Preliminary Summary Review of Hanover County’s Proposed Comprehensive Plan Update
March 14, 2007
Prepared on behalf of Citizens for Hanover’s Future
Background
This report summarizes some of the serious problems and deficiencies found in a preliminary review of the “Land Capacity and Demand” (August 24, 2006), and the “Summary of Land Capacity Analysis and Preliminary Recommendations” (October 3, 2006) prepared in support of the Update of Hanover County’s Comprehensive Plan (“the Update”). This review was initiated by citizens of Hanover County, and was conducted over the last week. The review was not to be exhaustive or final. Rather, its purpose was to identify any significant issues or concerns related to the methodology and conclusions supporting the proposed Comprehensive Plan.

After an informal presentation in Hanover, this written summary was prepared at the request of county staff for a meeting to discuss the initial results of this review. Accordingly, this review should be seen as a work in progress, and is subject to revision based on further research and review, input of county staff and their consultants, and as resources may become available.

Overview
Hanover County’s proposed Comprehensive Plan Update, and in particular its “Land Capacity and Demand” section (staff draft, dated 8/24/06) and the subsequent “Summary of Land Capacity Analysis and Preliminary Recommendations” contain a number of critical errors and unfounded assumptions. These cause the Update to designate tens of thousands of acres for high intensity development in excess of Hanover’s needs over the next two decades, and well beyond.

The Update doubles its error term by designating an additional acre of land for intensive development for each acre it projects will actually be developed.

On its own, the “Summary of Land Capacity Analysis and Preliminary Recommendations” false representation of the current capacity of land designated for non-residential development invalidates its recommendations. But other substantial errors in the Update do so as well, of which some are briefly discussed below.

Supply-side Issues
Twenty-nine “available” non-residential parcels are not total capacity

The Update’s August 24, 2006 “Land Capacity and Demand” section determined the County to have sufficient land designated for non-residential development for a capacity of between 120.65 to 157.31 million square feet (msf) of non-residential ‘new development”.1 These figures represent the development potential of land currently designated for non-residential development, the vast majority of which is within the SSA. As the Land Capacity and Demand section puts it: “…the actual capacity of land to contain additional development (especially within the Suburban Services Area) is best represented by the low end of the capacity range.” By ‘low end’, the document is referring to a capacity of 120.65 msf.2

However, the subsequent October 3, 2006 “Summary of Land Capacity Analysis and Preliminary Recommendations” (“the Summary”), estimates the County’s “non-residential capacity for development” to be only 14.5 msf.3 So how does the Summary document cause land with a capacity for 106 to 143 msf of non-residential space disappear?

By pretending it doesn’t exist.

Rather than applying the capacity from its parent document, the Summary makes believe that the large majority of capacity it accounts for doesn’t exist. It does this by selecting just 29 parcels in enterprise zones that are currently available for lease or purchase. It then falsely represents these as being the ‘estimated non-residential capacity for development” through 2026. And, on this basis, it concludes there is a deficit 6,580 to 7,430 acres representing 21.4 to 25.1 msf of non-residential space.4

This is absurd.

The Update’s error is similar to confusing a single realtor’s current listings as being all of the property that might possibly become available on the market for the next 20 years. Or, it is analogous to confusing the total production capacity of the U.S. automotive industry over the next 20 years with how many cars are parked outside GM’s plants on a given day awaiting shipment.

As demonstrated below, the county currently has sufficient land designated for non-residential development for, potentially, 275 to 360 years (2 percent average annual job growth at 400 sf per new job – which is 25 percent more than the average job in the county generates). Were, as the Update assumes, only half of this land to be developed, this represents ‘only’ a 140 to 180 year supply.

Suitability of land in the SSA
The Update’s “Land Capacity and Demand” section does not make the above calculation, and anecdotally dismisses much of this land as being unsuitable for development. The Summary just pretends most of it doesn’t exist. Were the current supply of land designated for non-residential development to be unsuitable, the rate of job growth in the county should show a decline. Rather, it shows an increasing trend, from an average annual increase of 2.56 percent from 1995 to 2000, to 2.8 percent from 2000 to 2004. (Note, short term rates of job growth in growing communities typically exceed their long-term and outer-year growth rates).

Cushman and Wakefield’s market absorption data lend further corroboration that there is a sufficient supply of land in the SSA designated for non-residential development. These data show Hanover to have absorbed about 30 percent of the Richmond region’s total direct absorption of retail and flex space in 2006.5

Short-term vs. long-term trends and the 70/30 goal
The Update rationalizes adding several thousand acres of land designated for higher intensity residential development to the SSA in an effort to realize, in the short term, its ultimate long-term goal for 70 percent of the county’s housing to be located within the SSA.6

However, it would be typical for the county to experience a higher level of demand for larger-lot housing within and outside the SSA at this still early stage of its growth cycle. After all, Hanover is still largely rural to semi-rural, and many who choose to move to the county do so for that reason. This would account for why only about half the housing recently built in the county has been within the SSA, with the other half built outside its boundary – many of which take advantage of the county’s relatively low 10-acre minimum lot size requirement.

But this can be expected to change in the outer years when the supply of developable residential land becomes less abundant, the county becomes more suburban/urbanized, and the price of land increases.

This is characteristic of other suburbanizing jurisdictions in the Richmond region (e.g., Chesterfield and Henrico) and elsewhere in Virginia. For example, as the demand (and price) of housing in Loudoun, Prince William and Fairfax counties increased over the course of their growth cycles (during which they became increasingly urbanized), new housing shifted toward smaller lots with a higher percentage of townhouses, condominiums and apartments. The same dynamic is virtually certain to occur in Hanover, though its relatively slower growth rate (in comparison to high-growth Northern Virginia) will cause it to occur over a longer period of time. If it chose, Hanover could accelerate this shift by requiring rural clustering and/or by increasing its minimum rural lot size from 10 to 15 or 20 acres.

Demand-side Issues
The preceding discussion has focused on the supply side. But the Update’s treatment of the supply side is also highly problematic.

Jobs-to-workforce ratio
The Update is under the erroneous impression that the county’s current job-to-workforce ratio is 0.8 : 1.00, when in fact, it is about 1.02 : 1.00. The source of this error is the Update’s mistaking Virginia Employment Commission (VEC) and Bureau of Labor Statistics (BLS) data to include all jobs in the county, when these data actually account for only those jobs ‘covered’ by unemployment insurance (about 85 percent of such jobs). In fact, according the U.S. Bureau of Economic Analysis (BEA, whose jobs data does account for all jobs in the county), there are about 8,200 more jobs in the county than the Update recognizes (U.S. BEA 2004), 7,610 of which are ‘non-farm’ proprietors.7

This error causes the Update to mis-state the current jobs-to-workforce ratio as .8 : 1.0, when in fact, it stands at about 1.02 : 1.00. To achieve and maintain a ratio Hanover has already met and surpassed, the Update designates as much land as it estimates is required to accommodate 15,500 (34,000 less 18,500 = 15,500) new jobs.8 But more than half (8,200) of these jobs already exist and will not require any significant additional space or land. These 8,200 already existing jobs amount to between 21 percent (mid-range ‘high’) to 47 percent (VEC ‘low’) of the new jobs the Update considers to be ‘a likely future for the local economy’.

Accordingly, and before adjusting for any other errors or problems, the amount of new non-residential land the Update determines to be required is off by roughly this same amount.9 And, because the number of new housing units in the county is linked to the number of new jobs, this error spills over into the Update’s assessment of the amount of new land needed for intensive residential development. The magnitude of this error is then doubled as the Update designates one additional acre for each acre it anticipates will actually be developed.

Ashland’s missing share
The Update’s projection of the number of jobs, population and housing it expects to occur in Hanover do not appear to have been adjusted to reflect Ashland’s share of this growth. This causes the Update to designate additional land elsewhere in the county to accommodate jobs, population and housing that will locate within the Town of Ashland. The Richmond Regional Planning District Commission’s (RRPDC, Final Draft) 2031 projections allocate 3,460 of Hanover’s new job growth to Ashland.10 This represent between 7 percent (target trend ‘high’) to 19 percent (VEC ‘low’) of the new jobs the Update provides for.

A similar error appears to have been made on the residential side where 3,187 persons RRPDC allocates to Ashland are included in the Update’s estimate of population (and households) that will occur outside Ashland. Again, the Update’s assumption that one extra acre should be allocated for intensive development for each acre it projects will be developed doubles the magnitude of this error.

Market share and absorption rates
The Update’s non-residential demand forecast lacks a connection to regional market data. Rather than using market data to estimate Hanover’s absorption of such space, it merely assumes that Hanover will absorb whatever share of the region’s new development it estimates. It is not surprising then that this ‘if we project it, it will come” method conflicts with recent market data.

The Richmond region is reported to have had direct absorption of .767 msf of office, retail and flex space in 2006 (absorption of industrial space was a negative 1.4 msf). But the update projects Hanover to absorb an average of .621, .971, .782, or 1.17 msf (respectively, mid-range low, mid-range high, target trend low, and target trend high) each year for the next 20 years.

To meet these projections Hanover would, on average, need to capture between 80 to150 percent of all the retail, flex, and office space that was absorbed in the greater Richmond market area in 2006 every year for the next twenty years.11

Square feet per new job
The Update foresees the VEC and mid-range ‘trend’ job and square footage projections in Table 7 of its “Land Capacity and Demand” section as representing a ‘likely’ future for the local economy. The square footage projections indicate the average new job in the county to generate between 495 to 550 sf of new commercial space. This compares to a current average of about 320 sf per job (17.4 msf divided by 54,700 civilian jobs, BEA 2005 est.) By way of comparison, newer flex space jobs generally range between 350 sf up to about 500 sf. per job, big box and discount retail jobs range from about 450 to 650 sf, while jobs in newer office space generally range between about 200 – 250 sf per job.

The substantially higher figure applied in the Update reflects its expectation that a large majority of new jobs will be in the big-box and/or discount retail, warehousing, distribution, amusement, storage, and/or distribution sectors. Accordingly, the Update does not represent a balance of new jobs within the county, but (on average) a concentration of such jobs in lower-wage, lower value-added sectors.

Were the Update to be based on a more balanced distribution of new jobs (though still largely in the sectors noted above) such that the average new job generated only 400 sf (25 percent more than the existing job in the county), its projection for the amount of additional land to be designated for non-residential development would be reduced by about 20 to 30 percent.

Conclusion
Although there may be a need to make some adjustments within or at the margins of the SSA’s boundary, the Update does not offer a valid justification for a vast expansion of the SSA’s boundaries at this time.

Overall, were the Update’s errors and other shortcomings to be corrected, and applying a reasonable market-based estimate of the county’s non-residential absorption rates, a balance of new job growth, and accounting for Ashland’s share of new jobs and population, there would be little need to expand the current boundaries of its SSA. Rather, the county’s 20+ year growth and development-related needs could be well met by some internal adjustments within the SSA, and possibly some (comparatively) modest incremental adjustments at its margins where opportunities for office and other higher value and higher wage jobs exist.

Should future market, growth, or other conditions warrant, further adjustments can be made in subsequent updates to the Comprehensive Plan.

Were the Update’s vision to be realized, rather than creating a balance of new jobs, it would likely result in a predominance of jobs among lower-value big-box and/or discount retail, amusement, distribution, warehouse, and storage space.

About the Author
Mr. Siegel has 30 years of experience in the field of public and environmental finance, development and land use impact analysis. He has been the Principal of Washington, DC-based Public and Environmental Finance Associates, llc., since 1992. His clients have included local governments, state agencies, economic development authorities, local utilities, airport authorities, Federal agencies, landowners, developers, business owners, environmental, and citizen groups.

Prior to forming his own consultancy, Mr. Siegel held positions as a regional impact planner, public finance economist, research and budget analyst. He also served as the Director of the Office of Commercial Revitalization for the State of Maryland, and the Assistant Director of the Research Center of the Government Finance Officer’s Association (GFOA).

Much of Mr. Siegel’s professional experience has involved development impact analysis in high-growth communities in Colorado, Wyoming, Washington, Oregon, Florida, Maryland, Virginia, and the U.S. Virgin Islands.

Filed under: 2006 Comp Plan |