Category Archives: Transportation

Next Up: Carbon Tax, Cap and Trade On Your SUV

They are coming next for your SUV.

While the Air Pollution Control Board still has steps to take, it is safe to consider Virginia’s membership in the Regional Greenhouse Gas Initiative a done deal.  That will quickly hit you in your electric bill, as Virginia’s two major electricity generators will have to pay a tax on their carbon emissions and alter their generation fleets to steadily reduce their CO2 output.

Here is what’s next:  The counterpart to RGGI for another major sector of the economy is the Transportation and Climate Initiative (TCI), which Virginia announced it would join in September.   In addition to Virginia, the current TCI member jurisdictions are Connecticut, Delaware, the District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont, with policy support from Georgetown University.   Continue reading

New Momentum for Mileage-Based User Fees

Graphic source: I-95 Corridor Coalition

From a purely economic perspective, the ideal system for funding road and highway improvements would be a Mileage Based User Fee (MBUF) in which motorists would pay in direct proportion to which they use the public road network. Charging for road usage would incentivize Virginians to drive less, thus reducing both congestion and carbon emissions. Plus, an MBUF (also known as a Vehicle Miles Driven tax) would replace Virginia’s increasingly antiquated and jury-rigged system of transportation funding that relies on retail and wholesale gasoline taxes, sales taxes, motor vehicle registrations, and other revenue sources that transfer wealth from low-mileage drivers to high-mileage drivers.

Aside from the fact that such a system would create winners and losers, which would complicate a political implementation, the idea of a VMT tax has been beset by practical issues. How would the technology work and how much would it cost to administer? How could peoples’ privacy be protected? And how does one account for inter-state travelers — if Virginia couldn’t collect the tax from out-of-staters using state roads and highways, would such a system unfairly burden Virginia taxpayers?

But the idea is gaining new respectability. The I-95 Corridor Coalition, a partnership of more than 100 state transportation agencies, toll authorities, and public safety organizations, is exploring the feasibility of establishing MBUFs. If Virginia converted its 22.39 cents-per-gallon gasoline tax and 26.08-cents-gallon diesel tax to an MBUF on a revenue-neutral basis, it would have to charge 1.02 cents per mile. (That compares to the IRS mileage tax allowance of 58 cents per mile.) Continue reading

Charlottesville’s Parking Gamble

Rendering of the Center of Developing Entrepreneurs.

The People’s Republic of Charlottesville is undertaking an interesting experiment — the city has approved development of the Center of Developing Entrepreneurs (CODE), a Silicon Valley-inspired office space, that provides only 74 parking spaces downtown for as many as 600 workers. Worried that the project will aggravate the parking shortage around the Downtown Mall, some local businesses have expressed their unhappiness.

The Center should provide useful insight into the evolving economics of parking. Local governments typically require developers to provide a minimum number of parking spaces per resident or worker. Other downtown businesses have had to abide by the rules, but suddenly CSH Development, developer of CODE is exempt, sparing it considerable development expense. Nearby businesses fear that workers at CODE will swamp the limited supply of public parking.

“I don’t blame [developer Jaffray] Woodriff,” said Jacie Dunkle, owner of the Tin Whistle Irish Pub and the Salad Maker, according to C-ville.com. “I blame the city. It never required him to have more spaces, even though people are struggling to find parking in the city as it is.”

But some economists have argued that most Virginia localities have excess parking, which takes up space that could be devoted to other urban uses. Free marketeers suggest that the market, not government decrees, should determine the supply of parking spaces, and environmentalists advocate limiting parking as a way to curtail automobile use, reduce CO2 emissions and save the planet. Continue reading

The Art of Streetscaping

Naples, Fla., a city of some 20,000 inhabitants, is one of the wealthiest communities in the United States. Reputedly, the jurisdiction has the second highest proportion of millionaires. Modest lots within walking distance of the beach sell for a couple million dollars, and tear-downs are common. The landscaping in residential neighborhoods is as manicured as the Japanese Imperial Palace. With a formidable tax base to spend upon public works, one would expect the public spaces in a place like this to be attractive — and the bits and pieces of Naples that I have seen in the past 24 hours do not disappoint.

We had occasion to stroll along 5th Avenue — less famous than its New York counterpart, but far friendlier. Indeed, Naples’ 5th Avenue is one of the most inviting streets I have seen anywhere in the United States. It compares favorably even to the great streets of Europe. The local authorities have done everything right. While Virginia communities are unlikely to have as much money to lavish upon brick crosswalks or the year-round sub-tropical climate to support such lush flowering plants, they can learn a lot.

First, look at the bones. 5th Avenue has four lanes, two of which are dedicated to on-street parking. The line of parked cars creates a barrier between moving automobiles and the sidewalk, separating pedestrians from motorists. Not that safety is a huge consideration — the lanes are fairly narrow, so the cars don’t drive very fast. Equally important, the street has a broad sidewalk, creating abundant space for plantings, benches, artwork, and outdoor restaurant seating. Continue reading

RVA Affirms Bike Lanes, Opens City to Scooters

The sidewalk scooter fad now coming to Richmond was in full swing in San Antonio during a visit over the holidays, providing a good preview of Things to Come.

Downtown Richmond is not now and probably never will be as packed as downtown San Antonio during the Alamo Bowl, and it was clear from their team colors that the out-of-towners were most of the customers for the devices.  If you think bicycle behavior is occasionally obnoxious, you ain’t seen nuttin’ yet.

On the sidewalks and on the streets, moving often at car-like speeds (also on the sidewalks), sometimes lined up like ducklings behind a leader and sometimes all bunched up filling the lanes, unconcerned at times about whether they were with or against traffic.

Continue reading

I-66 Rush-Hour Travel Speeds Up 12%

Source: Nick Donohue, Deputy Secretary of Transportation

Did the implementation of tolls on Interstate 66 inside the Beltway hurt or harm rush-hour travel times? I addressed that issue yesterday based on data from a Washington Post article. Now I supplement that post with data direct from Deputy Secretary Transportation Nick Donohue.

The tolls have been widely criticized by commuters, many of whom recoil at charges that have exceeded $40 for a one-way trip during rush hour. However, average eastbound travel speeds improved 12.2% for all lanes in the year since the tolls were implemented, according to Virginia Department of Transportation data that Donohue cited in a presentation to the Joint Commission on Transportation Accountability last week. The greatest gains occurred between 6:00 and 6:30 a.m. and around 9:30 a.m. Continue reading

Transportation Revenue Focus of Concern Again

U.S. retail gasoline prices adjusted for inflation. Source: EIA . The blue line is the adjusted price, looking back into the 1970s. Note the peak just about when Virginia thought it wiser to tax a percentage of price rather than a fixed tax per gallon. Find the interactive version here: https://www.eia.gov/outlooks/steo/realprices/

In the middle of a booming economy, with many state revenue sources surging, flat transportation revenues were the focus of warnings Monday in presentations by Virginia Secretary of Finance Aubrey Layne and Secretary of Transportation Shannon Valentine.

“I think we are heading for a cliff,” Layne told the House Appropriations Committee.  “For the first time in our history, we’re seeing no increase in fuel tax revenue while vehicle miles traveled goes up.”

Continue reading

No Quick Fix for I-66

Image credit: Washington Post

When the Interstate 66 Express Lanes opened a year ago, they triggered a maelstrom of controversy as Northern Virginia commuters encountered new driving patterns. Motorists were particularly irate at peak rush-hour tolls rising as high as $47.50 to drive just a few miles on I-66 inside the Beltway. Virginia transportation officials said, never fear, people would adapt and the picture would improve.

So… Has it? The Washington Post has taken a close look at the numbers. And the newspaper’s verdict is: The express lanes have caused shifts in driving behavior — shifting more people to carpooling, more to mass transit — but for the most part commuters are as miserable as ever. Continue reading

NoVa Pushes Back on D.C. Fare Decriminalization

When last we visited the matter of turn-stile jumping and other ways of cheating the Washington Metro mass transit system, Washington City Council had voted to decriminalize the nonpayment of fares. It wasn’t hard to predict that Virginians would not look kindly upon the decision.

Now comes the inevitable reaction.

Continue reading

Washington City Council Puts Virginia Taxpayers, Metro Riders at Risk

Well, Washington City Council has gone and done it — decriminalized Metro fare evasion. America now will be treated to an interesting social experiment. If it doesn’t go well, Virginia taxpayers will wind up picking up part of the tab.

The financially strapped Metro, which operates the mass transit bus and rail system for the Washington metropolitan area, is already losing $25 million a year from turnstyle jumping and other forms of non-payment. Metro officials worry that decriminalization could mean even bigger losses.

City council members counter that criminal enforcement, along with criminal penalties and jail terms, disproportionately impacts African-Americans. Ninety-one percent of citations and summonses were issued to blacks. “That is a problem,” Council member Robert C. White Jr. said, referring to the 91 percent figure. “I’m sad that’s Metro’s losing money, but I’m more sad about what’s happening to black people.”

The interesting question is whether fare evasion and lost revenue will increase. Evasion arrests, citations and warnings have surged in recent years, from 4,000 in 2013 to 15,000 by 2017, reports the Washington Post. Eighty percent of those losses occur in the District of Columbia.

“We have a big problem with fare evasion at Metro,” said D.C. Council member Jack Evans, who also serves as Metro board chairman. “And when it is understood that you will just get a civil citation that is largely unenforceable, you have a higher incidence.”

Advocates of decriminalization have likened the nonpayment of fares to the nonpayment of parking tickets, which is a misdemeanor. If parking-ticket scofflaws don’t face criminal charges, why should turnstyle jumpers?

Advocates of criminal penalties and enforcement invoke the “broken windows” theory of policing, which contends that failure to punish small offenses emboldens criminal behavior and leads to worse offenses. Conversely, enforcing minor criminal offenses suppresses worse crimes.

Metro posits that increased enforcement against fare evasion has led to a reduction in more serious offenses, owing to the police presence and the proportion of fare evasion stops leading police to more severe offenders.

For example, the board argued, while 8 percent of fare evasion stops lead to arrests according to current figures, most of those arrests resulted not from the initial fare evasion charge but rather from existing warrants for other offenses — a further crime such as assault on a police officer, or failure to produce identification.

Bacon’s bottom line. The D.C. councilpersons raise a fair point: Why should fare skippers (mostly black) be treated so much worse than parking scofflaws (of undetermined racial composition)? Isn’t there a double standard at work? Here’s how I would respond.

First, nonpayment of parking citations doesn’t create an environment that leads to other crimes. Failure to crack down on turnstyle jumping, by contrast, contributes to a sense of lawlessness in the D.C. subway system that encourages other forms of criminal behavior.

Second, revenue lost from turnstyle jumpers is only part of the fiscal equation. If lawlessness increases — more pickpocketing, more robbery, more assaults — many law-abiding Metro passengers will stop riding the rails. A small increase in lawlessness could spark a large change in behavior, especially among risk-averse riders such as women and the elderly. Thus a doubling of fare evasion, should it occur, could quadruple or quintiple the revenue losses if we account for lost ridership. Remember, ridership has been declining in recent years due to safety, scheduling and riding-experience concerns. Lawlessness could accelerate the trend.

Of course, this is all speculation. We won’t know the result until the new policy is implemented.

Here’s the rub. While Washington City Council conducts its social experiment, Washington shares the fiscal pain of lost revenue with Virginia and Maryland. Should revenues decline, Metro will be faced with a choice of cutting back operations, deferring maintenance, or going to the state and local governments whose population it serves and asking for more money. Washington City Council has put Virginia taxpayers and Metro riders at risk.

Amazon Deal Highlights Virginia’s Competitive Advantage Over Maryland

Many Virginians have qualms about the $550 million in job-creation incentives plus more than $1 billion in promised transportation and higher-ed investments it took to recruit a $2.5 billion Amazon facility to Northern Virginia. But things could be worse. Maryland offered an $8.5 billion package — and didn’t land the deal. The Washington Post is asking if the Old Line State, which pitched a Montgomery County location, has lost its economic-development mojo.

For the record, Maryland officials are putting on a positive face. They are delighted that Montgomery County was one of Amazon’s 20 finalists, and they say that the facility’s location in Arlington/Alexandria will send positive economic ripples throughout the Washington region.

But Montgomery County — the Fairfax of Maryland — has studiously refashioned itself over the past few decades as a walkable urban community with access to abundant mass transit, just the kind of urban fabric Amazon was looking for. The county has access to the same high-tech labor pool as Arlington and Alexandria, which snagged the deal. And the state offered $6 to $7 billion more in inducements than Virginia.

Anirban Basu, chairman of the Maryland Economic Development Commission, has been asking himself, “Why would Amazon turn away billions of dollars in subsidies to go across the river?”

Experts quoted by the WaPo pointed point to site-specific factors that favored Virginia. National Landing (the rebranded location in Crystal City and Potomac Yard that Amazon selected) is closer to downtown Washington, D.C., and so close to Reagan National Airport that Virginia has offered to build a walkway to link it to the Amazon office complex. National Landing has direct access to a Metro station, which the Commonwealth has offered to upgrade. And most of the property involved in Virginia’s bid is owned by a single developer, JBG Smith.

And who would believe this? Northern Virginia’s transportation infrastructure compares favorably to that of Maryland.

Northern Virginia’s transit and road networks also outpace the Maryland suburb’s. Virginia recently expanded its part of the Capital Beltway with tolled express lanes, and the second phase of Metro’s Silver Line, which will extend the subway to Dulles International Airport and into Loudoun County, is slated to open in 2020.

Finally, Basu cited Virginia’s “creative stroke of genius” in lining up $1.1 billion in higher-education support to build the computer-science talent pipeline. Virginia’s plan includes $250 million toward Virginia Tech building a $1 billion “Innovation Campus” near the future Amazon hub.

I would add another factor not mentioned in the WaPo article. Amazon has a history of working closely with Virginia officials and its largest utility, Dominion Energy, fostering development of Amazon’s cloud-services business in Northern Virginia. The company knows it can get things done in Virginia, whereas Maryland, where it has had little experience, is more of a cipher.

But Maryland’s competitiveness issue runs deeper. “One of the reasons Maryland created such a large incentive package for Amazon is because we know our business climate is not as competitive,” said Basu, whose Baltimore firm, the Sage Policy Group, conducted the state’s economic impact study of Amazon’s potential benefits but was not involved in the bid.

As the WaPo quotes regional economic analyst Stephen S. Fuller, 25 years ago economic activity in the Washington region was split equally among Northern Virginia, Washington and the Maryland suburbs. By last year, Northern Virginia’s share had grown to 48 percent, while the Maryland suburbs held about steady with 31 percent, and Washington had dropped to 21 percent.

Think about that. For all of Northern Virginia’s horrendous problems with traffic congestion, autocentric land uses, skilled labor shortages, lack of a top-tier research university, local-government unfunded pension liabilities, and some of the highest taxes in Virginia, it has been kicking Terrapin butt for two-and-a-half decades as measured by job creation. Writes the WaPo:

[Basu] has concluded that Amazon must have rejected the state’s “antiquated” regulations and higher taxes for corporations and top-earning residents. Amazon has said salaries at the new headquarters will average $150,000. Unlike in Virginia, Maryland jurisdictions impose a local income tax in addition to the state tax.

According to the Tax Foundation, Virginia is has a more favorable tax climate than Maryland almost across the board.

Personal income taxes
Virginia ranked 35th
Maryland ranked 45th

Corporate taxes
Virginia ranked 10th
Maryland ranked 22nd

Sales taxes
Virginia ranked 10th
Maryland ranked 18th

Property taxes
Virginia ranked 30th
Maryland ranked 42nd

Only in “unemployment insurance taxes” does Maryland compare favorably to Virginia, with a 28th ranking compared to Virginia’s 43rd.

Bottom line: Virginians get to keep more of their paychecks. When you’re  a company recruiting high-end business and technical talent, that counts for a lot.

Update: I have edited the original version of this story to distinguish between Virginia’s “incentives” paid directly to Amazon and state and local promises to invest in transportation and higher-ed.

Updates: Deadly Road Diet? Rider T1 Case

The Powerful Law of Unintended Consequences

A raging forest fire is hard to imagine in Northside Richmond, but there could be other emergencies where the city and its residents would come to regret the loss of vehicle travel lanes on Brook Road. A recent deadly fire in California we all watched on television may be giving us a warning.

Apparently, evacuations from the lightning-quick brush fire around Paradise, California, were complicated by a 2014 decision there to impose a “road diet” on a four-lane road that became the escape route.  The push for “road diets” is also behind the argument for creating new bike lanes in both directions of several miles of Brook Road, a topic of earlier Bacon’s Rebellion posts and furious local debate.

A description of the bottleneck created by the highway adjustments in Paradise, and its impact on the fire evacuation, was published on wattsupwiththat.com, an interesting blog I only found because it linked to one of my posts on Dominion Energy.

The bottom line problem is that people just like building in dangerous places in California, including fire-prone areas.   When I lived in Southern California in the 60’s there were regular local stories about houses sliding into the ocean or homes destroyed by brush fires, only to be quickly rebuilt.  The population has grown, development has pushed further into countryside and mountains, and now there are regular national stories.

Bottlenecks have already developed on Franklin Street because of its seldom-used bike lane.  Just about any activity (parked or parking delivery trucks, leaf removal) in the one remaining travel lane causes a backup.  Similar bottlenecks will happen if the Brook Road project proceeds.  In both cases there are parallel streets that were not available to evacuees in the High Sierra, but it still calls into question whether safety ever trumps ideology with some people.

Next Step, Supreme Court of Virginia?

The State Corporation Commission issued an opinion Friday reaffirming its earlier decision that Dominion Energy Virginia must include payments it receives from the PJM regional transmission authority along with the payments it makes to PJM in the separate Rider T1 it puts on all our bills.

Following the commission’s August decision the utility filed for reconsideration.  The next step, should it decide to take it, is to the Virginia Supreme Court.

The amount of money in dispute is minor, so the precedent must be the point.  Dominion Energy is seeking to book the payments it is getting back from PJM into base rates, which increases the amount customers must pay in Rider T1 (for transmission) and increases the profit the company earns (and keeps) in base rates – base rates that seemingly will never be adjusted downward again and profits which may never be shared as rate credits again.

“Put simply, Dominion seeks to charge customers dollar-for-dollar for these transmission costs through Rider Tl but opposes crediting customers in the same manner for transmission revenues received for the exact same service,” the order reads.

Since 2007, more and more of the company’s operations are being paid for with stand-alone rate adjustment clauses outside of base rates.  New renewable generation may be funded that way, and the coming rebuild of the distribution grid might be as well.  If there are to be silos keeping all the costs in one place, the same silos should hold any and all related revenues to offset those costs.

How Walkable Urbanism and the Talent Pipeline Won the Amazon Deal

Conceptual rendering of Virginia Tech’s proposed $1 billion campus in Alexandria near the proposed Amazon campus.

More information is coming out about the wheeling and dealing behind Virginia’s incentive package that coaxed Amazon, Inc., to locate a $2.5 billion campus in Northern Virginia. It turns out that many of the key pieces in Virginia’s incentive package were initiatives that had been in the works for years. Virginia is putting resources into projects that, most likely, it would have funded eventually anyway.

Amazon wanted an urban location and it selected the Crystal City-Potomac Yard area of Arlington and Alexandria, currently being rebranded by the largest property owner, JBG Smith, as National Landing. A decade ago JBG Smith had commenced the yeoman’s work, with no immediate prospect of reward, of winning the local planning and regulatory approvals to re-develop the aging edge city into a walkable, high-density, mixed-use area — just the kind of urbanism Amazon was looking for.

Meanwhile, Virginia Tech had engaged in preliminary planning to build a major academic campus in Northern Virginia. The idea was mainly conceptual when Amazon announced his national HQ2 competition, but Tech had a scaffold upon which to build when the state began scrambling to put a deal together.

It helped that Commonwealth’s point man for selling Amazon, Stephen Moret, was not a conventional economic developer. The Virginia Economic Development Partnership president takes a broad, integrative approach to the profession that transcends the assembly of real estate deals. Having recently earned a Ph.D. from the University of Pennsylvania in higher education management and serving as a member of the State Council of Higher Education for Virginia, Moret is well versed in the critical need to build the talent pipeline. He is also conversant about the connections between land use, workforce, innovation districts and economic development.

I haven’t talked to Moret since the Amazon deal was closed. But I recall a conversation a year-and-a-half ago in which he casually blue-skyed an idea for promoting corporate investment in Southwest Virginia by creating a New Urbanism-style development zone around the campus of the University of Virginia-Wise. In that vision, the real estate was almost incidental. Moret’s idea was to create a knowledge-based community with access to UVa-Wise students and graduates that a corporate investor would find attractive.

It’s not a stretch to say that the Amazon project is the same idea writ large — very large. The $550 million in direct employment subsidies constitutes only a modest piece of the deal. What really sold Amazon on Northern Virginia was the prospect of setting its corporate facility (a) in a walkable urban community, (b) in close proximity to a technology-oriented university campus, (c) in order to create a dynamic innovation ecosystem with Amazon at the center, (d) in a metro area with one of the largest tech-savvy labor pools in the country.

Building the talent pipeline. Both the Roanoke Times and the Washington Post have published articles highlighting how the educational piece of the incentives package came together.

As the Roanoke Times writes, Virginia Tech’s proposal to build a $1 billion, one-million-square-foot campus near the Amazon facility was the cornerstone of the talent-recruitment piece of Virginia’s bid.

Virginia Tech had been planning some sort of campus near the nation’s capital since President Tim Sands arrived at the university four years ago. Tech didn’t have a location in mind or much more than a general sense of what the Innovation Campus could be.

“If the first time we had thought about it had been 14 months ago, this probably wouldn’t be what it is,” Sands said during the gauntlet of interviews after Tuesday’s announcement. “We were ready and the timing was perfect.”

Moret was unaware of Sands’ Northern Virginia ambitions when he first reached out to schedule a conference call with college and university leaders around the state last year.

He discussed the HQ2 bid with everyone and laid out early plans to roughly double the number of computer science graduates the state produced each year as part of the HQ2 bid.

He also asked if anyone was interested in the possibility of opening a campus near Amazon in the Washington, D.C., area.

“Virginia Tech reached out right away and said, ‘Hey, we’ve actually been working on this idea for a few years. And we’re prepared to put in a very large investment to make this happen,’” Moret recalled.

George Mason University also stepped up in a big way with plans to expand its Arlington campus. But the GMU campus will not be tightly integrated geographically with Amazon’s like Tech’s will be.

Crystal City rendering by Torti Gallas + Partners

Investing in walkable urbanism. Writing for the Congress for the New Urbanism’s Public Square Journal,  Robert Steuteville provides background on the urban planning piece of the deal.

Crystal City can be thought of as a large suburban retrofit—guided by a plan and form-based code that won a 2009 CNU Charter Award for Torti Gallas + Partners and Kimley-Horn and Associates. That plan and code, adopted by the county in 2010, entitled the new, higher-density development and put in place a framework to create a more walkable urban neighborhood over time.  …

The area was originally built without a master plan, and that changed with the recent master plan. “It’s high-rise suburban. It wants to be higher density, with a more urban mentality— away from cars and with retail on the street that is accessible to people,” says John Torti of Torti Gallas. “It has the potential of becoming a wonderful place.”

Steuteville’s article provides the following graphic comparing a mile-long segment of Rt. 1 as it looks now with the plan transform it into a more walkable, urban boulevard:

Continue reading

Decriminalizing Metro Fare Jumping

Wow. Just as a white knight in the form of Amazon, Inc., rides in to help salvage the floundering Washington Metro mass transit system, Washington, D.C., City Council pulls a bone-headed move that could undo everything.

Amazon HQ2 will plop down a massive activity center near the Crystal City and Potomac Yard Metro stations, catalyze the development of walkable urbanism in the neighborhood, and throw in money to add new entrances to each station. Amazon anticipates that half of its expected 2,500 employees will ride the Metro, and it is logical to think that employees of the companies that grow up around Amazon will do so, too, eventually adding thousands of new riders to the system. What a life saver!

But in an 11 to 2 vote Tuesday, Washington City Council voted to decriminalize Metro fare evasion on the grounds that the use of criminal sanctions to collect fares… what else… disproportionately impacts African-Americans.

Data show fare evasion arrests, citations and warnings have risen dramatically — from 4,000 in 2013 to 15,000 in 2017, reports the Washington Post. Council member Charles Allen contends that police disproportionately target African Americans, citing the fact that 91 percent of Metro Transit Police citations and summons for fare evasion from January 2016 to February 2018 were issued to African-Americans. Metro estimates that it loses $25 million annually to fare evasion.

The Washington Post article mentioned no evidence presented by anyone, other than the raw statistics, to suggest that police were unfairly singling out African-Americans for enforcement.

City Councilman Jack Evans, who happens to be Metro Board Chairman, cast one of the two dissenting votes. He stated the obvious: “By decriminalizing fare evasion we are only encouraging people to not pay their fare. Because there is absolutely no mechanism to collect from a civil infraction. … You cannot steal from Metro. You can’t steal period. And if we get to a point where we say it’s okay to steal, I’m not sure where we are at this point in time.”

If curtailing sanctions leads to a surge in fare skipping and a decline in revenue, Metro will have to make up the balance from someone. And we all know who that will be — the taxpayers. Not just Washington taxpayers but Virginia and Maryland taxpayers, who subsidize Metro operations. Perhaps Governor Ralph Northam should issue a declaration to the D.C. City Council: Do what you want, but if the Metro suffers a decline in ridership revenue, you can make up the difference. Don’t come to us!

(Hat tip: Rob Whitfield)

Dissecting Virginia’s Amazon Deal

Source: PROJECT COOPER: BRIEFING FOR THE
HOUSE APPROPRIATIONS COMMITTEE

Virginia has committed to investing a sum unprecedented for an economic development deal in the Commonwealth — roughly $2.5 billion in state and local dollars to bring Amazon, Inc. to Northern Virginia. In a presentation to the House Appropriations Committee yesterday, Stephen Moret, CEO of the Virginia Economic Development Partnership (VEDP) provided a detailed account of the incentives. Now that the numbers are out, the public has an opportunity to review the deal. At Bacon’s Rebellion, we love critiquing things, so here goes…

Cash flow positive for the state. The first point to note is that, while Virginia is making a massive public investment to the project, it will be cash-flow positive for the Commonwealth from Year One. If Amazon pays its projected 2,500 employees an average of $150,000 a year — the target number to qualify for state subsidies — the company’s Virginia workforce will generate a lot of new income taxes and sales tax revenue. By Year Ten, added state revenue from direct, indirect and induced employment will amount to $209 million. The sum could grow to $364 million within 30 years. That compares to a General Fund revenue forecast of about $20 billion in Fiscal Year 2019.

As Steve Haner explained in the previous post, the deal will have a minimal impact on the current budget cycle, and future expenditures on higher education, transportation and direct subsidies to Amazon will be phased in over time. The project is designed to ensure that new General Fund revenues will exceed project-related outlays. In other words, according to Moret’s numbers, the state will make a “profit” on the deal from which the entire state benefits.

Investing in competitiveness. A second key point is that 60% of the incentives will be invested in infrastructure and educational programs that don’t go into Amazon’s pocket. I have a huge philosophical problem with the state giving $550 million in Phase One (and another $200 million in a potential Phase Two) to one of the world’s richest companies. Talk about welfare capitalism! But Amazon could have located in Dallas, Texas, or a handful of other cities, so it has the power to play off one location against another. I don’t like it, but that’s the way the world works. The question for Virginians is whether or not the state comes out ahead.

Critical to the deal, Virginia will invest heavily in building its tech talent pipeline. According to Moret’s presentation, the state envisions producing approximately 25,000-35,000 new degrees (over and above baseline levels) in computer science and related programs over the next 20 years. That’s more than Amazon will require. So, labor-starved tech companies other than Amazon will benefit from the investment.

In an earlier post, I had expressed concern that the state would be subsidizing Amazon’s employee recruitment efforts to the tune of $22,000 per employee, giving the company an immense advantage over other Northern Virginia companies competing for talent. In his presentation, Moret acknowledged that there would be “short-term pressure” on Northern Virginia job markets, but that NoVa executives were mostly positive about the deal. His presentation includes a sampling of reactions back in February:

“The economic lift that we get in Virginia, the branding part of it, would be a strong positive for our recruiting efforts. Clearly we will be competing for talent, but that’s fine,” said a Fortune 500 CEO. “I think it’s important for regions to have a diversity of employment options. The economic lift and intellectual lift for the region is a strong, strong positive. I would like to see us get selected.”

“It would be a double-edged sword. Great for the economy. Great for the brand,” said the CEO of a successful tech company. “Long-term it would be good, but it’s another competitor to deal with for talent. … It would give cachet to our area.”

Said the C-level exec of a Fortune 500 company: “In the short run, it will entail some competition for talent. But it’s very powerful for the region for the long term. We’ve made Virginia our hub. The fastest growing part of our ecosystem
is tech – we hire thousands of associates [every year]. We want to have an ecosystem where new tech grads stay here and where there is a desire of folks from around the country to move here.”

The workforce worries are real. But the Virginia’s higher-ed investments will expand the local talent pipeline, Moret argues, while the presence of Amazon will help give the Northern Virginia tech sector a more positive brand nationally, aiding recruitment from other labor markets.

Meanwhile, the state, Arlington County, and the City of Alexandria will spend hundreds of millions of dollars building out transportation infrastructure serving the Crystal City/Potomac Yard area. The transportation initiatives, designed to complement walkable urbanism in the region’s urban core, will accommodate business and residential growth for more than just Amazon. The Metro bus and rail system is operating at significantly below capacity, notes Moret. This deal could boost ridership and revenues for the troubled mass transit system.

Projected share of Amazon commuters by transportation mode.

As Arlington and Alexandria re-develop the region as a walkable mixed-use community, Arlington projects that 77% of Amazon’s workers will walk, bike, car-share or take mass transit to work. That number, if accurate, is phenomenal. By creating a new template for Crystal City/Potomac Yard, Amazon could catalyze the development of even more transportation-efficient walkable urbanism that can soak up a lot of future transportation demand. Continue reading