The economic future of Virginia Beach is either precarious and cause for concern or reasonably stable and we‘re basically OK. That is, we are poised for growth or we are not. Review the factors and you decide.
Factor: Population growth.
From 1990 to 2000, the census shows the city’s population grew by 8.2%, but from 2000 to 2010, the rate of growth fell to 3%. Due to the slowing rate of population growth experienced over the last decade, the city is projecting an annual growth rate of 0.3% through the forecast period (2017). Documents show that the city has experienced a net out migration for nearly every year since 1993 and that population growth currently depends on the fact that the city’s births exceed deaths.
The lack of population growth will have a long-term impact on Virginia Beach.
Citywide assessments – meaning home values – will decline throughout the next several years. Our real estate tax rate may be increased to maintain the total real state tax revenue at the current level. To maintain that level, our real estate tax rate could be increased by 4 cents this year and 3 cents each of the next two years. Council may increase our real estate tax rate from $.89 to $.99 during the next three years to keep the money rolling in.
A report in July 2000 shows total military spending in South Hampton Roads was $15.54 billion and a more recent report in 2009 shows a slight decline in total military spending to $14.7 billion in Hampton Roads. Unfortunately, reports in 2011 and 2012 forecast a much more precipitous decline during the years to come. Specifically, the Navy will divide all assets with 60% to the West Coast and beyond with 40% remaining on the East Coast.
Another article in October 2011, stated that the Hampton Roads economy relies on defense activity for almost 46% of economic activity. Another recent report shows that the anticipated decline in defense spending in this region for the next fiscal year “could slice $2.6 billion to $4.2 billion from the region’s gross product.”
The military has been a significant and reliable economic engine for Hampton Roads and Virginia Beach. The DOD has spent billions of dollars here, many personnel and their families live and spend here and many have retired here. All have contributed to the economic stability of our area. Unfortunately, that “gravy train” will be diverted and reduced – perhaps significantly.
The total number of jobs in Virginia Beach as listed in a recent 5-year forecast is 185,000 jobs. The largest group is government employment and accounts for approximately 49% of the total number of jobs in Virginia Beach. The government group includes the military – 21,375; the federal government – 5,157; state government 1,984; local government 20,981 and other services – 5,325. Only 6% of the 185,000 are professional and technical services jobs. The rest are mid to low paying jobs. The number and quality of jobs has not increased significantly.
Is tourism, as managed by the City Council of Virginia Beach, a reliable economic engine? The basic question is: Does the tax revenue collected from tourism spending at the oceanfront exceed city council expenditures to support tourism activities at the oceanfront?
Council recently changed the process of moving our tax revenue to specific accounts for projects and activities at the oceanfront to support tourism. The end result is the same: city tax revenue from meal, lodging and admission, in excess of the tax revenue from the oceanfront, is moved to those accounts.
Council can now embark on special projects using even more citizens tax revenue to support projects in the new “Tourism Zone” at the oceanfront.
Cost of Living
The cost of just living in Virginia Beach continues to increase because our population has remained flat for so long. Using a stable population of 436,000 over the last ten years, we calculate the operating budget cost per capita over the years. Our operating budget in 2003 was about $1,312,000. Divided by the population, yields cost per capita of $$3,010. Doing the same for the operating budget of 2008 yields $3,952 and for the forecast budget of 2017, $4,493. Our per capita cost will increase by $1,483, a 49% increase.
To sum up: Virginia Beach is struggling with zero population growth; will experience a significant decline in military spending with the resultant decline in tax revenue; lack of high-paying jobs; tourism that is not an economic engine. Just these factors would signal a decline in economic activity and therefore a decline in tax revenue.
Without a responsible reduction in spending, council will only increase the burden on taxpayers. Council’s solution: increase water, sewer, storm water and trash pick up fees and real estate taxes.
The economic future of Virginia Beach is precarious. The citizens of Virginia Beach will experience a continuing increase in the cost of living in Virginia Beach until our council diversifies and improves our economy.