VCU President Michael Rao
by Peter Galuszka
There’s long been the “Virginia Way” of ruling oligarchs making decisions in backrooms while leaving the public out of the picture. But then there’s also the “Richmond Way,” which is the same thing on steroids.
The key focus today is the so-called Navy Hill District Corporation, a group headed by Dominion Energy chieftain Tom Farrell that wants to replace the aging Richmond Coliseum and build a $1.4 billion mixed-use project on 10 blocks just north of Broad Street downtown.
With Richmond Mayor Levar Stoney complicit, the group which involves some of the city’s biggest movers and shakers has worked mostly in secret and has gone to great lengths to keep the public as far away from planning as possible.
Richmond has had its share of flops when it gets into top-down, centralized economic planning somewhat reminiscent of Moscow, where I used to live and work. One was the 6th Street market, a failed project not far from Navy Hill. The city, which has a poverty rate of about 25%, is paying millions to the Washington Redskins, one of the richest firms in the National Football League, to train at a city facility for three weeks every summer.
Navy Hill also had an inauspicious start. When the city sent out requests for proposals for replacing the Coliseum a few years ago, it got exactly one proposal – from Farrell’s group. Continue reading
by Peter Galuszka
It’s been a very long goodbye. Faced with billions of dollars in health-related lawsuits and huge public relations problems in 2008, cigarette giant Philip Morris split itself in two very different companies.
It reminds me of the scene in Stanley Kubrick’s brilliantly sarcastic war move, “Full Metal Jacket.” A colonel stops Private Joker and demands to know why he has born-to-kill and peace symbols on his helmet at the same time. “What does it MEAN?” growls the Colonel. “I dunno, Sir,” replies Private Joker, “I guess it’s the Jungian thing, you know, the duality of man.”
Duality of cigarette making is more like it. Back in 2008, Philip Morris split itself into a Swiss-based international firm while Richmond got Philip Morris USA and its holding company, The Altria Group. The latter is still a potent force with 3,750 local workers and a big honey pot of largess.
Philip Morris International boosted sales by creating such nicotine laden smokes as “Marlboro Wides” and Marlboro Max 9,” which sold in Third World countries that didn’t have the bucks or the court systems to challenge cancer causing products. Continue reading
by Peter Galuszka
Virginia farmers are paying a big price for President Donald Trump’s chaotic trade war with China. If anything, it’s likely to get worse as Trump vows even bigger tariffs, drops the idea and then comes back to it.
There’s no question that Trump’s peculiar negotiating behavior and questionable logic are having their effect.
China had been Virginia agriculture’s number one export destination with soybeans leading the list, along with apples, livestock and other products.
In 2017, China bought $671 million worth of farm goods from state farmers. Then, Trump became president and quickly imposed a series of tariffs against China about a year and a half ago. Exports to China dropped precipitously to $235 million. Canada is now Virginia’s biggest export partner for agriculture. Continue reading
by James A. Bacon
Thanks in part to a $797 million surplus in last year’s budget, Virginia will build up its budget reserves to $1.6 billion by the end of the 2020 fiscal year, and Governor Ralph Northam is promising to take a “cautious and strategic” approach to the next biennial budget.
“During the next budget cycle we will continue laying a strong foundation for Virginia — preparing for a rainy day while investing responsibility in our long-term growth,” the governor said in an address to General Assembly budget committees.
Northam highlighted the $20 billion in economic development announcements made since he has taken office, more than any previous administration in a full four-year term. But looking ahead, he took note of increasing economic uncertainty heightened by the trade war with China. Speaking personally, he described how retaliatory tariffs could keep the soy beans grown on his family farm in the Eastern Shore “in the fields if we can’t sell them.” Continue reading
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.” Continue reading
2018 labor force participation rates. Source: VEC. Click for larger view.
Laissez les bon temps roulez. Virginia’s strong employment climate is adding a financial spare tire to Virginia’s unemployment trust fund, now above 83 percent solvency by one actuarial measure and exceeding a federal recommended minimum balance on another measure.
The annual unemployment fund status update for a legislative oversight commission Wednesday lasted about 30 minutes, with the chairman, Del. Lee Ware, R-Powhatan, noting it was far shorter and less dramatic than some previous meetings in tight times, adding “it’s a good drama not to have.” The presentation is here.
The projected $1.45 billion fund balance for next December 31 will be another record, said Virginia Employment Commissioner Ellen Marie Hess. The figures used are not adjusted for inflation, however, and the state has been at higher solvency levels in previous periods of prosperity. The funds are just sitting there earning interest and awaiting the next recession, which history deems inevitable. Continue reading
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.
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
Image credit: Power for the People VA
I am not making this up. Yesterday, Dominion Energy joined a newly launched coalition of more than a dozen major corporations and environmental groups – CEO Climate Dialog. This organization will urge Congress to pass climate change legislation. Example members of the group include BP – an oil and gas company, Citibank, Dow Chemical, DuPont, Exelon – a power company and The Nature Conservancy, an environmental organization. Continue reading
Dust Bowl refugees in the 1930s. Will Virginia be on the delivering end or receiving end of the next recession-induced migration?
In the previous post I argued that there are large pockets of hidden risk in the U.S. and global economies that could trigger a devastating economic downturn. I’m not predicting that a recession is imminent — I do not profess to see the future — but I would suggest that only fools would pretend that these risks do not exist and fail to protect themselves from them.
As I have detailed in previous posts, Virginia is highly vulnerable to an economic downturn. The consolation is that we’ll have plenty of company. The Old Dominion is hardly the only state in the union that has failed to take advantage of 10 years of economic expansion to buffer itself from the next recession, which, unless President Trump has repealed the law of business cycles, is inevitable. What we don’t know is the timing. Do we have five years to adapt, or only one? Continue reading
The economy is chugging along at a 3% growth rate, unemployment is hitting record lows, productivity is surging. The economy looks like it’s in fantastic shape. A friend of mine and long-time Trump hater, normally disinclined to give the president credit for anything, marveled recently that the low-inflation, low-unemployment economy “is as good as it gets.” I hope like heck it stays that way.
But I am an inveterate worry wart. I’ve lived through booms before — the 1980s savings & loan bubble, the 1990s tech bubble, the 2000s real estate bubble. I’ve heard the promises that “it’s different this time.” And I’ve seen the busts that followed. It’s a universal rule that most “experts” did not foresee the meltdowns coming. The same thing may be happening again. Very few are paying attention to the build-up of highly leveraged corporate debt, both in the U.S. and abroad.
I don’t know if the “junk bond” sector will precipitate the next recession. Perhaps the next downturn will originate overseas and spread to the U.S., and a meltdown in junk bonds will merely act as an accelerant to a broader collapse. Whatever the case, the $1 trillion market now represents a significant risk. State and local governments in Virginia need to acknowledge this and other risks lurking in the economy as they go about making spending and taxing decisions. Only a fool would assume that the decade-long expansion, one of the longest in U.S. history, will last forever. Continue reading
Source: StatChat blog
Rural Virginia may have seen a decline in the number of jobs since 2011, but get this: Incomes have been rising faster than in Virginia’s metropolitan areas — 12% since 2010 compared to just 5% for the metros, says Hamilton Lombard on the University of Virginia’s Demographics Research Group blog, StatChat. Likewise, poverty rates have fallen more in Virginia’s rural areas. Continue reading
It’s been a long time since the unemployment situation looked this good. From the Virginia Employment Commission, here are the latest unemployment and job growth numbers for Virginia’s metropolitan areas:
You’d think that Virginia’s mainstream media might bring attention to this good news. But I don’t recall seeing a single front-page article touting the Old Dominion’s job growth and low unemployment numbers. The statistics are routinely buried in short, boilerplate articles on the business page.
Perhaps Virginia editors and reporters don’t think that the best unemployment picture in almost 50 years is news worth noting. Perhaps they think that highlighting these numbers might give undue credit to the moronic President Trump, who stupidly insisted that sustained 3%+ economic growth was possible even while his better-informed detractors did not. Perhaps they fret that good news distracts from their preferred narrative of racism, inequality, suffering, and oppression. Whatever their reasoning, I think the news is worth celebrating.
(With a little creativity, the media could give Gov. Ralph Northam all the credit for Virginia’s numbers. … But the media is not very happy with him either.)
The economy might go all to hell in 2020 — massive global credit creation makes me very nervous — but right now it feels really good. You can count on Bacon’s Rebellion to continue exploring the themes of job creation, wealth creation and opportunity for all Virginians.
Since we have been discussing manufacturing in Virginia, I want to take the opportunity to recommend this wonderful book. It is the story of how one man fought to maintain his manufacturing operation in Virginia. While the main focus of the story is the problem of Chinese subsidization of companies that were competing with Virginia furniture manufacturers, the story does illuminate many of the other problems facing manufacturers in rural Virginia. In addition, for long-time observers and students of Virginia politics and history, the story of the interlocking family operations- Bassetts, Stanleys, Vaughans, and Lanes–that comprised furniture making in Southside Virginia in the 20th century, is fascinating. (I just discovered to my chagrin that Jim Bacon had a long post several years ago about this book. Regardless of my neglecting to check BR history, it does rate a second recommendation.)
The subject of Macy’s book, John Bassett, III, has published his own book on how manufacturers can continue to succeed in America. I have not read this one, but, based on his success, he needs to be taken seriously.
USS Harry S. Truman, CVN 75. Navy Photo.
Despite 12 years of work for the Virginia shipyard where these magnificent beasts are born, maintained and where they go to die, I am no expert on nuclear aircraft carriers. Political games around budgets, however? There I have a bit of experience.
A few years back the United States Navy made what appeared to be a serious effort to retire the USS George Washington at the mid-point of its life, but it fizzled, and the ship is currently undergoing the overhaul needed for an additional 25 years of service. The work is employing thousands of craftsmen and contractors and consuming plenty of taxpayer dollars. Continue reading