Category Archives: Economic development

Comrades: Check Out Virginia’s Planned Economy!

There are portions of the recent state audit report on economic incentives that would warm the hearts of retired Soviet planned economy apparatchiks, sitting around their dachas dreaming of the good old days.  Case in point:  The analysis concluding Virginia’s use of a single sales factor method to tax manufacturers is “moderately effective.”

The report in question is from the Joint Legislative Audit and Review Commission, and it previously generated mainstream stories about the data center industry and a Bacon’s Rebellion post about grants in the sputtering semi-conductor manufacturing industry.  Only ten of the 127 pages (39 to 49) deal with the use of a single sales factor in determining the state income tax owed by a manufacturer.  Continue reading

JLARC: Semiconductor Grants Have Not Succeeded

Incentives “spending” reviewed in recent JLARC report. Click for larger view.

The recent report from the Joint Legislative Audit and Review Commission on economic incentives related to manufacturing (here) goes far beyond a discussion of data centers, and if the General Assembly accepts it as gospel some of the existing incentives might be in jeopardy.

Two programs aimed at environmental goals should be eliminated, the staff (and by its vote the full legislative panel) concluded:  The Green Jobs Creation Tax Credit and the Green Diesel Fuel Producers Tax Credit.  Neither is being used to any extent.  Continue reading

JLARC and the Virginia Cloud

Facebook data center in Henrico

Some years ago, the General Assembly made considerable use of the time between sessions. There were special study commissions that met fairly frequently, as well as meetings of subcommittees of standing committees. For various reasons, that does not happen much now. As a result, the legislature has struggle with tough issues, with little time for research and reflection, during the crowded regular sessions.

More and more, the Joint Legislative Audit and Review Commission (JLARC) is filling the void, providing the legislature with analyses and background on a number of thorny issues. This is a positive development.

Originally, the primary function of JLARC was to conduct regular, thorough analyses of agency operations. Gradually, that function has evolved to consist of (i) ongoing oversight over VITA, VRS, economic development incentives, Virginia529 (college savings plan), and Cardinal (the state’s new accounting system); (ii) several annual reports on state spending; and (iii) specific topics referred to it by the legislature or taken up on its own initiative.

This year the agency has one of its heaviest study loads ever. In addition to the ongoing oversight and state spending studies, the workload includes studies on community services board funding, implementation of STEP-VA (reform of the state’s behavioral health system),  the Office of the State Inspector General, VITA’s new infrastructure, Office of the Attorney General, gaming in the Commonwealth, Medicaid expansion, Workers’ compensation, and the Department of Game and Inland Fisheries. Continue reading

Bacon Bits: Two Reasons to Be Worried, and One Reason Not

Be afraid, very afraid. How frequent is cell phone use? According to a team of Old Dominion University researchers tallying seat belt use, some 4% of drivers they spot are on the phone or texting. So reports the Daily Press. Clearly, cell phone use is a problem. But I would argue that texting (which I never do) is far worse than yakking on the phone (which I do do… occasionally). Both may be a distraction, but the one requires drivers to take their eyes off the road, while the other doesn’t. If distractions are the issue, then the General Assembly should ban husbands and wives driving in the same car together. There’s nothing like a side-seat driver to grab one’s attention and increase the risk of accidents!

Virginia lost a big one. I have long hoped that the Wallops Space Flight facility might engender the rise of a space industry in Virginia. But the odds of the Old Dominion developing a critical mass in this industry of the future suffered a significant setback yesterday when Boeing announced that it would relocate the headquarters of its Space and Launch division from Arlington to Titusville, on Florida’s Space Coast. States the aerospace giant: “Looking to the future, this storied Florida space community will be the center of gravity for Boeing’s space programs as we continue to build our company’s leadership beyond gravity.”

Scary ignorance about coal ash. Coal ash is a potential hazard to human health, but the risks it poses are extremely low level. Unfortunately, an article in the Prince William Times, describing how Governor Ralph Northam signed a coal ash regulation bill into law, incorporates some of the hysterical rhetoric that has infiltrated our discourse. The article refers to the coal combustion residue as “toxic coal ash” and describes it as “composed of lead, mercury, cobalt, arsenic, hexavalent chromium and other heavy metals, many of which are carcinogens.” In truth, coal ash is comprised mainly of rock mixed with coal that is not removed in the coal cleaning process and does not combust in boilers used for electric generation. The ash does contain trace amounts of all the aforesaid metals, which can leach in minute quantities into ground water, but is toxic only when it rises above certain levels. If the ash itself were toxic, then the new law requiring utilities to recycle at least 25 percent of it into cinderblocks and pavers would the greatest folly indeed.

Danville’s Revival: Historic Architecture + Walkable Urbanism

The new Danville — more of this….

In Part II of his extended essay on the revitalization of downtown Danville, Va., The Atlantic magazine writer James Fallows dates the beginning of the city’s revival to the decision to demolish The Downtowner, a classic example of atrocious 60s-era architecture. In retrospect, it now obvious that the “modernist” architecture of the 50s and 6os was so hideous that it is not only not worth preserving, it is a blight. Or, as Fallows put it: “Most people believed that the old buildings had timeless-classic potential, and the Downtowner did not.”

… and less of this.

When the city took the wrecking ball to the Downtowner in 2012, only 400 or so people worked or lived in the downtown tobacco warehouse district now known as the River District. After several years the renovation and retrofit of old industrial buildings, the number now stands at 6,000.

Classic architecture (even if it is industrial architecture) + a traditional downtown street grid + views of the Dan River have proved to be a winning combination. Who ever would have thought that Danville would reinvent itself as a center of walkable urbanism? But it has, and therein lies its hope for sustainable economic growth. Continue reading

Bacon Bits: Keeping the Political Class on its Toes

Cranky strikes again. John Butcher does another deep dive into Richmond Public School statistics, comparing the capital city’s school system with the schools in peer cities of Norfolk, Hampton and Newport News. Richmond spends $2,887 more per student than the state average, and it spends $1,659 more on instructional expenses. Yet somehow, the district supports fewer instructional positions per 100 students and pays teachers and principals less. And, as Butcher has amply demonstrated before, disadvantaged and non-disadvantaged students in Richmond under-perform their disadvantaged and non-disadvantaged peers in other urban-core localities by wide margins.

How about the indignity of attending lousy schools? But never fear, Richmond school administrators are au current with the latest in politically correct virtue signaling. As reported by the Richmond Times-Dispatch, Richmond schools started requiring graduating students to wear gender-neutral gaps and gowns this year, ending a decades-long practice of having separate colors for men and women. Explained Superintendent Jason Kamras: “We want to make sure out transgender and nonbinary students don’t have to suffer the indignity of being forced to express their gender in a manner contrary to their identity.”

Big subsidies for big data. Virginia is home to 159 data centers that benefited from $417.5 million in sales-and-use tax exemptions from mid-2010 through mid-2017, according to estimates from a new Joint Legislative Audit and Review Commission report. JLARC deems the state subsidies to have been “relatively effective” and generate “moderate economic benefits.” It is reasonable for the state to continue the exemption, concluded JLARC. However, the tax break does not appear to have stimulated growth in distressed areas. Continue reading

The Deep State as Competitive Economic Advantage

Stephen Moret’s sales pitch to the Amazon in the HQ2 deal offered an analysis that was both acute and chilling — acute if you’re an economic developer seeking to promote Northern Virginia as a place for tech companies to do business, chilling if you are an American worried about the growing overlordship of the technocratic elite.

According to Luke Mullins’ Washingtonian article, “The Real Story of How Virginia Won Amazon’s HQ2,” Virginia’s proposal to Amazon highlighted Northern Virginia’s proximity to the Pentagon and other federal agencies. Writes Mullins:

By plopping HQ2 into Crystal City — right next door to the Pentagon — its employees could become part of the Washington community, attending backyard barbecues and school dance recitals with the very regulatory staffers and procurement officials whose decisions will determine the company’s future — as the very journalists and political strategists who might paint the firm as an Evil Empire. Continue reading

How Moret and Moretti Won the Amazon Deal

Enrico Moretti

Everybody who pays attention to economic development in Virginia knows by now who Stephen Moret is. He is the Louisianan, recruited to turn around the Virginia Economic Development Partnership and rethink the state’s economic development strategy, who landed the Amazon HQ2 deal. Few are familiar, however, with the theoritician behind the practitioner, a man with a near-identical last name — Enrico Moretti.

Bacon’s Rebellion readers learned of Moretti, a Berkeley University professor, when I reviewed his book, “The New Geography of Jobs,” back in 2012. Moretti’s analysis of the primacy of labor markets in the Knowledge Economy — metropolitan areas with deeper, richer labor markets enjoy a tremendous competitive advantage in competing for both corporate investment and skilled/educated workers — has informed my economic-development commentary ever since.

Well, it turns out that Moret is a big fan of Moretti. Indeed, when fashioning a new economic development strategy for Virginia, Moret engaged Moretti for input. That insight emerges from an excellent article in the Washingtonian by Luke Mullins, “The Real Story of how Amazon Won Amazon’s HQ2.” Mullins’ article provides the most incisive reporting on how Virginia won HQ2 that I have yet seen. Continue reading

Bacon Bits: Dulles and Danville

Unfriendly skies. Washington Dulles International Airport is the most expensive airport in the United States to fly from. In a survey of the 45 largest airports, Travel Pulse found that the average ticket cost $427.37. On the other hand, travelers do get a bit more for their money, such as free carry-ons and seat selection.

Question: Why is Dulles so expensive? Pricy airports tend to be hubs for traditional airlines like United and American, the survey author said. So, are the airlines the problem? Or has Dulles squandered money on ill-conceived capital projects — expanding to accommodate growth that never occurred? Our friend Reed Fawell might have something to say on that topic.

Danville’s revival. If you haven’t visited the City of Danville in the last 20 years, perhaps you should. My wife and I drove through downtown a few months ago and she was blown away by how vibrant it was. It turns out that James Fallows, a senior writer for The Atlantic, was similarly impressed. In a recent article he explains that the city maintained a viable economy into the 1970s and 1980s based on textiles and tobacco, did not experience the same hollowing out of its industrial infastructure, and saw no need to tear them down, as was the fashion in many other cities in the era of “urban renewal.” The textiles-and-tobacco economy collapsed in the 1990s, but the brick manufacturing structures were preserved.

Today, Danville has more “antique architecture” than downtown Charlotte or downtown Atlanta, even though those cities are vastly larger. The revival of former tobacco and textile buildings in Danville’s “River District” has created a unique environment of walkable urbanism that may seed the city’s renewable.

Ain’t No Negatives Here

In the recent past, the website of the Virginia Economic Development Partnership (VEDP) featured a prominent dashboard or scoreboard showing the cumulative number of jobs “created” since the beginning of the current administration.  Governors used these numbers when touting their economic development programs. It did not matter that these were jobs projected, not necessarily available or filled, or that some of those jobs would never materialize.

I was reminded of this scoreboard by a story in today’s Richmond Times-Dispatch about a printing company in Henrico closing, with a resultant loss of 240 jobs.  My counterpart at DPB who handled VEDP’s budget and I used to have a standing joke about the VEDP jobs scoreboard. Whenever I would point out a company closing or downsizing, especially at the beginning of the Great Recession, or a corporation moving out of Virginia and ask whether VEDP was including those job losses in its calculations, he would laugh and reply, “Oh no, Dick, we don’t include the negative numbers!”

It is a welcome sign that the “new” VEDP does not engage in this misleading boosterism.

Roanoke Gears up to Recruit Young Talent

Experience Leadership is a Roanoke program aimed at recruiting and retaining talent. photo credit: Roanoke Times

The Roanoke Valley is making the leap from thinking about economic development as recruiting corporate investment to recruiting skilled and educated workers. As the national economy continues to grow, the main bottleneck to regional growth is the availability of a workforce with the skills that employers are looking for. Reports the Roanoke Times:

The Roanoke Regional Partnership, an economic development organization, has made a concerted effort to recruit talent to the region. After collaborating with its eight localities, the business community, tourism officials, colleges and universities, and professional organizations such as the regional chambers and Roanoke-Blacksburg Technology Council, the partnership is developing new and creative ways to recruit talent, ranging from new college graduates to professionals with several years of experience.

Roanoke employers are offering summer internships, organizing networking events for young people, and trying to create workplace cultures that offer more relaxed dress codes, gourmet coffee machines, office beer taps, and more vacation days in the hope of appealing to young people. Continue reading

Tourist Storm Protection

According to a story in Saturday’s Virginian Pilot, Virginia Beach is slated for more beach widening this summer.  The total cost of the project is $22.6 million, with the federal government providing $14.7 million (65 percent) and the city of Virginia Beach paying the remaining $7.9 million.

The newspaper article says that this project is a “part of a long-term plan to protect the commonwealth’s shoreline from storms.”  That sounds like a worthy idea, especially in this era of sea-level rise.  But, let’s not kid ourselves.  This project is not about protecting the shoreline or about resiliency, the buzzword of the day.  After all, if one is going to protect the shoreline and make it more resilient to stronger storms, one would not try to do so by putting down a substance that will start washing away the day after it is put down.  The owner of one of the ocean front hotels stated quite plainly the real purpose of the project:  “…having  a wide beach is important, not only for safety, but for what we’re selling to our guests.”

I do not have an objection to spending public funds to enhance a tourist attraction of the Commonwealth.  After all, tourism is one of the state’s largest industries.  The Virginia Tourism Corporation reported that, in 2017, tourism accounted for $25 billion in domestic visitor spending, supported 232,000 jobs, and brought in $1.7 billion in state and local tax revenue.

I do have an objection to who is providing the funding for the beach widening.  Continue reading

What can Virginia learn from Nashville (Part 2)?

Update. In the first installment of this two installment post I described the metropolitan juggernaut that is modern day Nashville. I also provided some historical perspective on how Nashville became the sixth fastest growing US city (measured along several axes) between 2011 and 2016. As a side note, the 35 fastest growing cities documented in the prior link included no cities in Virginia. I have family in Nashville. For three of the last four years I have visited my family, run in a wildly popular race and witnessed the remarkable growth of Music City. My 2019 trip is complete and this article is the promised update.

First, a step back. Admiring the rapid growth of Nashville requires a fundamental belief. One has to believe that rapid growth in urban areas is a good thing. This is not a universally held belief, in Virginia or in Tennessee. Thomas Jefferson, for example, was quoted as saying, “When we get piled upon one another in large cities, as in Europe, we shall become as corrupt as Europe.” While I understand the bucolic allure of country living I believe that the economic future of the United States and Virginia will largely be in the cities. I think Virginia should be striving to create an environment conducive to fast growing, safe, livable cities. To that end much can be learned from Nashville as well as Charlotte, Austin, Raleigh, etc. Continue reading

Incentives Have Negative Impact on State Fiscal Health


Subsidies, tax breaks and other economic development incentives may attract corporate investment to a state, but do they pay for themselves or represent a net drain on state resources? Based on data from 32 states, a study by four North Carolina State University researchers find that the overall net effect is mildly negative, although results vary by the type of incentive.

Fortunately for Virginia, according to that data, the Old Dominion ranks second-to-the-bottom for incentives as a percentage of economic value added. Continue reading

VEDP Snags Recognition as Best Economic Development Organization in Nation

Site Selection magazine has awarded the Virginia Economic Development Partnership (VEDP) its Prosperity Cup as “the most competitive state-level economic development group” in the country. That’s quite a turnaround for an economic development organization that only two-and-a-half years previously the Joint Legislative Audit and Review Commission (JLARC) had found to be inefficient, ineffective, and suffering from “systemic deficiencies.”

The magazine credited VEDP’s jump to first place, from sixth in 2017 and 2018, to CEO Stephen Moret for assembling a team that’s “serious about economic development..” Virginia’s success in nailing down two mega-projects, the $3 billion Micron Semiconductor deal and the nationally touted, $2.5 billion Amazon HQ2 project, certainly didn’t hurt.

Amazon and Micron “were obviously two signature wins for Virginia in the last several months, but there are a lot of other great things going on all over the state,” Moret told Site Selection. In addition to the two mega-projects, Virginia snagged an impressive $5 billion of investment in smaller deals.

Continue reading