Free falling.
As coal production declines, the economy of far Southwest Virginia is in free fall, with potentially dire fiscal consequences for local governments. “A sharp decline in coal production jeopardizes the fiscal health of local governments, degrading their capabilities to provide adequate public services and issue and serve debt,” finds a report by Columbia University’s Center on Global Energy Policy and the Brookings Institution. Between 2007 and 2017, Virginia coal production fell by 50% from 24.9 million short tons to 12.8 million. The study identifies Dickenson and Buchanan counties as the fifth and sixth most mining-dependent localities in the nation, with 17% and 16% respectively of the labor force engaged in the industry in 2015. The Virginia Mercury has the story here.
Tarnished silver. Phase One of the Washington Metro’s Silver Line to Tysons ran $220 million over budget and was completed six months later. Now Phase Two of the $5.8 billion project funded largely by commuters on the Dulles Toll Road, reports the Washington Post, is running late. The project, expected to be wrapped up next month, may not be completed until next spring or summer. The construction project has been plagued by cracks in concrete structures, defective rail ties, and faulty dimensions for a rail-yard platform. It is not clear yet if the problems will exceed the project’s $550 million contingency fund.
Why do today what you can put off until tomorrow? Bacon’s Rebellion has made much of Virginia’s $5.8 billion in unfunded pension liabilities. Now a new study, “The Sustainability of State and Local Government Pensions: A Public Finance Approach,” says there’s no reason for Virginia or any other state to panic. After “reverse engineering” future benefit cash flows of the pension plans, the authors find that pension benefit payments in the U.S., as a share of the economy, are currently at their peak level and will remain there for the next two decades. Thereafter, the reforms instituted by many plans will gradually cause benefit cash flows to decline significantly.”
“Under low or moderate asset return assumptions and in the aggregate for the U.S. as a whole, pension debt can be stabilized as a share of the economy with relatively moderate fiscal adjustments,” the authors write. “Notably, there appear to be only modest returns to starting this stabilization process now versus a decade in the future.”
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