Does Virginia Beach Have the Right Investment Priorities?

The City of Virginia Beach has shelled out $265 million in public funds to support 13 major public-private development projects from the Cavalier Hotel renovation to the Sandler Center for the Performing Arts. Those projects have attracted more than $1 billion in private investment, said Virginia Beach Mayor Bobby Dyer in his state-of-the-city address two days ago. “That’s a solid return that has meant money for schools, public safety, roads and other essential city services.”

“I have not always been on board with every public-private partnership as considered, but I do know a good deal when I see it,” Dyer said, according to the Virginian-PilotBut the city’s overall approach to P3s has paid off, he contended. The city has a AAA bond rating. All of its public schools are accredited. And the crime rate is the lowest it has been since the 1960s.

Bacon’s bottom line: Public-private partnership always warrant close scrutiny. Private interests have every incentive to seek public subsidies in order to maximize their private returns, and studies ginned up to support P3 projects often are loaded with dubious and unsupported assumptions. But if a locality works to minimize risks and ensure that each project is cash-flow positive, I can be converted on a case-by-case basis.

Virginia Beach is an especially interesting case because its proximity to the Atlantic Ocean and its low-lying elevation make it especially vulnerable to the rising sea level.

Last evening I had a wide-ranging conversation with a group of friends, including Noah Sachs, author of a recent paper highlighting the threat posed by rising sea level to chemical storage facilities in Hampton Roads, and Dan Slone, a land-use attorney with clients in flood-prone regions of the country. The underlying premise of the conversation was that sea-level rise poses an existential threat to Hampton Roads in the long-term, and a threat to investment in the region in the short- to medium-term.

Major insurers are increasingly taking sea-level rise and exposure to hurricane flooding into account when deciding where to allocate investment capital. Low-lying metropolitan areas such as Miami, Fla., and Hampton Roads. Not only are they concerned that their investment properties might be flooded, they increasingly question the ability of local governments and utilities to serve areas subject to increasingly frequent inundation and erosion. Other businesses with a 20- to 30-year time horizon have similar worries.

I’m skeptical of the more alarmist scenarios, but rising sea levels due to subsidence in Virginia’s tidewater region as well as warming global temperatures do seem to be inevitable. Some regions around the world have sufficient density of development — the New York metropolitan area, the Netherlands — that it might make economic sense to invest tens of billions of dollars to fortify against rising seas. I doubt that such density exists in Virginia Beach, if anywhere in Hampton Roads outside, perhaps, of downtown Norfolk.

How is a locality like Virginia Beach supposed to respond to such a challenge? I sympathize with Dyer’s desire to build up Virginia Beach’s tax base. But the city has finite resources to invest. In the long run, what kind of projects offer the highest return on investment — flashy P3 projects or boring drainage and flood control projects designed to protect existing real estate investment? I don’t pretend to know the answer. What I do know is that the mayor of Virginia Beach does not appear to be asking the same kind of questions. And that worries me.

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6 responses to “Does Virginia Beach Have the Right Investment Priorities?

  1. What doesn’t make sense in all of Hampton Roads is not keeping drainage facilities maintained and functioning. Inadequate facilities to allow growth in the first place plus maintenance and improvement projects deferred since the 80’s, topped off with subsidence as mentioned in the post above all need serious attention and funding.

    Hurricane Matthew showed Virginia Beach what happens when it takes decades for drainage upgrades By Mechelle Hankerson, The Virginian-Pilot, Oct 5, 2017.

    “For decades, Virginia Beach has put off projects to upgrade its infrastructure for handling stormwater.”

    “In the spring, a $2 million request to create a regular canal maintenance program was left out of the budget. Currently, crews dredge canals as part of the ditch maintenance program or as standalone projects.

    “[Deputy City Manager] Leahy said he wants that work to be funded next year.

    “Public ditches play a role too. It takes the city 11 years to clean all 564 miles of them. An eight-year cycle is the goal, public works manager Mark Johnson said. When possible, the city tries to include canals in the ditch cleaning or lake dredging program.

    “Almost 800 lakes and ponds are also considered part of the stormwater system, and the city has a list of 50 public ones targeted for dredging over the next six years.”

    • Failing to properly maintain lakes and ditches is yet another form of hidden deficit spending. So, I’m wondering about that $2 million — is that a one-shot deal to catch up, or how much the city needs to increase spending every year?

  2. It is insane to promote the construction of new housing in low-lying marginal marshlands when they are already flooding regularly and the flood insurance for these dwelling units is paid for by tax dollars. Yet our eastern Tidewater areas are full of this, promoted by local governments for the sake of growing their tax base! At the least, at the State if not the federal level, we should be forbidding construction of any kind in areas already forecast to be in flood zones within 20 years.

    This is not rocket science: the forecast maps are already out there; here, for example, is the interactive map for Norfolk/Va Beach set for 2 feet of sea level rise above 2017 levels (you can change the location to anywhere else in coastal Virginia, show population and existing structure overlays, and change the amount of imputed sea level rise to see the effects). Bear in mind, Hampton Roads is already regularly experiencing over 1 foot of water in vulnerable existing streets and parking lots under adverse weather situations — the water has no place to go.
    https://riskfinder.climatecentral.org/place/norfolk.va.us?comparisonType=place&forecastType=NOAA2017_int_p50&level=2&unit=ft&zillowPlaceType=place

  3. The city manager of Virginia Beach is proposing $1.3 billion in recurrent flooding mitigation spending over the next 15 years. Also note that after the canal/ditches that indeed were negligently maintained, were cleaned out there has been virtually no flooding in the neighborhoods affected by hurricane Matthew. Which by the way, was a thousand year storm event.

    • Thanks for providing that info. $1.3 billion sounds like real money, even if it’s stretched over 15 years. Also, it’s good to hear that cleaning the ditches actually works.

      Do you happen to know how high above the water table those ditches are? How effective will they be if the water table rises a foot or two over the next few decades?

  4. You must remember that Virginia Beach is over 23 miles long and more than 11 miles wide on average. 300 mi.² including 50 miles of waterways.
    The southern part of the city is very low and is greatly affected by wind tides sweeping across Back Bay. We also get substantial water flows from Albemarle Pamlico sound, especially doing spring tides and high southerly wind events. The city managers proposed CIP to address recurrent flooding and eventually sea level rise is available on VBGOV.com.

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