Sweet Sunset

Sweet sunset at Atlantic Beach, N.C.

I’m a dyed-in-the-wool Virginian and would never seriously think about moving to any other state. But if I did… The North Carolina coast would be at the top of the list of places I’d consider.

Boomergeddon Watch: U.S. Virgin Islands

Trouble in paradise…

The borrowing window has slammed shut on the U.S. Virgin Islands, reports Reuters. With about 100,000 inhabitants, the U.S. protectorate, acquired from Denmark during World War I, owes more than $2 billion to bondholders and creditors — the biggest per capita debt load, about $19,000, for every man woman and child, in the country. And that figure doesn’t include the islands’ woefully underfunded pension and healthcare obligations. Reports Reuters:

How these islands will recover from years of budget deficits and a severe liquidity crisis remains to be seen. The territory lost its single-largest private employer five years ago when a refinery shut down. Gross domestic product has declined by almost one-third since 2008. At times this year the government was operating with just two days’ cash on hand.

Locals live with pitted roads, crumbling schools, electricity outages and deteriorating medical care.

At the Juan F. Luis Hospital and Medical Center, plumbing troubles are just the beginning. Doctors have stopped performing some vital procedures, including implanting pacemakers and heart defibrillators, because the facility can’t pay suppliers for the devices, officials say.

The Virgin Islands are entering a vicious downward cycle. Unable to borrow, it cuts government services. As quality of life declines, people leave. As the population stagnates (or shrinks) the debt burden for those who remain gets even worse.

Here’s why what happens in the Virgins don’t stay in the Virgins:

Bond buyers for years whistled past the territories’ shaky finances, comforted in the knowledge that these governments couldn’t seek bankruptcy protections available to many municipalities.

“There was an idea that because of the lockbox structure and the fact that the territories did not have a path to bankruptcy, they had to pay you,” said Curtis Erickson, San Francisco-based managing director of Preston Hollow Capital, a municipal specialty finance company.

That all changed in 2016 when Congress passed legislation known as PROMESA giving Puerto Rico its first access to debt restructuring. The move sparked a ferocious battle among creditors to see who would shoulder the largest losses.

If bond holders end up taking a haircut for their holdings in Puerto Rico and Virgin Island bonds, they may start re-appraising their exposure to debt of, say, Chicago, Illinois and other deeply indebted U.S. municipalities and states. They may demand higher risk premiums for investing in municipal debt, which will impact governments with low bond ratings most of all, increasing their borrowing costs and making their debt burden all the more burdensome.

The dominos are falling…

Does “Ooker” Estridge Know Something the Experts Don’t?

Tangier Island, a marshy, low-lying island of about 1.2 square miles  in the Chesapeake Bay, would seem to be Virginia’s poster child for sea-level rise. The island, according to Wikipedia, has lost about two-thirds of its land mass since 1850. There had been a universal belief, I thought, that the island is headed for oblivion as sea level continues to creep higher, whether at the same slow-but-steady rate that has held over the past century or at the accelerated rate postulated by those who hew to the most pessimistic global warming scenarios.

But the assumption of a rising sea level is not embraced universally. The mayor of Tangier, an incorporated town that serves the island’s 500 souls, attributes the island’s shrinkage to erosion, not sea level rise.

Mayor James Eskridge. Photo credit: Associated Press.

The views of James “Ooker” Eskridge gained national exposure when he appeared in a CNN Town Hall devoted to Al Gore’s documentary, “”An Inconvenient Sequel: Truth to Power,” and said to the former vice president, “”I’m not a scientist, but I’m a keen observer. If sea level rise is occurring, why am I not seeing signs of it?”

US News provides a few additional details:

Eskridge, 58, a lifelong waterman who harvests crabs from the bay, was among the 87 percent of voters in this deeply spiritual community who supported [President] Trump.

When CNN aired a segment on Tangier’s plight in June, Eskridge told meteorologist Jennifer Gray: “I love Trump as much as any family member I got.”

Eskridge and others believe that erosion, not sea-level rise, is the real threat because they can see it. And they believe infrastructure, such as a sea wall around the island, can save it.

“The erosion that’s taking place you can almost see every week, every month for sure,” he told The Associated Press in May.

During his interview with CNN, Eskridge said: “Donald Trump, if you see this … whatever you can do, we welcome any help you can give us.”

A colorful fellow, Eskridge makes good news copy. But the media seem to be treating him as curiosity. And perhaps for good reason. From all the evidence I have seen — and you don’t have to be a Global Warming alarmist to believe it — the global sea level has been rising at a consistent rate for as long as it has been measured (although the rate has varied somewhat locally)

On the other hand, Eskridge does live on Tangier Island, and he he knows the local waters intimately. No one seems to have asked him why he thinks erosion, not sea level rise, is behind the island’s diminution. What evidence does he have? Perhaps he knows something that the scientists don’t. Perhaps there are dynamics they have failed to consider. Someone ought to ask him. He may have no idea what he’s talking about. But then again, maybe he does.

As for the mayor’s proposed solution — building a sea wall around the populated portion of the island — that’s an entirely different matter. Building a wall (it sounds very Trumpian, doesn’t it?) might sound like a great idea if you’re a Tangier resident and someone else is paying for it. But someone must ask, how much would it cost compared to the economic benefit of saving the island’s 500 or so residents from inundation?

I’ll concede that there is some sentimental value in saving a community that has been in place since the 1770s and has preserved a unique dialect dating back to the 18th century or earlier. The island is a historic artifact of times gone by. But is Tangier more special than any other endangered community that can trace its roots back a hundred years or more? We cannot escape the reality that our society has finite resources and that any sum spent on, say, preserving Tangier Island, cannot be spent on a project helping someone else.

It’s safe to say that I’m dissatisfied with the rigor of thinking all the way around.

A Substation in Time Saves Nine

Photo credit: Dominion

The 2013 sniper attack on Pacific Gas & Electric Company’s Metcalf transmission substation was a wake-up call for the electric power industry. A team of riflemen knocked out the facility near San Jose, Calif., by firing upon and severely damaging 17 transformers. Thanks to redundancy in the grid, PG&E was able to prevent blackouts by re-routing electrical power. But the incident drove home how vulnerable the electric grid is to sabotage.

“The next day,” recalls Mike Lamb, manager of operations engineering for Dominion Energy Virginia, “we started brainstorming about what resiliency improvements we needed.”

As part of a multi-pronged strategy to bolster resiliency of its 6,500-mile electric transmission lines, 57,000 miles of distribution lines, 900 substations and 66,000 transformers, Dominion procured mobile transmission equipment designed by manufacturers in Europe, Asia and North America. The mobile equipment provides a “plug and play” design that allows it to connect with high-voltage cables in a fraction of set-up time required by conventional technology.

Most of the equipment held in resiliency reserves sits idle until needed in the aftermath of a hurricane, earthquake, or human-caused event. As it turned out, has Dominion found a use for the trailer-borne transmission outside of an emergency situation.

Temporary substation on the job in the Cartersville transmission line rebuild.

The company had a “wreck-and-rebuild” job on an older transmission line between the Bremo Power Station and a substation in Cartersville. Typically, says Lamb, a temporary transmission line would be constructed to carry load to customers while the old line was being rebuilt. In this particular case, a five-mile section had poor access.

Besides saving the $4 million expense of stringing a temporary line, says Lamb, the company was able to conduct a “proof of concept.” Workers proceeded slowly and deliberately over four months in order to work out set-up processes and develop checklists.

“We accomplished a lot of things with this one installation,” Lamb says. “If we have an unplanned situation in the future, we could hopefully make it within five to seven days.”

Nationally, the electric grid is aging. Most transformers in the United States were installed between 1950 and 1970, and have far exceeded their expected 40-year life span. U.S. utilities, some fear, may be forced to contend with an increasing number of breakdowns. Thus the grid is growing more fragile even as the threat of sabotage, cyber attacks and natural disaster looms ever larger.

While Dominion says that it has been proactively replacing older transformers, substation equipment, and transmission lines in order to improve reliability, the mobile transmission equipment gives it an added safeguard against an extended outage.

“The installation of the mobile transmission substation in Cartersville was a first in North America, and the equipment operated as designed,” says Lamb. “Dominion will definitely be better equipped and prepared in the future to respond to unplanned events.”

Here’s What Happens When You Mess Where You Shouldn’t Be a’Messin’

The City of Martinsville may be on the hook for an $800,000 loan extended to the Integrative Centers for Science and Medicine (ICSM) by the Tobacco Region Revitalization Commission. The tobacco commission gave ICSM the money to help start the College of Henricopolis School of Medicine in the economically beleaguered manufacturing town.

The tobacco commission agreed to back the for-profit medical college on the grounds that it would create jobs and add to the tax base. The city of Martinsville co-signed a performance agreement requiring that the medical college would hire 25% of its staff and generate $1.5 million in capital investment within 18 months. As of January, the 18-month mark, neither goal had been met, reports the Martinsville Bulletin.

Now the tobacco commission wants its money back, and Dr. Noel Boaz, president of the college and ICSM, its nonprofit arm, says the college doesn’t have it. The college spent the $800,000 but never achieved accreditation, and never received permanent certification from the State Council of Higher Education for Virginia. Boaz contends that the tobacco commission is wrong to demand its money back, and the Martinsville Bulletin has all the gory details.

But there is a simple lesson to be learned: Local governments have no business getting involved in business deals like this. Martinsville lacked the in-house expertise to evaluate the plans and promises of entrepreneurs like Boaz, and the city was in no position to take the financial risk. Locally backed economic development deals borne of desperation always seem to turn out badly.

Living the Good Life… for a Week

This is the view this morning from our beach cottage in Emerald Isle, N.C. The weather is beautiful. I’m guessing that my blogging will be spotty this week, but I will check in sporadically.

Fulminations about Yuppy Scum and Idiot Technology

This is me right now — without the muscles.

OK, I’m really ticked off, my wife is out of the house, and I have no one to vent to. So, I will air my wrath online.

First thing that happened: I was picking up some branches out of Countryside Lane at the intersection with River Road. (No, I’m not much of a Good Samaritan, but I am president of the Home Owners Association, so I feel obligated to do such things.) As I was getting back into my car, I saw a guy come out of nowhere and ram into the River Road/Countryside Lane Street sign, knocking it half over. Just knocked it right over. The dude sat there, seemingly wondering what to do. When I approached to inspect the damage, he started backing up, as if to leave. When I started jogging closer to get a look at his license plate, he took off down River Road like a bat out of hell.

The dirt bag was driving what seemed to be a fairly expensive, black, two-door car. (I have no ability to recognize the model of the car he was driving.) He was white, well groomed and seemed to be in his 30s. Pardon my stereotype, but he looked like egg-sucking Yuppy scum!! I’d love to take a hammer to his Volvo or Beemer, or whatever it was!

Then, when I got home: I got a push message from Apple on my PC to download an iTunes software update. I complied. Everything seemed normal. But when I tried to add a playlist to my iPhone, nothing worked. I tried everything I could imagine, then finally gave up and called Geek support. My tech guy was baffled at first, but then discovered that the hundreds of songs that I had downloaded onto my PC previously were now marked by iTunes as needing to be downloaded again! What the %#$@??? Now I’ve got to download all my songs again? Thanks Apple!

This gets back to one of my favorite themes. Yeah, technology is capable of doing all sorts of amazing things. But the more complex it gets, the more FUBAR it gets. Besides the iTunes incident, I continually get menus popping up on my PC and laptop from Apple, Microsoft, WordPress and others asking me to fill out user names and passwords for stupid reasons, and NOTHING WORKS, even though I know my username and password are correct! As a consequence, I’m driven to create new user names and passwords, some of which I manage to keep track of, and some of which I don’t. It’s all a colossal pain! So, while technology makes my life better in some ways, it is also driving me to the brink of madness!

I need a drink. Thank God for bourbon.

Note to Agitators, Bomb Throwers and Rebels

For a couple of years now, two to three dozen readers of Bacon’s Rebellion have been contributing faithfully to the upkeep of the blog through small monthly contributions. I want to thank them for their loyal support and report to them what I’ve been doing with the money.

Twitter fail. In concert with a push to build a Twitter following, which I hoped would drive more traffic to the blog, I spent several hundred dollars on a variety of Twitter-related promotions. I succeeded in increasing the number of Twitter followers, but I could see no impact upon the number of click-throughs to the blog or the number of blog readers. It was a worthwhile experiment, but it did not yield meaningful results, so I pulled the plug on the campaign.

Improved user experience. Since then, I have resolved to use the contributions to improve the reader experience.

First, I want to protect against the disruption of another Denial of Service attack like the one that knocked the blog offline a year or so ago, and I want to guard against the threat of a ransomware attack. Accordingly, I have subscribed to a service that regularly backs up the blog content. If another attack occurs, I should be able to recover more quickly than I did last time.

Secondly, I have subscribed to a service that purports to speed up the loading of Bacon’s Rebellion pages to your browser. This, too, I regard as an experiment. Let me know if you notice a difference.

Party time! Finally, let me toss out an idea.

A top goal since the inception of the blog has been to maintain a civil dialogue between readers across the political spectrum. Given the polarized state of the nation, never has that goal been more important. I’ve always felt that it’s harder to be rude to someone you know in person. Accordingly, I have been thinking of hosting a get-together in Richmond for Bacon’s Rebellion readers and contributors who would like to meet one another, promote civil dialogue, and/or provide input to the Big Bacon himself on how to improve the blog.

Naturally, alcohol and bacon-themed foodstuffs will be involved.

If you would like to participate, please respond publicly in a comment or privately by emailing me at jabacon[at]baconsrebellion.com. If there is sufficient interest, I will organize an event.

How Good Intentions Created a Tool of Oppression

Lakisha Johnson and daughter. Photo credit: Reuters

Politicians had the best of intentions when they crafted policies to make higher education more accessible to everyone by handing out generous student loans. But they ended up plunging millions of Americans deep into debt and subjecting them to relentless efforts to recover that debt.

A Reuters investigation into student loan debt collections highlights the plight of a Philadelphia woman, Lakisha Johnson.

Lakisha Johnson figured all she needed was her 2016 tax refund to get her and her daughter out of a homeless shelter and back into a place of their own.

The U.S. Department of Education had other plans.

Johnson, a home health aide, and 12-year-old Aijiah were forced to move out of their West Philadelphia apartment just before Thanksgiving last year, after the landlord jacked up the rent from $675 to $875. Soon, they were living on a bunk bed in the shelter a few blocks from Aijiah’s school. The girl was petrified that a classmate would see her using the secured entrance of the crowded, noisy shelter.

With the $13 an hour she earns caring for her elderly charges, Johnson planned to stay at the shelter — or with anyone who would let the two sleep on a floor, a couch or a spare mattress — until April. In past years, that’s when she received her federal Earned Income Credit tax refund.

The check never came.

On the phone, an Internal Revenue Service agent told her the Department of Education (DOE) was “holding back” the $8,220 refund to recoup some of her student loan debt. It would probably do the same next year, the agent told her, to recover the rest of the nearly $17,000 she owed.

Johnson is just one of eight million borrowers in the United States who are in default on a combined $137.4 billion in government-held or government-backed student loans. Eleven percent of all student debt is severely delinquent or in fault, a higher rate than the mortgage foreclosure rate at the peak of the sub-prime real estate bust. But unlike mortgages, a form of debt that can be discharged, there is no way to shake student loans.

Since the summer of 2015, Reuters has found, student loan servicers and private debt collectors have garnished about $3 billion in wages. And last year, tax refund seizures and Social Security benefit reductions amounted to another $2.6 billion, up from $2.2 billion in 2015. Since 2009, the federal government has clawed back at least $15.2 billion. Writes Reuters:

Default, which usually occurs when a borrower hasn’t made a payment for 270 days or more, can make it only harder for a debtor to regain financial stability. It can trash credit scores, scaring off potential employers. It can disqualify debtors for auto loans, apartment rentals, utilities and even cellphone contracts. In about 20 states, student loan borrowers who default can lose their driver’s and professional licenses.

Needless to say, those impacted from the student debt-collection regime are disproportionately poor and minorities.

The Reuters article focuses mainly on the aggressive tactics of debt collectors and the failure (or refusal) to inform many debtors of all of their options, such as shifting to a plan that limits repayments to a percentage of income. In effect, the debt collectors come across as the “bad guys” in the story.

But Reuters does quote Jack Remondi, CEO of Navient Corp., a loan servicer operating under contract with the Department of Education:

Remondi blamed rising student loan defaults on “the front end of the process,” such as the government policy of lending to borrowers regardless of their credit standing and without consideration of “whether the investment they are making is reasonable.”

Bacon’s bottom line: That is the root of the problem. Under the guise of creating opportunities for the poor, the government policy of treating access to higher education as a “right” and indiscriminately handing out loans to unsophisticated consumers turned millions of Americans into debt peons. Government policy made their condition worse. Government policy, far from liberating the American poor, is grinding many into deeper poverty. Between shoveling out student loans and stoking the issuance of sub-prime mortgages a decade ago, misguided policies emanating from the good intentions of federal policy makers have shattered the lives of millions of poor. (Don’t get me started on the issues of under-performing schools and the mal-incentives of the welfare state.)

Meanwhile the poverty-creation machine chugs on unperturbed in Virginia. Here is data from the State Council of Higher Education for Virginia encompassing public four-year colleges, private four-year colleges, and community colleges:

  • 10% of from first-time-in-college students dropped out after the first year of enrollment.
  • 40% of those students had debt, which averaged $8,036. The wages of college drop-outs the following year averaged $12,500.

All told, 36% of students at 20% of the poverty line and below fail to graduate. College loans, it must be said, also have allowed many students to lift themselves out of poverty, so it would be a mistake to dismantle the entire system. But student lending is in desperate need of reform. Good intentions are not enough.

The Surge in Prince William Data Storage

Data centers continue to be the biggest economic development game in Virginia. The sector is dominated by Loudoun County, which spotted the potential earlier than anyone else and moved quickly to gain competitive advantage. Now Loudoun’s next-door-neighbor, Prince William County, is coming on strong.

The data center industry has brought 31 projects to the county to date, injecting $6.2 billion in capital investment and 912 jobs into the local economy, reports Virginia Business magazine. Most of the tax revenue goes to the county’s bottom line. For every $1 in county services the industry requires, data centers yield about $4.30 in tax revenue to Prince William.

Prince William is close to Ashburn in Loudoun County, which is known as Data Center Alley because of its concentration of more than 10 million square feet of data centers that are either in operation or under development.

As of December, Northern Virginia was the leading North America data center market with more than 30% of the market share and a record of 113.0 megawatts absorption of the total 357.85 megawatts in the top U.S. markets, according to JLL’s 2017 Data Center Outlook.  That’s nearly double the total for the nearest competing market, Northern California, which had 59.1 megawatts.

In its latest report on data centers, JLL notes that Northern Virginia has all six major data center REITs (real estate investments trusts) and the top five cloud providers developing in the market.

The area has 12.6 million square feet of data center space, with 190 megawatts of new electric power under construction. JLL credits the area’s fiber-rich Internet infrastructure and affordable cost of electricity — an average of 5.2 cents per kilowatt hour for data centers — as competitive advantages.

Bacon’s bottom line: The data-center boom has a long way to go. Market analysts forecast continued growth as Big Data and the Internet of Things, among other factors, create demand for ever more data storage. Meanwhile, the shift from decentralized, in-house storage to Cloud storage will tend to concentrate the storage of data geographically in super-efficient facilities with access to abundant fiber-optic cable and a supply of cheap, preferably green, electricity. The main limit on the ability of Northern Virginia to accommodate more data centers may be the ability of Dominion Energy and the Northern Virginia Electric Cooperative to supply the region with power.

Dominion needs to upgrade its electric transmission capacity to serve Northern Virginia, but homeowners are not happy at the prospect of large towers and lines despoiling their views. As it happens, Prince William is ground zero for this conflict, where local residents are up in arms over Dominion’s proposed transmission line to serve a proposed Amazon Web Services data center in the Haymarket area. If Virginia wants to continue reaping the economic advantages of Northern Virginia’s data center boom, someone needs to figure out how to mediate these seemingly irreconcilable differences.