Category Archives: Business and Economy

Who Hit the Brakes on NoVa Growth?

Hamilton Lombard. Photo credit: UVA Today

by James A. Bacon

Northern Virginia’s population is growing, but not nearly as fast as before. According to a new study by University of Virginia demographer Hamilton Lombard, Northern Virginia accounted for 66.5% of the state’s population growth between 2010 and 2019, but slipped to 33.7% in the last year.

“While Northern Virginia is still growing in population, its recent slowdown is remarkable given how long so much of Virginia’s population growth has been concentrated in Northern Virginia,” Lombard said in an interview with UVA Today. “Since 1980, Northern Virginia has contributed to over half of the commonwealth’s entire population growth. Earlier in the 2010s, over two-thirds of Virginia’s population growth occurred in Northern Virginia.”

“Yet, since the mid-2010s, population growth in Northern Virginia has slowed considerably as more residents have left the region, often moving to other Southern states,” Lombard said. “Some of the initial out-migration may have been driven by the federal budget sequestration and shutdowns, which slowed growth in the region’s economy.”

Northern Virginia has driven demographic, political and economic change in Virginia over the past three or four decades. The region now dominates the state in much the same way that Chicago overshadows the rest of Illinois and New York City runs the Empire State. A marked slowdown in the region’s growth could have momentous consequences for Virginia’s economic prosperity and political economy. Here’s the big question: Was 2020 a transitory blip or does it portend longer-lasting changes? Continue reading

State Tax Harvest Under Northam Expands Again

by Steve Haner

With the release today of the April 2021 Virginia state revenue report, a correction in an earlier post becomes necessary. Overall general fund state tax collections are not up 26% so far compared to four years ago, they are up almost 30 percent. Corporate income tax collections are not up 68%, but 86% over the same period four years ago.

Your correspondent regrets the error and admits jumping the gun after the March report knowing things would become more dramatic soon. Since the essence of good communication is repetition, expect another update in a month. And as has been the case for a while now, expect Governor Ralph Northam to seek to distract the voters from what is really going on.

From today’s news release:

“Virginia is posting the largest monthly revenue increase in the 21st century this month, in sharp contrast with many other states,” said Governor Northam. “Make no mistake — this is the result of strong fiscal management and Virginians doing the right things to put this pandemic behind us. People are getting back to work, businesses are investing, and we expect this surge to continue in the months ahead as our economy returns to full strength.”

“Make no mistake — this is the result of strong fiscal management…” the Governor said. Well, no, unless you count a host of tax increases to be “strong fiscal management.” Or unless you consider a set of federal bailout bills that flooded people with cash to spend as “strong fiscal management.” Stimulus yes, management no.  Continue reading

This One Easy Trick Makes Gas Lines Grow Expontentially

Photo credit: Richmond Times-Dispatch

by James A. Bacon

As panic buying sends Virginians to the gas pumps to top off their tanks, Attorney General Mark Herring is encouraging citizens to report instances of price gouging.

“This ransomewear (sic) attack on the Colonial Pipeline could create disruptions in the gasoline supply across the Commonwealth, and unfortunately, bad actors could take advantage of this just to line their own pockets,” said Attorney General Mark Herring in a press release. “Virginians should not have to worry about paying exorbitant prices for gas and other necessary goods during this time.”

Herring encouraged Virginians to file complaints with the Department of Agriculture and Consumer Services.

This is the absolute worst possible thing the state can do. Economics 101: During times like this, prices should rise. Continue reading

Gas Shortages: Deja Vu All Over Again

Photo credit: New York Post

by Kerry Dougherty

It’s like old times. 1979 to be exact.

Just 3 1/2 months into the Biden administration and we’ve gone from energy independence to gas lines.

What’s next, 18% percent mortgages? Or will Joe borrow Jimmy Carter’s old cardigan and urge us all to turn down the thermostats?

Yep, everywhere I went yesterday it looked a lot like it did 32 years ago. Long lines of cars snaking around gas stations. Exasperated drivers pounding their steering wheels.

I remember 1979 well because I was living in Northern Virginia and the odd/even gas rationing was chaotic. I became so desperate for fuel for my diesel VW Rabbit that I actually siphoned gallons out of the heating oil tank at my house one day.

I can still taste it.

Yes, I know that’s illegal. I believe the statute has run on that crime. Continue reading

Our Deranged Economic Policy

by James A. Bacon

Back during the Great Depression, critics of President Roosevelt’s economic policies equated them with paying unemployed workers to dig holes and fill them back up. As loony as that sounds, it’s better than what government does today. At least the idea of paying people to dig holes honored the age-old connection between work and reward. Now the government just hands out money willy nilly, no effort required.

I felt a full-scale rant coming on when I read this article in the Martinsville Bulletin his morning, which describes how businesses in Martinsville and Henry County in Southside Virginia cannot find find enough workers — this in a community which has long had one of the highest unemployment rates in the state.

Will and Tammy Pearson, owners of two restaurants and a bowling alley, say they are so short-staffed that everyone who does have a job is working overtime. No one is responding to job advertisements. “With the unemployment and stimulus benefits,” says Will, “people don’t want to work.”

The Pearsons’ experience is common across the area. Continue reading

Has COVID-19 Killed the Urban Renaissance?

Image credit: “Has the Pandemic Changed Cities Forever?”

by James A. Bacon

If you’re looking for a good Sunday read, consider an article by Tim Sablik, “Has the Pandemic Changed Cities Forever?“, in the Richmond Federal Reserve Bank’s Econ Focus. Sablik does a fine job of sketching out the big issues identified by the nation’s leading urbanologists as they ponder the impact of the COVID-19 epidemic on urban development.

In a nutshell, Sablik argues that (a) the epidemic has clobbered the urban cores of American metros as knowledge workers have drastically changed their work habits and personal preferences, (b) that the pendulum will swing back partially as the epidemic subsides, but that (c) things will not go back to the way they were. There are profound implications for cities and counties in Virginia as they plot their futures. Reading Sablik essay is a good place to start any re-evaluation. Continue reading

The Ballad Merger II: Cuts and Consolidations

by Carol J. Bova

Upon the merger of Mountain States Health Alliance and Wellmont Health System in 2018, the first order of business for the newly created Ballad Health was shoring up its finances. If Ballad wasn’t successful at this, it would not have the resources to invest in the new services, facilities, programs, and equipment to improve community health it had promised as a condition of the merger.

Not all of Ballad’s actions were well-received. Some changes triggered community protests and county objections in its Tennessee and Virginia service territories. But the company did achieve its aim of bolstering cash flow. Here’s how Ballad went about it.

Job cuts. Financial conditions were adverse from the beginning. In an April 16, 2018 letter to the Tennessee Commissioner of Health, ten weeks into the merger, Ballad wrote that “due to the increased cost of labor, pharmaceuticals and supplies, and the continued shift to the outpatient setting from inpatient, operating income of the combined systems has declined by 123% since the same time in the prior year.” Continue reading

Virginia Taxes New Firms Higher, NC the Opposite

The overall effective tax rate on various kinds of businesses in Virginia, and how they rank against the other 50 states. (Lowest = #1) Click for larger view. Source: Tax Foundation and KPMG LLC

 

by Steve Haner

Virginia is far more tax friendly to established businesses than it is to new ones.  That’s one major conclusion of a major state-by-state business tax comparison released today (here) by the Tax Foundation and KPMG LLC.

In neighboring North Carolina, on the other hand, the tax structure encourages new investment with more attractive rates for incoming businesses of several types. It has been a conscious strategy for that state’s political leaders for some time.

Instead of seeking to put an overall ranking on the state’s business tax climate, as has been done in the past or in other studies, the Tax Foundation devised eight imaginary firms in different industries and then calculated their effective tax rate in each of the fifty states. It used tax laws and incentives as they were in force January 1 of this year.

One of the principal authors is a former General Assembly legislative aide well known around our capital, Jared Walczak, now a vice president at Tax Foundation. This approach of comparing how the various states would tax a set of reasonably typical firms is a big step up from previous methods.  Continue reading

Michael Saylor: Prophet or Charlatan?

by James A. Bacon

Great cover story in Virginia Business magazine this month: MicroStrategy CEO Michael Saylor’s $2 billion gamble on bitcoin.

I’m glad to see this story. First, it represents a return to the kind of business journalism Virginia Business did when I was editor and publisher many eons ago, when we wrote about Virginia’s most consequential and controversial CEOs. This story is the best read about a Virginia entrepreneur that I have come across in literally years.

Second, the story explores a topic of great fascination — cryptocurrency. With my libertarian leanings, I am sympathetic to the vision of cryptocurrencies such as bitcoin as an alternative to the fiat money created by central banks. As the U.S. indulges in ever-growing deficit spending and amasses a national debt that can never be repaid, the Federal Reserve Bank will face mounting pressure to inflate away the debt. Just one problem: I don’t see bitcoin as an alternative currency. With its wildly gyrating prices, it is not a stable store of value. Put your bitcoin in the bank, and you have no idea what it will be worth tomorrow. Continue reading

Corporate Tax Already Exploding in Virginia

by Steve Haner

First published this morning in The Roanoke Times.

With Virginia’s fiscal year now three-quarters complete, and basically one year since the depths of the COVID-19 recession, state tax revenues are soaring. Despite reports that the boom results from the economic rebound, it remains clear that changes in tax policy under Governor Ralph Northam are the major driver.

Usually, the state financial reports compare results year over year. Instead, compare the recent data to four years ago. Four years ago it was Governor Terry McAuliffe coming to the end of his term as President Donald Trump began work on what would be his legacy tax bill, the Tax Cuts and Jobs Act of 2017.

In the four years since the March 2017 report, the state’s overall general fund collections to date are up 26%, almost three times the basic inflation rate for the same period (under 9%.) That is an extra $3.35 billion compared to four years ago at the same point. That is just the General Fund, ignoring all the other ways the state taxes us, such as last year’s gasoline tax increases.

About half of the added General Fund revenue came from individual income tax withholding, up 17% or more than $1.5 billion. It is the largest revenue category, so you would expect that to lead the pack. But it leads only in dollars, not in percentage growth.

Corporate income taxes grew 68 % over four years ago. The revenue category that includes the state’s tax on real estate transactions recorded at courthouses was up 72%. State policy didn’t spark the real estate price boom behind soaring recordation taxes. But intentional state policy has increased the corporate income tax harvest by two-thirds, to $315 million more than four years ago.  Continue reading

Shoot-Yourself-in-the-Foot Economics

Virginia unemployment rate over past three years. Source: Ycharts.com

A sure sign of dysfunctional government policy: Thousands of Virginians remain unemployed, but small businesses are struggling to find employees. We’re not talking about highly specialized jobs like aerospace engineers or data analysts that require years of education. We’re talking about ordinary jobs.

“Virginia’s small businesses are working hard on their recovery but are struggling to find the right workers to fill open positions,” NFIB Virginia State Director Nicole Riley said in a Wednesday press release, as reported by The Virginia Star. “It is important that Virginia lawmakers keep small businesses a priority and focus on policies that will strengthen job growth and not hinder the small business recovery.”

“Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force,” said NFIB Chief Economist Bill Dunkelberg. “However, owners remain determined to hire workers and grow their business.” Continue reading

TCI Model Rule Ready for Study, Comment

by Steve Haner

First published this morning by the Thomas Jefferson Institute for Public Policy.  (Happy birthday, Mr. President.)

Read the governing document for the Transportation and Climate Initiative and it becomes clear there is more going on than just an effort to reduce motor fuel use with a combination of taxes and shrinking caps. That may really be a secondary goal. Continue reading

Good News for Virginia in Best-Places-to-Work Rankings

by James C. Sherlock

The new Fortune 100 Best Companies to Work For has been released.

Good news

Four Virginia-headquartered companies made the list.

  • Hilton, McLean #3
  • Capital One Financial, McLean #9
  • CarMax, Richmond #36
  • Navy Federal Credit Union, Vienna #59

Other News

There are nine health systems on the list. Not only are none of them headquartered in Virginia; none of them have facilities in Virginia.

Kings Dominion Stays a Step Ahead of the Minimum Wage

Bridgett Bywater, the new GM at Kings Dominion.

by James A. Bacon

Virginia’s $9.50-per-hour minimum wage will go into effect May 1, but it won’t have much impact on King’s Dominion, which expects to hire more than 2,000 seasonal workers, mostly young people, this season. The Hanover County amusement park plans to boost its minimum wage to $13 per hour, reports Virginia Business. The enterprise also is hiring 80 new full-time positions with wages and benefits starting at $16 an hour in culinary and operations roles.

Hopefully, the flap over the minimum wage in Virginia will prove to be much ado about nothing, as market forces in a fast-recovering economy push up wages faster than the General Assembly can jack up the minimum. In 2017, according to the Bureau of Labor Statistics, 70,000 of Virginia’s 1,978,000 workers were paid the $7.50 minimum wage. Presumably, a significant number more were paid less than $9.50 and will benefit from the wage increase. That’s the up-side of the mandated wage boost.

What we don’t know is how many workers will lose their jobs as employers decide they don’t add enough value to the enterprise to justify the higher wage, or, in the longer run, invest in automation. Bacon’s Rebellion will stay alert for signs of how the minimum is impacting “marginalized” employees, such as minorities, teenagers, and rural workers. Continue reading

The Real King Ralph (Sampson, not Northam) Saves the White Spot!

Robert Henry at the counter of The White Spot Photo credit: https://www.wspot.net/wspot/#

by Don Rippert

Double Gus, all the way. Students who attended The University of Virginia going all the way back to 1953 are likely to be familiar with the White Spot “restaurant.” The term “restaurant” is in quotes because The Spot, as it is affectionately known, is a hole in the wall that originally had 11 stools all in a row along a counter directly across from the stovetop. At some point The Spot expanded to include the adjacent space where a few simple tables sit. As for the food… The Spot never served alcohol but still managed to attract lines of UVA students out the door waiting for a stool. Enough said. The hallmark dish was the Gus burger. The Gusburger was a mainstay of The Spot going back at least to 1977 (and probably much further). It was a cheeseburger or double cheeseburger with a fried egg on top. And this was long before the trend of putting eggs on burgers became a common fad.

Everybody wondered what would become of the beloved Spot given the Coronavirus shutdowns. A cramped space like The White Spot was not expected to fare well. But suddenly … Good news! An icon has come to save an icon. UVa and NBA basketball legend Ralph Sampson has teamed with businessman Bert Ellis to buy The White Spot. Best of all, they insist that maintaining the classic look, feel and menu of The Spot is job #1. Continue reading