By Lydia Wheeler
Spend money, but do it in a smarter way.
That's the message to city officials in this year's annual State of the Region report from James Koch, Old Dominion University's board of visitors professor of economics and president emeritus.
Koch addressed Hampton Roads city, civic and business leaders Tuesday morning at the Norfolk Waterside Marriott. He also met with Inside Business to discuss the report he has produced for the past 14 years.
It would be more productive for the Hampton Roads cities to collectively give tax incentives to firms that offer apprenticeship programs, rather than spend millions separately on public/private developments, the report says. The net economic impacts of building arenas, conference centers and performance venues are not only questionable, the report says, but self-canceling when multiple cities do the same thing.
Koch points to the new hotel and convention center planned for Main Street in Norfolk. The city has earmarked $19.7 million for the $126 million, 300-room hotel, 50,000-square-foot conference center and 600-space parking garage
But while Norfolk plans to add hotel rooms to the region, the revenue per available room has been on the decline every year for the past five years in all Hampton Roads cities, except for Virginia Beach, according to the report.
"Achieving profitability could be elusive if the new hotel sells rooms for $40 more per night than those already available at nearby hotels such as the Marriott and Sheraton," the report says, though city officials say the upscale conferences will attract tech-savvy, luxury-oriented clientele willing to pay more.
Koch said he isn't singling out Norfolk. All Hampton Roads cities should pay close attention when private investors say they can't invest their own money without a public subsidy.
"It should give pause to any government that believes that the addition of public money will somehow make those projects compute financially," he says in the report. Instead Koch recommends investing in K-12 education.
"Mediocre, low-performing schools with high dropout rates are a recipe for economic stagnancy," says the report, and only three of 13 regional public school districts reported four-year, one-time high school graduation rates that exceeded the commonwealth's average of 88 percent in 2012.
Improving overall performance won't be easy. Koch said it will require more generous funding; increasing the proportion of educational budgets devoted to instruction rather than administration; a willingness to reallocate educational resources when necessary, which includes closing under-enrolled schools; and providing visible incentives to school districts, teachers and administrators to do things differently and improve their students' performances.
Other recommendations include supporting research and development at EVMS and ODU; supporting Hampton University's Proton Therapy Institute, a state-of-the-art cancer treatment and research facility; and merging EVMS with ODU and not with William and Mary. Because it lacks an engineering program and is 50 miles from EVMS, the report says a merger with the Williamsburg school will do little to spur development in medical and health research. ODU, however, is likely to have 40,000 students in 2030 and be generating $400 million annually in externally funded research.
The report also discusses the economic impact of coal in Hampton Roads; K-12 online education in Hampton Roads; the region's Asian Indian population; mental health care; the housing market; and sequestration, which it says could have been much worse.
Sequestration reduced the value of our regional activity by about $460 million this year and cost us approximately 4,000 jobs, the report says, but we may be living through the worst of it now. In 2013 defense spending is likely to take a $42.5 billion hit and in 2014 less will be cut - only $12.5 billion. Then, Koch said, spending is likely to start increasing again in the following years.nib