has in the past. But this time is different. Concludes the study:

Universities simply cannot afford to increase costs in nonstrategic areas and take on more debt, if they want to survive. It is imperative that universities become much more focused on creating value from their core. That will require having a clear strategy, streamlined operations, a strong financial foundation, trust and accountability, and a willingness to invest only in innovations that truly create value for the institution.

Bottom-Up Intellectual Ferment in Richmond

Ibrahim Abdul-Matin

by James A. Bacon

Is religion a positive force for solving environmental challenges? That was the topic of a friendly debate last night between Ibrahim Abdul-Matin, a former sustainability advisor to New York Mayor Michael Bloomberg, and Scott Wayne, a former British diplomat and now founder of the Frontier Project creativity consulting firm.

The debate, which was moderated by Roberta Oster Sachs, a CBS producer, took place in the Frontier Project’s office in Shockoe Bottom. It was an intimate gathering. Wine and cheese was served before, during and after the debate. Every one of the 30 or so members of the audience had a chance, if they wanted, to make comments and ask questions.

Abdul-Matin, author of “The Green Deen: What Islam Teaches about Protecting the Planet,” took the position that religion is a positive force. The major threats to the environment are driven by excessive consumption, a vice that the spiritual values taught by major religions act to temper.

Scott Wayne

Wayne countered that the biggest threat to the environment wasn’t consumption per se but the extraordinary growth in the number of consumers worldwide. What the world needs is fewer people, which can be accomplished by more widespread practice of birth control. But some of the world’s religions, most notably the Catholic Church, are hostile to birth control.

OK, that’s a gross oversimplification of their viewpoints, but it conveys the tenor of the discussion. What was remarkable about the session was not that it took place between world-renowned religious scholars or literary figures but that it took place between two ordinary Richmonders. Well, perhaps I shouldn’t say “ordinary.” Abdul-Matin and Wayne are far more accomplished than the average Joe. Indeed,  Abdul-Matin has written a book that broaches the topic. Yet neither of them enjoys any great celebrity.

What struck me is that nothing like this ever took place in Richmond when I first moved here some 25 years ago. The Richmond region is far more intellectually vibrant today than it once was. The love of ideas is no longer confined to the campuses of the region’s three universities, Virginia Commonwealth University, Richmond University and Virginia Union University. The thirst for intellectual stimulation is ubiquitous.

Richmonders have always prided themselves as patrons of the arts and culture. We have a symphony. We have a ballet. We have one of the finest art museums in the country. We have a lecture series, the Richmond Forum, that brings in luminaries from around the world. But that’s old-school patronage of the arts. You go to the event, you sit, you listen, and then maybe you talk about it with your spouse on the drive home.

People today aren’t content to simply sit and listen. They want to be engaged. They want to participate in the interchange of ideas. Events like the Frontier Project’s discussion series appeal to this craving.

There’s a larger lesson here for readers of Bacon’s Rebellion and others who share our passion for building more prosperous, livable and sustainable communities. I have written extensively about the importance of the so-called “creative class” to driving artistic, scientific and entrepreneurial innovation in a region. Creative-class people are doers, not watchers. They don’t gravitate to communities that support what economic geographer Richard Florida calls the SOBs — symphony, opera and ballet. They gravitate to communities where they can get engaged.

Thus, to members of the creative class (as opposed to the corporate class), the coolest things about Richmond bubble from the bottom up. The French Film Festival. The James River Writers Festival. The Folk Festival. The First Fridays art walk. The C3 speaker series on innovation. To that list, perhaps, we can add the Frontier Project discussion series.

(In a similar vein, while Richmond may be one of the biggest cities in the United States lacking a pro-sports franchise, it has a active and impassioned amateur sports community. Rather than watch someone else play sports, Richmond’s creatives prefer to go mountain biking, do open-water swimming in the James River or join Seal Team outdoor fitness training on Belle Isle.)

There is no metric that I know of to measure the intellectual vitality of a region. The average level of education in Richmond may have increased somewhat during the years that I have lived here but that doesn’t begin to account for the quantum leap in curiosity, excitement and engagement that I have witnessed. I love this town, and with each passing year I know I made the right decision to make it my home.