Author Archives: James A. Bacon

Bacon Bits: Rural Development Edition

Seeding entrepreneurship. The Virginia Coalfield Economic Development Authority has approved $180,000 in seed-capital grants up to $10,000 for businesses that have been operating less than a year and have fewer than 10 full-time employees. The new businesses are projected to create $770,000 in total private investment and create 135 full-time and part-time jobs. Assuming the businesses deliver on their investment and jobs — not to be taken for granted — this looks like a promising approach to economic development. Since it started two years ago, reports the Bristol Herald-Courier, 53 businesses receiving micro-grants have generated $3.1 million in private investment and created 542 full- and -part-time jobs. Beats subsidizing an out-of-state company to build a light manufacturing plant and then shut it down 10 years later.

Addressing the doc shortage. Southwest Virginia has a chronic shortage of doctors, nurses and other health care providers. The United Company Foundation in Bristol is issuing a $1 million challenge grant to the Edward Via College of Osteopathic Medicine in Blacksburg to lower medical school debt for doctors who agree to practice in Southwest Virginia, reports the Roanoke Times. Two $40,000 scholarships will be awarded this spring to third-year medical students. After they complete their residencies, they will be required to work for three years in the region.

To plug the broadband gaps, first you have to find the broadband gaps. Continue reading

More Unaffordable Affordable Housing

The Lawson Companies., a Virginia Beach multifamily development company, is planning to construct a $19.25 million, low-income housing project in South Richmond, reports Richmond BizSense. The apartment complex will have 96 units, for an average cost of $200,000 each. Rent for two-bedroom apartments will average around $1,000 a month, while three-bedroom units will go for $1,100.

“We see this project drawing a lot of families,” said Freddie Fletcher, a Lawson development associate. “It’s a good market over there for families looking for an affordable, Class A apartment.”

The Virginia Housing Development Authority (VHDA) is providing financing for the development. The article does not say whether or not the $1,000-a-month rent will be subsidized from vouchers or other public funds.

The project appears to be similar to many other lower-income housing projects in Virginia. Lawson Corp. has $290 million in ongoing development across Hampton Roads and Northern Virginia, and is looking to do more deals in the Richmond region. Continue reading

Newspapers Are “Toast,” Says Owner of Virginia’s Biggest Newspaper Chain

Warren Buffett’s Berkshire Hathaway Inc., may be one of the nation’s largest owners of newspapers in the country, but the multi-billionaire investor has largely written them off. Repeating observations he has made previously, he told Yahoo News that other than the New York Times, Washington Post, and Wall Street Journal, newspapers in the U.S. are “toast.”

In the golden age of print, Buffett said, it was “survival of the fattest.” He with the fattest newspapers — packed with the most ads — won. But the rise of digital media eviscerated newspapers’ most profitable revenue stream, classified ads. (He didn’t say so specifically in the brief interview clip, but digital media also are eroding newspapers’ remaining revenue streams, display ads and subscriptions.) Newspapers, he says, are “disappearing.”

The Sage of Omaha appears to have made his peace with the passing of a great American institution. BH Media no longer manages its newspapers, which include the Richmond times-Dispatch, the Roanoke Times, and franchises in Charlottesville, Lynchburg, Danville, and Bristol. The conglomerate has outsourced that job to Lee Enterprises, owner of the St. Louis Post-Dispatch. Continue reading

Floods, Roads and Risk Management

Storm-related road repairs in Northumberland County. Photo credit: Virginia Mercury.

In a blog post yesterday (“Risk and the Fisc”), I cited an Old Dominion University study that guesstimated that Katrina-scale hurricane could cause $40 billion in damages and lost economic activity in Hampton Roads. The cost to the Commonwealth of coping with such a disaster, said Secretary of Finance Aubrey Layne, “keeps me up at night.”

Today comes news that the cost of repairing road damage in the aftermath of Tropic Storm Michael is estimated to be $25 million. Six months after the storm hit Virginia, 17 roads around the state are still under repair, reports The Virginia Mercury. That’s the damage from a tropical storm, which generated a fraction of the rain, wind, and storm surge associated with a Class 5 hurricane.

Crews have been fixing pipes and washed-out roads, mostly inland where heavy rains caused flash flooding. Continue reading

Does Facebook Solar Pay Its Own Way?

Dominion Energy has announced the construction of six new solar farms — three in Virginia and three in North Carolina – to offset the electricity demand of Facebook data centers in the two states. The 590 megawatts of new renewable energy generation will be enough to power 147,000 homes at peak output.

The partnership will support Dominion’s goal of having 3,000 megawatts of new solar and wind energy in operation or under development by 2022 and Facebook’s goal of supporting its  global operations with 100% renewable energy by the end of 2020. (See the press release here.)

In the abstract, I’m all in favor of generating electricity with clean, renewable energy sources like solar. But I’m still trying to understand the implications of the solar rush for grid stability and ratepayers. Continue reading

Risk and the Fisc

As the Northam administration’s point man in negotiations with the New York bond-rating agencies, Secretary of Finance Aubrey Layne spends much of his time worrying about the Commonwealth of Virginia’s credit-worthiness. The state nearly lost its sterling AAA bond rating last year. It was a close thing, he says. Even now, he adds, Virginia isn’t out of the woods.

Layne sees many things that could go wrong. The economy could slip into recession and projected tax revenues could decline. A stock market crash could boost unfunded pension liabilities by billions of dollars. The politicians in Washington could get serious about dealing with the $22 trillion national debt, curtailing the defense spending that undergirds Virginia’s economy.

The risk that “keeps me up at night,” says Layne, is of a Category 5 hurricane ripping through Hampton Roads. An Old Dominion University study published late last year found that a Florence- or Katrina-scale hurricane would cause $17 billion in wind and water damage and another $25 billion or more in lost economic activity. The state would be on the hook for evacuating and sheltering hundreds of thousands of  residents, cleaning up tens of thousands of truckloads of debris, and repairing state-maintained roads and other infrastructure, even as disruption to Virginia’s second-largest metropolitan economy cost millions of dollars in state tax revenue.

The Commonwealth faces huge risks, both short-term and long-term, but few of those risks are accounted for in Virginia’s $21 billion-a-year General Fund budget. The state’s “rainy day” fund and cash reserves are too paltry to buffer the budget from a fiscal shock of any magnitude. Under many scenarios Layne can contemplate, balancing the budget would require horrendous spending cuts.

“There’s no one looking into the future,” Layne says of the state’s biennial budget cycle. “Nobody’s looking beyond two years.” If revenue shortfalls loom more than two years out, he adds, “the attitude is, we’ll deal with that in the next budget.” Continue reading

Rural Exodus, Metro Influx Continue Unabated

The population of Virginia’s rural counties and small towns continues to shrink. Reports Radio IQ: “Large parts of Southwest Virginia are disappearing. That’s according to new numbers from the Census Bureau that show places like Wise County, Henry County, Buchanan County — they’re all significantly smaller than they were a decade ago. Tazewell County alone has lost 10% of its population in the last decade.

Meanwhile, in Northern Virginia… The U.S. Census Bureau’s new estimates for population as of July 2019 peg Fairfax County’s total at 1,140,795, according to Inside NoVa. That’s an increase of 0.3% from the year before and a growth rate of 6.4% from the last census eight years earlier. Arlington County’s population grew 14.4%, Fall Church’s by 20.3% and Loudoun County’s by 30%.

The demographic shift is inevitable. The economic logic of the knowledge economy favors large metropolitan areas over small metros, small towns and countryside. The same thing is happening all around the world, and it is pointless to fight it. The challenges for Virginia are twofold: How do rural jurisdictions shrink gracefully and how do fast-growth metropolitan areas accommodate the population influx?

Virginia’s Unaffordable Approach to Affordable Housing

The Creighton Court public housing project in Richmond.

If the public policy debate over affordable dwellings is as impoverished as that described in The Virginia Mercury this morning, poor Virginians are doomed to lives of housing misery. Here’s how reporter Ned Oliver sums up the controversy: “Is affordable housing something for the state to tackle, or should it be left to cities and counties to address with local money?”

Embedded in this formulation are two assumptions: (1) The paucity of affordable housing might be remedied by more grants and low-interest loans; and (2) it is the responsibility of government, either state or local, to find the money for those grants and loans. In other words, the solution to the affordability crisis is more government, not less. Yet in the same article, Oliver notes that it costs $200,000 per unit to build new apartment complexes! Continue reading

NoVa Transit Projects Got Highest Congestion Scores This Round

Smart Scale congestion scores for Top 10 Northern Virginia projects. Only the top seven received regional transportation funding in the most recent round.

Yes, it’s true that most of Northern Virginia’s regional transportation funds were dedicated to mass transit projects in the last round of funding, says Deputy Secretary of Transportation Nick Donohue. But six of the seven projects that did receive funding scored highest in congestion mitigation under the state’s Smart Scale scoring system.

The only project getting funding without a top congestion-mitigation score — a second entrance for the Crystal City Metro — scored high in other criteria, particularly the environment and land use. The Crystal City Metro, incidentally, is tied to the Amazon HQ2 project, one of the biggest economic-development projects in Virginia’s history, although Donohue says that economic-development benefits did not drive the funding for that project. Continue reading

Antifragile Urbanism, Skin in the Game, and Building What Works

Michael Mehaffy

One of the most important movements to emerge from the late 20th century was New Urbanism, a critique of autocentric suburbanism and architectural modernism that argued for human-scaled development patterns. The most important philosopher to emerge in the early 21st century is Nassim Nicholas Taleb, author of “The Black Swan,” “Antifragile,” and “Skin in the Game,” among others. I have drawn from the ideas of both for this blog. Now, I’m delighted to see a short, readable essay that synthesizes the two.

In an article published in Public Square, “Beyond resilience: Toward ‘antifragile’ urbanism,” Michael Mehaffy applies Taleb’s concept of antifragility to the building of better places. If you’re looking for detailed policy proposals, this essay is not for you. If you’re looking for more fruitful ways of looking at policy proposals, then you will be  rewarded. Continue reading

Affordable Housing: Thinking Outside the Container

Sheila Gunst shows off the kitchen in a modified, 320-square-foot shipping container.

Sheila Gunst estimates that there are 33 million cargo containers around the world, half of which are empty. Many of the empties languish in United States because China ships $400 billion more in trade goods to the U.S. every year than the U.S. ships back. After making multiple trans-oceanic trips, used containers stack up in port cities like Norfolk by the thousands.

And therein lies a business opportunity. The shipping lines can recycle them as scrap metal… or sell them to someone like Sheila, an interior designer living in the Richmond area, who dreams about refashioning them into inexpensive dwellings. Continue reading

Mugged by Reality: Sedgwick Gardens Edition

Lawrence Hilliard moved to Sedgwick Gardens to escape the ghetto. Then the ghetto came to him. Photo credit: Washington Post

A conservative, as the saying goes, is a liberal who has been mugged by reality. Well, it appears that a large number of liberals in the affluent Cleveland Park neighborhood of Washington, D.C., have been mugged by reality. Whether they become conservatives remains to be seen.

In a social experiment that could have implications here in Virginia where the idea of mixed-income housing is all the rage, the D.C. Housing Authority increased in 2016 the maximum value of vouchers to 175% of fair market rent as set by the Department of Housing and Urban Development. That meant, according to the Washington Post, that vouchers could be used for one-bedroom apartments renting at up to $2,648 per month.

At Sedgwick Gardens, a historic Art Deco apartment complex overlooking Rock Creek Park, one-bedroom apartments rented for about $2,200 per month in 2017. The apartment complex, located in D.C.’s predominantly white Cleveland Park neighborhood, is, as the WaPo puts it, “a bastion of urbane liberalism where only one in 20 voters cast a ballot for President Trump in the 2016 election.” The reaction of many Sedgwick Gardens inhabitants to the influx of tenants directly off the streets, however, was less than warm, tolerant and embracing. Continue reading

Richmond Schools: a Social Justice Lab Test

Doubling down on the social justice model of education, the Richmond Public School system is replacing the principals of 11 of the city’s 44 schools with “social justice-minded leaders,” in the words of the Richmond Times-Dispatch.

The hiring of principals on the basis of social-justice criteria from an applicant pool of more than 200, combined with a commitment to social justice from the school superintendent, the school board, and the Virginia Department of Education, will provide a classic laboratory experiment for the efficacy of social justice principles.

The turnover in school principals, like that of teachers, is a perennial problem in Richmond, one of the most severely under-performing school districts in Virginia, even accounting for the high percentage of disadvantaged and disabled students. Last year saw 10 new principals. Continue reading

Is Smart Scale Working Like It’s Supposed to?

Republican legislators in Northern Virginia (the few that are left) are wondering what happened to Virginia’s Smart Scale mechanism for allocating transportation dollars. Smart Scale was established during the McAuliffe administration to score proposed transportation projects on key metrics such as congestion relief, economic development, safety, land use, and the environment. But somehow 84% of the transportation dollars raised through Northern Virginia regional taxes were directed to transit projects, assert Del. Dave LaRock, R-Loudoun, and Del. Tim Hugo, R-Fairfax. Only $8 million per year of the $200 million in state funding has gone to highway projects.

“These recommendations are nothing short of outrageous and demonstrate beyond any shadow of a doubt that SMART SCALE scoring is failing,” said LaRock in a prepared statement yesterday. “It is not following the legislative mandates imposed by the Virginia Legislature in 2014. Northern Virginia’s notorious congestion will not go away if 70% of the estimated benefit of projects comes from Land use, Economic Development, and Accessibility, with another 18% from Environment.” Continue reading

Arlington Could Spend $11.5 Million to Do What?

Let’s see now. Arlington County offered $29 million in incentives to land the economic development coup of the decade, Amazon’s HQ2 project. Now, according to the Washington Business Journal, the County Board is considering granting another $11.5 million in incentives to keep the Drug Enforcement Administration in town. Are you kidding me?

Citizens are raising legitimate concerns that the influx of 25,000 Amazon employees will drive up housing costs and displace lower-income residents and make Northern Virginia’s overloaded roads and highways even more congested. I have argued that the benefit to Arlington — increased economic dynamism and diversification — is worth the millions of dollars worth of enticements. But let’s not pretend there isn’t a cost.

Who needs to bribe the DEA when you’ve got Amazon coming? And not just Amazon, but all the vendors, partners, spin-offs, and other enterprises that will become part of the Amazon ecosystem. What does the DEA bring to the table? Economic diversification? Hah! The DEA perpetuates dependency upon the federal government. Economic dynamism? Laugh out loud! The DEA is a government bureaucracy. Continue reading