Election, sequestration bring uncertainty to Va. county’s growing economy

Originally published on shfwire.com for the Scripps Howard Foundation Wire

PRINCE WILLIAM COUNTY, Va. – It was a particularly mild Friday, and Jacquie Lopez was sitting outside of the restaurant she and her husband own. A ukulele player strummed a Sara Bareilles cover to entertain the handful of customers lunching on pommes frites and tomato-basil quiche. Live music, French food, black-and-white-checkered tablecloths – this is her American dream.

Two years ago, Lopez, of Lake Ridge, Va., was carpooling to Washington every day. Her job as an IT project manager for the Department of Veterans Affairs paid well, but the commute, in her words, was “hell.”

“That’s what you’re supposed to do in this area: make a lot of money, and hate the commute,” she said.

By the numbers, she’s not far off.

Lopez lives in Prince William County, located about 30 miles from D.C. on the southwestern edge of the national capital region. The median household income is $92,655 – the ninth highest among the 20 largest counties in the country – and a quarter of the workforce travels an hour or more to work, one way.

Prince William County has a growing economy with a safety blanket of federal money – although no one knows if that money will still be there in January or who will be in office to manage it. Lopez was among the 57.5 percent of the county’s voters who helped President Barack Obama win Virginia and the presidency in 2008; whether Obama can carry the swing state again may depend on whether business owners support him.

Lopez, 44, left her 11-year government career to open Cock & Bowl, a mid-priced bistro in Occoquan, Va., in April 2010. Some doubters told her she was crazy to open a business in the middle of a recession. But her restaurant is going strong, and she credits her success partially to the recession itself. Instead of going on family vacations, she said, residents might be going out to dinner more.

“We give them an evening’s vacation,” she said. “If the economy is going to tank a little bit, you’re still going to eat.”

 

Weathering the storm

Lopez’s success reflects the area’s positive economic climate during a nationwide recession and some local hiccups.

The county saw its worst unemployment rates in February 2010 – 6.5 percent. By local standards, this was quite a blow. Pre-recession, in May 2007, Prince William County had an unemployment rate of 2.3 percent.

But even at its worst, it was significantly below the February 2010 national rate of 9.8 percent. Now the rate is 4.9 percent, compared to 8.3 percent nationally.

The county had some of the highest foreclosure numbers in Northern Virginia at the start of the recession: about 250 in 2006, up to 2,800 the following year and reaching a peak of almost 6,500 in 2008, according to county officials.

Median housing values dropped from almost $432,000 in 2006 to $238,000 in 2009, according to reports by RealEstate Business Intelligence LLC, making refinancing more difficult.

“We were seeing a boom of residential construction. When the economy tanked, we were sitting on a lot of inventory that couldn’t be sold,” Woodbridge District Supervisor Frank Principi said.

The foreclosure spike may have also stemmed from the rate of high-cost loans among the increasing Latino population, according to a 2009 report from the Urban Institute.

Homeownership – more affordable in Prince William than nearby counties – increased more for Latinos than any other demographic between 2000 and 2007. Latinos also held the highest percentage of high-cost loans. This wasn’t necessarily because of income; in fact, three-quarters of Latinos given these loans had medium or high incomes, the report said.

But as the construction industry contracted, many male Latinos – half of whom were construction workers in 2006 – lost their jobs.

“With less secure employment and greater shares of higher-cost loans, many Latino households who attained the American dream of homeownership are now finding themselves with unaffordable mortgage,” the report said.

The housing market has since stabilized. Foreclosures in 2011 numbered fewer than 1,500, the lowest since the housing bubble burst. There isn’t as much new development as before the foreclosure spike, said Jason Grant, the county communications director, but houses are selling faster than ever, and their prices are on the rise again.

The housing market bounced back in Prince William County when it didn’t in other parts of the country, and the simple reason for that, Grant said, is the area’s strong job market.

Part of this comes from the presence of federal government. Brent Heavner, spokesman for the county Department of Economic Development, estimates that almost 200 federal contractors have locations in the county or in adjacent Manassas and Manassas Park. Those companies include Aerojet, a space and defense contractor; Progeny Systems, a technology defense contractor; and Micron Techonology.

The county is also home to 6,500 active duty Marines at the Marine Corps Base Quantico.

“The need for defense contractors and engineers … helped us weather that storm,” Heavner said.

Almost 27 percent of the working population was employed directly by the government in 2010, according to the U.S. Census Bureau, although that includes state and local levels.

Business in Prince William overall has grown tremendously over the past 10 years or so: The number of businesses rose by 55 percent, Heavner said, and the number of jobs by 39 percent. Within the past year alone, the number of employed residents in the county grew by 5,000.

Why do businesses keep coming? For one thing, the county has a nice location. The national capital region has the fourth-largest regional economy in the country, Principi said. Virginia was rated the third-best state for business in 2012, according to a CNBC report.

But unlike areas closer to D.C., Prince William still has relatively cheap land. The county holds 6.6 million square feet of office space, almost 1 million of which is vacant – or, as Heavner puts it, “available.”

Plus, Principi said, there’s an educated workforce to go with it. Thirty-nine percent of adults 25 and over hold bachelor’s degrees or higher, compared to 28.2 percent nationally.

The population grew with business: 402,000 people lived in the area in 2010, according to the U.S. Census, compared with 280,800 in 2000. That’s a 43 percent increase.

And more people mean more businesses are likely to come. By numbers alone, it looks like an endless upward spiral.

Looking to the future

But Principi noted that the factors that saved the area during the worst of the recession could soon be a hindrance. The elections in November and federal budget cuts at the end of the year could reduce the area’s most stable resource: government money.

“Between those two things, we will no longer be protected, insulated, in that federal government bubble,” he said.

Federal spending in the region increased dramatically in the decade following 9/11, said Jeffrey Kaczmarek, director of the Department of Economic Development.

But the federal budget could be reduced by $1.2 trillion in January, either through legislation or across-the-board, automatic cuts – the sequestration or fiscal cliff – if Congress and the president can’t agree on spending and taxes.

These automatic cuts include $800 billion from defense spending. Stephen Fuller, director of George Mason University’s Center for Regional Analysis, estimates in a report that 136,000 defense-related jobs will be lost in Virginia as a result.

But businesses in Prince William don’t know with certainty what will happen to the budget, and they know even less how they will be affected.

“What is the economy going to look like in three months, in a year, in three years?” Kaczmarek asked. “Companies are reluctant to hire, to invest, if they’re unsure.”

A lack of faith in the future affects small businesses as well, said Brenda Monn, co-owner of Jerry’s Occoquan Jewelers in Old Town Occoquan. The 35-year-old jewelry store attracts an affluent clientele, she said, including many small-business owners and government employees.

As a result, her business was relatively insulated from the recession, she said. But about 18 months ago, she noticed a shift in the community’s mentality.

“Even though a lot of our customers are successful small business owners, they’re just not spending. They’re scared of being taxed to death,” she said. “There’s just an aura of fear.”

Monn said she notices more small business owners agreeing with Republican politics.

Principi – one of two Democrats on the eight-member county board – said that pro-business policy is not a partisan issue.

Regardless of who is elected to office, the county is encouraging companies to prepare for less federal funding, Kaczmarek said.

“There’s no question that the federal government will be a driver,” he said. “We just think that it won’t be quite the driver that it was.”

The next savior of Prince William’s economy could be a strong biotechnology and life sciences industry – companies like ATCC and Mediatech, both located in Manassas. The department of economic development tries to attract industries that are spending money, Heavner said, and this is the spender of the future.

The county will benefit from a new $25 million minor league baseball stadium for the Potomac Nationals, along with a $15 million parking garage paid for by the Virginia state government.

Kaczmarek said that Prince William County is trying to rebrand its image from a “bedroom community” – a town whose workers commute to Fairfax County and D.C. – to an employment base, a place where people both live and work.

From Lopez’s experience, new businesses could find an eager workforce in Prince William residents.

“If you could pay them somewhat comparably, they would give up that commute in a heartbeat,” she said, as the ukulele played on.