Hampton Roads 2014 James V

Old Dominion University ODU Digital Commons Economics Faculty Books Department of Economics 10-2014 The tS ate of the Region: Hampton Roads 2014 James V. Koch Old Dominion University, [email protected] Vinod Agarwal Old Dominion University, [email protected] Chris Colburn Old Dominion University, [email protected] Vicky Curtis Old Dominion University Steve Daniel Old Dominion University See next page for additional authors Follow this and additional works at: https://digitalcommons.odu.edu/economics_books Part of the Finance and Financial Management Commons, and the Regional Economics Commons Recommended Citation Koch, James V.; Agarwal, Vinod; Colburn, Chris; Curtis, Vicky; Daniel, Steve; Janik, Elizabeth; Lian, Feng; Lomax, Sharon; McAdory, Alice; Molinaro, Janet; Plum, Ken; Toolsidass, Ayush; Weber, Shara; Watson, Luke; and Yochum, Gilbert, "The tS ate of the Region: Hampton Roads 2014" (2014). Economics Faculty Books. 4. https://digitalcommons.odu.edu/economics_books/4 This Book is brought to you for free and open access by the Department of Economics at ODU Digital Commons. It has been accepted for inclusion in Economics Faculty Books by an authorized administrator of ODU Digital Commons. For more information, please contact [email protected]. Authors James V. Koch, Vinod Agarwal, Chris Colburn, Vicky Curtis, Steve Daniel, Elizabeth Janik, Feng Lian, Sharon Lomax, Alice McAdory, Janet Molinaro, Ken Plum, Ayush Toolsidass, Shara Weber, Luke Watson, and Gilbert Yochum This book is available at ODU Digital Commons: https://digitalcommons.odu.edu/economics_books/4 The State of the Region HAMPTON ROADS 2014 REGIONAL STUDIES INSTITUTE | OLD DOMINION UNIVERSITY Gloucester Mathews County County James City County Williamsburg VIRGINIA BEACH-NORFOLK- NEWPORT NEWS, VA-NC York County METROPOLITAN STATISTICAL AREA Newport News Poquoson Hampton Isle of Wight County Norfolk Portsmouth Virginia Beach Suolk Chesapeake VIRGINIA NORTH CAROLINA Gates Currituck County County Last update 5/30/13 October 2014 Dear Reader: his is Old Dominion University’s 15th annual State of the Region report. While it represents the work of many people connected in various ways to the university, the report does not constitute an official viewpoint of Old Dominion, or its president, John R. Broderick. The State of the Region report maintains the goal of stimulating thought and discussion that ultimately will make Hampton Roads an even better place to live. We are proud of our region’s many successes, but realize it is possible to improve our performance. In order to do so, we must have accurate information about “where we are” and a sound understanding of the policy Toptions available to us. The 2014 report has a strong economic development flavor and is divided into seven parts: Rebounding, Albeit Slowly: In a nutshell, our regional economy continues to The Impact of Vehicle Tolls on Hampton Roads: Job Mobility, recover, but still has not regained the jobs lost in the 2008 recession. Residential Living Choices and Regional Cohesion: This was one of the hottest topics in Hampton Roads this past year and we analyze the probable Mixed Signals: Migration Data and Regional Economic Vitality: effects of those tolls on our region. Between 2010 and 2013, our region experienced net out-migration, after taking account of births and deaths. We are, however, attracting many new immigrants Economic Development Incentives: Competing Against Ourselves? from abroad. Is the time-honored strategy of providing financial incentives to attract new firms the most productive way for our region to proceed, or instead should we be Megachurches in Hampton Roads: There are 14 “megachurches” in looking at alternatives such as “gardening” existing firms and creating “innovation Hampton Roads and each enjoys an average attendance in excess of 2,000 districts”? weekly. They are redefining organized religion in our region. The Answer Is Always “Yes”: In a related chapter, we point out that our Homeless Children in Hampton Roads: Estimating the Costs to cities persistently ignore available evidence and choose to provide large financial Society: More than 22 percent of homeless people are children under age 18. subsidies for arenas, stadiums, convention centers and hotels. We focus on the work of the organization ForKids Inc. as a way to estimate these costs and benefits of homelessness to society. THE STATE OF THE REGION | HAMPTON ROADS 2014 i Old Dominion University continues to provide support for this report. However, it would not appear without the vital backing of the private donors whose names appear below. They believe in Hampton Roads and the power of rational discussion to improve our circumstances, but are not responsible for the views expressed in the report. The Aimee and Frank Batten Jr. Foundation Hampton Roads Chamber of Commerce R. Bruce Bradley Kaufman and Canoles Ramon W. Breeden Jr. Thomas Lyons Arthur A. Diamonstein Patricia W. and J. Douglas Perry George Dragas Jr. Anne B. Shumadine Edward L. Hamm Jr. The following individuals were instrumental in the writing, editing, design and dissemination of the report: Vinod Agarwal Elizabeth Janik Janet Molinaro Luke Watson Chris Colburn Feng Lian Ken Plum Gilbert Yochum Vicky Curtis Sharon Lomax Ayush Toolsidass Steve Daniel Alice McAdory Shara Weber Special recognition is due Vinod Agarwal, director of the Economic Forecasting Project for his help and assistance. Our hope is that you, the reader, will be stimulated by the report and will use it as a vehicle to promote productive discussions about our future. Please contact us at jkoch@ odu.edu (757-683-3458) or [email protected] (757-683-3500) should you have any questions. All 15 of the State of the Region reports may be found at www.odu.edu/forecasting and www.jamesvkoch.com. Single paper copies may be purchased for $25. Sincerely, James V. Koch Gary A. Wagner Board of Visitors Professor of Economics Professor of Economics and President Emeritus ii THE STATE OF THE REGION | HAMPTON ROADS 2014 Table of Contents Rebounding, Albeit Slowly . 3 Mixed Signals: Migration Data And Regional Economic Vitality . 41 Megachurches In Hampton Roads . 57 Homeless Children In South Hampton Roads: Estimating The Costs To Society . 71 The Impact Of Vehicle Tolls On Hampton Roads: Job Mobility, Residential Living Choices And Regional Cohesion . 91 Economic Development Incentives: Competing Against Ourselves? . 109 The Answer Is Always “Yes”: How Our Cities Repeatedly Ignore The Evidence And Choose To Construct Unprofitable And Unneeded New Convention And Hotel Capacity . 131 TABLE OF CONTENTS 1 Rebounding, Albeit Slowly REBOUNDING, ALBEIT SLOWLY he Great Recession inflicted significant damage upon the citizenry of Hampton Roads. The Bureau of Labor Statistics reports that our regional rate of unemployment more than doubled from 3.4 percent in April 2008 to 8.2 percent in January 2010. Meanwhile, between 2007 and 2010, we lost almost T40,000 jobs in Hampton Roads (see Graph 1). Even so, cushioned by Department of Defense (DOD) spending, our regional placed on all food, uniform and housing allowances, etc. Active-duty military recession turned out to be milder than that of the nation. When the U.S. rate of wages did not increase by 95 percent between 2001 and 2011. unemployment topped out at 9.9 percent in March and April of 2010, this was Ironically, the deceleration of defense spending has enabled us to achieve a considerably higher than our regional 8.2 percent peak. long-sought regional goal – the diversification of our regional economy. As DOD spending in Hampton Roads was indeed the key to our more sedate Graph 3 reveals, in 2014, we expect that only 42.2 percent of our regional economic decline; it increased in our region by an average of 6.1 percent economic activity will be directly and indirectly attributable to DOD spending; annually between 2000 and 2011. Unfortunately, this powerful growth engine this would be down from our recent peak of 46.6 percent in 2011. Alas, we began to sputter in 2012 and as Graph 2 indicates, absolute DOD spending in have achieved our economic diversification for the wrong reason – a decline in Hampton Roads in 2014 likely will barely exceed our 2011 level and actually DOD spending rather than a spirited increase in our private-sector activity. be below our 2012 level. In any case, while we have been experiencing economic growth in Hampton DOD expenditures on military personnel have been a significant driving force in Roads (roughly 1.54 percent over the past year after removing inflation), this has our regional economy for at least the last decade. One can observe in Table 1 not translated to significant job growth. A review of Graph 1 demonstrates that that the average compensation of an active-duty military member in our region we have yet to recover all the jobs we lost in the Great Recession. Our regional increased by more than 95 percent between 2001 and 2011, while average economic recovery has trailed that of both the Commonwealth and the United federal civilian employees’ compensation increased a bit more than 54 percent, States. As Graph 4 illustrates, the country finally recovered all of the jobs it lost average state and local government employees’ compensation by 39 percent, in the recession in May of this year and Virginia is less than 1 percent away and average private non-farm employees’ compensation by almost 31 percent. from doing so. We, however, are sputtering along at almost 4 percent below However, the political/economic energy for these DOD compensation increases our 2007 peak of 776,600 regional jobs. is dissipating; it appears that the next wage increase will be 1 percent. There are, however, some bright spots in our regional economic picture. In the Note that the compensation data reported in Table 1 include the value of all next few sections we will examine them and our prospects for the future.

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