Virginia Economic Growth Still a Struggle

New home of Phone2Action -- celebrating small victories.

New home of Phone2Action — celebrating small victories.

Straws in the wind regarding Northern Virginia’s business climate:

Budget sequestration may be a thing of the past, but the federal budget squeeze is not. In her latest Richmond Times-Dispatch column, economist Chris Chmura notes that in the fiscal year ending Sept. 30, 2015, federal spending on contracts fell 4.4% — some $2.4 billion — in Virginia. About two-thirds of that was defense spending. With slow economic growth and Baby Boomer retirements driving Medicare spending ever higher, there is likely no relief in sight. Short of another big war, it seems to me, it is difficult to imagine a strong rebound in federal contracting.

Meanwhile, Washington, D.C., continues to gain competitive advantage over outlying jurisdictions in the metropolitan region. Even Arlington County, which is highly urbanized, close to the urban core, and blessed by mass transit and walkable neighborhoods, is feeling the challenge. “The county is … facing heavy competition from Alexandria and D.C., both of which are aggressively recruiting the same pool of talent,” writes Daniel J. Sernovitz with the Washington Business Journal.

The competition has gotten so fierce that Governor Terry McAuliffe made a trip to Arlington last week to celebrate the leasing of 3,586 square feet on Wilson Blvd. by Phone2Action, a 25-employee startup that had recently landed $4.7 million in venture funding. The governor provided $127,800 in state assistance. According to Sernowitz, Opower, an energy conservation company, has wangled money out of the state and Arlington County, to stay in Arlington rather than move to the district. Meanwhile, Arlington and Alexandria, he reported in February, felt compelled to set aside more funds for business recruitment.

To mangle an old phrase, if Northern Virginia sneezes, Virginia catches a cold. The commonwealth finished the 2016 fiscal year $266 million in the red, as revenues increased only 1.7%, short of the projected 3.2%.

— JAB