Category Archives: Land use & development

Three Land Use Trends to Watch

Construction booming in Tysons despite 17.5% office vacancy rate.

Three articles today may help us divine the future of residential and commercial development in Virginia:

Rebound of the exurbs? For many years, I was committed to the proposition that metropolitan development had reached a tipping point in which the forces favorable to urban re-development were stronger than the forces driving suburban sprawl. The exurbs — low-density tract development on the metropolitan fringe — seemed to be in full retreat as market preferences shifted toward walkable, mixed-use development in central cities and inner suburbs.

There still seems to be an unfulfilled demand for walkable urbanism, but I may have been to quick to write off the exurbs. Jonathan Fox, a principle at the Fox Group, argues in the Washington Post that median home prices in Washington’s inner suburbs flat-lined in 2016 while prices in outlying communities such as Marshall, Warrenton, Lorton and Middleburg have experienced double-digit increases in median home prices and strong gains in cost per square foot.

“As home prices and the cost of living continue to increase in Washington,” writes Fox by way of explanation, “there will be more demand for affordable housing which is often found in farther out regions of the counties.

My question for Fox: Is he focusing on real estate prices in the oases of small-town walkability in outlying communities — Warrenton, for instance, is highly walkable — or does his analysis include the surrounding tract development? If so, are walkable communities out-performing tract communities?

Tysons redevelopment is booming. But… The Tysons area may have a 17.5% office-vacancy rate, but re-development is going gangbusters. Traditional supply-and-demand logic does not seem to apply, says Gerald Gordon, president of the Fairfax County Economic Development Authority, as reported by Inside Nova.

Tysons tenants are engaged in a “flight to quality,” moving from older buildings to new ones with the latest amenities. “The new space is more expensive, but it sits right on top of a Metro station,” Gordon said.

But redevelopment away from the Metro stops may prove a challenge. “We’re going to have to work hard just to stay in place,” Gordon said. “When I first got here, office users were taking an average of 265 square feet per employee. Today, it’s anywhere between 80 and 140. So you have to bring in twice as many jobs to fill the same space.”

Moral: As employers figure out how to use less office space — more collaborative space, more mobile office technology, more “hoteling” — high commercial vacancy rates will continue to be an issue. There will be a lot of obsolete office space on the market.

Bifurcation of retail. Everyone knows that Amazon.com and other online retailers are gutting the traditional retail industry. But that doesn’t mean everything will be purchased online. People still like to shop as part of an entertainment or social experience. My wife’s cousin calls it “retail therapy.” A related phenomenon is what I call “girlfriend shopping” — shopping as a bonding experience. While Amazon.com makes shopping ridiculously easy, it’s not what you’d call an enjoyable experience.

Tom Goodwin, head of innovation for Zenith Media, argues in Bloomberg that physical retailers can create a competitive advantage that trumps price and convenience.

“Shopping is the world of adding experiences,” he writes. “It’s the interactive perfume lab in Selfridge’s, the selfie opportunities in Harvey Nichols, the Hardware club experiences in Harrod’s or the extravagant laboratories of Le Labo. Coffee shops seem to have learned this, it’s the unnecessarily long wait, the drama of the brew, the theatre of the leather bound menu in Intelligensia coffee.”

Market forces will push retailers in one of two directions — more frictionless, low-cost shopping online or more experience-rich shopping in the physical world.

Bacon’s bottom line: I don’t get the sense that local governments in Virginia have absorbed two important lessons. First, technology has rendered obsolete the space-intensive offices of yesteryear, and the demand for commercial space is shrinking. Old office parks will rapidly lose their market appeal. Counties will see their tax bases shrivel. Second, retail activity continues to move moving online, which is rendering shopping centers obsolete and redundant. Again, counties will see their tax bases shrivel.

The future belongs to those who can adapt. Office activity will shift to centers of walkable urbanism; access to mass transit is a major bonus (although, in an Uberized world, I’m not persuaded it is absolutely essential). Retail activity likely will do the same. When people want to enjoy shopping as an experience, they want to enjoy the experience outside the store as well. Strip shopping centers and aging malls don’t have much to offer.

Nobody knows where all this heading. (That includes your humble futurist and prognosticator). Things are changing too fast for planners and politicians to figure it out. How will self-driving cars alter the equation? How will Transportation-as-a-Service change the way think about where they live, work and play? There’s lots of speculation, but nobody knows. We won’t know until the market figures it out. The communities that prosper will be those that are the most flexible, adaptable and willing to experiment with new forms of transportation and land use.

Owens & Minor Goes for Millennials, Walkable City

Owens & Minor wants Millennials,and Millennials want 15-minute, livable communities. Graphic credit: Institute for the Future

Good economic news for the Richmond region: Medical supply giant Owens & Minor Inc. announced plans Thursday to open a client engagement center in downtown Richmond that will employ 500 people. Jobs will average about $53,700 in annual pay.

In making the announcement Governor Terry McAuliffe made much of the fact that Richmond competed against 60 other cities in a year-long search process. Less was made of the fact that Owens & Minor, which is located in the Mechanicsville suburb of Richmond, chose to locate in the central city rather than one of the region’s outlying counties.

The reason? “We want to attract the millennial generation,” CEO Cody Phipps told the Richmond Times-Dispatch. “We did our research. The millennial generation is going to be 50-plus percent of the workforce in the next few years, and they want to live in urban areas. They want to be downtown. They want to work in a state-of-the-art space. We like that we can draw from the universities around here.”

Owens & Minor will make Riverfront Plaza in downtown Richmond its newest home.

Owens & Minor will make Riverfront Plaza in downtown Richmond its newest home. Photo credit: Richmond Times-Dispatch

I don’t know who conducted Phipps’ research, but I know of one outfit in town that does specialize in generational marketing — The Institute for Tomorrow, which is affiliated with the Southeastern Institute of Research (SIR). (I worked for SIR about ten years ago.) Two days before Owens & Minor’s announcement, Managing Partner Matt Thornhill tweeted presciently, “Winning communities of tomorrow are 15-minute livable communities.”

By way of elaboration, he blogged about recent research conducted for the Virginia Secretary of Transportation. In a survey of 600 people around the U.S. who had just moved or were considering moving more than 100 miles, four out of five agreed with the statement, “Having access to stores, restaurants, and services close to my home (within about 15 minutes) is very important to me.” Almost as important was living withing a 15 minute commute of work.

It is often said that Millennials want to live “downtown” where it’s hip and cool and there are coffee shops and microbreweries. According to a recent Urban Land Institute study, though, only 37% of Millennial consider themselves to be a “city person,” wrote Thornhill; 36% classified themselves as “suburbanites” and 26% as “small town/country” people.

While there is nothing inevitable about Millennials wanting to live and work downtown, they are “hard-wired to be in community with each other,” Thornhill observed. “Thanks in part to doing school projects in teams from their middle school years onward, Millennials like to collaborate and trust in decisions made by the wisdom of the crowd. … They want neighborhoods where they can walk, bike, and use transit to get around.”

This community mindset, opined Thornhill, will drive the growth of “activity centers” of 15-minute livable communities. Activity centers don’t have to be in traditional cities (although most are).  “Builders, developers, urban planners, and government officials are now catching up to the changing preferences of consumers and looking for ways to in-fill activity centers across their metropolitan landscape.”

Thornhill stops his analysis there. But as I think about the Owens & Minor decision, it’s not clear that urban planners and government officials actually have gotten the message. While most of the City of Richmond fits the definition of a 15-minute walkable community, there are only flyspecks of walkability in neighboring Henrico and Chesterfield counties. In Henrico County the one area that potentially has the critical mass to compete with downtown Richmond, the Innsbrook Office Park, was rezoned for urban mixed use back in 2010. But re-development has stalled for more than six years due to inflexible application of the zoning code.

Absent a dramatic change of thinking and practice in the suburban counties, it looks like the future of the Richmond metropolitan region belongs to the city. Everything old is new again: Richmond possesses the key elements of walkability — moderate density, mixed uses, grid streets and timeless architecture — inherited from a past era of urban grandeur. The counties are stuck with suburban sprawl. Expect to see more headlines like Owen & Minor’s in the region’s future.

Suburbs Not So Simple

Virginia suburbs have diverse patterns of development.

Virginia suburbs broken down by percentage of population in each suburban type.

A difficulty in analyzing the economic dynamics of the “suburbs” is that land use and development is far from uniform. Recognizing that the term encompasses a wide range of human settlement patterns, the authors of “Housing in the Evolving American Suburb” broke down suburbs into five major types.

Established high-end. These have high home values and established development patterns. They tend to be built at higher densities and located closer to the metropolitan core. Residents resist new growth.

Stable middle-income. These neighborhoods tend to be older and located closer to the urban core. They exhibit a wide range of home values.

Economically challenged. These locations have lower home values and have seen little to no population growth in recent years. They may have aging infrastructure or under-performing services.

Greenfield lifestyle. These are newer, developed within the past ten to 15 years, and closer to the suburban fringe, where the bulk of new community development is occurring. They tend to have some land still available for new development.

Greenfield value. These, too, are located at or close to the suburban fringe, attracting value-oriented home buyers. Developing over the past ten to 15 years, they often reflect a “drive until you qualify” pattern.

The distribution of population between suburban types is similar in Richmond and Hampton Roads, as seen in the table above. But the sprawling, faster-growing Washington region is distinguished by a significantly higher “greenfield value” population. The drive-until-you-qualify phenomenon is in strong in Washington’s Northern Virginia suburbs, impelled by development restrictions and high housing prices in the core jurisdictions.

Bacon’s bottom line: I suppose this taxonomy is marginally interesting, but I don’t see how it guides either homeowners or county governance. The same study examines home buyer preferences (see previous post). How do these suburban types match against those preferences? The study doesn’t say. How does the trajectory of housing values match against those preferences? It doesn’t say. How should county officials alter their comprehensive plans to better align housing/community types with market demand? Again, not much to say.

What Home Buyers Are Looking For

Home buyers still favor housing attributes that favor the suburbs

Source: “Housing in the Evolving American Suburb.” Home buyers still show strongest preference for housing attributes associated with suburban living.

For all the talk of urban renaissance in cities across Virginia and the United States, first-time home buyers find that new or existing suburban homes offer the best match for their preferences and budget, reports the Urban Land Institute (ULI) in a new study, “Housing in the Evolving American Suburb.”

While American’s urban cores are experiencing investment and population growth after decades of disinvestment and flight, the action is still in the suburbs because that’s where most of the developed land is. And, while members of the Millennial generation may value walkability and access to public transit more than previous generations, they still put the highest value on square footage, larger lots, and access to good schools and public services.

Nevertheless, there is likely a deficit of walkable urbanism compared to the demand for it, and that scarcity creates a premium for houses in walkable neighborhoods, the study argues.

In the coming years, efforts will likely continue to make at least some suburban areas more urban, with walkability to restaurants, stores, and other conveniences, combined where possible with access to good transit. Some of that development will be close to existing urban areas, and some will be close to existing or newly built mixed-use modes that include restaurants and stores. Some of the suburban development will deliver a more urban experience for a wider range of households. … Many large master-planned communities are including urban town centers as a component of their development.

Bacon’s bottom line: So, the race is on in metropolitan regions like Richmond. Who can move faster to attract affluent households that pay the most in taxes and enjoy the greatest ability to live where they want — the City of Richmond or the suburban counties? The city has the walkable neighborhoods, proximity to cultural amenities, and access to mass transit. But the counties have larger lots and houses, lower taxes, and access to better public schools.

Both cities and counties in Virginia have the potential to offer the best of both worlds. The City of Richmond could gain an enormous competitive advantage if it could improve the quality of its public schools. Sadly, that seems to be an intractable task. Conversely, Henrico and Chesterfield Counties could gain a competitive advantage by zoning for walkable, mixed-use neighborhoods. Although the counties have allowed islands of walkable urbanism to take root, the pace of change is glacially slow.

Both urban and suburban jurisdictions face institutional rigidities that prevent them from achieving maximum potential in the early 21st century. What a shame.

Great Moments in Virginia Governance: Norfolk Edition

burfoot under indictment for corruptionFrom the Virginian-Pilot: An employee of Norfolk Treasurer Anthony Burfoot testified in U.S. District Court Monday that she waived penalties and fees for local developers at the direction of her boss.

Prosecutors allege that Dwight Etheridge, Tommy Arney, Ronnie Boone Sr. and others paid Burfoot more than $400,000 in kickbacks and bribes between 2005 and early 2011. In exchange, prosecutors say, Burfoot helped, or at least promised to help, their various projects through the city bureaucracy.

The office of Treasurer is not one I think of as influencing development decisions. Treasurers don’t even influence real estate assessments — that’s the job in Virginia of commissioners of revenue. It will be interesting to see, as this trial unfolds, what kind of favors are within the purview of a city or county treasurer to grant. If Burfoot turns out to be guilty, other jurisdictions might think of turning over the same rock to see what kind of nastiness resides beneath.

mccabeUpdate: Oh, brother, now accusations of corruption extend to Norfolk Sheriff Bob McCabe. Quoth the Virginian-Pilot: “Businessman Ronnie Boone Sr. told federal investigators he bribed longtime Sheriff Bob McCabe in addition to Treasurer Anthony Burfoot, according to two sources familiar with the interview.”

Jones’s Bet on Mixed-Income Housing

The Church Hill North vision of mixed-income housing

Can Church Hill North break Richmond’s cycle of poverty?

by James A. Bacon

Richmond Mayor Dwight C. Jones most likely will be remembered for boondoggles like the Washington Redskins stadium and fiascoes like the proposed Shockoe Bottom baseball stadium. But he should be recognized, too, for a mixed-income redevelopment project in the city’s poverty-stricken east end that has garnered too little attention: Church Hill North.

A crowd of city officials, community supporters and alumni gathered at the 22-acre site of the old Armstrong High School Monday to mark the start of construction on a 256-unit affordable housing complex. Years in the making, Church Hill North represents a marked departure from dismal, cookie-cutter public housing projects like the nearby Creighton Court, which became synonymous with poverty, squalor and crime.

Instead of concentrating poverty, the idea is to dilute it by planning a mix of poor, working- and middle-class homeowners in a community of diverse housing types. Rather than construct cookie-cutter buildings like those found in “the projects,” Church Hill North will provide a diversity of housing types — one-story bungalows, single-family dwellings, duplexes, townhomes, three-story stacked flats and three-story apartment buildings for seniors. Units are expected to sell in the $150,000 to $170,000 range.

The $100 million development, which is expected to take between eight and 10 years to complete, will include a 20,000-square-foot community center, a memorial garden, and 1.2 acres of public space and playgrounds. One hundred and twenty-eight units will replace public housing for residents of Creighton Court.

In his remarks yesterday, as recorded by Richmond BizSense, Jones emphasized the anti-poverty aspects of the project. For the good of the poor, the community, and economic development, public housing projects need to go. “It would benefit businesses to eradicate poverty,” he said. “When our poverty is eradicated, our ratings on Wall Street go up. A good quality of life is in the best interest of business.”

Jones praised the public-private partnership model used to execute the project. Community Builders, a non-profit organization specializing in affordable housing, is the developer. The Richmond Redevelopment and Housing Authority is backing the project financially. The state’s Vibrant Community Initiative will chip in $2.5 million to expand the availability of affordable rentals.

Bacon’s bottom line: I question the sociological premise underlying the project that nicer dwellings and mixed-income housing will eradicate poverty. But after eighty years of failed public housing initiatives across the country, I suppose it’s worth one more try.

There is a consensus across the U.S. ideological spectrum that the housing projects of the post-World War II era were a catastrophic failure. Concentrating poverty geographically created cesspools of crime and social dysfunction. The idea behind Church Hill North is to make a neighborhood that works for people of all incomes. Living in decent accommodations amidst middle-class neighbors, from whom they will absorb middle-class norms, will create more uplifting conditions and reverse the vicious cycle of poverty.

I certainly hope that happens, but I’m not holding my breath. I expect one of two things will occur to Church Hill North. Either the neighborhood will become such a desirable place to live that the middle class will displace the poor over time, or, once the shiny newness of the houses wear off, the presence of a hundred poor families will drive property values down and the middle class will depart. The prospect of middle-class homeowners acculturating the poor in their midst to bourgeois behavior seems remote.

In my observation, people of different socio-economic backgrounds have different tolerances for crime, vandalism, noise, and obstreperous public behavior. (This has nothing to do with race, by the way. Read “Hillbilly Elegy,” if you think it does.) Those behaviors are more the result of social breakdown than material deprivation. Slums don’t create poor people; poor people create slums, and they drive away people who find their behavior objectionable.

But I might be wrong. It won’t be the first time. Let’s make every effort to get Church Hill North right. Whether it’s a success or failure or something in between, hopefully we can learn from the experience.

How Land Use Regulation Aggravates Income Inequality

This graph from the

This graph from the Shoag-Ganong study shows how states rank in two rankings of land use regulation: the Wharton Index of Regulation and the number of land use cases per capita. Regulation in Virginia, highlighted in red, was light-to-moderate compared to other states.

The thesis advanced by economists Daniel Shoag and Peter Ganong in their paper, “Why Has Personal Income Convergence in the U.S. Declined,” is not new. Market-oriented urbanists have made the same connections for years: that land use restrictions drive up the cost of housing, and that high housing costs aggravate income inequality by throttling the flow of lower-income households to wealthier regions offering greater economic opportunity. But Shoag and Ganong have tapped a new set of data to make that case more ironclad than ever.

The convergence of per capita incomes across U.S. states from 1880 to 1980 is “one of the most striking patterns in macroeconomics,” the authors state; for more than a century, incomes converged.at a rate of 1.8% per year. Then between 1990 to 2010, there was virtually no convergence at all. Prior to 1980, Americans were moving, on net, from poor places to richer places. Since then, higher-skill workers still have been moving but lower skill workers have tended to stay put.

Economic theory would suggest that in a free labor market, workers would tend to migrate to states and metropolitan regions offering better prospects for jobs and wages — as in fact occurred for more than a century. However, inter-state mobility has declined as housing prices have increased significantly more in high-income states than in low-income states, thus pricing lower-income workers out of expensive housing markets.

“Although skilled adults are still moving to high income locations, unskilled adults are actually weakly migrating away from these locations,” the authors find. “High housing prices in high nominal income areas have made these areas prohibitively costly for unskilled workers.”

Although the study was published in 2015, it has been getting increased exposure. Ganong presented the paper in a July Brookings Institute conference on municipal finance, and the Wall Street Journal highlighted the findings in an article today.

The driving force behind higher housing prices is land use regulation. Since 1977, they write, “it has been widely accepted that municipalities’ land use restrictions raise property values for incumbent homeowners. … Local variation in regulations is not randomly assigned; it is the product of substantial work by local governments and regulatory bodies.”

Hypothesizing that restrictive land use policies might explain the phenomenon, Shoag and Ganong devised a clever new measure — the frequency with which the phrase “land use” appeared in state appellate court cases over time. The number of land use court cases served as a proxy for the intensity of land use regulation in each state.

In conclusion:

A simple back of the envelope calculation … finds that cross-state convergence accounted for approximately 30% of the drop in hourly wage inequality from 1940 to 1980, and that had convergence continued apace through 2010, the increase in hourly wage inequality from 1980 to 2010 would have been approximately 10% smaller. The U.S. is increasingly characterized by segregation along economic dimensions, with limited access for most workers to America’s most productive cities and their amenities.

Bacon’s bottom line: Shoag and Ganong have documented one of the major drivers of income inequality in the country, and it has nothing to do with globalization, automation, illegal immigration or tax breaks for the rich. Sadly, the phenomenon is totally absent from our debased media commentary and presidential debate.

If anything, the authors understate the role of high housing prices because their database makes it possible to compare states only. If we look at migration patterns within Virginia, for instance, we would see the same trends at work. Thousands of unemployed and underemployed workers in Southside and Southwest Virginia find are discouraged from seeking superior work opportunities in high-wage Northern Virginia by Virginia’s strictest land use controls and the highest cost of housing.

There are legitimate reasons for some land use controls. New development should be required to mitigate its environmental impacts, such as erosion and sediment control. A case also can be made for limiting development in order to preserve unique historical or cultural attributes. But land use restrictions are far more typically put into place to restrict growth, with the goal of holding down increases by dampening the demand for schools, roads and other public amenities. But most restrictions create unintended consequences, of which the lofty price of housing is just the most visible.

Taking a Hard Look at Historic Tax Credits

tobacco_rowby James A. Bacon

A General Assembly subcommittee is giving well-deserved scrutiny to Virginia’s tax credits for rehabilitating historic properties.

That program, which has provided more than $1 billion in tax credits since its inception in 1997, is widely credited with revitalizing older neighborhoods across Virginia, particularly in the City of Richmond with its wealth of historic properties. However, as the state grapples with a $1.5 billion revenue gap in the current two-year budget, it is encouraging to see lawmakers employ economic thinking for a change.

“It is really hard for us to make a good business decision here when we don’t know what kind of return we are getting on our money,” said Del. Jimmie Massie, R-Henrico, according to the Richmond Times-Dispatch. “If we are getting a 10 to 15 percent return, that is one thing. If we are getting 5 percent, that’s another.”

Virginia allows developers to claim credits of 25 percent of eligible expenses on renovations of certified historic structures, explains the T-D. With a federal historic tax credit of 20 percent, developers can claim total credits of 45 percent. They can use the credits against their own tax liabilities or syndicate the credits for investors.

According to a 2014 study by the Center for Urban and Regional Analysis at Virginia Commonwealth University, 2,375 projects tapping tax credits generated almost $4 billion in economic activity in the state between 1997 and 2013. A survey of developers indicated that 85% would not have made their investment without the credits.

The Richmond regions has benefited disproportionately from the credit. About 1,185 projects generated about $2 billion in expenditures. However, the program also has defenders from other cities, such as Staunton, which has seen a downtown renaissance in recent years.

Bacon’s bottom line: No question, the tax credit has been a boon to urban-core economies. I’m a big fan of restoring and rehabilitating historic buildings. (I restored two ante-bellum houses in Church Hill.) I greatly prefer historic architectural styles to modern motifs.

But saying that developers would not have undertaken historic renovations without the tax credit is not saying that they would have done nothing. Presumably, those developers would not have stayed idle. What the VCU study could not measure is what projects they would have undertaken in the absence of the credits. Thus, while stating that every $1 in tax credits generated $4 in construction activity sounds impressive, it is a meaningless metric of net economic impact.

I see historic tax credits as analogous to conservation tax credits. A decade ago, conservation tax credits were being handed out indiscriminately, sometimes going to properties of dubious conservation value. The General Assembly cracked down, imposing a $100 million cap. Likewise, historic tax credits may have gone to development projects of dubious value. I recall hearing that developers game the system by preserving a small historic structure, or part of a structure like a wall, and incorporating it into a larger project while pocketing credits for the full amount. (Sorry, I don’t have time this morning to document such instances for this blog post.)

The tax credits represent a drain on the state treasury. It’s about time the General Assembly started asking tough questions of the program. I am particularly concerned how much “gaming” the system goes on. Tightening up the requirements might be in order. Further, lawmakers might well consider a yearly cap, as the state does with conservation easements. As much as I personally love historic renovations, preserving the integrity of the public fisc is the greater good.

Yeah, It’s Probably a Good Idea to Update Your Zoning Code Every Half Century or So

Pouring whale oil. At long last, Henrico zoning code will leave the 19th century behind.

Pouring whale oil. At long last, Henrico’s zoning code will leave the 19th century behind.

News flash: Henrico County officials see the need to bring the county zoning code into the 21st century.  Although the zoning code has been amended 240 times, it was adopted in 1960 and has never seen a systematic overhaul since.

The code, Randy Silber, deputy county manager for community development, tells the Richmond Times-Dispatch, is “over 55 years old. It’s antiquated. … There’s disconnect in the uses in the zoning ordinance and the economic development that is being put before us.”

Regulations governing sperm whale oil and poison manufacturing remain on the books, notes Silber. The code also refers to bone distilleries. “I don’t even know what that is,” he says.

The 1960 zoning code shaped the “suburban sprawl” model that propelled Henrico County growth in the 56 years since. But the model has run its course, having saddled the county with vast expanses of low-density land use patterns that are costly to maintain and are beset by intractable road congestion issues. Moreover, businesses are reversing a decades-long migration from the central city to the suburbs as Millennials and Empty Nesters seek walkable, mixed-use communities found in the urban core, along with easy access to the city’s museums, festivals and cultural events. To avoid the same kind of hollowing out that central cities experienced a half century ago, Henrico must create walkable, urban places as well.

While Henrico has permitted a few such places, growth continues to be dominated by old-fashioned sprawl. An outdated zoning code is, in effect, mandating the county’s premature obsolescence.

The fact that county professionals see the need for change is encouraging — although the examples cited in the Times-Dispatch article suggest that they may be in more of a mind to tinker with the code than to embrace an alternative paradigm for development and re-development. It’s also unclear whether the citizenry, which is terrified of any change that might affect their homes’ property values, sees the need for change. But at least it’s a start.

DEQ Approves Utility-Scale Solar Permit in Buckingham

solar_panelsby James A. Bacon

The Department of Environmental Quality (DEQ) has issued a permit for construction of a 19.8-megawatt, utility-scale solar project in Buckingham County, Governor Terry McAuliffe announced yesterday. Construction of the 200-acre facility is expected to begin early in 2017 and be finished by the end of the year. The cost is estimated to run between $30 million and $35 million.

DEQ Director David Paylor hinted that more solar projects are in the pipeline. “DEQ is looking forward to issuing more of these renewable energy permits in the future,” he said. “Our priority will be to take the steps necessary to protect Virginia’s environment while helping the Commonwealth become a leader in renewable energy production.”

The project is being developed by Firestone Solar LLC, a subsidiary of Virginia Solar, headed by Richmonder Matthew Meares.

“We are very pleased and thankful to Buckingham County and the Commonwealth of Virginia for supporting a 100 percent Virginia-owned and operated utility scale solar developer by approving our Firestone solar project’s state permit,” Meares said in the press release. “We hope this is the first of many such projects by Virginia Solar in the Commonwealth promoting Governor McAuliffe’s goals of helping the environment creating new economic drivers, utilizing Virginia products and services, and attracting business to the Commonwealth.”

Few other details were available about the project from the press release. However, the project has been in the works since at least August 2015. An article in the Farmville Herald indicated that the facility would include “ancillary support facilities and electrical interconnections … to be transmitted on a Dominion distribution line.”

The project could employ 150 workers during the construction phase, but full-time employment after construction would be minimal. Stated the Farmville Herald:

The project would have up to three employees every two months on-site for system inspections, vegetation management and preventative maintenance. … In addition, one employee may be on-site for security at any time, according to the application. There are not expected to be any permanent employees stationed at the site.

Bacon’s bottom line: So much for the miraculous green-energy job creation machine: a couple of low-skilled, part-time jobs. Solar may (or may not) be good energy policy, but promises that it will spur job creation are a cruel delusion. (Not that the alternative, gas-fired power plants, are a big job creator either on a jobs-per-kilowatt basis. But power plant jobs do require a high level of training and education, and they pay well.)

As always seems to be the case with solar projects, the economics of the Firestone deal remain a mystery. It’s not clear who will buy the solar power — whether Firestone will sell into the PJM Interconnection wholesale market or whether it has lined up a specific customer take the electricity, as in Amazon Web Services. Another possibility is that the developer will just flip the project to Dominion Virginia Power, as has happened with other projects in Virginia.

The up-front cost of about $1,625 per kilowatt is more than twice the cost of a state-of-the-art gas-fired plant, but it is considerably cheaper than the $2,250 per kilowatt for the recently announced Oceana Naval Air Station. (That may not be an apples-to-apples comparison, however, because the Ocean deal may have included infrastructure improvements not included in the Buckingham project.) If Virginia Solar is selling its power to a private customer, the cost is immaterial to the general public. But if the power will be passed on to Virginia rate payers, cost is very germane.

There is little information about the developer. Virginia Solar doesn’t even have a website. (The domain name www.virginiasolar.com is available for purchase.) Matthew Meares, the principal behind Virginia Solar, describes his specialty as “solar and wind financial structuring” on his LinkedIn page. That page also describes him as managing director of Richmond-based Sunworks NC, which has a one-page website. The company’s core competencies include financial modeling of various “tax equity and debt structures,” capital structuring, development assistance, technical due diligence, and energy production analysis.

There is a cottage industry of entrepreneurs who do the leg work of identifying prime solar sites, consolidating the land parcels, lining up the regulatory permits and then flipping the project to a player with deeper pockets. The ideal solar site is located near an existing electric transmission line that requires minimal investment to connect to the grid. It is in a rural area where NIMBYs won’t object to its presence and local governments will welcome the boost to the tax base. It also helps when negotiating the acquisition of land parcels to be a no-name firm rather than Dominion Virginia Power, Appalachian Power or any other company that cries out, “Deep pockets!”

Update: Reader Erik Curren pointed me to the www.vasolarllc.com website, which provides a bit more detail. Virginia Solar LLC was behind a 17-megawatt project in Powhatan County, projected to be installed in 2016. “Dominion Virginia Power intends to purchase this project and has submitted it to the Virginia State Corporation Commission for approval,” states the home page.