On Tuesday, October 6 in Norfolk, and Thursday, October 8 in Hampton, LEAD Hampton Roads, a program of the Hampton Roads Chamber of Commerce, presented its 16th annual State of the Region Address. The highly-anticipated gatherings featured Dr. James V. Koch, President Emeritus, Old Dominion University, who was assisted by Dr. Vinod Agarwal and Dr. Timothy Komarek, both of the Economics Department of Old Dominion University. Over 900 business and community leaders attended.
Before the presentations, the audiences took out their smart phones to vote on The LEAD Hampton Roads Business Pulse. The Pulse polls the audience each year on six topics, including local politics, tourism, and the stock market. Click here to see the results of this year’s poll.
Dr. Koch started the economic overview of the past twelve months. The news was slightly somber. Our region’s economy is “basically running in place,” according to Dr. Koch. Our real regional GDP shrank by 0.1% in 2014. It is only expected to grow by 1.10% in 2015, as compared to the national average of slightly over 2%. Moreover, the Hampton Roads economy added 1,100 jobs in 2014; however, we remained approximately 22,000 jobs below our pre-recession level.
Hampton Roads is dependent on Department of Defense (DOD) spending, but the region is down 26,900 active duty military personnel. This is a loss of 23.7% from its peak of 113,400 in in 2003 to 86,500 today.
DOD contract spending is also falling. In Virginia, 70% of DOD contracts are held by northern Virginia companies, 16% by companies in Hampton roads, and 14% from all other areas of the state.
Within Hampton Roads, DOD contracts for Fiscal Year 2015 were distributed as follows: Newport News: $1,132.1 billion (all to Huntington Ingalls), Virginia Beach: $838.2 million, Norfolk: $774.7 million, Hampton: $166.6 million, Chesapeake: $147.8 million, Portsmouth: $145.8 million and Suffolk $65.9 million.
Changes in the industry may not be to our advantage. Future contracts are expected to favor cyber-security rather than equipment. This will strengthen Northern Virginia’s position in the state economy.
The Port of Virginia
A 2014 William and Mary economic impact study reported that the Port was responsible for $60.3 billion in spending in Virginia, 374,000 jobs and $70.5 billion in employee compensation.
While the Port of Virginia has struggled economically over the years, it is on a positive upswing both in net operating revenue ($16.1 million in 2015) and TEUs handled (210,177 in 2015, compared to a low of 144,073 in 2009, is a net gain of over 45%).
The Port is fortunate to have a deep channel and no air restrictions. This makes it ready to welcome the larger New Panamax ships already sailing. New York is currently spending $1.5 billion to raise the Bayonne Bridge to prepare for these ships. Virginia now has a window of opportunity to bring new business to the Port and then work to keep those customers when the other Ports become New Panamax-ready.
Nonprofit Organizations and other Economic Drivers in Hampton Roads
There are over 2,000 public, charitable nonprofits in the region, without including churches or organizations with less than $25,000 in annual revenue. In 2012, these 2,000 organizations reported $7.4 billion of revenue to the IRS, and received $1.5 billion in gifts. They pay $2.6 billion in compensation to their employees. They are a significant part of the economy.
United Way of South Hampton Roads in particular has an impressive reach. In 2013, its numerous member organizations – which range from YMCAs and the Girl Scouts to Goodwill industries and the legal aid society – took in $390 million in revenue. The United Way agencies serve 200,000 clients annually: one in every five Southside residents. United Way of South Hampton Roads agencies provided 7.7 million meals in 2013 and assisted over 125,000 people experiencing emergency situations.
Dr. Koch also touched on the potential economic impact of adding casinos to the region. Their research shows that casinos would only bring modest growth, because the bulk of the revenue would be shifting local entertainment dollars to the casinos away from local malls or movie theaters. Any potential gain would come from out-of-town gamblers or locals who would otherwise travel to other states and could now spend gaming dollars locally.
Finally, Dr. Komarek discussed the expected need for 3,000 new nurses over the next 25 years as a large percentage of our region’s current nurses retire. He put forward that the region will be able to fill the gap through our nursing schools and by attracting nurses to move to the region.
Kurt Krause, Managing Director for The Main, said “I thought [the State of the Region gave] a great description of our region and where we’re headed and where we’ve been... I thought Dr. Koch did a marvelous job in identifying all the areas that we need to focus in on.”
Thanks to our sponsors Optima Health (Presenting Sponsor), PNC (Platinum Sponsor), Saint Leo University and Damuth Trane (Gold Sponsors), and EVMS and BB&T (Silver Sponsors).